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, 2000
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)
(650) 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, 2000: 14,555
Page 1 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
-------------- --------------
Assets Real estate investments:
Rental property, net of accumulated
depreciation of $1,852 and $1,805
at March 31, 2000 and December 31,
1999, respectively $ 4,242 $ 4,220
Cash and cash equivalents 1,068 1,208
Deferred costs, net of accumulated amortization
of $44 and $40 at March 31, 2000 and
December 31, 1999, respectively 43 45
Prepaid expenses and other assets 21 15
-------------- --------------
Total assets $ 5,374 $ 5,488
============== ==============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 29 $ 48
Security deposits 62 60
-------------- --------------
Total liabilities 91 108
-------------- --------------
Partners' equity (deficit):
General Partner (193) (193)
Limited Partners, 14,555 limited partnership
units outstanding at March 31, 2000 and
December 31, 1999 5,476 5,573
-------------- --------------
Total partners' equity 5,283 5,380
-------------- --------------
Total liabilities and partners' equity $ 5,374 $ 5,488
============== ==============
See accompanying notes to financial statements.
</TABLE>
Page 2 of 12
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Income
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
March 31,
-----------------------------------
2000 1999
------------- -------------
Revenue:
Rental income $ 216 $ 252
Interest and other income 13 5
------------- -------------
Total revenue 229 257
------------- -------------
Expenses:
Operating 76 93
Depreciation and amortization 51 49
General and administrative 53 68
------------- -------------
Total expenses 180 210
------------- -------------
Net income $ 49 $ 47
============= =============
Net income per limited partnership unit $ 3.37 $ 3.23
============= =============
Distributions per limited partnership unit:
From net income $ 3.37 $ 1.92
Representing return of capital 6.66 --
------------- -------------
Total distributions per limited partnership unit $ 10.03 $ 1.92
============== =============
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 12
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statement of Partners' Equity (Deficit)
For the three months ended March 31, 2000
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General Limited
Partner Partners Total
-------------- ------------- --------------
Balance at December 31, 1999 $ (193) $ 5,573 $ 5,380
Net income -- 49 49
Distributions -- (146) (146)
------------- ------------- --------------
Balance at March 31, 2000 $ (193) $ 5,476 $ 5,283
============= ============ =============
</TABLE>
See accompanying notes to financial statements.
Page 4 of 12
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended
March 31,
-------------------
2000 1999
--------------- -------------
Cash flows from operating activities:
Net income $ 49 $ 47
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51 49
Changes in certain assets and liabilities:
Deferred costs 2 (5)
Prepaid expenses and other assets (6) 62
Accounts payable and other liabilities (19) 12
Security deposits (2) (3)
------------- ------------
Net cash provided by operating activities 75 162
------------ ------------
Cash flows from investing activities:
Additions to real estate (69) (14)
------------- ------------
Net cash used for investing activities (69) (14)
------------- ------------
Cash flows from financing activities:
Distributions to limited partners (146) (28)
------------- ------------
Net cash used for financing activities (146) (28)
------------- ------------
Net increase (decrease) in cash and cash equivalents (140) 120
Cash and cash equivalents at beginning of period 1,208 872
------------ ------------
Cash and cash equivalents at end of period $ 1,068 $ 992
============ ============
</TABLE>
See accompanying notes to financial statements.
Page 5 of 12
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------
In the opinion of Rancon Financial Corporation (RFC) and Daniel Lee Stephenson
(the Sponsors), Rancon Income Partners I (the "General Partner") and Glenborough
Corporation ("Glenborough"), the Partnership's asset and property manager, 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, 2000 and December 31, 1999, and the related statements of income,
changes in partners' equity (deficit) and cash flows for the three months ended
March 31, 2000 and 1999.
Allocation of Net Income and Net Loss - Allocation of the profits and losses
from operations are made pursuant to the terms of the Partnership Agreement.
Generally, net income from operations is allocated to the general partner and
the limited partners in proportion to the amounts of cash from operations
distributed to the partners for each fiscal year. In no event shall the general
partner be allocated less than 1% of the net income from any period. If there
are no distributions of cash from operations during such fiscal year, net income
shall be 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 loss for any period.
Net income other than net income from operations shall be allocated as follows:
(i) first, 1% to the general partner; (ii) second, to the partners who have a
deficit balance in their capital account in proportion to and to the extent of
such deficit balances, provided, that in no event shall the general partner be
allocated more than 10% of the net income other than net income from operations
until the earlier of sale or disposition of substantially all of the assets or
the distribution of cash (other than cash from operations) equal to the original
invested capital of the general partner and the limited partner; (iii) the
balance, if any, shall be allocated (a) first, to the general partner in an
amount equal to the lesser of (1) the amount of cash from sale or financing
anticipated to be distributed to the general partner or (2) an amount sufficient
to increase the general partner's account balance to an amount equal to such
distribution from sale or financing; (b) the balance, to the limited partners.
In no event shall the general partner be allocated less than 1% of the net
income other than net income from operations for any period.
Page 6 of 12
<PAGE>
Management Agreement - Effective January 1, 1995, RFC entered into an agreement
with 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. On January 1, 1998, the
agreement was amended to eliminate Glenborough's responsibility for providing
investor relations services.
Effective July 1, 1999, the agreement was further amended to: (i) reduce the
asset administration fee to $100,000 (ii) increase the sales fee for improved
properties from 2% to 3% and (iii) reduce the management fee applicable to
Wakefield Industrial Center from 5% to 3% of the gross rental receipts. The
Partnership will also pay Glenborough: (i) a sales fees of 4% for land; (ii) a
refinancing fee of 1% and (iii) a management fee of 5% of gross rental receipts
from Bristol Medical Center. As part of this agreement, Glenborough will perform
certain duties for the General Partner of the Rancon Partnerships. 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. Glenborough is not an affiliate of the Partnership or RFC.
Basis of Accounting - The accompanying unaudited financial statements have been
prepared on the accrual basis of accounting in accordance with generally
accepted accounting principles under the presumption that the Partnership will
continue as a going concern.
Note 2. REFERENCE TO 1999 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the December 31, 1999 audited
financial statements.
Note 3. SALE OF REAL ESTATE
-------------------
On May 12, 1999, the Partnership sold Aztec Village Shopping Center ("Aztec"), a
23,879 square foot retail center located in San Diego, California, to an
unaffiliated third party for $1,000,000. The Partnership realized a $252,000
gain on sale. The sale generated $937,000 in cash proceeds of which $742,000 was
distributed to the partners and the remainder was added to the Partnership's
cash reserves.
Note 4. DISTRIBUTIONS
-------------
During the three months ended March 1, 2000, the Partnership distributed
$146,000 of cash from operations to the limited partners.
Page 7 of 12
<PAGE>
RANCON INCOME FUND I,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 5. COMMITMENTS AND CONTINGENT LIABILITIES
--------------------------------------
The Partnership is contingently liable for a subordinated real estate commission
payable to the General Partner in the amount of $30,000 at March 31, 2000 for
the May 1999 sale of Aztec. Per the Partnership Agreement, upon the sale of a
Partnership property, the General Partner shall be entitled to a subordinated
real estate commission, provided that, in no event shall the subordinated real
estate commission payable to the General Partner exceed 3% of the gross sales
price of the property which is sold. The subordinated real estate commission is
payable only after the limited partners have received distributions equal to
their original invested capital plus a cumulative non-compounded return of 6%
per annum on their adjusted invested capital. Since the circumstances under
which this commission would be payable are limited, the liability has not been
recognized in the accompanying unaudited financial statements; however, the
amount will be recorded if and when it becomes payable
Page 8 of 12
<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, 2000 and its results of operations for the three months ended March
31, 2000 and 1999. This information should be read in conjunction with the
Partnership's audited December 31, 1999 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, 2000. As of March 31, 2000, the Partnership had cash of $1,068,000.
The remainder of the Partnership's assets consists primarily of its real estate
investments, which totaled approximately $4,242,000 at March 31, 2000.
On May 12, 1999, the Partnership sold Aztec Village Shopping Center to an
unaffiliated third party for $1,000,000. The sale generated $937,000 cash
proceeds of which $742,000 was distributed to the partners and the remainder was
added to the cash reserves.
The Partnership is contingently liable for a subordinated real estate commission
payable to the General Partner in the amount of $30,000 at March 31, 2000 for
the May 1999 sale of Aztec.
Operationally, the Partnership's primary source of funds consists of cash
generated from operating its rental properties. 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. An additional source of funds has been the interest earned on invested
cash balances.
Management believes that the Partnership's available cash together with the cash
generated from operations will be sufficient to finance the Partnership's and
the properties continued operations on both a short-term and long-term basis.
Operating Activities
- --------------------
During the three months ended March 31, 2000, the Partnership's cash provided by
operating activities totaled $75,000.
The $19,000, or 40%, decrease in accounts payable and other liabilities from
December 31, 1999 to March 31, 2000 was primarily due to a reduction of the
accrual for property taxes resulting from the sale of Aztec Village Shopping
Center.
Page 9 of 12
<PAGE>
Investing Activities
- --------------------
During the three months ended March 31, 2000, the Partnership's cash used for
investing activities totaled $69,000 due to additions to real estate.
Financing Activies
- ------------------
During the three months ended March 31, 2000, the Partnership made a $146,000
distribution of cash from operations.
RESULTS OF OPERATIONS
- ---------------------
Rental income decreased $36,000, or 14%, in the three months ended March 31,
2000 compared to March 31, 1999 primarily due to the loss of rental income
resulting from the sale of Aztec Village Shopping Center.
As of March 31, 2000, occupancy rates at Bristol Medical Center and the
Wakefield Building, were 65% and 100% respectively, compared to March 31, 1999
when their occupancies were 62% and 100%, respectively,
Interest and other income increased $8,000, or 160%, in the three months ended
March 31, 2000 compared to March 31, 1999, primarily due to the increase in
interest from a higher average invested cash balance following the sale of Aztec
Village Shopping Center.
Operating expenses decreased $17,000, or 18%, in the three months ended March
31, 2000 compared to the same period in 1999, primarily due to the sale of Aztec
Village Shopping Center.
General and administrative expenses decreased $15,000, or 22%, in the three
months ended March 31, 2000 compared to the three months ended March 31, 1999
primarily due to a reduction in asset management fees resulting from an
amendment to the management agreement with Glenborough.
Page 10 of 12
<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 11 of 12
<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 12, 2000 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 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000791996
<NAME> RANCON INCOME FUND I
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 1,068
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,078
<PP&E> 6,094
<DEPRECIATION> 1,852
<TOTAL-ASSETS> 5,374
<CURRENT-LIABILITIES> 91
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,283
<TOTAL-LIABILITY-AND-EQUITY> 5,374
<SALES> 0
<TOTAL-REVENUES> 229
<CGS> 0
<TOTAL-COSTS> 76
<OTHER-EXPENSES> 104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 49
<INCOME-TAX> 0
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-BASIC> 3.37
<EPS-DILUTED> 3.37
</TABLE>
