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 June 30, 1996
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: 0-19438
RANCON PACIFIC REALTY L.P.
(Exact name of registrant as specified in its charter)
California 33-0270528
(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
(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 June 30, 1996: 2,827,352
NO EXHIBIT INDEX REQUIRED
Page 1 of 11
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
RANCON PACIFIC REALTY L.P.
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
June 30, December 31,
1996 1995
-------- ----------
Assets
------
Cash and cash equivalents $ 1,281 $ 1,331
Rental property (net of accumulated
depreciation of $11,476 and
$11,022 at June 30, 1996 and
December 31, 1995, respectively) 31,206 31,634
Deferred loan fees (net of
accumulated amortization of
$97 and $61 at June 30, 1996
and December 31, 1995,
respectively) 535 571
Other assets 191 199
------- -------
Total Assets $ 33,213 $ 33,735
======= =======
Liabilities and Partners' Equity
--------------------------------
Accounts payable and other
liabilities $ 295 $ 308
Interest payable 156 159
Notes payable 23,473 23,589
------- -------
Total Liabilities 23,924 24,056
------- -------
Commitments and contingent
liabilities (see Note 3)
Minority interest 436 388
Partners' Equity (Deficit):
General partners (153) (90)
Limited partners (2,827,352 and
2,828,457 limited partnership
units outstanding at June 30,
1996 and December 31, 1995,
respectively) 9,006 9,381
------- -------
Total Partners' Equity 8,853 9,291
------- -------
Total Liabilities and Partners'
Equity $ 33,213 $ 33,735
======= =======
See accompanying notes to financial statements.
Page 2 of 11
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ -----------
1996 1995 1996 1995
---- ---- ---- ----
Operating Income:
Rental Income $ 1,411 $ 1,314 $ 2,817 $ 2,645
Interest and other income 10 11 22 18
------ ------ ------ ------
Total operating income 1,421 1,325 2,839 2,663
------ ------ ------ ------
Costs and Expenses:
Operating 648 577 1,249 1,154
Depreciation 227 245 454 450
General and administrative 93 94 179 171
Interest expense 490 499 984 1,025
------ ------ ------ ------
Total costs and expenses 1,458 1,415 2,866 2,800
------ ------ ------ ------
Loss before minority
interest (37) (90) (27)
(137)
Minority interest in net loss 6 4 2 10
------ ------ ------ ------
Net loss $ (31) $ (86) $ (25) $
(127)
====== ====== ====== ======
Distributions per limited
partnership unit:
Representing return of capital $ 0.06 $ --- $ 0.12 $ ---
From net income --- --- --- ---
------ ------ ------ ------
$ 0.06 $ --- $ 0.12 $ ---
====== ====== ====== ======
Net loss per
limited partnership unit $(0.01) $(0.03) $(0.01) $
(0.04)
====== ====== ====== ======
Weighted average number of
limited partnership units
outstanding during the
period used to compute
net loss and distributions
per limited partnership
unit 2,828,090 2,828,457 2,828,247 2,828,457
========= ========= ========= =========
See accompanying notes to financial statements.
Page 3 of 11
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
(Unaudited)
General Limited
Partners Partners' Total
------- ------- ------
Balance at December 31, 1994 $ (89) $ 9,703 $ 9,614
Net loss (1) (126) (127)
------- ------- -------
Balance at June 30, 1995 $ (90) $ 9,577 $ 9,487
======= ======= =======
Balance at December 31, 1995 $ (90) $ 9,381 $ 9,291
Net loss --- (25) (25)
Distributions to partners --- (350) (350)
Adjustment to minority investment (63) --- (63)
------- ------- -------
Balance at June 30, 1996 $ (153) $ 9,006 $ 8,853
======= ======= =======
See accompanying notes to financial statements.
Page 4 of 11
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
June 30,
------------------
1996 1995
----- -----
Cash flows provided by operating activities:
Net loss $ (25) $ (127)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 454 450
Loan fees amortized to interest expense 36 20
Changes in certain assets and liabilities:
Deferred loan fees --- (51)
Other assets 8 4
Accounts payable and accrued expenses (13) 36
Payable to Sponsor --- (72)
Interest payable (3) 166
------- -------
Net cash provided by operating
activities 457 426
------- -------
Cash flows used for investing activities:
Additions to real estate (26) (20)
------- -------
Cash flows used for financing activities:
Notes payable principal payments (116) (101)
Distributions to partners (350) ---
Distributions to minority interest
holders, net (15) (10)
------- -------
Net cash used for financing
activities (481) (111)
------- -------
Net increase (decrease) in cash (50) 295
Cash at beginning of year 1,331 1,123
------- -------
Cash at end of period $ 1,281 $ 1,418
======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 950 $ 862
======== ========
See accompanying notes to financial statements.
Page 5 of 11
RANCON PACIFIC REALTY L.P.
Notes to Consolidated Financial Statements
June 30, 1996
(Unaudited)
Note 1. ORGANIZATION AND 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
Pacific Realty, L.P. (the Partnership) as of June 30, 1996 and
December 31, 1995, and the related statements of operations for
the three and six months ended June 30, 1996 and 1995, and
changes in partners' equity and cash flows for the six months
ended June 30, 1996 and 1995.
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 $215,000 per year, which is fixed for five years and
subject to reduction in the year following the sale of assets;
(ii) sales fees of 2% for improved properties; (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.
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 as of February 28, 1995, March 31,
1995 and July 1, 1995.
During the quarter ended June 30, 1996, 1,105 units were
abandoned as a result of partners desiring to no longer receive
Partnership K-1's and to give them the ability to write off
investments for income tax purposes. The equity (deficit)
balance of the abandoned units was allocated to the remaining
Page 6 of 11
RANCON PACIFIC REALTY L.P.
Notes to Consolidated Financial Statements
June 30, 1996
(Unaudited)
outstanding units. As of June 30, 1996, limited partnership
units issued and outstanding were 2,827,352.
Reclassification - Certain 1995 balances 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.
Note 3. RELATED PARTY TRANSACTIONS
--------------------------
In consideration for organizational and transitional management
services, the Sponsor is to receive a fee of up to 6% of the
aggregate appraised value of the property interests conveyed to
the Partnership or $2,092,000. One-sixth of this fee, or
approximately $350,000, was due upon the exchange of the property
for Partnership Units. The remaining five-sixths of the fee was
due in 60 monthly installments of $29,000. Ten monthly
installments were paid for the period from March 1, 1988 through
December 31, 1988. The next 48 monthly payments relating to the
period from January 1, 1989 to December 31, 1992 were deferred
until such time as (i) a specified amount of cash distributions
were made to the holders of the preferred units during any
calendar year or, (ii) the holders of the preferred units have
received a return of the full amount of their investment. No
monthly installments were paid during those 48 months. The two
monthly installments of $29,000 related to January and February
1993 were paid during 1993. Payment of the balance of the fee of
approximately $1,395,000 related to the 48 monthly installments
will continue to be deferred until one of the two criteria set
forth above is met.
Note 4. ADJUSTMENT TO MINORITY INVESTMENT
---------------------------------
During 1995, it was discovered that pervious years allocations of
losses and cash distributions were incorrectly allocated between
Transamerica La Jolla Partners (TLJP) and the Partnership due to
additional cash contributions made by the Partnership to the
joint venture, owner of the Villa La Jolla Condominiums. The
cumulative effect of the misallocation of losses and
distributions was $63,000 and $12,000, respectively. This
misallocation of losses has been properly stated in 1996 and
accounts for the adjustment to minority investment included in
the Partnership's Consolidated Statement of Partners' Equity.
Page 7 of 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
GENERAL
-------
Rancon Pacific Realty L.P. (the Partnership) was formed in
September, 1987 for the purpose of acquiring the real properties
and certain other assets, subject to secured indebtedness and
certain other liabilities (net assets) of three public limited
partnerships: Shadow Hill Partners (SHP), Eastgate Village
Partners (EVP) and Brichard-La Jolla Partners (BLJP) (the
Participating Partnerships). The Participating Partnerships
contributed their net assets to the Partnership on February 29,
1988, and the Partnership issued each Participating Partnership
that number of Exchange Units equal to the exchange value
assigned to the net assets contributed by that Participating
Partnership along with rights to purchase three Preferred Units
for each Exchange Unit issued.
The Partnership immediately transferred the exchange property it
acquired from BLJP to Villa La Jolla Partners (VLJP), a then
newly-formed joint venture between the Partnership and
Transamerica Realty Investment Corporation (TRIC) (which owned
approximately 26.2% of the outstanding interests of BLJP). In
turn, the Partnership received a majority interest (73.8%) in
VLJP; TRIC thereafter transferred its interest in VLJP to
Transamerica La Jolla Partners (TLJP). TLJP's interest in VLJP
subsequently was reduced to 8.41% and the Partnership's interest
was increased to 91.59%, as a result of capital contributions
made by the Partnership to VLJP. During 1995 it was discovered
that previous years allocations of losses and cash distributions
were incorrectly allocated between TLJP and the Partnership. The
cumulative effect of the misallocation of losses and
distributions was $63,000 and $12,000, respectively.
In order to satisfy certain lender requirements for the
Partnership's new loan secured by the Villa La Jolla Condominiums
(discussed below), VLJ Partners, a California limited partnership
(VLJ LP) was formed as of September 1, 1995. VLJP contributed
the property and all of its related assets and liabilities to VLJ
LP in exchange for a 99% limited partnership interest. The
general partner is VLJ, Inc., a California corporation, whose
sole shareholders are the owners of VLJP, thereby having no
affect on the Partnership's investment in the property.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 23, 1989, the Partnership was fully funded from the
sale of all Preferred Units in the amount of $14,857,500. As of
June 30, 1996, the Partnership had cash of $1,281,000. The
remainder of the Partnership's assets consist primarily of its
investments in three residential properties, which totaled
approximately $31,206,000 at June 30, 1996.
The Southern California regional economy in general, and the real
estate industry in particular, are considered to be in a
Page 8 of 11
recessionary cycle. All of the Partnership's assets are located
in the Southern California region. The operations of the
Partnership continue to be affected by the economic strength or
weakness of the real estate industry in Southern California.
As a result of substantial disbursements made in 1990, primarily
for principal reductions of notes payable, building improvements
and distributions to holders of Preferred Units, the
Partnership's cash management from 1991 to 1994 was focused on
rebuilding cash balances rather than making distributions. As
efforts to rebuild cash balances were successful, the Partnership
was able to make a distribution of $210,000 to the limited
partners during 1994. As a result of the 1995 refinancing of the
debt secured by the Villa La Jolla condominiums, management feels
the Partnership is in a secure cash position and has reinstated
periodic distributions to the partners of the net cash generated
by the operations of the Partnership. Distributions to the
partners of $175,000 were paid in each of the first and second
quarters of 1996.
Management believes that the Partnership's current cash, together
with the cash flow to be generated from operations, will be
sufficient to finance the properties' continued operations, make
regular periodic distributions to the partners and meet future
debt commitments, other than payments due on maturity in 2002 and
2018.
Although no assurance can be given, the Partnership does not
anticipate any major expenditures for improvements to its
properties in the near future and hopes to increase cash flow
from operations by maintaining and eventually increasing rental
rates while maintaining operating expenses at or near the current
level.
RESULTS OF OPERATIONS
---------------------
Rental income for the six months ended June 30, 1996 as compared
to 1995 increased 7% or $172,000 primarily due to an increase in
rental rates at all of the Partnership's properties. Occupancy
rates as of June 30, 1996 were 98%, 95% and 96% for Pacific Bay
Club, La Jolla Canyon and Villa La Jolla, respectively, compared
to 94%, 98% and 97%, respectively, for the same period in 1995.
The $4,000, or 22%, increase in interest and other income for the
six months ended June 30, 1996 as compared to 1995 is due to the
increase in the Partnership's cash balance as a result of the
additional funds provided by operating activities.
Operating expenses increased $95,000, or 8%, for the six months
ended June 30, 1996 compared to the same period in 1995,
primarily as a result of an increase in repair and maintenance
expenses at the Villa La Jolla property.
General and administrative costs remained consistent for the six
months ended June 30, 1996 compared to 1995.
Page 9 of 11
Page 10 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 11 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: August 13, 1996 RANCON PACIFIC REALTY L.P.
a Delaware Limited Partnership
By: RC PACIFIC REALTY PARTNERS, L.P.,
General Partner
Date: August 13, 1996 By:
Daniel L. Stephenson
Director, President, Chief Executive
Officer and
Chief Financial Officer of
RC Pacific Realty, Inc.,
General Partner of
RC Pacific Realty Partners, L.P.
Page 12 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: August 13, 1996 RANCON PACIFIC REALTY L.P.
a Delaware Limited Partnership
By: RC PACIFIC REALTY PARTNERS, L.P.,
General Partner
Date: August 13, 1996 By: /s/ Daniel L. Stephenson
Daniel L. Stephenson
Director, President, Chief Executive
Officer and
Chief Financial Officer of
RC Pacific Realty, Inc.,
General Partner of
RC Pacific Realty Partners, L.P.
Page 11 of 11
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<NAME> RANCON PACIFIC REALTY LP
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