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: 0-19438
RANCON PACIFIC REALTY L.P.,
A DELAWARE LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 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 94402-1708
(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: 2,824,358
Page 1 of 12
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
RANCON PACIFIC REALTY L.P.
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Assets
Rental property:
Land $ 14,213 $ 14,213
Buildings and improvements 28,506 28,487
-------------- --------------
42,719 42,700
Less accumulated depreciation (12,160) (11,932)
-------------- --------------
Net rental property 30,559 30,768
Cash and cash equivalents 1,529 1,407
Deferred financing costs, net of
accumulated amortization of $152
and $134 at March 31, 1997 and
December 31, 1996, respectively 480 498
Other assets 232 170
-------------- --------------
Total assets $ 32,800 $ 32,843
============== ==============
</TABLE>
- continued -
Page 2 of 12
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Balance Sheets - continued
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 23,262 $ 23,337
Accounts payable and accrued expenses 171 70
Interest payable 154 155
Other liabilities 276 251
------------- -------------
Total liabilities 23,863 23,813
------------- -------------
Commitments and contingent liabilities (see Note 3)
Minority interest 420 423
------------- -------------
Partners' equity (deficit):
General Partner (89) (90)
Limited Partners, 2,824,558 and 2,825,584
limited partnership units outstanding at
March 31, 1997 and December 31, 1996, respectively
(including 2,121,285 preferred units outstanding at
March 31, 1997 and December 31, 1996) 8,606 8,697
------------- -------------
Total partners' equity 8,517 8,607
------------- -------------
Total liabilities and partners' equity $ 32,800 $ 32,843
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 12
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Income
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
-------------- -------------
<S> <C> <C>
Revenue:
Rental income $ 1,484 $ 1,385
Interest and other income 24 24
------------- -------------
Total revenue 1,508 1,409
------------- -------------
Expenses:
Operating 630 592
Interest 482 494
Depreciation 228 227
General and administrative 79 86
------------- -------------
Total expenses 1,419 1,399
------------- -------------
Income before minority interest 89 10
Minority interest (4) (4)
------------- --------------
Net income $ 85 $ 6
============= =============
Net income per limited partnership unit $ 0.03 $ ---
============= =============
Distributions per preferred unit:
From net income $ 0.03 $ ---
Representing return of capital 0.05 0.08
------------- -------------
Total distributions per preferred unit $ 0.08 $ 0.08
============= =============
Weighted average number of limited
partnership units outstanding during
the period used to compute net
income per limited partnership unit 2,825,071 2,828,457
============= =============
Weighted average number of preferred units
outstanding during the period used to compute
distributions per preferred unit 2,121,285 2,121,785
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 12
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated 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 $ (90) $ 8,697 $ 8,607
Net income 1 84 85
Distributions --- (175) (175)
------------- ------------ -------------
Balance at March 31, 1997 $ (89) $ 8,606 $ 8,517
============= ============ =============
Balance at December 31, 1995 $ (90) $ 9,381 $ 9,291
Net income --- 6 6
Distributions --- (175) (175)
Adjustment to minority interest (63) --- (63)
-------------- ------------ --------------
Balance at March 31, 1996 $ (153) $ 9,212 $ 9,059
============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 12
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated 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 $ 85 $ 6
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 228 227
Amortization of loan fees, included in interest expense 18 18
Minority interest in net income/loss and distributions (3) (8)
Changes in certain assets and liabilities:
Other assets (62) (78)
Accounts payable and accrued expenses 101 131
Interest payable (1) (1)
Other liabilities 25 (1)
---------- ----------
Net cash provided by operating activities 391 294
---------- ----------
Cash flows from investing activities:
Additions to real estate (19) (13)
---------- ----------
Net cash used for investing activities (19) (13)
---------- ----------
Cash flows from financing activities:
Note payable principal payments (75) (56)
Distributions to partners (175) (175)
---------- -----------
Net cash used for financing activities (250) (231)
---------- ----------
Net increase in cash 122 50
Cash and cash equivalents at beginning of period 1,407 1,331
---------- ----------
Cash and cash equivalents at end of period $ 1,529 $ 1,381
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 465 $ 477
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6 of 12
<PAGE>
RANCON PACIFIC REALTY L.P.
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of RC Pacific Realty Partners, L.P. and Glenborough Inland Realty
Corporation, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of only normal accruals) necessary to
present fairly the consolidated financial position of Rancon Pacific Realty,
L.P., a Delaware limited partnership, (the Partnership) as of March 31, 1997 and
December 31, 1996, and the related consolidated statements of income, changes in
partners' equity and cash flows for the three months ended March 31, 1997 and
1996.
In December, 1994, Rancon Financial Corporation (RFC), an affiliate of the
Partnership, 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 $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
or the Partnership.
During the quarter ended March 31, 1997, a total of 1,026 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
outstanding units. As of March 31, 1997, there were 2,824,558 limited
partnership units issued and outstanding.
Consolidation - The accompanying consolidated financial statements of Rancon
Pacific Realty, L.P. include the accounts of Rancon Pacific Realty, L.P. and its
majority owned partnership Villa La Jolla Partners. All significant intercompany
balances and transactions have been eliminated in the consolidation.
Reclassification - Certain 1996 balances have been reclassified to conform to
the current year presentation.
Page 7 of 12
<PAGE>
RANCON PACIFIC REALTY, L.P.
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
consolidated Notes to Financial Statements included in the 1996 audited
financial statements.
Note 3. RELATED PARTY TRANSACTIONS
Pursuant to a plan of exchange which was consummated in 1988, the Sponsor is to
receive a fee of up to 6% of the aggregate appraised value of the property
interests conveyed to the Partnership in consideration for organizational and
transitional management services. One-sixth of this fee or approximately
$350,000 was paid 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 related to the period from
January 1, 1989 to December 31, 1992 will not be paid unless and until such time
as (i) the specified amount of cash distributions are 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. Two monthly installments of
$29,000 were paid in January and February, 1993. Payment of the balance of the
fee of approximately $1,395,000 related to the 48 monthly installments will not
be paid unless and until one of the two criteria set forth above is met.
Note 4. ADJUSTMENT TO MINORITY INVESTMENT
During the first quarter of 1996, it was determined that a reallocation in the
amount of $63,000 to the previous years allocations of losses between
Transamerica La Jolla Partners (TLJP) and the Partnership was necessary. This
amount appears as an adjustment to minority interest on the Partnership's March
31, 1996 consolidated statement of partners' equity (deficit).
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, 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 June 23, 1989, the Partnership was fully funded from the sale of 2,122,500
Preferred Units in the amount of $14,857,500. As of March 31, 1997, the
Partnership had cash and cash equivalents of $1,529,000. The remainder of the
Partnership's assets consists primarily of its investments in three residential
properties, with a net book value totaling approximately $30,559,000 at March
31, 1997.
The Partnership currently owns three properties: Pacific Bay Club Apartments (a
159 unit apartment complex in San Diego, California), La Jolla Canyon Apartments
(a 157 unit apartment complex in San Diego, California) and Villa La Jolla
Condominiums (a 385 unit condominium complex in San Diego, California).
All of the Partnership's assets are located in San Diego County, 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 market appears to be improving. Management
continues to evaluate the Southern California real estate market in an effort to
determine the optimal time to dispose of the assets and realize their maximum
value.
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 properties' continued operations as
well as meet future debt commitments. Management will continue to monitor market
conditions in order to sell its properties for the best obtainable price prior
to June 1999, the date upon which the Partnership is due to terminate, or as
soon as practicable.
The increase in other assets of $67,000, or 41%, is due to a $24,000 increase in
prepaid insurance from December 31, 1996 to March 31, 1997 combined with an
increase in impound accounts, as required by the lender, of $43,000.
Accounts payable and accrued expenses increased from $70,000 at December 31,
1997 to $171,000 at March 31, 1997 due to the accrual of property taxes which
are payable in April 1997.
Page 9 of 12
<PAGE>
RESULTS OF OPERATIONS
Rental income for the three months ended March 31, 1997 as compared to 1996
increased 7% or $99,000 primarily due to increased rental rates at all of the
Partnership's properties. Occupancy rates as of March 31, 1997 were 98%, 99% and
97% for Pacific Bay Club, La Jolla Canyon and Villa La Jolla, respectively,
compared to 99%, 94% and 96%, respectively, for the same period in 1996.
Operating expenses increased $38,000, or 6%, for the three months ended March
31, 1997 compared to the same period in 1996. The increase is due to an increase
in management fees as a result of the increase in operating revenues, an
increase in repair and maintenance expenses at the Villa La Jolla property due
to aging of the building and the write-off of bad debt relating to the prior
year.
Interest expense continues to decline due to the decreasing balances of the
Partnership's outstanding debt.
General and administrative costs decreased $7,000 or 8% for the three months
ended March 31, 1997 compared to 1996 primarily due to a one-time payment for
professional services in 1996 rendered in connection with the valuation of the
limited partner interests.
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 PACIFIC REALTY, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
(Registrant)
By: RC PACIFIC REALTY PARTNERS, 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 RC
Pacific Realty, Inc.,
General Partner of RC
Pacific Realty Partners,
L.P.
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000823610
<NAME> Rancon Pacific Realty, L.P.
<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-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 1,529
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,761
<PP&E> 42,719
<DEPRECIATION> (12,160)
<TOTAL-ASSETS> 32,800
<CURRENT-LIABILITIES> 325
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,517
<TOTAL-LIABILITY-AND-EQUITY> 32,800
<SALES> 0
<TOTAL-REVENUES> 1,508
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 482
<INCOME-PRETAX> 85
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
