UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the year ended December 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.
(Exact name of registrant as specified in its charter)
Delaware 33-0270528
----------- ------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
------------
San Mateo, California (Zip Code)
---------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (650) 343-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Exchange Units
(Title of Class)
Preferred Units
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. Inapplicable
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus dated August 8, 1988, filed pursuant to Rule 424(b), File no. 2-17900
(the Prospectus), is incorporated by reference in Parts I, II, III and IV
hereof.
For additional items incorporated by reference, see Item 14.
Page 1 of 28
<PAGE>
PART I
Item 1. Business
Incorporated by reference herein is the information regarding the organization
and description of the business of Rancon Pacific Realty L. P., (the
Partnership), included in the Prospectus (Exhibit 28.1 hereto) under the
captions "The Partnership" and "The Exchange Properties" commencing at pages 18
and 34 of the Prospectus, respectively. The Partnership reached final funding in
June 1989. During the year ended December 31, 1992, the Partnership repurchased
and retired 715 preferred units and 828 exchange units were abandoned by a
limited partner. During the year ended December 31, 1997, 2,756 exchange units
were abandoned and during the year ended December 31, 1996, 2,373 exchange units
and 500 preferred units were abandoned. Limited Partners abandon their units
when they desire to no longer receive a K-1 from the Partnership. The equity of
the abandoned limited partner units has been allocated to the remaining limited
partners. At December 31, 1997, the Partnership had 701,543 exchange units and
2,121,285 preferred units issued and outstanding. The Partnership has no
employees.
At December 31, 1997, the Partnership owned three properties, which are more
fully described in Item 2.
Competition within the Market
Management believes that characteristics influencing the competitiveness of a
real estate project are the geographic location of the property, the
professionalism of the property manager and the maintenance and appearance of
the property, in addition to external factors such as general economic
circumstances, trends, and the existence of new, competing properties in the
vicinity. Although management believes the Partnership properties are
competitive with comparable properties as to those factors within the
Partnership's control, over-building and other external factors could adversely
affect the ability of the Partnership to attract and retain tenants. The
marketability of the properties may also be affected (either positively or
negatively) by these factors as well as by changes in general or local economic
conditions, including prevailing interest rates. Depending on market and
economic conditions, the Partnership may be required to retain ownership of its
properties for periods longer than anticipated at acquisition, or may need to
sell earlier than anticipated or refinance a property, at a time or under terms
and conditions that are less advantageous than would be the case if unfavorable
economic or market conditions did not exist.
Working Capital
The Partnership's practice is to maintain cash reserves for normal repairs,
replacements, working capital and other contingencies. The Partnership knows of
no statistical information which allows comparison of its cash reserves to those
of its competitors.
Item 2. Properties
<TABLE>
<CAPTION>
# of Units Encumbrances at
Name Location Type Size Owned December 31, 1997
<S> <C> <C> <C>
Pacific Bay Club San Diego, California Residential 103,275 sq. ft. 159 $ 4,404,000
Apartments
La Jolla Canyon San Diego, California Residential 83,164 sq. ft. 157 $ 5,360,000
Apartments
Villa La Jolla San Diego, California Residential 271,369 sq. ft. 385 $ 13,263,000
Condominiums
</TABLE>
Page 2 of 28
<PAGE>
Pacific Bay Club Apartments
Pacific Bay Club Apartments is a 159-unit garden apartment complex situated on
approximately 4.4 acres in San Diego, California. The property is located two
blocks east of Morena Boulevard, a major north-south frontage road along
Interstate Highway 5. The property is approximately eight miles north of
downtown San Diego at 4070 Huerfano Avenue, San Diego, California 92117. The
area surrounding the property is primarily single-family residential, with
middle and upper-middle income housing. Immediately adjacent to the property to
the south and east are two condominium projects.
The Pacific Bay Club Apartments complex is comprised of two three-story
buildings with elevators. The buildings were constructed in 1972 using wood
frame construction and stucco exteriors, with flat, built-up roofs. The unit mix
is 66 studio apartments at 475 square feet each, 42 one-bedroom/one-bathroom
apartments at 650 square feet each and 51 two-bedroom/two bathroom apartments at
875 square feet each. There are clubhouse and barbecue facilities, a heated
swimming pool, spa and sauna, four laundry facilities and 222 parking spaces.
All of the units are rented unfurnished. Each apartment is equipped with a
refrigerator, electric range, garbage disposal, dishwasher (except studios),
private patio, wall-to-wall carpeting and custom window coverings. All utilities
are paid by the landlord except electricity and cable. There is one office used
for leasing activities.
According to the Partnership's property manager, Pacific Bay Club's strongest
competition is located approximately 10 miles away, closer to the coast. Pacific
Bay Club Apartments is approximately 25 years old and is competing with
properties which were built an average of seven years ago. In order to be
competitive, Pacific Bay Club's units offer upgraded amenities and continuing
efforts are devoted to the outside appearance of the complexes. Pacific Bay Club
is 98% leased at December 31, 1997, which is equal to the market average.
The occupancy levels at December 31, 1997, 1996 and 1995, expressed as a
percentage of the total apartments available for rent, were 98%, 98% and 96%,
respectively. The average monthly rental rates for the apartments at December
31, 1997 are as follows:
Rental rate:
Studio $ 600
One bedroom/one bathroom $ 701
Two bedroom/two bathroom $ 820
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Pacific Bay Club Apartments property secures a note
payable in the amount of $4,404,000. The note matures November 1, 2018.
During 1997, the property was assessed property taxes of approximately $77,000
based on a tax rate of 1.12%.
La Jolla Canyon Apartments
La Jolla Canyon Apartments is a 157-unit garden apartment complex situated on
approximately 4.7 acres in San Diego, California. The property is located
approximately 11 miles north of downtown San Diego and five miles northeast of
La Jolla at 9515 Genessee Avenue, San Diego, California 92122 in an area
referred to as "The Golden Triangle". The Golden Triangle is formed by the
intersection of Interstate 5 and 805 and Highway 52. The immediate area
surrounding the property is primarily single-family homes and condominium
projects.
Page 3 of 28
<PAGE>
The La Jolla Canyon Apartments complex is comprised of six two-story buildings.
The buildings were constructed in 1976 using wood frame construction and stucco
exteriors, with sloping, asphalt shingle roofs. The unit mix is 112
one-bedroom/one-bathroom apartments at 487 square feet each and 45
two-bedroom/one-bathroom apartments at 636 square feet each. There are
recreation facilities, a solar-heated swimming pool, spa and sauna, modern
laundry facility and 205 parking spaces.
All of the units are rented unfurnished. Each apartment is equipped with a
refrigerator, electric range, garbage disposal, private patio, wall-to-wall
carpeting and custom window coverings. Some units have dishwashers. All
utilities are paid by the landlord except electricity and cable. A leasing
office and one decorated model apartment are used in leasing activities.
La Jolla Canyon is close to the University of California San Diego Campus,
Scripps Clinic, research facilities such as the Salk Institute and many major
pharmaceutical and biotech companies. The improved economy in San Diego County
has created 25,000 new jobs in 1997 and the need for additional housing;
therefore, although quite small, the units have been easy to rent to the
surrounding community.
According to research conducted by the property manager, there are approximately
5,000 residential units within the Golden Triangle that compete with La Jolla
Canyon and the construction of approximately 1,000 units has been planned for
the next two years. In 1997, a 500-unit high rise apartment building was
constructed within three blocks of the La Jolla Canyon Apartments complex and
there appears to have been no significant impact on the rental rates or
occupancy levels obtained at La Jolla Canyon. La Jolla Canyon is approximately
22 years old yet remains competitive in the market with an occupancy of 99% at
December 31, 1997, which is above the market average of 98%.
The occupancy levels at December 31, 1997, 1996 and 1995, expressed as a
percentage of the total apartments available for rent, were 99%, 98% and 95%,
respectively. The average monthly rental rates for the apartments at December
31, 1996 were:
Rental rate:
One bedroom/one bathroom $ 736
Two bedroom/one bathroom $ 834
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the La Jolla Canyon Apartments property secures a note
payable in the amount of $5,360,000. The note matures October 1, 2018.
During 1997, the property was assessed property taxes of approximately $91,000
based on a tax rate of 1.12%.
Villa La Jolla Condominiums
Villa La Jolla Condominiums is part of a condominium complex consisting of 500
garden-style residential units, of which the Partnership owns 385 units; the
other 115 units were sold to individual owners prior to the acquisition of the
property by the Partnership. The condominium complex is situated on
approximately 18.28 acres in La Jolla, California. The complex was built and
opened as an apartment complex in 1972 and converted to condominiums in 1980.
The property is located approximately 11 miles north of downtown San Diego, two
miles north of downtown La Jolla and one mile east of the Pacific Ocean at 8540
Villa Mallorca Drive, La Jolla, California 92037. The immediate area surrounding
the property consists of residential condominium projects and single-family
homes.
Page 4 of 28
<PAGE>
The portion of the complex owned by the Partnership is comprised of 52 two-story
buildings. The buildings were constructed using wood frame construction and
stucco exteriors, with sloping asphalt roofs. The unit mix is 101 studio
apartments at 505 square feet each, 222 one-bedroom/one-bathroom apartments at
710 square feet each and 62 two-bedroom/two-bathroom apartments at 1,012 square
feet each. There are two swimming pools, two spas, six laundry facilities, a
recreation facility (fitness center and clubhouse) and 395 parking spaces.
All of the units are rented unfurnished. Each unit is equipped with a
refrigerator, electric oven and range, garbage disposal, private patio (with
storage), wall-to-wall carpeting and custom window coverings. A majority of the
units have dishwashers. All utilities are paid by the tenants. A leasing office
and two decorated model units are used in leasing activities.
According to research conducted by the Partnership's property manager, there are
seven properties in the immediate market area, comprising 2,500 units, competing
with the Villa La Jolla property and four projects, comprising 2,300 units,
slated for construction over the next few years. Due to the improved San Diego
County economy and increasing population, management does not expect these
projects to have a significant impact on the marketability of the Villa La Jolla
Condominiums. At December 31, 1997, the 99% ocupancy rate at the Villa La Jolla
property is consistent with the average market occupancy.
The occupancy levels at December 31, 1997, 1996 and 1995 expressed as a
percentage of the total units available for rent, were 99%, 97% and 97%,
respectively. The average monthly rental rates for the units at December 31,
1997 were:
Rental rate:
Studio $ 700
One bedroom/one bathroom $ 795
Two bathroom/two bathroom $ 1,009
In the opinion of management, the property is adequately covered by insurance.
At December 31, 1997, the Villa La Jolla Condominiums property secures a note
payable in the amount of $13,263,000. The note matures September 1, 2002.
During 1997, the property was assessed property taxes of approximately $239,000
based on a tax rate of 1.14%.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Page 5 of 28
<PAGE>
PART II
Item 5. Market for Partnership's Common Equity and Related Stockholder Matters
Market Information
- ------------------
There is no established trading market for the Exchange Units or the Preferred
Units.
Holders
- -------
As of December 31, 1997, a total of 1,365 persons held the Exchange Units and a
total of 1,172 persons held the Preferred Units (collectively, the Limited
Partners).
Dividends
Incorporated by reference herein is the information regarding the Partnership's
distribution policies included in Paragraph 11 of the Partnership's Agreement of
Limited Partnership (Exhibit 3.1 hereto) and the Partnership's Third Amendment
to Agreement of Limited Partnership (Exhibit 3.3 hereto).
The following distributions of Cash from Operations were made by the Partnership
to the holders of Preferred Units during the last three fiscal years.
Amount Amount Amount
Date of Distributed Distributed Distributed to
Distribution to Limited Partners Per Unit General Partner
------------ ------------------- -------- ---------------
11/26/97 $ 175,000 $ 0.08 $ --
08/29/97 $ 175,000 $ 0.08 $ --
05/30/97 $ 175,000 $ 0.08 $ --
02/28/97 $ 175,000 $ 0.08 $ --
11/30/96 $ 175,000 $ 0.08 $ --
08/31/96 $ 175,000 $ 0.08 $ --
06/30/96 $ 175,000 $ 0.08 $ --
03/01/96 $ 175,000 $ 0.08 $ --
12/15/95 $ 175,000 $ 0.08 $ --
Of the total distributions paid in 1997 and 1996, $0.12 and $0.29 represented a
return of capital, respectively. All distributions in 1995 represented a return
of capital.
Page 6 of 28
<PAGE>
Item 6. Selected Financial Data
The financial data should be read in conjunction with the financial statements
and related notes contained elsewhere in this report. This financial data is not
covered by the reports of the independent public accountants.
The following is selected financial data for the five years ended December 31,
(in thousands, except per Unit data).
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Rental Income $ 6,224 $ 5,758 $ 5,465 $ 5,249 $ 5,286
Net income (loss) $ 559 $ 81 $ (148) $ (349) $ (139)
Net income (loss) allocable
to limited partners $ 554 $ 80 $ (147) $ (346) $ (138)
Net (income) loss per limited
partnership unit $ 0.20 $ 0.03 $ (0.05) $ (0.12) $ (0.05)
Total assets $ 32,376 $ 32,843 $ 33,735 $ 33,785 $ 34,428
Long-term obligations $ 23,027 $ 23,337 $ 23,589 $ 23,418 $ 23,502
Cash distributions per limited partnership unit:
Preferred Unit $ 0.32 $ 0.32 $ 0.08 $ 0.10 $ --
Exchange Unit $ -- $ -- $ -- $ -- $ --
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of operations
LIQUIDITY AND CAPITAL COMMITMENTS
Pursuant to a plan of exchange which was consummated in 1988, the Partnership
issued 707,500 exchange units and rights to purchase 2,122,500 preferred units
at a cost of $7 per preferred unit in exchange for the assets of Shadow Hill
Partners, Eastgate Village Partners and Brichard-La Jolla Partners (the
Participating Partnerships). The exchange units were allocated among the
Participating Partnerships using the appraised value of the real property owned
by them, less related mortgage indebtedness and adjusted for the book value of
other specified net assets as of September, 1987. Rights to purchase three
preferred units were issued with each exchange unit. Preferred Units covered by
unexercised rights were then sold to other investors. 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 December 31, 1997, the Partnership had cash and cash equivalents of
$1,876,000. The remainder of the Partnership's assets consists primarily of its
investments in three residential properties, with a net book value totaling
approximately $29,988,000 at December 31, 1997.
The increase in other liabilities of $24,000, or 10%, from December 31, 1996 to
December 31, 1997 is primarily due to the increase in security deposits
collected in 1997 when the Partnership raised the amount of the required
security deposit at the Villa La Jolla Condominiums property.
Page 7 of 28
<PAGE>
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 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.
During 1989, management discovered the presence of asbestos at the three
properties and elected to remove the asbestos from the common areas as well as
to take the steps necessary to notify tenants and on-site staff. Asbestos has
been removed from some of the individual apartment and condominium units.
Management will monitor the need for any additional asbestos removal and will
incur the costs only when a need for such removal arises. Careful attention has
been taken by management to insure that the proper notifications to tenants are
maintained.
RESULTS OF OPERATIONS
Rental income increased $466,000 and $293,000 for the year ended December 31,
1997 compared to 1996 and 1996 compared to 1995, respectively, primarily due to
an increase in rental rates and steady or higher occupancies at all the
Partnership's properties.
The 6% and 31% increases in interest and other income for the year ended
December 31, 1997 compared to 1996 and 1996 compared to 1995, respectively, are
due to increases in the Partnership's invested cash balances as a result of
additional funds provided by operating activities.
Operating and depreciation expenses remained consistent for the years ended
December 31, 1995 through 1997.
Interest expense continues to decline due to the decreasing balances of the
Partnership's outstanding debt.
General and administrative expenses decreased $24,000, or 7%, in 1997 compared
to 1996 primarily due to a $12,000 decrease in tax preparation fees and a
one-time payment of $5,000 for professional services in 1996 rendered in
connection with the valuation of the limited partner interests, as described
below. The remaining difference primarily relates to the decrease in travel
related expenses from 1996 to 1997. The $55,000, or 18%, increase in 1996
compared to 1995 is due to an increase in general legal fees of $14,000
associated with administering the Partnership's day-to-day affairs, $5,000 in
fees rendered in connection with valuations of limited partner interests and
$24,000 and $7,000 for additional insurance and loan administration fees,
respectively, as a result of the Villa La Jolla refinancing in September 1995.
Year 2000 Compliance
The Partnership utilizes a number of computer software programs and operating
systems across its entire organization, including applications used in financial
business systems and various administrative functions. To the extent that the
Partnership's software applications contain a source code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of modification, or replacement of such applications will be necessary. The
Partnership has completed its identification of applications that are not yet
"Year 2000" compliant and has commenced modification or replacement of such
applications, as necessary. Given information known at this time about the
Partnership's systems that are non-compliant, coupled with the Partnership's
ongoing, normal course-of-business efforts to upgrade or replace critical
systems, as necessary, management does not expect "Year 2000" compliance costs
to have any material adverse impact on the Partnership's liquidity or ongoing
results of operations. No assurance can be given, however, that all of the
Partnership's systems will be "Year 2000" compliant or that compliance costs or
the impact of the Partnership's failure to achieve substantial "Year 2000"
compliance will not have a material adverse effect on the Partnership's future
liquidity or results of operations.
Page 8 of 28
<PAGE>
Item 8. Financial Statements and Supplementary Data
For information with respect to Item 8, see Financial Statements and Schedules
as listed in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Page 9 of 28
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership
RC Pacific Realty Partners L.P. (RCPLP) is a Delaware limited partnership formed
in 1987 to serve as the General Partner of the Partnership. RC Pacific Realty,
Inc. (RCPRI) is the general partner of RCPLP and RFC and certain of its key
employees and others are limited partners of RCPLP. RCPRI was incorporated in
California in 1987 to serve as the general partner of RCPLP. The executive
officers and directors of RCPRI are:
Daniel L. Stephenson Chairman of the Board, President, Chief Executive
Officer and Chief Financial Officer
There is no fixed term of office for Mr. Stephenson.
Mr. Stephenson, age 54, founded RFC (formerly known as Rancon Corporation) in
1971 for the purpose of establishing itself as a commercial, industrial and
residential property syndication, development and brokerage concern. Mr.
Stephenson was President and Chief Executive Officer of RFC from 1971 to 1986
and from August 1991 to September 1992, and has from inception, held the
position of Chairman of the Board. In addition, Mr. Stephenson is Chairman of
the Board of PacWest Group, Inc., a real estate firm which has acquired a
portfolio of assets from the Resolution Trust Corporation.
Item 11. Executive Compensation
The Partnership has no executive officers. For information relating to fees,
compensation, reimbursements and distributions paid to related parties,
reference is made to Item 13 below.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
No person is known by the Partnership to be the beneficial owner of more than 5%
of the Units.
Security Ownership of Management
<TABLE>
<CAPTION>
Amount and Nature of
<S> <C> <C> <C>
Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class
- -------------- ------------------------ -------------------- ----------------
Preferred Units Daniel L. Stephenson (IRA) 14,254 Units (indirect) Less than 1 percent
</TABLE>
Changes in Control
The Limited Partners have no right, power or authority to act for or bind the
Partnership. However, the Limited Partners have the power to vote upon the
following matters affecting the basic structure of the Partnership, each of
which shall require the approval of Limited Partners holding a majority of the
outstanding Units: (i) amendment of the Partnership's Partnership Agreement;
(ii) termination and dissolution of the Partnership; (iii) sale, exchange or
pledge of all or substantially all of the assets of the Partnership; (iv)
withdrawal or removal of the General Partner or any successor General Partner;
(v) purchase price of the withdrawing General Partners' interest; (vi) election
of a new General Partner; (vii)
Page 10 of 28
<PAGE>
the approval or disapproval of the terms of purchase of the General Partner's
interest; and (viii) the modification of the terms of any agreement between the
Partnership and the General Partner or an affiliate.
Item 13. Certain Relationships and Related Transactions
For the year ended December 31, 1997, the Partnership did not incur any costs
reimbursable to RFC.
Page 11 of 28
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of the report
(1) Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Partners' Equity (Deficit) for the
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule:
Schedule III -- Real Estate and Accumulated Depreciation as
of December 31, 1997 and Note thereto
All other schedules are omitted because they are not
applicable or the required information is shown in the
consolidated financial statements or notes thereto.
(3) Exhibits:
(3.1) Agreement of Limited Partnership and First Amendment
thereto (included as part of the Prospectus filed as
Exhibit 28.1 hereto)
(3.2) Second Amendment to Agreement of Limited Partnership*
(3.3) Third Amendment to Agreement of Limited Partnership *
(3.4) Agreementof Limited Partnership and amendment thereto
of Villa, L.P.
(10.1) Management, administration and consulting agreement
and amendment thereto for services rendered by
Glenborough Inland Realty Corporation dated December
20, 1994 and March 30, 1995, respectively
(10.2) Promissory note secured by a deed of trust on Villa
La Jolla Condominiums in the amount of $13,500,000
dated August 31, 1995
Page 12 of 28
<PAGE>
(28.1) Prospectus dated August 8, 1988 (portions of which
are incorporated by reference into this annual
report.)*
* Included as an Exhibit in Form 10-K filed for fiscal
year ended December 31, 1992.
(b) Reports on Form 8-K
None.
Page 13 of 28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RANCON PACIFIC REALTY L.P.,
(Partnership)
By: RC PACIFIC REALTY PARTNERS, L.P.
General Partner
Date: March 27, 1998 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Partnership and in the
capacities and on the dates indicated.
Date: March 27, 1998 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 14 of 28
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULE
Page
Report of Independent Public Accountants 16
Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 and 1996 17
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 18
Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1997, 1996 and 1995 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 20
Notes to Consolidated Financial Statements 21
Schedule:
III - Real Estate and Accumulated Depreciation
as of December 31, 1997 and Note thereto 27
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
Page 15 of 28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of RANCON PACIFIC REALTY L.P.
We have audited the accompanying consolidated balance sheets of RANCON PACIFIC
REALTY L.P., as of December 31, 1997 and 1996, and the related consolidated
statements of operations, partners' equity (deficit) and cash flows for the
years ended December 31, 1997, 1996 and 1995. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of RANCON PACIFIC
REALTY L.P., as of December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for the years ended December 31, 1997, 1996
and 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying schedule
listed in the index to financial statements and schedule is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic consolidated financial statements. This
information has been subjected to the auditing procedures applied in our audits
of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic consolidated financial
statements taken as a whole.
San Francisco, California /s/ Arther Andersen LLP
February 11, 1998
Page 16 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Balance Sheets
December 31, 1997 and 1996
(in thousands, except units outstanding)
<TABLE>
<CAPTION>
1997 1996
---- ------
<S> <C> <C>
Assets
Rental property, net of accumulated depreciation
of $12,748 and $11,932 in 1997 and 1996, respectively $ 29,988 $ 30,768
Cash and cash equivalents 1,876 1,407
Deferred financing costs, net of accumulated amortization
of $207 and $134 in 1997 and 1996, respectively 425 498
Other assets 87 170
-------------- -------------
Total Assets $ 32,376 $ 32,843
============= =============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 72 $ 70
Interest payable 154 155
Notes payable 23,027 23,337
Other liabilities 275 251
-------------- -------------
Total liabilities 23,528 23,813
-------------- -------------
Commitments and contingent liabilities (see Note 4)
Minority interest 382 423
-------------- -------------
Partners' equity (deficit):
General Partner (85) (90)
Limited Partners, 2,822,828 and 2,825,584 units outstanding in
1997 and 1996, respectively (including 2,121,285 preferred
units outstanding in 1997 and 1996) 8,551 8,697
-------------- -------------
Total partners' equity 8,466 8,607
-------------- -------------
Total liabilities and partners' equity $ 32,376 $ 32,843
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 17 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Operations
For the years ended December 31, 1997, 1996 and 1995
(in thousands, except per unit amounts)
<TABLE>
<CAPTION>
1997 1996 1995
---- ------ -----
<S> <C> <C> <C>
Revenue:
Rental income $ 6,224 $ 5,758 $ 5,465
Interest and other income 54 51 39
------------- -------------- -------------
Total revenue 6,278 5,809 5,504
------------- -------------- -------------
Expenses:
Operating 2,517 2,495 2,402
Interest 1,919 1,952 2,047
Depreciation 912 910 902
General and administrative 345 369 314
------------- -------------- -------------
Total expenses 5,693 5,726 5,665
------------- -------------- -------------
Income (loss) from operations 585 83 (161)
Minority interest (26) (2) 13
-------------- -------------- -------------
Net income (loss) $ 559 $ 81 $ (148)
============= ============== =============
Net income (loss) per limited partnership unit $ 0.20 $ 0.03 $ (0.05)
============= ============== =============
Distributions per preferred unit:
Representing return of capital $ 0.12 $ 0.29 $ 0.08
From net income 0.20 0.03 --
------------- -------------- ------------
Total distributions per preferred unit $ 0.32 $ 0.32 $ 0.08
============= ============== =============
Weighted average number of limited partnership
units outstanding during the period used to compute
net income (loss) per limited partnership unit $ 2,824,124 $ 2,827,286 $ 2,828,457
========= ============= ============
Weighted average number of preferred units
outstanding during the period used to compute
distributions per preferred unit $ 2,121,285 $ 2,121,516 $ 2,121,785
============ ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 18 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Partners' Equity
(Deficit) For the years ended December 31,
1997, 1996 and 1995
(in thousands)
General Limited
Partner Partners Total
Balance at December 31, 1994 $ (89) $ 9,703 $ 9,614
Distributions to partners -- (175) (175)
Net loss (1) (147) (148)
--------- ----------- ----------
Balance at December 31, 1995 (90) 9,381 9,291
Distributions to partners -- (700) (700)
Net income 1 80 81
Adjustment to minority interest (1) (64) (65)
---------- ------------ -----------
Balance at December 31, 1996 (90) 8,697 8,607
Distributions to partners -- (700) (700)
Net income 5 554 559
--------- ----------- ----------
Balance at December 31, 1997 $ (85) $ 8,551 $ 8,466
========= =========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 19 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
Consolidated Statements of Cash
Flows For the years ended December 31,
1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 559 $ 81 $ (148)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 912 910 902
Amortization of loan fees,
included in interest expense 73 73 47
Minority interest in income (loss) 26 2 (13)
Changes in certain assets and liabilities:
Other assets 83 29 (137)
Accounts payable and accrued expenses 2 13 55
Payable to sponsor __ -- (72)
Interest payable (1) (4) 159
Other liabilities 24 -- (4)
----------- ---------- ------------
Net cash provided by operating activities 1,678 1,104 789
----------- ---------- -----------
Cash flows from investing activities:
Additions to rental properties (132) (44) (81)
------------ ---------- ------------
Net cash used for investing activities (132) (44) (81)
------------ ---------- ------------
Cash flows from financing activities:
Notes payable principal payments (310) (253) (187)
Distributions to partners (700) (700) (175)
Distributions to minority interest holders (67) (31) (23)
Proceeds from note payable -- -- 13,500
Payoff of matured note payable -- -- (13,142)
Closing costs and loan fees -- -- (473)
----------- ---------- -----------
Net cash used for financing activities (1,077) (984) (500)
------------ ---------- -----------
Net increase in cash and cash equivalents 469 76 208
Cash and cash equivalents at beginning of year 1,407 1,331 1,123
----------- ---------- -----------
Cash and cash equivalents at end of year $ 1,876 $ 1,407 $ 1,331
=========== ========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,847 $ 1,883 $ 1,842
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 20 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Rancon Pacific Realty L.P., (the Partnership), was formed for the purpose of
acquiring the assets, subject to the liabilities, of three California limited
partnerships: Shadow Hill Partners, Eastgate Village Partners and Brichard-La
Jolla Partners. The General Partner of the Partnership is RC Pacific Realty
Partners L. P. of which RC Pacific Realty, Inc. is the general partner and
Rancon Financial Corporation (RFC) (the Sponsor) and certain of its key
employees and others are limited partners.
Pursuant to a plan of exchange which was consummated in 1988, the Partnership
issued 707,500 exchange units and rights to purchase 2,122,500 preferred units
at a cost of $7 per preferred unit in exchange for the assets of Shadow Hill
Partners, Eastgate Village Partners and Brichard-La Jolla Partners (the
Participating Partnerships). The exchange units were allocated among the
Participating Partnerships using the appraised value of the real property owned
by them, less related mortgage indebtedness and adjusted for the book value of
other specified net assets as of September 1987. Rights to purchase three
preferred units were issued with each exchange unit. Preferred Units covered by
unexercised rights were then sold to other investors.
The Partnership reached final funding in June 1989. In 1992, the Partnership
repurchased and retired 715 preferred units and 828 exchange units were
abandoned by a limited partner. In 1996, 2,373 exchange units and 500 preferred
units were abandoned. Limited partners abandon their units when they desire to
no longer receive a K-1 from the Partnership. The equity of the abandoned
limited partner units has been allocated to the remaining limited partners. At
December 31, 1997, exchange and preferred units issued and outstanding were
701,543 and 2,121,285, respectively.
The Partnership and Transamerica Realty Investment Corporation formed Villa La
Jolla Partners (VLJP), ("the Joint Venture"), which became the owner of the
Villa La Jolla Condominiums. Transamerica Realty Investment Corporation
thereafter transferred its 26.2% interest in VLJP to Transamerica La Jolla
Partners (TLJP). During 1988 and 1989, the Partnership made additional cash
contributions to VLJP in order to facilitate the payoff of the interim financing
provided by TLJP. Such cash contributions caused TLJP's ownership interest to
decrease to 8.41% and the Partnership's to increase to 91.59%. During 1996, it
was determined that a reallocation in the amount of $65,000 to the previous
years allocations of losses between TLJP and the Partnership was necessary. This
amount appears as an adjustment to minority interest on the Partnership's 1996
consolidated statement of partners' equity.
In order to satisfy certain lender requirements for the Partnership's loan
secured by the Villa La Jolla Condominiums (see Note 4), VLJ Partners (formerly
known as Villa, L.P.), 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.
Page 21 of 28
<PAGE>
General Partner and Management Matters
- --------------------------------------
In December 1994, RFC entered into an agreement with Glenborough Corporation
(successor by merger 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 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
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. RFC has 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.
Significant Accounting Policies
- -------------------------------
Basis of Accounting - The accompanying 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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Partnership and VLJP. As of December 31, 1997, 1996 and 1995,
the Partnership owned an 91.59% interest in VLJP and thus reports the results of
its operations on a consolidated basis. The joint venture agreement provides for
distributions and profit/loss allocations based on ownership percentages. All
significant intercompany balances and transactions have been eliminated in the
consolidation.
Rental Property - Rental properties are stated at cost unless events or
circumstances indicate that cost cannot be recovered, in which case carrying
value is reduced to estimated fair value. Estimated fair value: (i) is based
upon the Partnership's plans for the continued operation of each property; (ii)
is computed using estimated sales price, as determined by prevailing market
values for comparable properties and/or the use of
Page 22 of 28
<PAGE>
capitalization rates multiplied by annualized rental income based upon the age,
construction and use of the building, and (iii) does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property. The fulfillment of the Partnership's plans
related to each of its properties is dependent upon, among other things, the
presence of economic conditions which will enable the Partnership to continue to
hold and operate the properties prior to their eventual sale. Due to
uncertainties inherent in the valuation process and in the economy, it is
reasonably possible that the actual results of operating and disposing of the
Partnership's properties could be materially different than current
expectations. Depreciation is provided using the straight-line method over the
useful lives of the respective assets (see Note 2).
Cash Equivalents - The Partnership considers all certificates of deposit and
money market funds with original maturities of less than ninety days to be cash
equivalents.
Deferred Financing Costs - Deferred loan fees are amortized over the life of the
related loan on a straight-line basis. Amortization expense, which is included
in interest expense, was $73,000 for both of the years ended December 31, 1997
and 1996 and $47,000 for the year ended December 31, 1995.
Rental Income - Rental income is recognized as earned over the life of the
respective leases.
Allocation of Profits, Losses and Cash Distributions - Allocation of profits,
losses and cash distributions are made pursuant to the terms of the Partnership
Agreement dated December 31, 1987, which provide certain preferential treatment
for holders of preferred units.
Net Income (Loss) Per Limited Partnership Unit - Net income (loss) per limited
partnership unit is calculated using the weighted average number of limited
partners' units outstanding during the period, including both preferred and
exchange units, and the limited partners' allocable share of the net income
(loss).
Income Taxes - No provision for income taxes is included in the accompanying
financial statements, as the Partnership's results of operations are passed
through to the partners for inclusion in their respective income tax returns.
Net income and partners' equity (deficit) for financial reporting purposes will
differ from the Partnership income tax return because of different accounting
methods used for certain items, principally depreciation expense.
Reclassification - Certain 1996 and 1995 balances have been reclassified to
conform with the current year presentation.
Page 23 of 28
<PAGE>
Note 2. RENTAL PROPERTY, NET
Rental property as of December 31, 1997 and 1996 is as follows:
1997 1996
---- ----
Land $ 14,213,000 $ 14,213,000
Buildings and improvements 27,121,000 27,083,000
Furniture and equipment 1,402,000 1,404,000
---------------- -----------------
42,736,000 42,700,000
Less: accumulated depreciation (12,748,000) (11,932,000)
---------------- -----------------
Total $ 29,988,000 $ 30,768,000
================ =================
All the Partnership's property has been pledged as security for notes payable.
Note 3. NOTES PAYABLE
Notes payable consists of the following as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----- ----
<S> <C> <C>
Note payable to Amresco Capital Corporation, secured by a first deed of
trust on Villa La Jolla Condominiums, bearing interest at a fixed rate
of 8.625%, payable in monthly installments of principal and interest
in the amount of $105,000. The outstanding balance is due September
1, 2002. $ 13,263,000 $ 13,374,000
Note payable to California Federal Savings & Loan, secured by a first deed of
trust on La Jolla Canyon Apartments, bearing interest at the 11th District cost
of funds rate plus 2.25% per annum (7.154% and 7.073% at December 31, 1997 and
1996, respectively), payable in monthly installments. The outstanding principal
balance is due October 1, 2018. $ 5,360,000 $ 5,469,000
Note payable to California Federal Savings & Loan, secured by a first deed of
trust on Pacific Bay Club Apartments, bearing interest at the 11th District cost
of funds rate plus 2.25% per annum (7.154% and 7.073% at December 31, 1997 and
1996, respectively), payable in monthly installments. The outstanding principal
balance is due November 1, 2018 $ 4,404,000 $ 4,494,000
----------------- -----------------
$ 23,027,000 $ 23,337,000
================= =================
</TABLE>
Page 24 of 28
<PAGE>
The aggregate annual maturities of notes payable for the years subsequent to
December 31, 1997, are as follows:
1998 $ 323,000
1999 350,000
2000 377,000
2001 408,000
2002 12,981,000
Thereafter 8,588,000
---------------
Total $ 23,027,000
==============
Note 4. COMMITMENT AND CONTINGENCY
Organizational and Transitional Management Fee
Pursuant to a plan of exchange which was consummated in 1988, Glenborough,
through an Assignment of Right to Receive Organizational and Transitional
Management Fee from 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 would not be paid unless and until one of
the two criteria set forth above is met.
Note 5. TAXABLE INCOME
The Partnership's tax returns, the qualification of the Partnership as a
partnership for federal income tax purposes, and the amount of income or loss
are subject to examination by federal and state taxing authorities. If such
examinations result in changes to the Partnership's taxable income or loss, the
tax liability of the partners could change accordingly.
The Partnership's tax returns are filed on a calendar year basis. As such, the
following is a reconciliation of the net income for financial reporting purposes
to the estimated taxable income, for the years ended December 31, 1997, 1996 and
1995, determined in accordance with accounting practices used in preparation of
federal income tax returns (in thousands).
Page 25 of 28
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (loss) per financial statements $ 559 $ 81 $ (148)
Financial reporting depreciation in excess
of tax reporting depreciation (382) (399) (208)
Operating expenses recognized in a
different period for tax reporting than
for financial reporting, net 149 42 (251)
-------- ------- --------
Estimated net income (loss) for federal
income tax purposes $ 326 $ (276) $ (607)
========= ======== ========
</TABLE>
The following is a reconciliation, as of December 31, 1997 and 1996, of
partner's equity for financial reporting purposes to estimated partners' equity
for federal income tax purposes (in thousands).
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Partners' equity per financial statements $ 8,466 $ 8,607
Cumulative provision for impairment of investment in real estate 2,754 2,754
Financial reporting depreciation in excess
of tax reporting depreciation (7,601) (7,219)
Property taxes capitalized for tax 813 813
Operating expenses recognized in a different period for financial
reporting than for tax reporting, net 74 42
Other, net -- (165)
--------- ----------
Estimated partners' equity for
federal income tax purposes $ 4,506 $ 4,832
======== ==========
</TABLE>
Page 26 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------------------------------------------------
Cost Capitalized
Initial Cost to Subsequent to Gross Amount Carried
Partnership Acquisition at December 31, 1997
--------------- ------------------ ---------------------
Buildings Building
and Carrying and (1) Accumulated
Description Encumbrances Land Improvements Improvements Cost Land Improvements Total Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
Rental Properties:
Residential Property,
San Diego County,
California:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
La Jolla Canyon
Apartments $ 5,360 $ 4,442 $ 5,290 $ 88 $ -- $ 4,442 $ 5,378 $ 9,820 $ 2,582
Pacific Bay Club
Apartments 4,404 1,431 7,350 141 -- 1,431 7,491 8,922 3,330
Villa La Jolla
Condominiums 13,263 9,300 17,364 84 -- 9,300 17,448 26,748 6,836
Less: Provision for
impairment of investment
in real estate (2) -- (960) (1,745) (49) -- (960) (1,794) (2,754) --
-------- --------- --------- --------- --------- ----------- ---------- --------- ---------
$ 23,027 $ 14,213 $ 28,259 $ 264 $ -- $ 14,213 $ 28,523 $ 42,736 $ 12,748
======== ========= ========= ========= ========= =========== =========== ========= =========
</TABLE>
- --------------------------------------------------------------------------------
COLUMN A COLUMN G COLUMN H COLUMN I
- --------------------------------------------------------------------------------
Date Life
Construction Date Depreciated
Description Began Acquired Over
- --------------------------------------------------------------------------------
Rental Properties:
Residential Property,
San Diego County,
California:
La Jolla Canyon
Apartments N/A 4/29/85 5 -30 yrs.
Pacific Bay Club
Apartments N/A 12/14/84 5 -30 yrs.
Villa La Jolla
Condominiums N/A 8/30/85 5 -30 yrs.
Less: Provision fo
impairment of inves
in real estate (2)
(1) The aggregate cost for Federal income tax purposes is $44,169.
(2) During 1986 a provision for impairment of investment in real estate of
$2,754 was recorded based on the appraised value of Villa La Jolla Condominiums.
Page 27 of 28
<PAGE>
RANCON PACIFIC REALTY L.P.
RANCON PACIFIC REALTY L.P.
NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(In Thousands)
Reconciliation of gross amount at which real estate was carried:
For the years ended December 31,
1997 1996 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment in real estate:
Balance at beginning of period $ 42,700 $ 42,656 $ 42,575
Additions during period:
Improvements 132 44 81
Deletions during period:
Dispositions (96) -- --
----------- ----------- ------------
Balance at end of period $ 42,736 $ 42,700 $ 42,656
========== ========== ===========
Accumulated Depreciation:
Balance at beginning of period $ 11,932 $ 11,022 $ 10,120
Additions charged to expenses 912 910 902
Dispositions (96) -- --
---------- ----------- ------------
Balance at end of period $ 12,748 $ 11,932 $ 11,022
========== ========== ===========
</TABLE>
Page 28 of 28
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000823610
<NAME> Rancon Pacific Realty, L.P.
<MULTIPLIER> 1000
<CURRENCY> U.S.dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 1,876
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,963
<PP&E> 42,736
<DEPRECIATION> 12,748
<TOTAL-ASSETS> 32,376
<CURRENT-LIABILITIES> 347
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,466
<TOTAL-LIABILITY-AND-EQUITY> 32,376
<SALES> 0
<TOTAL-REVENUES> 6,278
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,919
<INCOME-PRETAX> 559
<INCOME-TAX> 0
<INCOME-CONTINUING> 559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 559
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
