-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOLSCwAYfuP/ZjybQqf/9l9g0vE0kMwsXQYrQS68m/bOia86htSESyQCFoVXmJ/S SJZYmZXIc600J8dsZbpkbg== 0000912057-01-515785.txt : 20010516 0000912057-01-515785.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-515785 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA PACIFIC DEVELOPMENT FUND CENTRAL INDEX KEY: 0000351698 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953643693 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11068 FILM NUMBER: 1636225 BUSINESS ADDRESS: STREET 1: 5850 SAN FELIPE STREET 2: STE 500 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7137066271 MAIL ADDRESS: STREET 1: 5850 SAN FELIPE STREET 2: STE 500 CITY: HOUSTON STATE: TX ZIP: 77057 10-Q 1 a2049347z10-q.txt 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter ended March 31, 2001 ------------------------------------------------------ Commission file number 0-11068 ------------------------------------------------------ SIERRA PACIFIC DEVELOPMENT FUND (A LIMITED PARTNERSHIP) --------------------- State of California 95-3643693 - --------------------------------- -------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5850 San Felipe, Suite 450 Houston, Texas 77057 - ----------------------------------------- ---------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 706-6271 ----------------------------------------- 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 [ ]. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following financial statements are submitted in the next pages: Page number Consolidated Balance Sheets - March 31, 2001 and December 31, 2000 4 Consolidated Statements of Operations - For the Three Months Ended March 31, 2001 and 2000 5 Consolidated Statements of Changes in Partners' Equity - For the Year Ended December 31,2000 and for the Three Months Ended March 31, 2001 6 Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2001 and 2000 7 Notes to Consolidated Financial Statements 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) OVERVIEW The following discussion should be read in conjunction with the Sierra Pacific Development Fund's (the Partnership) Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The Partnership currently owns a 100% interest in the Sierra Creekside Partnership, which operates the Sierra Creekside property (the Property) in San Diego, CA. (b) RESULTS OF OPERATIONS Rental income for the three months ended March 31, 2001 increased by approximately $57,000, or 25%, when compared to the same period in the prior year. This increase was primarily due to higher rental rates obtained as a result of tenant rollover at the Property. Further, several tenants renewed or extended their leases at higher rental rates. The Property was 100% occupied at March 31, 2001 and 2000. 2 Operating expenses for the three months ended March 31, 2001 increased by approximately $66,000, or 42%, in comparison to the corresponding period in 2000. This increase was principally due to higher maintenance and repair costs and utilities incurred during the quarter. In addition, insurance, accounting and auditing costs, and other operating expenses rose during the quarter. Depreciation and amortization expenses for the first quarter decreased by approximately $9,000, or 11%, principally due to fully depreciated capitalized tenant improvements, when compared to the first quarter of the prior year. Interest expense for the first quarter increased by approximately $19,000, or 26%, when compared to the first quarter of the prior year. As stated below, the Partnership refinanced its mortgage loan on the Property in January 2000. An extraordinary loss of approximately $46,000 was recorded in the first quarter of the prior year due to the write-off of deferred loan costs associated with the payoff of the mortgage loan with Home Federal Savings. (c) LIQUIDITY AND CAPITAL RESOURCES In January 2000, the Partnership paid its loan balance of $1,669,000 to Home Federal Savings and entered into a loan agreement with General Electric Capital Corporation (GECC) in the principal amount of $4,250,000. The lender funded $4,050,000 at closing and held back $200,000 to be drawn upon to help finance future tenant improvements and leasing costs. The Partnership received net proceeds of $2,222,000 as a result of the new loan. The loan is secured by the Property and bears interest at 2.75% above the GECC Composite Commercial Paper Rate. Principal and interest payments are due monthly based on a 30-year amortization. The loan matures January 31, 2005. The majority of the loan proceeds were distributed to the minority owner of the property, Sierra Mira Mesa Partners (SMMP). The Partnership is in an illiquid position at March 31, 2001 with cash and billed receivables of approximately $29,000 and current liabilities of approximately $155,000. A secondary source of cash is available through contributions from SMMP. Management expects these contributions will be adequate to meet the financial obligations of the Partnership in the foreseeable future. During the three months ended March 31, 2000, SMMP contributed $31,000 to the Partnership and received distributions of $86,000 from the Partnership. The Partnership's primary capital requirements are for the construction of new tenant space and debt obligations. It is anticipated that these requirements will be funded from the operations of the Property, the $200,000 tenant improvement/lease commission holdback, and contributions from SMMP. Inflation: The Partnership does not expect inflation to be a material factor in its operations in 2001. 3 SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 - --------------------------------------------------------------------------------
March 31, 2001 December 31, 2000 (Unaudited) ---------------- ------------------ ASSETS Cash and cash equivalents $ 24,914 $ 47,822 Receivables: Unbilled rent 50,078 45,968 Billed rent 4,099 23,154 Income-producing property - net of accumulated depreciation and valuation allowance of $3,368,666 and $3,321,820, respectively 2,315,931 2,354,368 Other assets - net of accumulated amortization of $214,032 and $188,798, respectively 322,118 303,252 Excess distributions to minority partner 2,595,963 2,540,963 ----------- ----------- Total Assets $ 5,313,103 $ 5,315,527 =========== =========== LIABILITIES AND PARTNERS' EQUITY Accrued and other liabilities $ 243,579 $ 141,487 Note payable 4,018,219 4,025,544 ----------- ----------- Total Liabilities 4,261,798 4,167,031 ----------- ----------- Partners' equity (deficit): General Partner (84,068) (83,096) Limited Partners: 30,000 units authorized, 29,354 issued and outstanding 1,135,373 1,231,592 ----------- ----------- Total Partners' equity 1,051,305 1,148,496 ----------- ----------- Total Liabilities and Partners' equity $ 5,313,103 $ 5,315,527 =========== ===========
SEE ACCOMPANYING NOTES 4 SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 - --------------------------------------------------------------------------------
2001 2000 (Unaudited) (Unaudited) ----------- ------------ REVENUES: Rental income $ 286,237 $ 229,440 --------- --------- Total revenues 286,237 229,440 --------- --------- EXPENSES: Operating expenses 219,691 154,180 Depreciation and amortization 72,080 81,042 Interest 91,657 72,881 --------- --------- Total costs and expenses 383,428 308,103 --------- --------- LOSS BEFORE EXTRAORDINARY LOSS (97,191) (78,663) EXTRAORDINARY LOSS FROM WRITE-OFF OF DEFERRED LOAN COSTS 0 (46,020) --------- --------- LOSS BEFORE MINORITY INTEREST'S SHARE OF CONSOLIDATED JOINT VENTURE LOSS (97,191) (124,683) --------- --------- MINORITY INTEREST'S SHARE OF CONSOLIDATED JOINT VENTURE LOSS 0 6,334 --------- --------- NET LOSS $ (97,191) $(118,349) ========= ========= Per limited partnership unit: Loss before extraordinary loss $ (3.28) $ (2.44) Extraordinary loss 0 (1.55) --------- --------- Net loss per limited partnership unit $ (3.28) $ (3.99) ========= =========
SEE ACCOMPANYING NOTES 5 SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE THREE MONTHS ENDED MARCH 31, 2001 - --------------------------------------------------------------------------------
Limited Partners Total -------------------------- General Partners' Per Unit Total Partner Equity ---------- ------------ ------------ ------------ Proceeds from sale of partnership units $500.00 $ 14,677,000 $ 14,677,000 Underwriting commissions and other organization expenses (60.29) (1,769,862) (1,769,862) Cumulative net (loss) income (to December 31, 1999) (225.92) (6,631,704) $ 14,600 (6,617,104) Cumulative distributions (to December 31, 1999) (166.75) (4,894,473) (14,600) (4,909,073) ------- ------------ ------------ ------------ Partners' equity - January 1, 2000 47.04 1,380,961 0 1,380,961 Transfer among general partner and limited partners 2.75 80,771 (80,771) 0 Net loss (7.84) (230,140) (2,325) (232,465) ------- ------------ ------------ ------------ Partners' equity (deficit) - December 31, 2000 (audited) 41.95 1,231,592 (83,096) 1,148,496 Net loss (unaudited) (3.28) (96,219) (972) (97,191) ------- ------------ ------------ ------------ Partners' equity (deficit) - March 31, 2001 (unaudited) $ 38.67 $ 1,135,373 $ (84,068) $ 1,051,305 ======= ============ ============ ============
SEE ACCOMPANYING NOTES 6 SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 - --------------------------------------------------------------------------------
2001 2000 (Unaudited) (Unaudited) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (97,191) $ (118,349) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 72,080 81,042 Extraordinary loss from write-off of deferred loan costs 0 46,020 Minority interest's share of consolidated joint venture loss 0 (6,334) Decrease in receivables 14,945 9,553 Increase in other assets (44,100) (31,566) Increase in accrued and other liabilities 102,092 67,176 ----------- ----------- Net cash provided by operating activities 47,826 47,542 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property additions (8,409) 0 ----------- ----------- Net cash used in investing activities (8,409) 0 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable secured by property 0 4,050,000 Principal payments on notes payable (7,325) (1,675,632) Payments on deferred loan costs 0 (112,436) Contributions from minority partner 31,000 0 Distributions to minority partner (86,000) (2,361,547) ----------- ----------- Net cash used in financing activities (62,325) (99,615) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (22,908) (52,073) CASH AND CASH EQUIVALENTS Beginning of period 47,822 134,154 ----------- ----------- CASH AND CASH EQUIVALENTS End of period $ 24,914 $ 82,081 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 94,416 $ 55,108 =========== ===========
SEE ACCOMPANYING NOTES 7 SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION In February 1994, Sierra Pacific Development Fund (the Partnership) created a general partnership (Sierra Creekside Partners (SCP)) with Sierra Mira Mesa Partners (SMMP) to facilitate cash contributions by SMMP for the continued development and operation of the Sierra Creekside property. The percentage interests of the Partnership and SMMP are to be adjusted each year on January 1 during the term of SCP, beginning January 1, 1995 and ending December 31, 2013 unless terminated sooner, based upon the relative net contributions and distributions since inception through the preceding December 31. In 2000, SCP made distributions to SMMP in excess of SMMP's net cumulative contributions. Accordingly, on January 1, 2001, the Partnership's interest in SCP was increased to 100% from 94.92%. The excess distributions made to SMMP and cumulative loss allocated to SMMP is reported as an asset in the Partnership's balance sheet. Under the terms of the SCP joint venture agreement, SMMP would be obligated to contribute to the Partnership any negative balance standing in its capital account upon liquidation of the Partnership. 2. BASIS OF FINANCIAL STATEMENTS The accompanying unaudited consolidated condensed financial statements include the accounts of the Partnership and SCP at March 31, 2001. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Partnership's management, these unaudited financial statements reflect all adjustments which are necessary for a fair presentation of its financial position at March 31, 2001 and results of operations and cash flows for the periods presented. All adjustments included in these statements are of a normal and recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Annual Report of the Partnership for the year ended December 31, 2000. 3. RELATED PARTY TRANSACTIONS Included in the financial statements for the three months ended March 31, 2001 and 2000 are affiliate transactions as follows:
March 31 ---------------------------- 2001 2000 ----------- ------------ Management fees $ 15,859 $ 10,987 Administrative fees 10,355 10,632
8 Sierra Pacific Development Fund and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Page two 4. PARTNERS' EQUITY Equity and net loss per limited partnership unit is determined by dividing the limited partners' share of the Partnership's equity and net loss by the number of limited partnership units outstanding, 29,354. During 2000, an amount was transferred between the partners' equity accounts such that 99% of cumulative operating income, gains, losses, deductions and credits of the Partnership was allocated among the limited partners and 1% was allocated to the general partner. Management does not believe that the effect of this transfer was significant. 5. PENDING TRANSACTION CGS Real Estate Company, Inc. (CGS), an affiliate of the corporate general partner of the Partnership, is continuing the development of a plan which will combine the Partnership's property with the properties of other real estate partnerships managed by CGS and its affiliates. These limited partnerships own office properties, industrial properties, shopping centers and residential apartment properties. It is expected that the acquiror, American Spectrum Realty, Inc. (ASR), would qualify in the future as a real estate investment trust. Limited partners would receive shares of common stock in ASR, which would be listed on a national securities exchange. The Partnership's participation in this plan will require the consent of its limited partners. ASR filed a registration statement on Form S-4 August 14, 2000 relating to the solicitation of consents with the Securities and Exchange Commission (SEC). The registration statement was amended February 14, 2001 and April 24, 2001. The plan and the benefits and risks thereof will be described in detail in the final prospectus/consent solicitation statement included in the registration statement filed under the Securities Act of 1933 at the time it is declared effective by the SEC. Following effectiveness, solicitation materials will be provided to limited partners in connection with the solicitation of the consent of the limited partners. There can be no assurances that the plan described above will be consummated. 6. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires a company to recognize all derivative instruments (including certain derivative instruments embedded in other contracts) as assets or liabilities in its balance sheet and measure them at fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended, is effective for fiscal years beginning after June 15, 2000. The Partnership adopted the accounting provisions of SFAS No. 133 in 2001. The implementation of SFAS No. 133 did not have a significant effect on the Partnership's financial conditions or results of operations. 9 Sierra Pacific Development Fund and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Page three In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101), on Revenue Recognition in Financial Statements, which summarizes certain of the SEC staff's views on applying generally accepted accounting principles to revenue recognition in financial statements. The Partnership adopted the accounting provisions of SAB 101 in 2000. The implementation of SAB 101 did not have a significant effect on the Partnership's financial condition or results of operations. 7. SUBSEQUENT EVENT On April 16, 2001, the combined financial statements of the parent of the general partner and other affiliates were issued. The independent public accountant's report on such statements contained an explanatory paragraph relating to the ability of the combined entity to continue as a going concern. The combined entities have experienced losses in the periods presented and have a net capital deficiency. Certain entities in the combined financial statements have not made debt payments when due and various lenders have placed $10,520,000 of debt in default. Certain entities also need to pay or refinance a significant amount of debt coming due in the next twelve months. These factors raise substantial doubt about the ability of the combined entities, including the general partner, to continue as a going concern. Management of the combined entities has plans related to these matters, which include obtaining additional loans from shareholders, obtaining extensions from lenders or refinancing all debt through the completion of the transaction discussed in Note 5. In addition, if necessary, management believes it could sell properties to generate cash to pay debt. The Partnership does not believe that the affect of the ultimate outcome of the circumstances surrounding the combined entities will have a material adverse effect on its results of operations or financial position. 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report be signed on its behalf by the undersigned thereunto duly authorized. SIERRA PACIFIC DEVELOPMENT FUND a Limited Partnership S-P PROPERTIES, INC. General Partner Date: MAY 14, 2001 /s/ THOMAS N. THURBER -------------- --------------------------------------- Thomas N. Thurber President and Director Date: MAY 14, 2001 /s/ G. ANTHONY EPPOLITO -------------- --------------------------------------- G. Anthony Eppolito Chief Accountant 11 -----END PRIVACY-ENHANCED MESSAGE-----