-----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, Bh5asZPG/QF/uywJ9HLk+wBbYyyZXPzR3OWsBPYhDfxyNIRaJjb+wHu9csiSrjLG ChG1pEJTkFi8iMRGD961yA== 0000890566-99-001095.txt : 19990811 0000890566-99-001095.hdr.sgml : 19990811 ACCESSION NUMBER: 0000890566-99-001095 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA PACIFIC DEVELOPMENT FUND II CENTRAL INDEX KEY: 0000719606 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953856271 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12036 FILM NUMBER: 99683037 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 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 June 30, 1999 ---------------------------------------------------- Commission file number 0-12036 ---------------------------------------------------- SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) State of California 95-3856271 - --------------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 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 ------ Balance Sheets - June 30, 1999 and December 31, 1998 5 Statements of Operations - For the Six Months Ended June 30, 1999 and for the Three Months Ended June 30, 1999 and 1998 6 Statements of Changes in Partners' Equity - From April 29, 1983 (inception of Partnership) to December 31, 1998 and for the Six Months Ended June 30, 1999 7 Statements of Cash Flows - For the Six Months Ended June 30, 1999 and 1998 8 Notes to Financial Statements 9 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 Partnership's Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The Partnership currently owns three properties; 5850 San Felipe, Sierra Westlakes, and Sierra Southwest Pointe. In addition, the Partnership holds a 33.01% interest in Sierra Mira Mesa Partners ("SMMP"). (b) RESULTS OF OPERATIONS Rental income for the six months ended June 30, 1999 increased by $24,000, or 2%, when compared to the corresponding period in the prior year, primarily due to an increase in rental rates. This increase was partially offset as a result of lower common area maintenance fees billed during the period. Rental income for the three months ended June 30, 1999 increased by $24,000, or 4%, principally due to the higher rental rates. Occupancy at the properties remained comparable between the same periods. 2 Total operating expenses for the six months ended June 30, 1999 increased $129,000, or 19%, in comparison to the corresponding period in prior year, principally due to an increase in administrative fees and maintenance and repair costs incurred during the period. Further, lower property taxes were recorded in 1998 primarily due to a refund resulting from a successful tax appeal at 5850 San Felipe. Operating expenses for the three months ended June 30, 1999 increased by $76,000, or 23%, principally as a result of higher administrative fees and other operating expenses incurred during the quarter. Depreciation and amortization expenses for the six months ended June 30, 1999 decreased by $31,000, or 7%, primarily due to fully depreciated capitalized tenant improvements. The Partnership's share of income (loss) from investment in SMMP was $90,000 for the six months ended June 30, 1999 compared to ($51,000) for the corresponding period in 1998. The Partnership had understated its share of loss from investment in SMMP in 1997 and recorded a $76,000 adjustment in the first quarter of 1998. SMMP generated increased income for the six months ended June 30, 1999 when compared to the same period in the prior year. (c) LIQUIDITY AND CAPITAL RESOURCES In January 1999, the mortgage note on the Sierra Southwest Pointe property with a principal balance of $1,300,000 matured. The loan contains an option to extend the maturity date ten years from the date the option is exercised. The Partnership has decided to exercise this option and is currently negotiating extension terms with the lender. Management anticipates a fixed interest rate equal to the U.S. Government Security rate plus 250 basis points with monthly principal and interest payments based on a thiry-year amortization. The loan is secured by a trust deed on the Sierra Southwest Pointe property. The Partnership is in an illiquid position as of June 30, 1999 with cash and billed receivables of $173,000 compared to $330,000 of accrued and other liabilities. The Partnership's primary capital requirements will be for the construction of new tenant space. It is anticipated that these requirements will be funded from the operations of the properties and distributions from SMMP. (d) YEAR 2000 COMPLIANCE The Year 2000 Compliance issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Partnership's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. As a result, many companies' software and computer systems may need to be upgraded or replaced in order to comply with Year 2000 requirements. 3 The Partnership employs a property management company to manage, operate and lease the property. The management company believes it will be ready for the Year 2000 date change by the end of 1999. The impact of Year 2000 non-compliance by other third parties cannot accurately be gauged. The total cost to the Partnership of activities associated with Year 2000 Compliance is not anticipated to be material to its financial position or results of operations in any given year. In January 1999, the Partnership began utilizing a new software program to maintain books and records. The new software program is Year 2000 compliant. The total amount of potential risk that would be reasonably likely to result from Year 2000 failures cannot presently be estimated. In the event the Partnership does not properly identify Year 2000 issues in a timely manner, there can be no assurance that Year 2000 issues will not materially affect the Partnership's results. The Partnership's contingency plan should systems fail due to the Year 2000 date change is to temporarily convert to a manual system. The Partnership believes it could temporarily operate on a manual system without adversely impacting operations. The preceding Year 2000 discussion contains various forward-looking statements which represent the Partnership's beliefs or expectations regarding future events. All forward-looking statements involve a number of risks and uncertainties that could cause the actual results to differ materially from projected results. 4 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) BALANCE SHEETS JUNE 30, 1999 AND DECEMBER 31, 1998 - --------------------------------------------------------------------------------
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- ASSETS Cash and cash equivalents ...................... $ 48,260 $ 71,180 Receivables: Note, net of deferred gain of $736,271 ....... 2,772,729 2,772,729 Unbilled rent ................................ 260,683 277,328 Billed rent .................................. 124,263 79,259 Due from affiliates .......................... 1,005,459 1,005,459 Other receivables ............................ 203,876 7,946 Income-producing properties - net of accumulated depreciation and valuation allowance of $3,449,469 and $3,117,658, respectively ................................. 10,747,979 10,899,304 Investment in unconsolidated joint venture ..... 3,281,234 3,193,894 Other assets ................................... 989,894 1,035,815 ------------- ----------------- Total Assets ................................... $ 19,434,377 $ 19,342,914 ============= ================= LIABILITIES AND PARTNERS' EQUITY Accrued and other liabilities .................. $ 330,465 $ 579,821 Due to affiliate ............................... 306,184 0 Notes payable .................................. 6,219,530 6,231,204 ------------- ----------------- Total Liabilities .............................. 6,856,179 6,811,025 ------------- ----------------- Partners' equity: General Partner .............................. 0 0 Limited Partners: Class A Limited Partners: 60,000 units authorized, 56,674 issued and outstanding ............ 8,226,587 8,196,299 Class B Limited Partners: 60,000 units authorized, 29,979 issued and outstanding ............ 4,351,611 4,335,590 ------------- ----------------- Total Partners' equity ......................... 12,578,198 12,531,889 ------------- ----------------- Total Liabilities and Partners' equity ......... $ 19,434,377 $ 19,342,914 ============= =================
UNAUDITED SEE ACCOMPANYING NOTES 5 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 AND FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 - --------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- REVENUES: Rental income .............................. $ 1,194,025 $ 1,170,354 $ 569,806 $ 546,338 Interest income ............................ 204,768 186,318 102,364 93,233 ----------- ----------- ----------- ----------- Total revenues .......................... 1,398,793 1,356,672 672,170 639,571 ----------- ----------- ----------- ----------- EXPENSES: Operating expenses ......................... 793,426 664,480 404,314 327,869 Depreciation and amortization .............. 434,505 465,456 218,741 238,415 Interest ................................... 214,322 220,657 106,539 109,950 ----------- ----------- ----------- ----------- Total costs and expenses ................ 1,442,253 1,350,593 729,594 676,234 ----------- ----------- ----------- ----------- (LOSS) INCOME BEFORE PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE INCOME (LOSS) ..................... (43,460) 6,079 (57,424) (36,663) ----------- ----------- ----------- ----------- PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE INCOME (LOSS) ............... 89,769 (50,812) 59,894 22,885 ----------- ----------- ----------- ----------- NET INCOME (LOSS) ............................ $ 46,309 $ (44,733) $ 2,470 $ (13,778) =========== =========== =========== =========== Net income (loss) per limited partnership unit $ 0.53 $ (0.52) $ 0.03 $ (0.16) =========== =========== =========== ===========
UNAUDITED SEE ACCOMPANYING NOTES 6 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' EQUITY FROM APRIL 29, 1983 (INCEPTION OF PARTNERSHIP) TO DECEMBER 31, 1998 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 - --------------------------------------------------------------------------------
LIMITED PARTNERS TOTAL -------------------------------------------- GENERAL PARTNERS' CLASS A CLASS B TOTAL PER UNIT PARTNER EQUITY ------------ ------------ ------------ ----------- ------------ ------------ Proceeds from sale of partnership units ................. $ 14,392,000 $ 7,579,000 $ 21,971,000 $ 250.00 $ 21,971,000 Underwriting commissions and other organization expenses ... (1,939,045) (1,021,124) (2,960,169) (33.68) (2,960,169) Repurchase of 1,231 partnership units (177,934) (66,167) (244,101) 0.06 -- (244,101) Cumulative net income (loss) (to December 31, 1998) ............ (393,677) (208,839) (602,516) (6.96) $ 46,674 (555,842) Cumulative distributions (to December 31, 1998) ............ (3,685,045) (1,947,280) (5,632,325) (64.80) (46,674) (5,678,999) ------------ ------------ ------------ ----------- ------------ ------------ Partners' equity - January 1, 1999 .. 8,196,299 4,335,590 12,531,889 144.62 0 12,531,889 Net income .......................... 30,288 16,021 46,309 0.53 46,309 ------------ ------------ ------------ ----------- ------------ ------------ Partners' equity - June 30, 1999 .... $ 8,226,587 $ 4,351,611 $ 12,578,198 $ 145.15 $ 0 $ 12,578,198 ============ ============ ============ =========== ============ ============
UNAUDITED SEE ACCOMPANYING NOTES 7 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 - --------------------------------------------------------------------------------
1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .................................... $ 46,309 $ (44,733) Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: Depreciation and amortization ...................... 434,505 465,456 Undistributed (income) loss of unconsolidated joint venture .................................... (89,769) 50,812 Increase in rent receivable ........................ (28,359) (67,294) Increase in other receivables ...................... (195,930) (148,522) Increase in other assets ........................... (35,967) (179,858) (Decrease) increase in accrued and other liabilities (249,356) 94,526 --------- --------- Net cash (used in) provided by operating activities (118,567) 170,387 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property additions .................... (198,863) (353,602) --------- --------- Net cash used in investing activities .............. (198,863) (353,602) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on notes payable ................ (11,674) (10,672) Borrowings from affiliate .......................... 306,184 164,000 --------- --------- Net cash provided by financing activities .......... 294,510 153,328 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS .............. (22,920) (29,887) CASH AND CASH EQUIVALENTS - Beginning of period ........ 71,180 69,790 --------- --------- CASH AND CASH EQUIVALENTS - End of period .............. $ 48,260 $ 39,903 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest ........... $ 191,335 $ 200,944 ========= =========
UNAUDITED SEE ACCOMPANYING NOTES 8 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS ------------------------------------------------------------------------ 1. BASIS OF FINANCIAL STATEMENTS 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 June 30, 1999 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, 1998. 2. RELATED PARTY TRANSACTIONS Included in the financial statements for the six months ended June 30, 1999 and 1998 are affiliate transactions as follows: JUNE 30 --------------------------- 1999 1998 -------- -------- Management fees ........... $ 55,105 $ 57,338 Administrative fees ....... 163,402 103,146 Leasing fees .............. 12,173 37,553 Construction fees ......... 0 16,754 3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE Sierra Mira Mesa Partners ("SMMP") was formed in 1985 between the Partnership and Sierra Pacific Pension Investors '84 ("SPPI'84"), an affiliate, to develop and operate the real property known as Sierra Mira Mesa, an office building, located in San Diego, California. The Partnership's initial ownership interest in SMMP was 51%; the remaining 49% was owned by SPPI'84. Effective December 31, 1996, the general partners amended the partnership agreement to allow for adjustments in the sharing ratio each year based upon the relative net contributions and distributions since inception of each general partner. At June 30, 1999 the Partnership's interest in SMMP is 33.01%; the remaining 66.99% interest is owned by SPPI'84. The consolidated financial statements of SMMP include the accounts of SMMP and Sorrento I Partners, a majority owned California general partnership. Summarized income statement information for SMMP for the six months ended June 30, 1999 and 1998 follows: UNAUDITED 9 Sierra Pacific Development Fund II Notes to Financial Statements Page two JUNE 30 ------------------------- 1999 1998 ---------- ---------- Rental income .............. $1,059,081 $ 938,391 Total revenues ............. 1,170,121 1,040,153 Operating expenses ......... 361,757 378,712 Share of unconsolidated joint venture loss ....... 36,566 63,128 Net income ................. 269,349 74,196 As of June 30, 1999, SMMP holds a 35.10% interest in Sorrento II Partners ("SIIP"), a California general partnership with Sierra Pacific Institutional Properties V formed in 1993; a 6.55% interest in Sierra Creekside Partners ("SCP"), a California general partnership with Sierra Pacific Development Fund formed in 1994; and a 33.32% interest in Sierra Vista Partners ("SVP"), a California general partnership with Sierra Pacific Development Fund III formed in 1994. Summarized income statement information for these Partnerships, which are accounted for by SMMP under the equity method, for the six months ended June 30, 1999 and 1998 follows: SIIP ----------------------- JUNE 30 ----------------------- 1999 1998 -------- -------- Rental income .............. $554,777 $351,384 Total revenues ............. 554,777 351,384 Operating expenses ......... 243,567 201,480 Net loss ................... 92,300 252,939 SCP SVP ----------------------- -------------------- JUNE 30 JUNE 30 ----------------------- -------------------- 1999 1998 1999 1998 --------- --------- -------- ------- Rental income .............. $ 448,066 $ 490,069 $ 0 $ 0 Total revenues ............. 448,066 490,069 11,907 93,656 Operating expenses ......... 247,078 233,868 14,577 28,715 Net (loss) income .......... (50,053) (7,261) (2,670) 64,941 UNAUDITED 10 Sierra Pacific Development Fund II Notes to Financial Statements Page three 4. PARTNERS' EQUITY Equity and net income (loss) per limited partnership unit is determined by dividing the Limited Partners' share of the Partnership's equity and net income (loss) by the number of limited partnership units outstanding, 56,674 Class A and 29,979 Class B. UNAUDITED 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following Exhibits are filed herewith pursuant to Rule 601 of Regulation S-K. Exhibit Number Description of Exhibit - ----------- ----------------------------- 27 Financial Data Schedule (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 II a Limited Partnership S-P PROPERTIES, INC. General Partner Date: AUGUST 4, 1999 /S/ THOMAS N. THURBER -------------- -------------------------- Thomas N. Thurber President and Director Date: AUGUST 4, 1999 /S/ G. ANTHONY EPPOLITO -------------- -------------------------- G. Anthony Eppolito Chief Accountant 12 EX-27 2
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIERRA PACIFIC DEVELOPMENT FUND II JUNE 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 48,260 0 588,822 0 0 1,381,858 14,197,448 3,449,469 19,434,377 636,649 6,219,530 0 0 0 12,578,198 19,434,377 1,194,025 1,398,793 0 793,426 434,505 0 214,322 46,309 0 46,309 0 0 0 46,309 .53 .53
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