-----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, I5pwcugAfFylS+nqUfVe66KAUBYnH25kR9E/90X5pEQlNsyTu9EQRjiT1gpWatuQ HEO4qB1AkbcZ7B3PLTtfow== 0000890566-99-001395.txt : 19991109 0000890566-99-001395.hdr.sgml : 19991109 ACCESSION NUMBER: 0000890566-99-001395 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991108 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: 99743441 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 September 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 or organization) Number) 5850 San Felipe, Suite 450 Houston, Texas 77057 - ----------------------------------- ---------------------------- (Address of principal executive (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 - September 30, 1999 and December 31, 1998 5 Statement of Operations - For the Nine Months Ended September 30, 1999 6 and for the Three Months Ended September 30, 1999 and 1998 Statements of Changes in Partners' Equity - From April 29, 1983 (inception of Partnership) to December 31, 1998 and for the Nine 7 Months Ended September 30, 1999 Statements of Cash Flows - For the Nine Months Ended September 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 nine months and three months ended September 30, 1999 increased by $57,000, or 3%, and by $34,000, or 6%, when compared to the corresponding periods in the prior year, primarily due to additional common area maintenance fee billings at Sierra Westlakes. This increase was partially offset as a result of a decrease in occupancy at Sierra Southwest Pointe from 97% at September 31, 1998 to 85% at September 30, 1999. Occupancy at 5850 San Felipe and Sierra Westlakes remained comparable between the same periods. 2 Operating expenses for the nine months ended September 30, 1999 increased $53,000, or 5%, when compared to the corresponding period in prior year, primarily due to an increase in property taxes and administrative costs. This increase was partially offset due to lower professional fees incurred during the period. Operating expenses for the three months ended September 30, 1999 decreased by $76,000, or 18%, principally as a result of a decrease in professional fees and administrative costs. Further, utilities and maintenance and repair costs were lower during the quarter. Depreciation and amortization expenses for the nine months ended September 30, 1999 decreased by $32,000, or 5%, principally due to fully depreciated capitalized tenant improvements. The Partnership's share of income (loss) from investment in SMMP was $121,000 for the nine months ended September 30, 1999 compared to ($37,000) for the corresponding period in the prior year. 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 nine months ended September 30, 1999 when compared to the same period in 1998. (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. A new loan in the amount of $1,500,000 was funded in August 1999 with the same lender. This loan bears interest at 8.35% per annum and calls for monthly principal and interest payments of $11,927. Such payments shall continue until September 2009, when the indebtedness is due in full. The net proceeds will primarily be used to pay accrued liabilities and to fund future capital improvements. The loan is secured by a trust deed on the Sierra Southwest Pointe property. The Partnership is in a liquid position as of September 30, 1999 with cash and billed receivables of $624,000 compared to $354,000 of accrued and other liabilities. The Partnership's primary capital requirements will be for the construction of new tenant space. (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 SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 - --------------------------------------------------------------------------------
September 30, 1999 December 31, 1998 ------------------ ----------------- ASSETS Cash and cash equivalents ...................... $ 446,186 $ 71,180 Receivables: Note, net of deferred gain of $736,271 ....... 2,772,729 2,772,729 Unbilled rent ................................ 246,960 277,328 Billed rent .................................. 177,327 79,259 Due from affiliates .......................... 1,005,459 1,005,459 Other receivables ............................ 306,049 7,946 Income-producing properties - net of accumulated depreciation and valuation allowance of $3,619,948 and $3,117,658, respectively ................................. 10,572,817 10,899,304 Investment in unconsolidated joint venture ..... 3,310,926 3,193,894 Other assets ................................... 884,256 1,035,815 ----------- ----------- Total Assets ................................... $19,722,709 $19,342,914 =========== =========== LIABILITIES AND PARTNERS' EQUITY Accrued and other liabilities .................. $ 354,355 $ 579,821 Due to affiliate ............................... 306,184 0 Notes payable .................................. 6,412,314 6,231,204 ----------- ----------- Total Liabilities .............................. 7,072,853 6,811,025 ----------- ----------- Partners' equity: General Partner .............................. 0 0 Limited Partners: Class A Limited Partners: 60,000 units authorized, 56,674 issued and outstanding ............ 8,273,453 8,196,299 Class B Limited Partners: 60,000 units authorized, 29,979 issued and outstanding ............ 4,376,403 4,335,590 ----------- ----------- Total Partners' equity ......................... 12,649,856 12,531,889 ----------- ----------- Total Liabilities and Partners' equity ......... $19,722,709 $19,342,914 =========== ===========
UNAUDITED SEE ACCOMPANYING NOTES 5 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 - --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended September 30, September 30, --------------------------- -------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- REVENUES: Rental income .............................. $ 1,797,273 $ 1,739,891 $ 603,248 $ 569,537 Interest income ............................ 307,543 281,420 102,775 95,102 ----------- ----------- ----------- ----------- Total revenues .......... 2,104,816 2,021,311 706,023 664,639 ----------- ----------- ----------- ----------- EXPENSES: Operating expenses ......................... 1,130,210 1,077,146 336,784 412,666 Depreciation and amortization .............. 652,328 684,481 217,823 219,025 Interest ................................... 324,986 330,633 110,664 109,976 ----------- ----------- ----------- ----------- Total costs and expenses 2,107,524 2,092,260 665,271 741,667 ----------- ----------- ----------- ----------- (LOSS) INCOME BEFORE PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE INCOME (LOSS) ..................... (2,708) (70,949) 40,752 (77,028) ----------- ----------- ----------- ----------- PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE INCOME (LOSS) ............... 120,675 (36,596) 30,906 14,216 ----------- ----------- ----------- ----------- NET INCOME (LOSS) ............................ $ 117,967 $ (107,545) $ 71,658 $ (62,812) =========== =========== =========== =========== Net income (loss) per limited partnership unit $ 1.36 $ (1.24) $ 0.83 $ (0.72) =========== =========== =========== ===========
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 NINE MONTHS ENDED SEPTEMBER 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 .......................... 77,154 40,813 117,967 1.36 117,967 ------------ ------------ ------------ ------- ------------ ------------ Partners' equity - September 30, 1999 $ 8,273,453 $ 4,376,403 $ 12,649,856 $145.98 $ 0 $ 12,649,856 ============ ============ ============ ======= ============ ============
UNAUDITED SEE ACCOMPANYING NOTES 7 SIERRA PACIFIC DEVELOPMENT FUND II (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 - --------------------------------------------------------------------------------
1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .................................... $ 117,967 $ (107,545) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization ...................... 652,328 684,481 Undistributed (income) loss of unconsolidated joint venture .................................... (120,675) 36,596 Increase in rent receivable ........................ (67,700) (56,854) Increase in other receivables ...................... (298,103) (241,902) Decrease (increase) in other assets ................ 28,916 (210,674) (Decrease) increase in accrued and other liabilities (225,466) 94,222 ----------- ----------- Net cash provided by operating activities .......... 87,267 198,324 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property additions .................... (199,555) (411,877) ----------- ----------- Net cash used in investing activities .............. (199,555) (411,877) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Funding of note payable secured by property ........ 1,500,000 0 Principal payments on notes payable ................ (1,318,890) (17,270) Borrowings from affiliate .......................... 306,184 206,000 ----------- ----------- Net cash provided by financing activities .......... 487,294 188,730 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................... 375,006 (24,823) CASH AND CASH EQUIVALENTS - Beginning of period ........ 71,180 69,790 ----------- ----------- CASH AND CASH EQUIVALENTS - End of period .............. $ 446,186 $ 44,967 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest ........... $ 300,206 $ 311,027 =========== ===========
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 September 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 nine months ended September 30, 1999 and 1998 are affiliate transactions as follows: September 30 -------------------- 1999 1998 -------- -------- Management fees ... $ 83,323 $ 86,229 Administrative fees 216,879 175,095 Leasing fees ...... 29,957 38,295 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 September 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 nine months ended September 30, 1999 and 1998 follows: UNAUDITED 9 Sierra Pacific Development Fund II Notes to Financial Statements Page two September 30 ------------------------ 1999 1998 ------------------------ Rental income ......... $1,581,014 $1,402,947 Total revenues ........ 1,748,607 1,556,950 Operating expenses .... 546,496 571,196 Share of unconsolidated joint venture loss .. 50,092 101,443 Net income ............ 358,835 116,785 As of September 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 nine months ended September 30, 1999 and 1998 follows: SIIP ----------------------- September 30 ----------------------- 1999 1998 ----------------------- Rental income .... $ 831,944 $ 554,735 Total revenues ... 831,944 554,735 Operating expenses 338,169 292,399 Net loss ......... (127,792) (350,695) SCP SVP --------------------------------------------------- September 30 September 30 --------------------------------------------------- 1999 1998 1999 1998 --------------------------------------------------- Rental income .... $ 682,407 $ 706,189 $ 0 $ 0 Total revenues ... 682,407 706,189 11,907 93,656 Operating expenses 376,008 357,587 14,577 33,075 Net (loss) income (66,373) (50,279) (2,670) 60,581 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: NOVEMBER 4, 1999 /s/ THOMAS N. THURBER ---------------- ------------------------------ Thomas N. Thurber President and Director Date: NOVEMBER 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 SEPTEMBER 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 SEP-30-1999 446,186 0 730,336 0 0 1,935,021 10,572,817 3,619,948 19,722,709 660,519 6,412,314 0 0 0 12,649,856 19,722,709 1,797,273 2,104,816 0 1,130,210 652,328 0 324,986 117,967 0 117,967 0 0 0 117,967 1.36 1.36
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