-----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, SDuA9EJqfnpBoSWgFrhsX+0bZwGHAxqUG5L52FNESczTtKXmwR3hVyfHfYtJjA3z 3CaooYrQRFR3JNNf3z+aCw== 0000912057-01-515789.txt : 20010516 0000912057-01-515789.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-515789 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 III CENTRAL INDEX KEY: 0000747680 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330043953 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14276 FILM NUMBER: 1636250 BUSINESS ADDRESS: STREET 1: 5850 SAN FELIPE SUITE 120 CITY: HOUSTON STATE: TX ZIP: 77057 BUSINESS PHONE: 7139776171 MAIL ADDRESS: STREET 1: 5850 SAN FELIPE STREET 2: STE 500 CITY: HOUSTON STATE: TX ZIP: 77057 10-Q 1 a2049358z10-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 0-14276 ------------------------------------------------- SIERRA PACIFIC DEVELOPMENT FUND III (A LIMITED PARTNERSHIP) State of California 33-0043953 - ---------------------------------- -------------------------------------- (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 Sierra Pacific Development Fund III's (the Partnership) Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q. The Partnership currently owns a 66.45% interest in the Sierra Vista Partnership, which operated the Sierra Vista property (the Property). The Property was sold in October 1997. The Partnership's remaining real estate investment is an 18.72% minority interest in Sorrento I Partners (SIP), which operates the Sierra Sorrento I property. The Partnership records its interest in SIP as an investment in unconsolidated joint venture and accounts for such investment on the equity method. (b) RESULTS OF OPERATIONS No rental income has been generated since the sale of the Property in 1997. Operating expenses for the quarter ended March 31, 2001 increased by approximately $8,000, or 59%, in comparison to the corresponding period in the prior year, principally 2 due to an increase in accounting and auditing costs. Such costs accounted for the majority of all operating expenses for the three months ended March 31, 2001 and 2000. The Partnership's share of loss from its investment in SIP increased by approximately $2,000, or 38%, when compared to the same period in the prior year. This increase in loss was primarily due to higher accounting and auditing costs incurred by SIP. (c) LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary capital requirements are for the continued development and operation of the Sierra Sorrento I property. It is anticipated that these requirements will be funded from the operations of Sierra Sorrento I and the Partnership's joint venture partner, Sierra Mira Mesa Partners (SMMP). As required, SMMP either advances or contributes cash to meet these requirements. SMMP has adequate resources to make the necessary advances during the foreseeable future. During the three months ended March 31, 2001, the Partnership received net contributions of approximately $9,000 from SMMP. These proceeds were used to pay operating expenses incurred during the period. Certain factors raise substantial doubt about the Partnership's ability to continue as a going concern. As shown in the financial statements, the Partnership has no operating assets and its only remaining real estate investment is its minority interest in SIP. The other partner in SIP, SMMP, will receive preferential distributions from SIP until its contributed capital is returned. The Partnership does not anticipate receiving any cash distributions from SIP in the near future. Management believes the Partnership will be able to obtain any cash needed to fund future overhead expenditures from related parties until such time as the Partnership engages in new activities or a decision is made to liquidate the Partnership. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Partnership be unable to continue as a going concern. Inflation: The Partnership does not expect inflation to be a material factor in its operations in 2001. 3 SIERRA PACIFIC DEVELOPMENT FUND III 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 $ 1,420 $ 1,100 --------- --------- Total Assets $ 1,420 $ 1,100 ========= ========= LIABILITIES AND PARTNERS' EQUITY Accrued and other liabilities $ 13,085 $ 0 Investment in unconsolidated joint venture 366,250 357,312 --------- --------- Total Liabilities 379,335 357,312 --------- --------- Minority interest in consolidated joint venture 15,709 14,011 --------- --------- Partners' deficit: General Partner (393,624) (370,223) Limited Partners: 60,000 units authorized, 36,521 issued and outstanding 0 0 --------- --------- Total Partners' deficit (393,624) (370,223) --------- --------- Total Liabilities and Partners' deficit $ 1,420 $ 1,100 ========= =========
SEE ACCOMPANYING NOTES 4 SIERRA PACIFIC DEVELOPMENT FUND III AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 - --------------------------------------------------------------------------------
2001 2000 (Unaudited) (Unaudited) ----------- ----------- REVENUES: Total revenues $ 0 $ 0 -------- -------- EXPENSES: Operating expenses 21,765 13,665 -------- -------- Total costs and expenses 21,765 13,665 -------- -------- LOSS BEFORE PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE LOSS (21,765) (13,665) -------- -------- PARTNERSHIP'S SHARE OF UNCONSOLIDATED JOINT VENTURE LOSS (8,938) (6,489) -------- -------- LOSS BEFORE MINORITY INTEREST'S SHARE OF CONSOLIDATED JOINT VENTURE LOSS (30,703) (20,154) -------- -------- MINORITY INTEREST'S SHARE OF CONSOLIDATED JOINT VENTURE LOSS 7,302 4,559 -------- -------- NET LOSS $(23,401) $(15,595) ======== ======== Net loss per limited partnership unit $ 0 $ 0 ======== ========
SEE ACCOMPANYING NOTES 5 SIERRA PACIFIC DEVELOPMENT FUND III AND SUBSIDIARY (A LIMITED PARTNERSHIP) CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT 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 $ 250.00 $ 9,222,500 $ 9,222,500 Underwriting commissions and other organization expenses (37.00) (1,364,985) (1,364,985) Repurchase of 369 partnership units (0.18) (85,005) (85,005) Cumulative net loss (to December 31, 1999) (201.63) (7,363,663) $ (322,886) (7,686,549) Cumulative distributions (to December 31, 1999) (11.19) (408,847) (21,522) (430,369) ----------- ----------- ----------- ----------- Partners' deficit - January 1, 2000 0 0 (344,408) (344,408) Net loss 0 0 (25,815) (25,815) ----------- ----------- ----------- ----------- Partners' deficit - December 31, 2000 (audited) 0 0 (370,223) (370,223) Net loss 0 0 (23,401) (23,401) ----------- ----------- ----------- ----------- Partners' deficit - March 31, 2001 (unaudited) $ 0 $ 0 $ (393,624) $ (393,624) =========== =========== =========== ===========
SEE ACCOMPANYING NOTES 6 SIERRA PACIFIC DEVELOPMENT FUND III 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 $(23,401) $(15,595) Adjustments to reconcile net loss to cash used in operating activities: Partnership's share of unconsolidated joint venture loss 8,938 6,489 Minority interest's share of consolidated joint venture loss (7,302) (4,559) Increase in accrued and other liabilities 13,085 4,251 -------- -------- Net cash used in operating activities (8,680) (9,414) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Contributions from minority partner 9,000 20,000 Distributions to minority partner 0 (1,943) -------- -------- Net cash provided by financing activities 9,000 18,057 -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 320 8,643 CASH AND CASH EQUIVALENTS Beginning of period 1,100 3,722 -------- -------- CASH AND CASH EQUIVALENTS End of period $ 1,420 $ 12,365 ======== ========
SEE ACCOMPANYING NOTES 7 SIERRA PACIFIC DEVELOPMENT FUND III AND SUBSIDIARY (A LIMITED PARTNERSHIP) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ------------------------------------------------------------------------ 1. ORGANIZATION In April 1993, Sierra Pacific Development Fund III (the Partnership) created a general partnership (Sorrento I Partners (SIP)) with Sierra Mira Mesa Partners (SMMP) to facilitate cash contributions by SMMP for the continued development and operation of the Sierra Sorrento I property. In February 1994, the Partnership formed a joint venture with SMMP known as Sierra Vista Partners (SVP) to facilitate cash contributions by SMMP for the continued development and operation of the Sierra Vista property. The Partnership Agreements of SIP and SVP (the Agreements) were amended effective January 1, 1995 to consider both contributions and distributions when calculating each partner's percentage interest at January 1 of each year as called for by the Agreements. Accordingly, on January 1, 2001, the Partnership's interest in SIP was increased from 16.76% to 18.72% and the Partnership's interest in SVP was decreased from 66.64% to 66.45% to reflect 2000 contributions and distributions. In October 1997, the Sierra Vista property was sold for $5,630,000. The Partnership received cash proceeds of $2,141,000 from the sale, and the purchaser assumed the Partnership's debt on the property. In accordance with the joint-venture agreement, these proceeds were distributed to SMMP. Under the terms of the agreement, SMMP receives preferential cash distributions of available Distributable Funds (as defined) from the sale of the property to the extent of its capital contributions. SMMP had made net contributions of $3,335,000 to the Partnership through the sale date. The Partnership's remaining real estate investment is a 18.72% minority interest in SIP. Because the Partnership owns less than 50% of this entity, it records its interest in SIP as an investment in an unconsolidated joint venture using the equity method of accounting. Certain factors raise substantial doubt about the Partnership's ability to continue as a going concern. As shown in the financial statements, the Partnership has no operating assets and its only remaining real estate investment is its minority interest in SIP. The other partner in SIP, SMMP, will receive preferential distributions from SIP until its contributed capital is returned. The Partnership does not anticipate receiving any cash distributions from SIP in the near future. Management believes the Partnership will be able to obtain any cash needed to fund future overhead expenditures from related parties until such time as the Partnership engages in new activities or a decision is made to liquidate the Partnership. The financial statements do not include any adjustments 8 Sierra Pacific Development Fund III and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Page two relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Partnership be unable to continue as a going concern. 2. BASIS OF FINANCIAL STATEMENTS The accompanying unaudited consolidated condensed financial statements include the accounts of the Partnership and SVP, a majority-owned joint venture as of 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 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. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE SIP was formed on April 1, 1993 between the Partnership and SMMP, an affiliate, to develop and operate the Sierra Sorrento I property, an industrial building located in San Diego, California. At March 31, 2001, the Partnership has an 18.72% equity interest in SIP. This investment is accounted for using the equity method. Summarized income statement information for SIP for the three months ended March 31, 2001 and 2000 is as follows:
March 31 -------------------------- 2001 2000 ----------- ---------- Rental income $70,909 $70,909 Total revenue 70,909 70,909 Operating expenses 49,892 40,255 Net loss 47,743 38,718
9 Sierra Pacific Development Fund III and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Page three 4. PARTNERS' EQUITY (DEFICIT) Equity and net loss per limited partnership unit is determined by dividing the limited partner's share of the Partnership's equity and net loss by the number of limited partnership units outstanding, 36,521. 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 property owned by SIP 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 has evaluated SFAS No. 133 and the impact on existing accounting policies and financial reporting disclosures. The Partnership believes the adoption of SFAS No. 133 will not have a material effect on its financial statements. 10 Sierra Pacific Development Fund III and Subsidiary Notes to Consolidated Financial Statements (Unaudited) Page four 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. 11 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 III 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 12 -----END PRIVACY-ENHANCED MESSAGE-----