Item 1 of Part I.
1998 versus 1997 - - ---------------- Revenue - - ------- Rental income decreased $507,000 or 7% for the year ended December 31, 1998 compared to the year ended December 31, 1997 due primarily to the decline in occupancy at One Carnegie Plaza and Rancon Centre Ontario.
Interest and other income for the year ended December 31, 1998 decreased $42,000 or 11% from the year ended December 31, 1997 due to a lower average invested cash balance in 1998.
Expenses - - -------- Operating expenses decreased $33,000 or 1% during the year ended December 31, 1998 compared to the year ended December 31, 1997. This decrease in operating costs was associated with decreased occupancy at One Carnegie Plaza and Rancon Centre Ontario, offset by increased operating costs due to increased occupancy at Lakeside Tower, One Parkside and Carnegie Business Center II.
Interest expense remained consistent during the year ended December 31, 1998 as compared to the year ended December 31, 1997.
Depreciation and amortization expense decreased $312,000 or 15% during the year ended December 31, 1998 compared to the year ended December 31, 1997 due to tenant improvements and lease commissions becoming fully amortized during 1998, and due to ceasing depreciation of Rancon Centre Ontario upon reclassification of the property to held for sale.
In 1998 and 1997, management determined that the carrying values of the land held for development and the land held for sale were in excess of the estimated fair values of such property and, accordingly, recorded provisions for impairment of real estate investments as follows. The fair values were based on independent appraisals of the Partnership's real estate.
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1998 1997 ---- ---- Land held for development: San Bernardino, CA $ -- $ 1,603,000 Land held for sale: 60.14 acres in Perris, CA (Perris-Nuevo) -- 85,000 23.8 acres in Perris, CA (Perris-Ethanac) 323,000 -- ------------ -------------
Total provision for impairment of real estate investments $ 323,000 $ 1,688,000 ============ =============
Expenses associated with undeveloped land decreased $58,000 or 9% during the year ended December 31, 1998 compared to December 31, 1997 due primarily to a decrease in maintenance association dues in 1998.
The loss on sale of real estate of $34,000 during the year ended December 31, 1998 resulted from the sale of the 38.5 acres of unimproved land in Rancon Centre Ontario.
General and administrative expenses remained consistent during the year ended December 31, 1998 as compared to the year ended December 31, 1997.
The proposed dissolution costs of $125,000 and $479,000 during the years ended December 31, 1998 and 1997, respectively, consisted of expenses incurred related to the Solicitation and the Asset Sale and Dissolution Proposal as discussed in Item 1 of Part I.
Item 7A. Qualitative and Quantitative Information About Market Risk
Interest Rates The Partnership's primary market risk exposure is to changes in interest rates obtainable on its secured borrowings. The Partnership does not believe that changes in market interest rates will have a material impact on the performance or fair value of its portfolio.
All of the Partnership's outstanding debt was subject to fixed rates at December 31, 1999 and 1998, respectively. In addition, the average interest rate on the Partnership's debt remained stable at 9.04% at December 31, 1998 and 1999. The Partnership reviews interest rate exposure in the portfolio quarterly in an effort to minimize the risk of interest rate fluctuations. The Partnership does not have any other material market-sensitive financial instruments. It is not the Partnership's policy to engage in hedging activities for previously outstanding debt instruments or for speculative or trading purposes.
The table below provides information about the Partnership's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates.
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The Partnership believes that the interest rates given in the table for fixed rate borrowings approximate the rates the Partnership could currently obtain for instruments of similar terms and maturities and that the fair values of such instruments approximate carrying value at December 31, 1999.
Item 8. Financial Statements and Supplementary Data
For information with respect to this 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.
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Part III
Item 10. Directors and Executive Officers of the Partnership
Daniel Lee Stephenson and RFC are the general partners of the Partnership. The executive officer and director of RFC is:
Daniel L. Stephenson irector, President, Chief Executive Officer and Chief Financial Officer
There is no fixed term of office for Mr. Stephenson.
Mr. Stephenson, age 56, founded RFC (formerly known as Rancon Corporation) in 1971 for the purpose of establishing a commercial, industrial and residential property syndication, development and brokerage concern. Mr. Stephenson has, from inception, held the position of Director. In addition, Mr. Stephenson was President and Chief Executive Officer of RFC from 1971 to 1986, from August 1991 to September 1992, and from March 1995 to present. Mr. Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm that 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, reimbursement 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 - - --------------------------------
* Less than 1 percent
Changes in Control - - ------------------ The Limited Partners have no right, power or authority to act for or bind the Partnership. However, the Limited Partners generally have the power to vote upon the following matters affecting the basic structure of the Partnership, passage of each of which requires the approval of Limited Partners holding a majority of the outstanding Units: (i) amendment of the 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) removal of the General Partner or any successor General Partner; (v) election of a new General Partner or
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General Partners upon the removal, retirement, death, insanity, insolvency, bankruptcy or dissolution of the General Partner or any successor General Partner; (vi) modification of the terms of any agreement between the Partnership and the General Partner or an affiliate of the General Partner; and (vii) extension of the term of the Partnership.
Item 13. Certain Relationships and Related Transactions
During the year ended December 31, 1999 the Partnership did not incur any expenses or costs reimbursable to RFC or any other affiliate of the Partnership.
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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, 1999 and 1998
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Partners' Equity (Deficit) for the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule:
Schedule III -- Real Estate and Accumulated Depreciation as of December 31, 1999 and Notes thereto
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(3) Exhibits:
(3.1) Amended and Restated Agreement of Limited Partnership of the Partnership (included as Exhibit B to the Prospectus dated March 3, 1988, filed pursuant to Rule 424(b), File Number 2-97837, is incorporated herein by reference).
(3.2) Third Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated April 1, 1989 (filed as Exhibit 3.2 to the Partnership's annual report on Form 10-K for the fiscal year ended November 30, 1991 is incorporated herein by reference).
(3.3) Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated March 11, 1992 (filed as Exhibit 3.3 to the
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Partnership's annual report on Form 10-K for the fiscal year ended November 30, 1991 is incorporated herein by reference).
(3.4) Limited Partnership Agreement of RRF V Tri-City Limited Partnership, A Delaware limited partnership of which Rancon Realty Fund V, A California Limited Partnership is the limited partner (filed as Exhibit 3.4 to the Partnership's annual report on Form 10-K for the year ended December 31, 1996 is incorporated herein by reference).
(10.1) First Amendment to the Second Amended Management, administration and consulting agreement for services rendered by Glenborough Corporation dated August 31, 1998.
(10.2) Management, administration and consulting agreement and amendment thereto for services rendered by Glenborough Inland Corporation dated December 20, 1994 and March 30, 1995, respectively (filed as Exhibit 10.2 to the Partnership's annual report on Form 10-K for the year ended December 31, 1995 is incorporated herein by reference).
(10.3) Promissory note in the amount of $9,600,000 dated May 9, 1996 secured by Deeds of Trust on three of the Partnership Properties (filed as Exhibit 10.3 to the Partnership's annual report on Form 10-K for the year ended December 31, 1996 is incorporated herein by reference).
(27) Financial Data Schedule
(b) Reports on Form 8-K
On January 14, 1999, the Partnership filed a report on Form 8-K reporting under Item 2