ITEM 1. BUSINESS
(a.) GENERAL DEVELOPMENT OF BUSINESS. Sierra Pacific Institutional Properties V (the "Partnership") is a California limited partnership that was formed in October 1985 for the purpose of acquiring, developing, and operating commercial and industrial real estate.
The Partnership acquired land in August 1987 for the development of an 88,073 square foot office property in San Diego, California known as Sierra Sorrento II. This development consists of two separate buildings; a two-story building consisting of 29,500 usable square feet that was completed in November 1988 and a two-story building consisting of 58,573 usable square feet that was completed in May 1989.
The Partnership sold the Sierra Sorrento II land holdings to Lincoln National Life Insurance Company for $3,000,000 on February 1, 1989. Upon ownership transfer, the Partnership entered into a 40 year ground lease with the insurance company. The Sierra Sorrento II land lease required initial minimum payments of $25,000 per month commencing February 1989 and scheduled rent increases over the lease term. Subject to the provisions of the ground lease, the Partnership had the right to sell the property (land and buildings) to a third party. Upon ownership transfer the ground lease would terminate. Upon sale, the ground lessor would be entitled to remuneration of the $3,000,000 investment prior to distribution of proceeds to the Partnership. The ground lessor would also participate in the appreciation of the property (upon sale) based on a formula contained in the ground lease agreement. On July 8, 1997, the land was purchased by CGS Real Estate Company, Inc. ("CGS"), an affiliate of the General Partner. On September 24, 1997, all rights, title and interest in the ground lease were transferred and assigned to CGS.
On February 1, 2000, the Partnership purchased the land holdings from CGS for $3,500,000 and the ground lease subsequently terminated. The Partnership paid cash of $2,174,255 and was credited its current prepaid balance of $1,325,745 (See Item 13).
On October 1, 1993, the Partnership created a California general partnership (Sorrento II Partners or "SIIP") with Sierra Mira Mesa Partners ("SMMP"), an affiliate, to facilitate cash contributions by SMMP for the continued development and operation of the Sorrento II property. The Partnership contributed the Sierra Sorrento II property and $115,000 in cash and SMMP contributed cash ($3,126,263, net, through December 31, 1999) in exchange for a 43.92% interest in Sorrento II Partners. Such interest was computed based upon the Partnership's contributions relative to the estimated fair value of SIIP's net assets at the date of formation of the joint venture. SMMP made additional cash contributions amounting to $1,926,800 and received distributions amounting to $812,900 during 2000. The net contributions received from SMMP were primarily used to fund the land purchase. The percentage interests of the Partnership and SMMP are to be adjusted based upon cumulative contributions and distributions each year on January 1 during the term of SIIP, 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. Accordingly, as of January 1, 2001, the Partnership's interest in SIIP will be decreased to 48.49%, and SMMP's interest will be increased to 51.51%.
(b.) NARRATIVE DESCRIPTION OF BUSINESS. The Partnership owns and operates Sierra Sorrento II, an office project in San Diego, California. Success of the office building is dependent upon the timely payment of rent by two tenants which occupied 100% of the building at December 31, 2000.
The Sierra Sorrento II property consists of two adjacent office buildings. There is significant competition in the rental market in the Partnership's trade area. A 1994 appraisal identified just over seven million square feet of competing research and development office space in the property's market area.
(c.) COMPARISON OF CURRENT ACTIVITIES TO THOSE PROPOSED AT THE INITIATION OF THE PARTNERSHIP. In the Partnership's prospectus dated January 6, 1986, the investment objectives were described as follows:
"The Partnership has been formed to acquire and operate on an all-cash basis commercial and industrial real properties, including both properties which are to be developed by the Partnership or are under development or construction ("development properties") and properties which are newly-constructed or have operating histories ("existing properties"). A minimum of 75% of the cash invested in properties by the Partnership will be invested in properties which are in the development or lease-up stage. The properties in which the Partnership will invest will be located in areas in the western and southwestern United States which are expected to experience high population and/or economic growth levels during the Partnership's period of operations. The principal investment objectives of the Partnership are to: (i) preserve, protect and return the Partnership's invested capital; (ii) generate sufficient cash from operations to provide for distributions of Available Cash to the Limited Partners, a portion of which will be tax-sheltered to the holders of Taxable Entity Units; (iii) obtain maximum long-term appreciation in the value of the Partnership's real estate investments; and (iv) sell the Partnership's real estate investments for cash after an approximate three to five year holding period. There can be no assurance that such objectives will be attained."
Operations of the Partnership through 2000 have been consistent with the intent of the original prospectus in that the Partnership has invested in real estate projects that had the potential for capital gains, preservation of capital, and providing distributable cash flow partially sheltered from Federal Income Tax. However, the Partnership and its real estate have been adversely affected by the Tax Reform Act of 1986, aggressive lending by banks that resulted in commercial real estate overbuilding, and subsequent severe recessions. The original intention to sell its real estate investments after a five year holding period was delayed indefinitely. As of December 31, 2000, the Partnership had paid cash distributions of $2.69 for each $250 unit investment and remaining partners' equity was computed at $73.19 per unit. Thus, if the Partnership were to be liquidated at the end of 2000 at book value, each $250 investment would have returned a total of $75.88.
CGS is continuing the process of developing a plan pursuant to which the property owned by the Partnership would be combined 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 in the future qualify 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 transaction is subject to approval of the limited partners of the Partnerships. ASR filed a Registration Statement on Form S-4 August 14, 2000 relating to the solicitation of consents with the Securities and Exchange Commission. The Registration Statement was amended February 14, 2001.
ITEM 2.
ITEM 2. PROPERTY
During 2000, the Partnership owned a 56.08% interest in Sierra Sorrento II, an office property located in San Diego, California. (See Item 1. Business for discussion of percentage ownership changes.) The property includes two separate buildings comprising 88,073 rentable square feet and was 100% occupied at December 31, 2000. There were no material liens or encumbrances against the property at December 31, 2000. The average effective annual rent per square foot at December 31, 2000 was $11.04. The property has only two tenants whose principal businesses are electronics manufacturing and media and marketing. Details of these significant tenants and their leases follow.
Summary of Tenants/Leases
Depreciable Property Reference is made to Schedule III of the Form 10-K.
Real Estate Taxes The real estate tax obligation for 2000 was approximately 1.12% of the assessed value or $90,667.
Insurance It is the opinion of management that the property is adequately covered by insurance.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not involved in any material legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERS' EQUITY AND RELATED MATTERS
As of December 31, 2000, the number of security holders was as follows:
Number Number of of Units Record Holders -------- --------------
Limited Partners 30,777 1,418 ====== =====
These securities are of the same class, namely, limited partnership interests (units) and were sold pursuant to a registration statement filed under the Securities Act of 1933, as amended. The total offering was 140,000 units at $250.00 per unit.
No broker or dealer currently makes a market in the units of the Partnership. Accordingly, there are no published price or trading volume figures available for the units. The units have been transferred on an extremely limited extent from time-to-time since the inception of the Partnership; however, the market for the units is highly restricted and sporadic, especially in view of the investor suitability requirements imposed on new purchasers by the various state blue sky laws and the restrictions on transfer contained in the Partnership Agreement.
The Partnership has neither paid nor declared any cash or other distributions to the General or Limited Partners during the three most recent years. There are no contractual or other restrictions on the Partnership's ability to make such distributions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data for the Partnership is filed by reference to the Annual Report to the Limited Partners attached as an Exhibit.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations includes certain forward looking statements reflecting the Partnership's expectations in the near future; however, many factors which may affect the actual results, especially changing regulations, are difficult to predict. Accordingly, there is no assurance that the Partnership's expectations will be realized.
Overview:
The following discussion should be read in conjunction with the Selected Financial Data and the Partnership's Consolidated Financial Statements and Notes thereto incorporated by reference to the Annual Report to the Limited Partners attached as an Exhibit. As of December 31, 2000, the Partnership owned a 56.08% interest in Sierra Sorrento II, an industrial property located in San Diego, California ("the Property").
Results of Operations:
Comparison of year ended December 31, 2000 to year ended December 31, 1999.
Rental income increased approximately $136,000, or 11%, due to higher common area maintenance ("CAM") fees billed between years. Supplemental billings were made in March 2000 to recover higher than anticipated prior year CAM fees. Concurrently, new rates were implemented to reflect anticipated current year CAM fees. The Property remained 100% occupied in 2000.
Interest income associated with the Partnership's prepaid ground lease balance decreased approximately $23,000, when compared to the prior year. As stated below, the Partnership's ground lease terminated upon the purchase of the Sorrento II land holdings in February 2000. The current prepaid balance was credited toward the purchase price.
Total operating expenses decreased approximately $295,000, or 22%, in comparison to the prior year, primarily due to the termination of the Partnership's ground lease. Ground lease expense decreased as a result of the land purchase and subsequent ground lease termination. Further, other operating expenses decreased during the year due to lower garage parking expense. In 1998, contract garage parking was obtained from an adjacent property to accommodate for lack of available parking at the Property. In June 1999, work was completed on a parking expansion project at the Property, and the contract parking ceased. The decrease in total operating expenses related to ground lease expense was partially offset by an increase in depreciation and amortization, principally as a result of the write-off of predevelopment costs in 2000 associated with an abandoned unrelated parking lot project from a prior period.
Net income before Sierra Mira Mesa Partner's ("SMMP") share of consolidated joint venture income was approximately $320,000 in 2000, compared to a net loss of approximately $87,000 in 1999. In accordance with the Sorrento II partnership agreement, income resulting from its operations is first allocated to the General Partners in proportion to the relative amounts of net cumulative losses until such allocation of income equals the previously allocated net cumulative losses. Then, profits are allocated in proportion to the distributions made to the General Partners during the year. As such, Sorrento II Partners allocated the Partnership 81.09% of its income, and the other General Partner, SMMP, received 18.91% of its income for the year ended December 31, 2000.
Comparison of year ended December 31, 1999 to year ended December 31,1998.
Rental income increased approximately $378,000, or 46%, principally as a result of 100% occupancy for the entire year. During the first seven months of 1998, 29,150 square feet of the Property was vacant. A single tenant leased 22,150 square feet in August 1998 and the remaining 7,000 square feet in December 1998. The weighted-average annual rent per square foot, on an accrual basis, was $11.04 at December 31, 1999 compared to $10.95 at December 31, 1998.
The Partnership made additional ground lease prepayments totaling approximately $825,000 in 1999. Effective October 1999, all minimum base rent amounts becoming payable under the terms of the lease were to be applied against the prepaid balance until such time that the prepaid balance is extinguished plus interest at the rate of 10% per annum. Interest income of approximately $35,000 was recorded in 1999 as a result.
Total operating expenses increased approximately $73,000, or 6%, in comparison to the prior year, primarily due to an increase in ground lease expense, management fees and administrative costs. Additionally, a loan made to an affiliate in 1996 was deemed uncollectible and written-off to bad debt expense in 1999. Ground lease expense rose as a result of higher additional rents becoming due effective January 1999 in accordance with the lease agreement. The increase in management fees is attributable to the higher rental income. The increase in total operating expenses was partially offset by a decrease in depreciation and amortization, and by lower maintenance and repair costs incurred in 1999.
Net loss before SMMP share of consolidated joint venture loss was approximately $87,000 in 1999, compared to approximately $427,000 in 1998. In accordance with the Sorrento II partnership agreement, the Partnership's share of loss was allocated in proportion to its ownership interest for the years ended December 31, 1998 and 1999.
Liquidity and Capital Resources:
On October 1, 1993, the Partnership created a California general partnership (Sorrento II Partners) with SMMP, an affiliate, to facilitate cash contributions by SMMP for the continued development and operation of the Sorrento II property. SMMP has adequate resources to make the necessary advances during the foreseeable future.
In February 2000, the Partnership purchased the Sorrento II land holdings from CGS Real Estate, Inc. for $3,500,000 and the ground lease subsequently terminated. The Partnership paid cash of $2,174,255 and was credited its current prepaid balance of $1,325,745. SMMP contributed the majority of the cash for the land purchase. In 2000, SMMP made contributions totaling $1,926,800 to the Partnership and received distributions totaling $812,900 from the Partnership.
The Partnership generated cash from operations of $1,006,000 and paid $2,175,742 for the ground lease buyout and $74,565 for parking lot improvements. At December 31, 2000, the Partnership is in an illiquid position with cash and billed rents of $14,000 and current liabilities of $67,000.
The Partnership's primary capital requirements will be for construction of new tenant space. It is anticipated that these requirements and any operating capital requirements will be funded from operations of the Property and SMMP.
Inflation:
The Partnership's long-term leases contain provisions designed to mitigate the adverse impact of inflation on its results from operations. Such provisions may include escalation clauses related to Consumer Price Index increases.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and independent auditors' reports are incorporated by reference to the Annual Report to the Limited Partners attached as an Exhibit.
1. Reports of Independent Public Accountants
2. Consolidated Balance Sheets - December 31, 2000 and 1999
3. Consolidated Statements of Operations - for the years ended December 31, 2000, 1999 and 1998
4. Consolidated Statements of Changes in Partners' Equity - for the years ended December 31, 2000, 1999 and 1998
5. Consolidated Statements of Cash Flows - for the years ended December 31, 2000, 1999 and 1998
6. Notes to Consolidated Financial Statements
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
On April 11, 2000, the Partnership dismissed Deloitte & Touche LLP ("D&T") as its independent auditors. The reports of D&T on the Partnership's financial statements of the fiscal years ended December 31, 1999 and 1998 did not contain an adverse opinion, or disclaimer of opinion and were not qualified or modified as to audit scope or accounting principles. The Partnership's managing general partner approved the decision to change accountants. During the Partnership's two most recent fiscal years and subsequent interim periods, there were no disagreements with D&T on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of D&T would have caused it to make reference to such disagreement in its reports.
The Partnership engaged Arthur Andersen LLP ("AA") to act as its independent public accountants, effective April 11, 2000. During the two most recent fiscal years and subsequent interim periods, the Partnership has not consulted AA on items which (1) involved the application of accounting principles to a specified transaction, either completed or proposed, or involved the type of audit opinion that might be rendered on the Partnership's financial statements, or (2) concerned the subject matter of a disagreement or a reportable event with the Partnership's former accountant.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Sierra Pacific Institutional Properties V (the "Registrant") is a California Limited Partnership and has no officers or directors.
S-P Properties, Inc., a California corporation, is the General Partner of the Registrant. CGS and its affiliates are engaged in real estate management, leasing, ownership, and sales. The companies own or manage more than ten million square feet of commercial real estate in Texas, Arizona, Colorado, Missouri, California and the Carolinas.
The executive officers and directors of S-P Properties, Inc. are:
Thomas N. Thurber - President and Director, S-P Properties, Inc. Mr. Thurber is a Certified Public Accountant who began his career with Arthur Andersen & Co. in 1972. In 1979, he joined a major publicly traded real estate development firm (Daon) where he became Controller for U.S. Operations. Subsequently, Mr. Thurber served as Director of Real Estate for a developer of retail properties, and Chief Financial Officer of a trust with significant investments in commercial real estate. Mr. Thurber also serves as a director of Property Secured Investments, Inc. Mr. Thurber holds a bachelors degree in accounting from Florida State University.
Gregory J. Nooney, Jr. - Vice President, S-P Properties, Inc. Mr. Nooney also has served as Chairman of the Board and Chief Executive Office of Brooklyn Street Properties, Inc. since May 1983. He joined Brooklyn Street Properties, Inc. in 1954 and served as President from 1969 to May 1983. Brooklyn Street Properties, Inc., which was founded in 1945, is a real estate investment company. In addition, Mr. Nooney was chairman and Chief Executive Officer of Nooney Realty Trust, Inc. from 1984 through February 1998 and then served as Vice Chairman from February 1998 through November 1999. Mr. Nooney is currently Chairman of Coldwell Banker Commercial American Spectrum.
Patricia A. Nooney - Vice President, S-P Properties, Inc. Ms. Nooney is President of Coldwell Banker Commercial American Spectrum, a wholly-owned subsidiary of CGS Real Estate Company, Inc. Ms. Nooney joined Brooklyn Street Properties, Inc., in 1981 and has served as an officer since 1985. From 1990 to November 1999, Ms. Nooney was President and Secretary of Nooney Realty Trust, Inc.
William J. Carden - Assistant Secretary/Treasurer and Director, S-P Properties, Inc. Mr. Carden is the founder and President of CGS Real Estate Company, Inc., which owns over one million square feet of commercial real estate. He founded DVM Properties, Inc. in 1974 which concentrated on rehabilitation of retail, office, industrial, and commercial real estate. Mr. Carden is a former Director of Bay Financial, a New York Stock Exchange company and currently serves as a director of Property Secured Investments, Inc. and IDM Corporation.
Morris S. Cohen - Director, S-P Properties, Inc. Mr. Cohen's extensive real estate background includes negotiation of joint venture partnerships for property acquisitions, production of syndication packages and direct responsibilities for operations, finance, sales, leasing and property management. Mr. Cohen was a senior level officer with major public and privately held real estate companies and served as President of IDM Participating Income Corporation from April 1995 to October 1996. Mr. Cohen is a graduate of Queens College.
There have been no events under any bankruptcy act, no criminal proceedings, and no judgements or injunctions material to the evaluation of the ability and integrity of any director during the past five years.
SUMMARY OF 2000 AUDIT FIRM FEES
During 2000, the Partnership engaged Andersen as its principal auditors to provide audit services. Audit fees of $35,215 represent services provided in connection with the audit of the Partnership's consolidated and subsidiary financial statements for the year ended December 31, 2000 and review of interim financial information included in the Partnership's quarterly reports on Form 10-Q during the year.
ITEM 11.
ITEM 11. MANAGEMENT REMUNERATION
The Registrant is a California Limited Partnership and has no officers or directors. No options to purchase securities of the Registrant have been granted to any person.
In accordance with the terms of the Partnership Agreement, certain affiliates of the General Partner receive real estate brokerage commissions in connection with the leasing of properties by the Partnership and receive from the Partnership certain management and administrative services fees. These amounts are set forth in the Annual Report to the Limited Partners attached as an Exhibit.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership pays a management fee totaling 6% of the gross rental income (as defined in the partnership agreement) collected from the property or $600, whichever is greater, to American Spectrum Real Estate Services, Inc. ("ASRE"). These fees for the year ended December 31, 2000 were $85,584. Bancor Real Estate Company, Inc. ("Bancor") provides services to the Partnership such as accounting, legal, data processing and similar services and is entitled to reimbursement for expenses incurred to provide such services. Amounts so reimbursed totaled $80,969 during the year ended December 31, 2000. Bancor and ASRE are both wholly owned subsidiaries of CGS. William J. Carden, an officer and director of S-P Properties, Inc., the general partner of the Partnership, controls 50% of CGS.
The Partnership sold the Sierra Sorrento II land holdings to Lincoln National Life Insurance Company for $3,000,000 on February 1, 1989. Upon ownership transfer, the Partnership entered into a 40 year ground lease with the insurance company. The Sierra Sorrento II land lease required initial minimum payments of $25,000 per month commencing February 1989 and scheduled rent increases over the lease term. Subject to the provisions of the ground lease, the Partnership had the right to sell the property (land and buildings) to a third party. Upon ownership transfer the ground lease would terminate. Upon sale, the ground lessor would be entitled to remuneration of its $3,000,000 investment prior to distribution of proceeds to the Partnership. The ground lessor would also participate in the appreciation of the property (upon sale) based on a formula contained in the ground lease agreement. On July 8, 1997, the land was purchased by CGS. On September 24, 1997, all rights, title and interest in the ground lease were transferred and assigned to CGS.
In October 1997, the Partnership prepaid $900,000 of the ground lease to CGS in exchange for an amendment reducing the minimum rent required under the lease from $360,000 to $330,000 per year from 1999 to 2008. The minimum basic rent effective January 1, 2009 through December 31, 2028 remained unchanged at $360,000 per year. The November 1997, December 1997, and January 1998 rent amounts payable under the terms of the lease were applied against the prepaid balance. Effective February 1998, rent amounts were paid at the rate of $18,000 per month until such time that the prepaid balance was extinguished.
In 1999, the Partnership made additional ground lease prepayments totaling $825,000. Effective October 1999, all minimum base rent amounts becoming payable were to be applied against the prepaid balance until such time that the prepaid balance was extinguished plus interest at the rate of 10% per annum. As a result, interest income of $34,540 and $11,205 was recorded in 1999 and 2000, respectively. The prepaid balance at December 31, 1999 was $1,344,540. There was no prepaid balance at December 31, 2000 as a result of the Partnership's purchase of the land holding in February 2000.
On February 1, 2000, the Partnership purchased the land holdings from CGS Real Estate Company, Inc. for $3,500,000 and the ground lease subsequently terminated. The Partnership paid cash of $2,174,255 and was credited its current prepaid balance of $1,325,745.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. Exhibits
1. Annual Report to the Limited Partners
2. Exhibit Number 27 - Selected Financial Data
B. Financial Statement Schedules
The following financial statement schedule and the report of the independent public accountants thereon are included herein:
1. Report of Independent Public Accountants on Financial Statement Schedules as of December 31, 2000
2. Independent Auditors' Report on Financial Statement Schedules as of December 31, 1999 and 1998 dated February 25, 2000
3. Schedule III - Real Estate and Accumulated Depreciation - December 31, 2000
All other schedules are omitted as they either are not required or are not applicable, or the required information is set forth in the financial statements and notes thereto.
C. Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V a California Limited Partnership S-P PROPERTIES, INC. General Partner
Date: April 3, 2001 /s/ Thomas N. Thurber ------------------------------- ----------------------------------------- Thomas N. Thurber President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: April 3, 2001 /s/ Thomas N. Thurber ------------------------------ ------------------------------------------ Thomas N. Thurber President and Director S-P Properties, Inc.
Date: April 3, 2001 /s/ William J. Carden ------------------------------ ------------------------------------------ William J. Carden Assistant Secretary/Treasurer and Director S-P Properties, Inc.
Date: April 3, 2001 /s/ G. Anthony Eppolito ------------------------------ ------------------------------------------ Anthony Eppolito Chief Accountant S-P Properties, Inc.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Partners of Sierra Pacific Institutional Properties V
We have audited the consolidated financial statements of Sierra Pacific Institutional Properties V, a California limited partnership, and subsidiary (the "Partnership") as of and for the year ended December 31, 2000 and have issued our report thereon dated March 26, 2001. Such consolidated financial statements and report are included in your 2000 Annual Report to the Limited Partners and are incorporated herein by reference. Our audit also included the financial statement schedule of Sierra Pacific Institutional Properties V, listed in Item 14. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
ARTHUR ANDERSEN LLP
Houston, Texas March 26, 2001
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Partners of Sierra Pacific Institutional Properties V
We have audited the consolidated financial statements of Sierra Pacific Institutional Properties V, a California limited partnership, (the "Partnership") as of December 31, 1999 and 1998 and have issued our report thereon dated February 25, 2000. Such consolidated financial statements and report are included in your 1999 Annual Report to the Limited Partners and are incorporated herein by reference. Our audits also included the financial statement schedule of Sierra Pacific Institutional Properties V, listed in Item 14. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas February 25, 2000
SCHEDULE III - FORM 10-K
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000
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(1) The initial cost represents the original purchase price of the property. (2) The Partnership has capitalized property development costs. (3) On February 1, 1989, the Sierra Sorrento II land was sold for $3,000,000 and leased back from the buyer. Sales and Leaseback costs of $149,629 were capitalized. Because the sale and leaseback transaction contains many characteristics of a joint venture, the Partnership accounted for this arragement under the method of accounting described in Note 4 to the consolidated financial statements incorporated by reference to the Annual Report to the Limited Partners attached as an Exhibit. On October 1, 1993, the property was transferred to a general partnership, Sorrento II Partners. The Partnership has an equity interest of 56.08% and Sierra Mira Mesa Partners, an affiliate, has a 43.92% interest at December 31, 2000. On February 1, 2000, the Partnership repurchased the land holdings for $3,500,000. See Note 3. (4) Also represents costs for Federal Income Tax purposes. (5) Construction on a two-story building ("Building B"), 29,500 usable square footage, was completed in November 1988. Construction on a two-story building ("Building A") 58,573 usable square footage, was completed in May 1989. (6) Reconciliation of total real estate carrying value and accumulated depreciation for the three years ended December 31, 2000 is as follows:
Total Real Estate Accumulated Carrying Value Depreciation ----------------- ------------
Balance - January 1, 1998 $ 8,019,902 $ 2,390,306 Additions during the year 340,376 399,246 Deductions: Write off fully depreciated assets (28,663) (28,663) ----------- -----------
Balance - December 31, 1998 8,331,615 2,760,889 Additions during the year 342,748 361,033 Deductions: Write off fully depreciated assets (925,986) (925,986) ----------- -----------
Balance - December 31, 1999 7,748,377 2,195,936 Additions during the year 382,072 457,499 Deductions: Write off fully depreciated assets (81,781) (81,781) ----------- -----------
Balance - December 31, 2000 $ 8,048,668 $ 2,571,654 =========== ===========
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V (A California Limited Partnership)
SELECTED FINANCIAL DATA For the Years Ended December 31, 2000, 1999, 1998, 1997, and 1996
The following table sets forth certain selected historical financial data of the Partnership. The selected operating and financial position data as of and for each of the five years ended December 31, 2000 have been derived from the audited consolidated financial statements of the Partnership. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and Notes thereto which are incorporated by reference to the Annual Report to the Limited Partners attached as an Exhibit.
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(1) The net income (loss), limited partners' equity and distributions per unit are based upon the limited partnership units outstanding at the end of the year, 30,777 in all years. The cumulative distributions per limited partnership unit from inception to December 31, 2000 equal $2.69.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Sierra Pacific Institutional Properties V
We have audited the accompanying consolidated balance sheet of Sierra Pacific Institutional Properties V, a California limited partnership, and subsidiary (the "Partnership") as of December 31, 2000 and the related consolidated statements of operations, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sierra Pacific Institutional Properties V and subsidiary, as of December 31, 2000, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas March 26, 2001
INDEPENDENT AUDITORS' REPORT
To the Partners of Sierra Pacific Institutional Properties V
We have audited the accompanying consolidated balance sheets of Sierra Pacific Institutional Properties V, a California limited partnership, (the "Partnership") as of December 31, 1999 and the related consolidated statements of operations, changes in partners' equity and cash flows for the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sierra Pacific Institutional Properties V as of December 31, 1999, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998 in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Houston, Texas February 25, 2000
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V AND SUBSIDIARY (A California Limited Partnership)
CONSOLIDATED BALANCE SHEETS December 31, 2000 and 1999
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The accompanying notes are an integral part of these consolidated financial statements.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V AND SUBSIDIARY (A California Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2000, 1999 and 1998
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The accompanying notes are an integral part of these consolidated financial statements.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V AND SUBSIDIARY (A California Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the Years Ended December 31, 2000, 1999 and 1998
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The accompanying notes are an integral part of these consolidated financial statements.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V AND SUBSIDIARY (A California Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2000, 1999 and 1998
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The accompanying notes are an integral part of these consolidated financial statements.
SIERRA PACIFIC INSTITUTIONAL PROPERTIES V AND SUBSIDIARY (A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Sierra Pacific Institutional Properties V (the "Partnership") was organized on October 8, 1985 in accordance with the provisions of the California Uniform Limited Partnership Act to acquire and operate commercial and industrial real properties. S-P Properties, Inc. is the General Partner and manager of the Partnership.
The Partnership acquired land in August 1987 for the development of an 88,073 square foot office property in San Diego, California known as Sierra Sorrento II. This development consists of two separate buildings; a two-story building consisting of 29,500 usable square feet that was completed in November 1988 and a two-story building consisting of 58,573 usable square feet that was completed in May 1989.
On October 1, 1993, the Partnership created a California general partnership (Sorrento II Partners) with Sierra Mira Mesa Partners ("SMMP"), an affiliate, to facilitate cash contributions by SMMP for the continued development and operation of the Sierra Sorrento II property. The Partnership contributed the Sierra Sorrento II property and cash and SMMP contributed cash to the newly formed partnership. At December 31, 2000, the Partnership's remaining asset was a 56.08% interest in Sorrento II Partners.
On July 8, 1997, CGS Real Estate Company, Inc. ("CGS"), an affiliate of the General Partner, purchased the Sierra Sorrento II land from Lincoln National Life Insurance Company. On September 24, 1997, all rights, title and interest in the ground lease were transferred and assigned to CGS (See Note 3).
On February 1, 2000, the Partnership purchased the land holdings from CGS for $3,500,000 and the ground lease was subsequently terminated. The Partnership paid cash of $2,174,255 and was credited its current prepaid balance of $1,325,745 (See Note 3).
Basis of Financial Statements
The consolidated financial statements include the accounts of the Partnership and Sorrento II Partners, a majority owned California general partnership (see Note 4). The Partnership consolidates all subsidiaries in which it has a controlling equity interest. All significant intercompany balances and transactions have been eliminated in consolidation.
The Partnership maintains its books and prepares its financial statements in accordance with accounting principles generally accepted in the United States. However, the Partnership prepares its tax returns on the accrual basis of accounting as defined by the Internal Revenue Code with adjustments to reconcile book and taxable income (loss) for differences in the treatment of certain income and expense items. The accompanying financial statements do not reflect any provision for federal or state income taxes since such taxes are the obligation of the individual partners.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page two
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid, short-term investments with original maturities of three months or less.
Fair Value of Financial Instruments
The financial instruments of the Partnership at December 31, 2000 and 1999 consist of cash and cash equivalents, receivables and accounts payable. The fair value of cash and cash equivalents, receivables, and accounts payable approximates the carrying value at December 31, 2000 due to the short term nature of these items.
Income-Producing Property
Property is carried at cost and depreciated on the straight-line method over the estimated lives of the related assets, ranging from three to thirty years. Tenant improvements are carried at cost and depreciated on the straight-line method over the life of the related lease.
Expenditures for repairs and maintenance are charged against income as incurred. Improvements and major renewals are capitalized. Costs and the related accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal or when fully depreciated and any resulting gain or loss is reflected in income.
The Partnership regularly evaluates long-lived assets for impairment in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (the "Statement") whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Future cash flows are estimated and compared to the carrying amount of the asset to determine if an impairment has occurred. If the sum of the expected future cash flows is less than the carrying amount of the asset, the Partnership shall recognize an impairment loss in accordance with the Statement. No such impairment has been recognized by the Partnership at December 31, 2000.
Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 2000. The cash flows used to determine fair value and net realizable value are based on good faith estimates and assumptions developed by management. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore actual results may vary from the estimates and the variances may be material. The Partnership may provide write-downs which could be material in subsequent years if real estate markets or local economic conditions change.
Other Assets
Deferred leasing costs represent costs incurred to lease properties and are amortized over the life of the related lease using the straight line method of accounting.
Rental Income and Rent Receivable
Rental income is recognized on the straight-line method over the term of the related operating lease in accordance with the provisions of Statement of Financial Accounting Standards No. 13, "Accounting for Leases".
Unbilled rent receivable represents the difference between rent recognized on the straight-line method and actual cash due.
The Partnership periodically reviews its outstanding receivables for uncollectibility and provides a provision for bad debts for those accounts it believes it may not collect in full.
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page three
Ground Lease Payable
Ground lease payable represents the difference between rent recognized on the straight-line method in accordance with the provisions of Statement of Financial Accounting Standards No. 13, "Accounting for Leases" and actual cash due and paid by that date.
Calculation of Equity and Net Income (Loss) Per Limited Partnership Unit
Equity and net income (loss) per limited partnership unit are determined by dividing the Limited Partners' equity and net income (loss) by 30,777, the number of limited partnership units outstanding for all periods.
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.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 (SAB 101), 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.
2. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts, at December 31, 2000 and 1999, is as follows:
2000 1999 -------- -------- Other assets: Prepaid expenses $ 11,410 $ 5,626 Deferred leasing costs, net of accumulated amortization of $391,994 in 2000 and $306,675 in 1999 223,367 308,687 -------- -------- $234,777 $314,313 ======== ========
Accrued and other liabilities: Accounts payable $ 65,256 $ 43,980 Unearned rental income 0 23,800 Security deposits 7,249 7,249 Other 1,578 15,879 -------- -------- $ 74,083 $ 90,908 ======== ========
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page four
3. GENERAL PARTNER AND RELATED PARTY TRANSACTIONS
Affiliates of the General Partner receive a management fee totaling 6% of the gross rental income (as defined in the partnership agreement) collected from the property or $600, whichever is greater. Management fees paid to affiliates for the years ended December 31, 2000, 1999 and 1998 were $85,584, $69,072 and $49,919, respectively.
An affiliate of the General Partner is entitled to reimbursement for expenses incurred by the affiliate for services provided to the Partnership such as accounting, legal, data processing and similar services. The affiliate was reimbursed $80,969, $89,275 and $77,844 for such services for the years ended December 31, 2000, 1999, and 1998, respectively. In consideration for services rendered with respect to initial leasing of Partnership properties, an affiliate is paid initial leasing costs. For the years ended December 31, 2000, 1999 and 1998, a total of $0, $16,293, and $74,504 respectively, was paid for initial leasing costs. Additionally, the Partnership reimbursed the affiliate for construction supervision costs incurred by the affiliate. For the years ended December 31, 2000, 1999, and 1998, the affiliate received $0, $0, and $22,511, respectively, for tenant improvements supervisory costs.
The Partnership sold the Sierra Sorrento II land holdings to Lincoln National Life Insurance Company for $3,000,000 on February 1, 1989. Upon ownership transfer, the Partnership entered into a 40 year ground lease with the insurance company. The Sierra Sorrento II land lease required initial minimum payments of $25,000 per month commencing February 1989 and increases over the lease term. Subject to the provisions of the ground lease, the Partnership had the right to sell the property (land and buildings) to a third party. Upon ownership transfer the ground lease would terminate. Upon sale, the ground lessor would be entitled to remuneration of the prior $3,000,000 investment prior to distribution of proceeds to the Partnership. The ground lessor would also participate in the appreciation of the property (upon sale) based on a formula contained in the ground lease agreement. On July 8, 1997, the land was purchased from Lincoln National Life Insurance Company by CGS Real Estate Company, Inc. ("CGS"), an affiliate of the General Partner. On September 24, 1997, all rights, title and interest in the ground lease were transferred and assigned to CGS.
In October 1997, the Partnership prepaid $900,000 of the ground lease payments to CGS in exchange for an amendment reducing the minimum rent required under the lease from $360,000 to $330,000 per year from 1999 to 2008. The minimum basic rent effective January 1, 2009 through December 31, 2028 remained unchanged at $360,000 per year. The November 1997, December 1997, and January 1998 rent amounts payable under the terms of the lease were applied against the prepaid balance. Effective February 1998, rent amounts were to be paid at the rate of $18,000 per month until such time that the prepaid balance was extinguished.
In 1999, the Partnership made additional ground lease prepayments totaling $825,000. Effective October 1999, all minimum base rent amounts becoming payable were applied against the prepaid balance until such time that the prepaid balance was extinguished plus interest at the rate of 10% per annum. Interest income of $34,540 and $11,205 was recorded in 1999 and 2000, respectively, as a result. The prepaid balance at December 31, 1999 was $1,344,540.
On February 1, 2000, the Partnership purchased the land holdings from CGS for $3,500,000 and the ground lease subsequently terminated. The Partnership paid cash of $2,174,255 and was credited its current prepaid balance of $1,325,745.
During 1996, the Partnership made a non-interest bearing loan to an affiliate in the amount of $18,995. The loan was deemed uncollectible and subsequently written off to bad debt expense in 1999.
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page five
4. INCOME-PRODUCING PROPERTY
At December 31, 2000 and 1999 the total cost and accumulated depreciation of the property are as follows:
2000 1999 ----------- -----------
Land $ 2,915,068 $ 2,569,815 Building and improvements 5,133,600 5,178,562 ----------- -----------
Total 8,048,668 7,748,377
Accumulated depreciation (2,571,655) (2,195,937) ----------- -----------
Net $ 5,477,013 $ 5,552,440 =========== ===========
During 2000 and 1999, the Partnership removed $81,781 and $925,986, respectively, from its buildings and improvements and related depreciation accounts for fully depreciated property.
Sierra Sorrento II experienced a land ownership transfer in February 2000 (See Note 3).
On October 1, 1993, the Partnership formed a joint venture with SMMP, an affiliate. The joint venture, known as Sorrento II Partners ("SIIP"), was formed as a California general partnership to develop and operate the Sierra Sorrento II property. The Partnership had an 83.2% equity interest with its contribution of Sierra Sorrento II and $115,000 in cash. Such interest was computed based upon the estimated fair value of SIIP's net assets at the date of formation of the joint venture. SMMP was allocated a 16.8% initial equity interest in SIIP in exchange for its $710,000 cash contribution ($2,015,800, net, through December 31, 1997). SMMP made additional cash contributions amounting to $228,700, $971,420, and $1,926,800, and received distributions amounting to $85,657, $4,000 and $812,900 during 1998, 1999 and 2000, respectively. The percentage interests of the Partnership and SMMP are to be adjusted each year on January 1 during the term of SIIP, 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. Accordingly, as of January 1, 1998, 1999 and 2000, the Partnership's interest in SIIP was changed to 66.45%, 64.90% and 56.08%, respectively, and SMMP's interest was changed to 33.55%, 35.10% and 43.92%, respectively. On January 1, 2001, the Partnership's interest will be decreased to 48.49% and SMMP's interest will be increased to 51.51% to reflect the 2000 contributions and distributions. Under the terms of the SIIP joint venture agreement, SMMP will receive preferential cash distributions of available "Distributable Funds" from the operation of SIIP or sale of its property to the extent of its net capital contributions. Additional Distributable Funds are allocable to the Partnership to the extent of the deemed fair value of its original property contribution, with the remainder allocated to the Partnership and SMMP in proportion to their respective equity interests.
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page six
Future minimum base rental income, under the existing operating leases for the Sierra Sorrento II property, to be recognized on a straight-line basis and amounts to be received on a cash basis are as follows:
Straight-line Cash Year Ending December 31, Basis Basis ------------- ----------
2001 $ 972,183 $1,086,440 2002 972,183 1,118,346 2003 530,098 576,160 2004 441,680 479,230 2005 257,646 285,090 ---------- ----------
Total $3,173,790 $3,545,266 ========== ==========
In 2000, 55% of rental income was generated from an electronics manufacturer and 45% was from a media and marketing company. In 1999, an electronics manufacturer generated 56% of rental income and the remaining 44% was from a media and marketing company. In 1998, 82% of all rental income was from an electronics manufacturer and 18% was from a tenant in the healthcare sector.
5. PARTNERS' EQUITY
The partners' equity accounts have been adjusted to reflect an allocation of cumulative net loss to the partners in accordance with the agreement of limited partnership. This agreement provides that 99% of operating income, gains, losses, deductions and credits of the Partnership shall be allocated among the Limited Partners and 1% be allocated to the General Partner.
Prior year balances have not been adjusted because management does not believe that the effects of these adjustments are significant to the prior year partners' equity balances.
Upon any sale or other disposition of the Partnership's real properties, distributions will be made to the Limited Partners until they have received distributions from sales proceeds in an amount equal to 100% of their unreturned capital. Thereafter, distributions generally will be divided 1% to the General Partner and 99% to the Limited Partners until the Limited Partners have received distributions from all sources equal to the sum of their respective priority distributions (an amount equal to not less than 12% per annum cumulative, but not compounded, on each Limited Partners' unreturned capital). Thereafter, the General Partner will be entitled to receive incentive distributions which, when aggregated with the 1% distributions to the General Partner described above, are equal to 10% of the total net sale proceeds available for distribution to the Partners. Any remaining sale proceeds will be distributed to the Limited Partners.
Sierra Pacific Institutional Properties V Notes to Consolidated Financial Statements Page seven
6. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Partnership occasionally becomes party to litigation. In the opinion of management, pending or threatened litigation involving the Partnership will not have a material adverse effect on its financial condition.
7. PENDING TRANSACTION
CGS 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 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 transaction is subject to the approval of the limited partners of the Partnerships. ASR filed a Registration Statement on Form S-4 August 14, 2000 relating to the solicitation of consents with the Securities and Exchange Commission. The Registration Statement was amended February 14, 2001.
EXECUTIVE OFFICERS OF THE GENERAL PARTNER
The Executive Officers of S-P Properties, Inc., the General Partner are as follows:
Name Position - ---- --------
Thomas N. Thurber President and Director
Dawson L. Davenport Vice President
Steven M. Speier Secretary/Treasurer and Director
William J. Carden Assistant Secretary/Treasurer and Director
The 10-K Report sent to the Securities and Exchange Commission contains additional information on the Partnership's operations and is available to Limited Partners upon request.