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, 2000
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Commission file number 0-14276
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SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
State of California 33-0043953
- -------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5850 San Felipe, Suite 450
Houston, Texas 77057
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(Address of principal executive
offices) (Zip Code)
Registrant's telephone number,
including area code: (713) 706-6271
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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, 2000 and December 31, 1999 ....... 4
Consolidated Statements of Operations - For the Three Months
Ended March 31, 2000 and 1999 ............................................ 5
Consolidated Statements of Changes in Partners' Equity - For
the Year Ended December 31, 1999 and for the Three Months Ended
March 31, 2000 ........................................................... 6
Consolidated Statements of Cash Flows - For the Three Months
Ended March 31, 2000 and 1999 ............................................ 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 66.64% 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 16.76%
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.
2
(b) RESULTS OF OPERATIONS
No income was recorded for the three months ended March 31, 2000. The
Partnership recorded other income of $11,907 during the first quarter of the
prior year as a result of a refund associated with 1998 operations. No rental
income has been generated since the sale of the Property in 1997.
Operating expenses for the three months ended March 31, 2000 remained relatively
unchanged when compared to the same period in the prior year. Operating expenses
for the quarters ended March 31, 2000 and 1999 consisted primarily of accounting
and auditing costs.
The Partnership's share of loss from its investment in SIP was $6,489 for the
three months ended March 31, 2000 compared to $567 for the same period 1999.
(c) LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Partnership is in a liquid position with cash of
$12,365 and accrued and other liabilities of $4,251.
The Partnership's primary capital requirements are for the continued development
and operation of the Sorrento I property. It is anticipated that these
requirements will be funded from the operations of the Property 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.
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.
Inflation:
The Partnership does not expect inflation to be a material factor in its
operations in 2000.
3
SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
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MARCH 31, 2000 DECEMBER 31, 1999
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(UNAUDITED)
ASSETS
Cash and cash equivalents ............. $ 12,365 $ 3,722
--------------- ---------------
Total Assets .......................... $ 12,365 $ 3,722
=============== ===============
LIABILITIES AND PARTNERS' EQUITY
Accrued and other liabilities ......... $ 4,251 $ 0
Investment in unconsolidated
joint venture ....................... 347,103 340,614
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Total Liabilities ..................... 351,354 340,614
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Minority interest in consolidated
joint venture ....................... 21,014 7,516
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Partners' equity (deficit):
General Partner ..................... (360,003) (344,408)
Limited Partners:
60,000 units authorized,
36,521 issued and outstanding ..... 0 0
--------------- ---------------
Total Partners' equity (deficit) ...... (360,003) (344,408)
--------------- ---------------
Total Liabilities and Partners' equity. $ 12,365 $ 3,722
=============== ===============
See Accompanying Notes
4
SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
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2000 1999
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(Unaudited) (Unaudited)
REVENUES:
Other income ..................................... $ 0 $ 11,907
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Total revenues .............................. 0 11,907
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EXPENSES:
Operating expenses ............................... 13,665 13,797
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Total costs and expenses .................... 13,665 13,797
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LOSS BEFORE PARTNERSHIP'S SHARE OF
UNCONSOLIDATED JOINT VENTURE LOSS ............... (13,665) (1,890)
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PARTNERSHIP'S SHARE OF UNCONSOLIDATED
JOINT VENTURE LOSS .............................. (6,489) (567)
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LOSS BEFORE MINORITY INTEREST'S SHARE
OF CONSOLIDATED JOINT VENTURE LOSS .............. (20,154) (2,457)
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MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS .................. 4,559 630
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NET LOSS ........................................... $ (15,595) $ (1,827)
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Net loss per limited partnership unit .............. $ 0 $ 0
========== ==========
SEE ACCOMPANYING NOTES
5
SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE THREE MONTHS ENDED MARCH 31, 2000
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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 income (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' equity (deficit) - January 1, 2000 (audited) ................. 0 0 (344,408) (344,408)
Net loss (unaudited) ................................................... 0 0 (15,595) (15,595)
----------- ----------- ----------- -----------
Partners' equity (deficit) - March 31, 2000 (unaudited) ................ $ 0 $ 0 $ (360,003) $ (360,003)
=========== =========== =========== ===========
SEE ACCOMPANYING NOTES
6
SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
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2000 1999
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(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $ (15,595) $ (1,827)
Adjustments to reconcile net loss
to cash (used in) provided by
operating activities:
Partnership's share of unconsolidated
joint venture loss ........................... 6,489 567
Minority interest's share of consolidated
joint venture loss ........................... (4,559) (630)
Increase in accrued and other liabilities ...... 4,251 10,905
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Net cash (used in) provided by
operating activities ......................... (9,414) 9,015
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CASH FLOWS FROM FINANCING ACTIVITIES:
Loan to affiliate .............................. 0 (9,600)
Contributions from minority investor ........... 20,000 0
Distributions to minority investor ............. (1,943) 0
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Net cash provided by (used in)
financing activities ......................... 18,057 (9,600)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ........................... 8,643 (585)
CASH AND CASH EQUIVALENTS
Beginning of period ............................. 3,722 935
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CASH AND CASH EQUIVALENTS
End of period ................................... $ 12,365 $ 350
========== ==========
SEE ACCOMPANYING NOTES
7
SIERRA PACIFIC DEVELOPMENT FUND III
(A LIMITED PARTNERSHIP)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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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 (the Property). In February
1994, the Partnership formed a joint venture with SMMP known as Sierra Vista
Partners to facilitate cash contributions by SMMP for the continued development
and operation of the Sierra Vista property.
The Partnership Agreements of SIP and Sierra Vista Partners (the Agreements)
were amended effective January 1, 1995 to consider both contributions and
distributions when calculating each partners' percentage interest at January 1
of each year as called for by the Agreements. Accordingly, on January 1, 2000,
the Partnership's interest in SIP was increased from 11.88% to 16.76% and the
Partnership's interest in Sierra Vista Partners was decreased from 66.68% to
66.64% to reflect 1999 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 16.76% 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.
8
Sierra Pacific Development Fund III
Notes to Consolidated Financial Statements (Unaudited)
Page two
2. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated condensed financial statements include
the accounts of the Partnership and Sierra Vista Partners, a majority owned
joint venture at March 31, 2000. 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 which are necessary for a fair presentation
of its financial position at March 31, 2000 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, 1999.
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 Property, an industrial building located in San
Diego, California. At March 31, 2000, the Partnership has a 16.76% equity
interest in the Property. This investment is accounted for using the equity
method.
Summarized income statement information for SIP for the three months ended March
31, 2000 and 1999 follows:
MARCH 31
---------------------
2000 1999
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Rental income $ 70,909 $ 70,909
Total revenue 70,909 70,909
Operating expenses 40,255 29,841
Net loss 38,718 4,773
4. PARTNERS' EQUITY (DEFICIT)
Equity and net loss per limited partnership unit is determined by dividing the
limited partners' share of the Partnership's equity and net loss by the number
of limited partnership units outstanding, 36,521.
9
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
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27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed in April 2000 reporting a change in the Partnership's
Certifying Accountant.
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 10, 2000 /s/ THOMAS N. THURBER
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Thomas N. Thurber
President and Director
Date: MAY 10, 2000 /s/ G. ANTHONY EPPOLITO
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G. Anthony Eppolito
Chief Accountant
10