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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2005

OR

Commission file number: 0-14207

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

(650) 343-9300

(Registrant’s telephone number, including area code)

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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

Total number of units outstanding as of May 16, 2005: 68,510

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INDEX

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Balance Sheets

(in thousands, except units outstanding)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Operations

(in thousands, except per unit amounts and units outstanding)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statement of Partners’ Equity

For the three months ended March 31, 2005

(in thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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RANCON REALTY FUND IV,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

Rancon Realty Fund IV, a California Limited Partnership, (“the Partnership”), was organized in accordance with the provisions of the California Uniform Limited Partnership Act for the purpose of acquiring, developing, operating and selling real property. The Partnership was organized in 1984 and reached final funding in July 1987. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (“RFC”), hereinafter referred to as the Sponsor or the General Partner. RFC is wholly-owned by Daniel L. Stephenson. The Partnership has no employees.

During the three months ended March 31, 2005, a total of 378 units of limited partnership interest (“Units”) were redeemed at an average price of $529. As of March 31, 2005, there were 68,576 Units outstanding.

In the opinion of RFC, the General Partner and Glenborough Realty Trust Incorporated (“Glenborough”), the Partnership’s asset and property manager, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the consolidated financial position of the Partnership as of March 31, 2005 and December 31, 2004, the related consolidated statements of operations for the three months ended March 31, 2005 and 2004, partners’ equity for the three months ended March 31, 2005, and cash flows for the three months ended March 31, 2005 and 2004.

Allocation of Net Income and Net Loss

Allocations of net income and net losses are made pursuant to the terms of the Partnership Agreement. Generally, net income from operations is allocated 90% to the limited partners and 10% to the General Partner. Net losses from operations are allocated 99% to the limited partners and 1% to the General Partner until such time as a partner’s capital account is reduced to zero. Additional losses will be allocated entirely to those partners with positive capital account balances until such balances are reduced to zero.

Net income other than net income from operations shall be allocated as follows: (i) first, to the partners who have a deficit balance in their capital account, provided that, in no event, shall the General Partner be allocated more than 5% of the net income other than net income from operations until the earlier of sale or disposition of substantially all of the assets or the distribution of cash (other than cash from operations) equal to the Unitholder’s original invested capital; (ii) second, to the limited partners in proportion to and to the extent of the amounts to increase their capital accounts to an amount equal to the sum of the adjusted invested capital of their units plus an additional cumulative non-compounded 6% return per annum (plus additional amounts depending on the date Units were purchased); (iii) third, to the partners in the minimum amount required to first equalize their capital account in proportion to the number of units owned, and then, to bring the sum of the balances of the capital accounts of the limited partners and the General Partner into the ratio of 4 to 1; and (iv) the balance, if any, 80% to the limited partners and 20% to the General Partner. In no event shall the General Partner be allocated less than 1% of the net income other than net income from operations for any period. Net loss other than net loss from operations shall be allocated 99% to the limited partners and 1% to the General Partner.

The terms of the Partnership agreement call for the General Partner to restore any deficit that may exist in its capital account after allocation of gains and losses from the sale of the final property owned by the Partnership, but prior to any liquidating distributions being made to the partners.

Distribution of Cash

The Partnership shall make annual or more frequent distributions of substantially all cash available to be distributed to partners as determined by the General Partner, subject to the following: (i) distributions may be restricted or suspended for limited periods when the General Partner determines in its absolute discretion that it is in the best interest of the Partnership; and (ii) all distributions are subject to the payments of partnership expenses and maintenance of reasonable reserves for debt service, alterations improvements, maintenance, replacement of furniture and fixtures, working capital and contingent liabilities.

All excess cash from operations shall be distributed 90 percent to the limited partners and 10 percent to the General Partner.

All cash from sales or refinancing and any other cash determined by the General Partner to be available for distribution other than cash from operations shall be distributed in the following order of priority: (i) first, 1 percent to the General Partner and 99 percent to the limited partners in proportion to the outstanding positive amounts of Adjusted Invested Capital (as defined in the Partnership Agreement) for each of their Units until Adjusted Invested Capital (as defined in the Partnership Agreement) for each Unit is reduced to zero; (ii) second, 1 percent to the General Partner and 99 percent to the limited partners until each of the limited partners has received an amount which, including cash from operations previously

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

distributed to the limited partners, equals a 12 percent annual cumulative non-compounded return on the Adjusted Invested Capital (as defined in the Partnership Agreement) of their Units plus such limited partners’ Limited Incremental Preferential Return (as defined in the Partnership Agreement), if any, with respect to each such Unit, on the Adjusted Investment Capital (as defined in the Partnership Agreement) of such Units for the twelve month period following the date upon which such Unit was purchased from the Partnership and following the admission of such limited partner; (for limited partners admitted to the Partnership before March 31, 1985, there are additional cumulative non-compounded returns of 9 percent, 6 percent, or 3 percent depending on purchase date, through October 31, 1985); (iii) third, 99 percent to the General Partner and 1 percent to the limited partners, until the General Partner has received an amount equal to 20 percent of all distributions of cash from sales or refinancing; and (iv) the balance, 80 percent to the limited partners, pro rata in proportion to the number of Units held by each, and 20 percent to the General Partner.

Management Agreement

Effective January 1, 1995, Glenborough Corporation (“GC”) entered into an agreement with the Partnership and other related Partnerships (collectively, the “Rancon Partnerships”) to perform or contract on the Partnership’s behalf for financial, accounting, data processing, marketing, legal, investor relations, asset and development management and consulting services for a period of ten years or until the liquidation of the Partnership, whichever comes first. Effective January 1, 1998, the agreement was amended to eliminate GC’s responsibility for providing investor relation services and Preferred Partnership Services, Inc., a California corporation unaffiliated with the Partnership, contracted to assume the investor relations service. In October 2000, GC merged into Glenborough Realty Trust Incorporated (“Glenborough”).

During the ten years ended December 31, 2004, the Partnership paid Glenborough for its services as follows: (i) a specified asset administration fee ($166,000 in the first quarter of 2004); (ii) a sales fees of 2% for improved properties and 4% for land; (iii) a refinancing fee of 1% and (iv) a management fee of 5% of gross rental receipts. As part of this agreement, Glenborough performed certain duties for the General Partner of the Rancon Partnerships. The General Partner assigned any distributions it received to Glenborough. RFC agreed to cooperate with Glenborough, should Glenborough attempt to obtain a majority vote of the limited partners to substitute itself as the Sponsor for the Rancon Partnerships. Glenborough is not an affiliate of RFC or the Partnership.

In July 2004, the Partnership extended its management relationship with Glenborough through December 31, 2006. Commencing on January 1, 2005 and ending December 31, 2006, the Partnership engages Glenborough to perform services for the following fees: (i) a management fee of 3% of gross rental revenue (ii) a construction services fee per certain schedules ($6,500 in the first quarter of 2005); (iii) a specified asset and Partnership management fee of $300,000 per year with reimbursements of certain expenses and consulting service fee ($73,000 in the first quarter of 2005); (vi) a sales fee of 2% for improved properties and 4% for unimproved properties; (v) a financing services fee of 1% of gross loan amount; and (vi) a development fee equal to 5% of the hard costs of the development project ($51,000 in the first quarter of 2005), excluding the cost of the land, and the development fee and the general contractor’s fee shall not exceed 11.5%, in the aggregate, of the hard costs of the development project.

The new management agreement represents a reduction of $363,000 for the asset and Partnership services fee in 2005 and 2006, respectively, compared to the asset and Partnership management fee paid in 2004; as well as a reduction of 2% in the management fee from 5% in 2004 to 3% in 2005 and 2006, respectively.

Risks and Uncertainties

The Partnership’s ability to (i) achieve positive cash flow from operations, (ii) meet its debt obligations, (iii) provide distributions either from operations or the ultimate disposition of the Partnership’s properties or (iv) continue as a going concern, may be impacted by changes in interest rates, property values, local and regional economic conditions, or the entry of other competitors into the market. The accompanying consolidated financial statements do not provide for adjustments with regard to these uncertainties.

Note 2. SIGNIFICANT ACCOUNTING POLICES

Basis of Accounting

The accompanying consolidated financial statements have been prepared on in accordance with Generally Accepted Accounting Principles in the United States of America (U.S. GAAP). They include the accounts of certain wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 results of operations during the reporting period. Actual results could differ from those estimates.

Consolidation

In April 1996, the Partnership formed RRF IV Tri-City Limited Partnership; a Delaware limited partnership (“RRF IV Tri-City”). The limited partner of RRF IV Tri-City is the Partnership and the General Partner is RRF IV, Inc. (“RRF IV, Inc.”), a corporation wholly owned by the Partnership. Since the Partnership owns 100% of RRF IV, Inc. and indirectly owns 100% of RRF IV Tri-City, the financial statements of RRF IV, Inc. and RRF IV Tri-City have been consolidated with those of the Partnership. All intercompany balances and transactions have been eliminated in the consolidation.

Rental Properties

Rental properties, including the related land, are stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value: (i) is based upon the Partnership’s plans for the continued operations of each property; and (ii) is computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates multiplied by annualized rental income based upon the age, construction and use of the building. The fulfillment of the Partnership’s plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due to uncertainties inherent in the valuation process and in the economy, it is reasonably possible that the actual results of operating and disposing of the Partnership’s properties could be materially different than current expectations.

Depreciation is provided using the straight-line method over useful lives ranging from five to forty years for the respective assets.

Construction in Progress and Land Held for Development

Construction in progress and land held for development are stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value is reduced to estimated fair value. Estimated fair value: (i) is based on the Partnership’s plans for the development of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties; and (iii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnership’s plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing for further development.

Interest, property taxes and insurance related to property constructed by the Partnership are capitalized during periods of construction.

Cash and Cash Equivalents

The Partnership considers money market funds and certificates of deposit with original maturities of less than ninety days when purchased to be cash equivalents. As of March 31, 2005, the Partnership does not own any certificates of deposit.

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, other liabilities, construction costs payable, and line of credit payable ($8,109,000 and $7,660,000 as of March 31, 2005 and December 31, 2004), recorded amounts approximate fair value due to the relatively short maturity period. Based on interest rates available to the Partnership for debt with comparable maturities and other terms, the estimated fair value of the Partnership’s secured note payable as of March 31, 2005, and December 31, 2004 was approximately $5,788,000 and $6,010,000, respectively.

Deferred Costs

Deferred loan fees are amortized over the life of the related loan, on a basis which approximates the interest method, and deferred lease commissions are amortized on a straight-line basis over the initial fixed term of the related lease agreements.

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Revenues

The Partnership recognizes rental revenue on a straight-line basis at amounts that it believes it will collect on a tenant-by-tenant basis. The estimation process may result in higher or lower levels from period to period as the Partnership’s collection experience and the credit quality of the Partnership’s tenants changes. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants are unable to pay rent that the Partnership has previously recognized as revenue.

The Partnership’s portfolio of leases turns over continuously, with the number and value of expiring leases varying from year to year. The Partnership’s ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically is impacted by, among other things, the economic conditions of the market in which a property is located, the availability of competing space, and the level of improvements which may be required at the property. No assurance can be given that the rental rates that the Partnership will obtain in the future will be equal to or greater than those obtained under existing contractual commitments.

Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue in the period the applicable expenses are incurred. Differences between estimated and actual amounts are recognized in the subsequent year.

Sales of Real Estate

The Partnership recognizes sales of real estate when a contract is in place, a closing has taken place, the buyer’s investment is adequate to demonstrate a commitment to pay for the property and the Partnership does not have a substantial continuing involvement in the property. Each property is considered a separately identifiable component of the Partnership and is reported in discontinued operations when the operations and cash flows of the Property have been (or will be) eliminated from the ongoing operations of the Partnership as a result of the disposal transaction and the Property will not have any significant continuing involvement in the operations of the Partnership after the disposal transaction.

Net Income (Loss) Per Limited Partnership Unit

Net income or loss per limited partnership unit is calculated using the weighted average number of limited partnership units outstanding during the period and the Limited Partners’ allocable share of the net income or loss.

Income Taxes

No provision for income taxes is included in the accompanying consolidated financial statements as the Partnership’s results of operations are allocated to the partners for inclusion in their respective income tax returns. Net income (loss) and partners’ equity (deficit) for financial reporting purposes will differ from the Partnership’s income tax return because of different accounting methods used for certain items, including depreciation expense, provisions for impairment of investments in real estate, capitalization of development period interest and rental income and loss recognition.

Concentration Risk

One tenant represented 20% and 22% of rental income as of March 31, 2005 and 2004, respectively.

Reclassification

Certain prior year balances have been reclassified to conform to the current year presentation.

Reference to 2004 audited consolidated financial statements

These unaudited consolidated financial statements should be read in conjunction with the notes to consolidated financial statements included in the December 31, 2004 audited consolidated financial statements on Form 10-K.

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

Note 3. INVESTMENTS IN REAL ESTATE

Rental properties consisted of the following at March 31, 2005 and December 31, 2004 (in thousands):

As of March 31, 2005, the Partnership’s rental properties included eight retail and four office/R & D projects at the Tri-City in San Bernardino, California.

During the first quarter of 2005, Vanderbilt Plaza was transferred to land and buildings from construction in progress. The construction started in September 2003, and the building was substantially completed in September 2004. The total square footage of this property is approximately 114,000. New York Life, an existing tenant at One Parkside (owned and managed by Rancon Realty Fund V – a partnership sponsored by the General Partner of the Partnership) relocated to Vanderbilt Plaza in February 2005 and is currently occupying approximately 23,000 square feet of office space which was completed in the first quarter of 2005.

Construction in progress consisted of the following at March 31, 2005 and December 31, 2004 (in thousands):

Vanderbilt Plaza was transferred to land and building from construction in progress after the first tenant moved in on February 2005.

Land held for development consisted of the following at March 31, 2005 and December 31, 2004 (in thousands):

As of March 31, 2005, the Partnership owned approximately 16 acres of undeveloped land. A conceptual plan for a specification building is currently being designed on an approximately one acre of site. The plan includes a three-story multi-tenant building with an estimate of 75,000 gross square feet of office space.

The remaining 15 acres are part of a landfill monitoring program handled by the City of San Bernardino (as discussed in Note 5 below). As a result, at this time the Partnership believes that development of this landfill is not practical.

Note 4. NOTE PAYABLE AND LINE OF CREDIT

Note payable and line of credit as of March 31, 2005 and December 31, 2004 were as follows (in thousands):

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RANCON REALTY FUND IV

A California Limited Partnership

Notes to Consolidated Financial Statements

(Unaudited)

The note payable may be prepaid with a penalty based on a yield maintenance formula. There are no prepayment penalties if the note is repaid within six months of the maturity dates. The Partnership’s plan is to either sell the properties or refinance with a lower interest rate loan to pay off this high interest rate note when the prepayment penalty period ends on November 1, 2005.

The annual maturities of the Partnership’s notes payable subsequent to March 31, 2005 are as follows (in thousands):

Note 5. COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

The Partnership follows a policy of monitoring its properties for the presence of hazardous or toxic substances. The Partnership is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Partnership’s business, assets or results of operations. There can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Partnership’s results of operations and cash flows.

Approximately 15 acres of the Tri-City land owned by the Partnership was part of a landfill operated by the City of San Bernardino (“the City”) from approximately 1950 to 1960. The City is responsible for the landfill and the gas-monitoring program as prescribed by the Santa Ana Regional Water Quality Control Board (“RWQCB”). Under a Limited Access Agreement with the Partnership, methane monitoring is handled directly by the City. Although there is no requirement by the RWQCB or the County for Clean Closure which would include removal of all landfill, the City is required to place both a “Cover Improvement System” and a “Gas Extraction System” at the site. The City started the installation of the Cover Improvement System in October 2004. The schedule was delayed due to the weather conditions since December 2004. The estimated completion date is sometime during the second quarter of 2005. The City was directed by the County of San Bernardino Local Enforcement Agency under a Notice and Order of Compliance to install the Gas Extraction System after the Cover Improvement System is in place. No assurance can be made that circumstances will not arise which could impact the Partnership’s responsibility related to the land. At this time, the Partnership believes that development of this land is not practical.

General Uninsured Losses

The Partnership carries property and liability insurance with respect to the properties. This coverage has policy specification and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Should the properties sustain damage as a result of an earthquake or flood, the Partnership may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, the Partnership has elected to obtain insurance coverage for “certified acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002; however, our policies of insurance may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, the Partnership could lose some or all of its capital investment, cash flow and anticipated profits related to the properties.

Other Matters

The Partnership is contingently liable for subordinated real estate commissions payable to the Sponsors in the aggregate amount of $643,000 at March 31, 2005, for sales that transpired in previous years. The subordinated real estate commissions are payable only after the Limited Partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of 12% per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are limited, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Background

Rancon Realty Fund IV, a California Limited Partnership, (the “Partnership”) was organized in accordance with the provisions of the California Uniform Limited Partnership Act for the purpose of acquiring, developing, operating and selling real property. The Partnership was organized in 1984 and reached final funding in July 1987. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corp. (“RFC”), hereinafter referred to as the Sponsor or the General Partner. RFC is wholly-owned by Daniel L. Stephenson. The Partnership has no employees.

In April 1996, the Partnership formed RRF IV Tri-City Limited Partnership; a Delaware limited partnership (“RRF IV Tri-City”). The limited partner of RRF IV Tri-City is the Partnership and the General Partner is RRF IV, Inc. (“RRF IV, Inc.”), a corporation wholly owned by the Partnership. Since the Partnership owns 100% of RRF IV, Inc. and indirectly owns 100% of RRF IV Tri-City, the Partnership considers all assets owned by RRF IV, Inc. and RRF IV Tri-City to be owned by the Partnership.

Overview

The Partnership’s initial acquisition of property between December 1984 and August 1985 consisted of approximately 76.56 acres of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of 153 acres known as Tri-City (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses and all of the parcels thereof are separately owned by the Partnership and Rancon Realty Fund V (“Fund V”), a partnership sponsored by the General Partner of the Partnership. Since the acquisition of the land, the Partnership has constructed thirteen projects at Tri-City consisting of four office projects, one industrial property, and eight commercial properties. In 2002, one office building was sold. The Partnership’s properties are more fully described below.

As of March 31, 2005, the Partnership owned twelve rental properties, and approximately 16 acres of unimproved land (“Tri-City Properties”), all in the Tri-City master-planned development in San Bernardino, California.

Tri-City Corporate Center

Between 1984 and 1985, the Partnership acquired a total of 76.56 acres of partially developed land in Tri-City for an aggregate purchase price of $9,917,000. During that time, Fund V acquired the remaining 76.21 acres within Tri-City.

Tri-City is located at the northeastern quadrant of the intersection of Interstate 10 (San Bernardino Freeway) and Waterman Avenue in the southernmost part of the City of San Bernardino, and is in the heart of the Inland Empire, the most densely populated area of San Bernardino and Riverside Counties.

The Inland Empire is generally broken down into two major markets, Inland Empire East and Inland Empire West. Tri-City is located within the Inland Empire East market, which consists of approximately 12.5 million square feet of office space and an overall vacancy rate of approximately 12% as of March 31, 2005, according to a study conducted by an independent broker.

Within the Tri-City area at March 31, 2005, the Partnership has approximately 269,000 square feet of office space with an average vacancy rate of 34%, approximately 178,000 square feet of retail space with an average vacancy rate of 0.7%, and approximately 62,000 square feet of R & D space with vacancy rate of 60% (see below for further discussion).

Tri-City Properties

The Partnership’s improved properties in the Tri-City are as follows:

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These twelve operating properties total approximately 509,000 square feet and offer a wide range of retail, commercial, R&D and office products to the market.

Occupancy rates at the Partnership’s Tri-City properties as of March 31, 2005 and 2004 were as follows:

Weighted average occupancy decreased primarily as a result of the increase in vacancy from Carnegie Business Center I and from a new constructed property, Vanderbilt Plaza (as discussed below).

As of March 31, 2005, tenants at Tri-City occupying substantial portions of leased rental space included: (i) Countrywide Home Loan with a lease through August 2008; (ii) CompUSA with a lease through August 2008; (iii) Fidelity National Title with a lease through August 2008; (iv) PetsMart with a lease through January 2009; (v) Inland Regional Center with a lease through July 2009; (vi) The University of Phoenix, Inc. with a lease through August 2009; (vii) Office Max with a lease through October 2013; (viii) New York Life with a lease through March 2015; and (ix) Circuit City with a lease through January 2018. These nine tenants, in the aggregate, occupied approximately 276,000 square feet of the 509,000 total leasable square feet at Tri-City and accounted for approximately 76% of the rental income of the Partnership during the first quarter of 2005.

Occupancy decreased 60% from March 31, 2004 to March 31, 2005 at Carnegie Business Center I.

During 2004, ITT Education Center, a tenant located at Carnegie Business Center I, purchased two unimproved lots known as Brier Business Center I and Brier Plaza from the Partnership. In December 2004, ITT vacated their space in Carnegie Business Center I and moved to a new building constructed on the land purchased from the Partnership.

In May 2005, the Partnership signed a lease with a new tenant for the office space previously occupied by ITT at Carnegie Business Center I with a ten year term. The new tenant should occupy the office space in October 2005.

Vanderbilt Plaza started construction in September 2003, and the building was substantially completed in September 2004. The property is a four-story office building and the total square footage is approximately 114,000. In February 2005, New York Life, a tenant at One Parkside (owned and managed by Rancon Realty Fund V – a partnership sponsored by the General Partner of the Partnership) relocated to Vanderbilt Plaza and is currently occupying approximately 23,000 square feet of office space of the building.

During the 1^st and 2^nd quarters, the Partnership signed three leases for the office spaces of approximately 52,000 square feet at Vanderbilt Plaza with terms of five years for two tenants and seven years for one tenant. These three new tenants should occupy the office spaces in the 3^rd quarter of 2005.

Management is actively marketing the office spaces at Vanderbilt Plaza to minimize the risk of an extended vacancy period.

The Partnership’s Tri-City Properties are owned by the Partnership, in fee, subject to the following note and line of credit as of March 31, 2005:

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The note payable may be prepaid with a penalty based on a yield maintenance formula. There are no prepayment penalties if this note is repaid within six months of the maturity date. The prepayment penalty period ends on November 1, 2005.

Tri-City Land

As of March 31, 2005, the Partnership owned approximately 16 acres of undeveloped land. A conceptual plan for a specification building is currently being designed on an approximately one acre of land. The plan includes a three-story multi-tenant building with an estimate of 75,000 gross square feet of office space. The Partnership intends to develop this one acre of site to generate more operating income for the Partnership in this fast-growing market.

The remaining 15 acres of land was part of a landfill operated by the City of San Bernardino (“the City”) from approximately 1950 to 1960. The City is responsible for the landfill and the gas-monitoring program as prescribed by the Santa Ana Regional Water Quality Control Board (“RWQCB”). Under a Limited Access Agreement with the Partnership, methane monitoring is handled directly by the City. Although there is no requirement by the RWQCB or the County for Clean Closure which would include removal of all landfill, the City is required to place both a “Cover Improvement System” and a “Gas Extraction System” at the site. The City started the installation of the Cover Improvement System in October 2004. The schedule was delayed due to the weather conditions since December 2004. The estimated completion date is sometime during the second quarter of 2005. The City was directed by the County of San Bernardino Local Enforcement Agency under a Notice and Order of Compliance to install the Gas Extraction System after the Cover Improvement System is in place. No assurance can be made that circumstances will not arise which could impact the Partnership’s responsibility related to the land. At this time, the Partnership believes that development of this land is not practical.

Results of Operations

Comparison of the three months ended March 31, 2005 to the three months ended March 31, 2004.

Revenue

Rental income for the three months ended March 31, 2005 increased $11,000, compared to the three months ended March 31, 2004, primarily due to an increase in occupancy at Vanderbilt Plaza, which commenced operation in February 2005, offset by a decrease in occupancy at Carnegie Business Center I, as a result of a tenant, ITT Education Center, vacating their space at end of 2004 (as discussed above).

Expenses

Operating expenses increased $94,000, or 16%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to the operation at Vanderbilt Plaza which commenced in February 2005, offset by reduction in management fee from 5% to 3%..

Depreciation and amortization increased $56,000, or 15%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to additions to a new building and lease commissions.

Expenses associated with undeveloped land decreased $29,000, or 46%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to the transfer of Vanderbilt Plaza from construction in progress to land and buildings.

General and administrative expenses decreased $79,000, or 27%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to a reduction in asset and Partnership management fee in 2005.

Non-operating income / expenses

Interest and other income decreased $11,000, or 100%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to a lower average invested cash balance.

Interest expense decreased $104,000, or 75%, for the three months ended March 31, 2005, compared to the three months ended March 31, 2004, primarily due to decrease in interest and loan expenses capitalized to the Vanderbilt Plaza during the one-year lease up period.

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Liquidity and Capital Resources

The following discussion should be read in conjunction with the Partnership’s December 31, 2004 audited consolidated financial statements and the notes thereto.

As of March 31, 2005, the Partnership had cash and cash equivalents of $368,000.

The Partnership’s primary liabilities at March 31, 2005 included a note payable and a line of credit, totaling approximately $13,647,000 secured by properties with an aggregate net book value of approximately $17,926,000 and with maturity dates of May 1, 2006 and April 15, 2007. The note requires monthly principal and interest payments of $53,000, and bears a fixed interest rate of 8.74%. The line of credit requires monthly interest-only payments, bears interest at Prime Rate (5.5 % and 5.25% as of March 31, 2005 and December 31, 2004, respectively), and had an outstanding balance of $8,109,000 and $7,660,000 at March 31, 2005 and December 31, 2004, respectively.

In October 2004, the Partnership used its existing cash reserves primarily from sales of land held for development in 2004 to repay the note secured by One Vanderbilt in full.

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the aggregate amount of $643,000 at March 31, 2005, for sales that transpired in previous years. The subordinated real estate commissions are payable only after the Limited Partners have received distributions equal to their original invested capital plus a cumulative non-compounded return of 12% per annum on their adjusted invested capital. Since the conditions under which these commissions would be payable have not been achieved, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.

Operationally, the Partnership’s primary source of funds consists of cash provided by its rental activities. Other sources of funds may include permanent financing, draws on the line of credit, property sales and interest income on money market funds. Cash generated from property sales is generally added to the Partnership’s cash reserves, pending use in the development of properties or distribution to the partners.

Contractual Obligations

As of March 31, 2005, the Partnership had contractual obligations as follows (in thousands):

Management expects that the Partnership’s cash and cash equivalents as of March 31, 2005, together with cash from operations, sales and financing, will be sufficient to finance the Partnership’s and the properties’ continued operations and development plans on a short-term basis and for the reasonably foreseeable future. There can be no assurance that the Partnership’s results of operations will not fluctuate in the future and at times affect its ability to meet its operating requirements.

The Partnership knows of no demands, commitments, events or uncertainties, which might affect its capital resources in any material respect. In addition, the Partnership is not subject to any covenants pursuant to its secured debt that would constrain its ability to obtain additional capital.

Operating Activities

During the three months ended March 31, 2005, the Partnership’s cash provided by operating activities totaled $498,000.

The $23,000 decrease in accounts receivable at March 31, 2005, compared to December 31, 2004, was primarily due to collection of tenant rents receivable, which was outstanding at December 31, 2004.

The $442,000 increase in deferred costs at March 31, 2005, compared to December 31, 2004, was primarily due to increase in lease commission paid for new lease at Vanderbilt Plaza, as well as a renewal lease at One Vanderbilt.

The $109,000 increase in prepaid expenses and other assets at March 31, 2005, compared to December 31, 2004, was primarily due to increase in impound accounts related to the note payable.

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The $163,000 increase in accounts payable and other liabilities at March 31, 2005, compared to December 31, 2004, was primarily due to increase in accruals for property taxes.

The $95,000 increase in prepaid rents at March 31, 2005, compared to December 31, 2004, was due to the receipt of April 2005 rents in March 2005.

Investing Activities

During the three months ended March 31, 2005, the Partnership’s cash used for investing activities totaled $962,000 primarily for building and tenant improvements at Vanderbilt Plaza.

Financing Activities

During the three months ended March 31, 2005, the Partnership’s cash generated from financing activities totaled $131,000, which consisted of $450,000 in line of credit draws, offset by $39,000 in principal payments on note payable, $200,000 used for the redemption of 378 limited partnership Units, of which $33,000 was accrued at March 31, 2005 for final settlement in the second quarter of 2005, and $113,000 in payment of distributions to the General Partner, which was accrued in 2004.

Critical Accounting Policies

Revenue recognized on a straight-line basis

The Partnership recognizes rental revenue on a straight-line basis at amounts that it believes it will collect on a tenant by tenant basis. The estimation process may result in higher or lower levels from period to period as the Partnership’s collection experience and the credit quality of the Partnership’s tenant’s changes. Actual amounts collected could be lower or higher than the amounts recognized on a straight-line basis if specific tenants are unable to pay rent that the Partnership has previously recognized as revenue.

Carrying value of rental properties and land held for development

The Partnership’s rental properties, including the related land, are stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value is based upon (i) the Partnership’s plans for the continued operations of each property, and (ii) is computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates multiplied by annualized rental income based upon the age, construction and use of the building. The fulfillment of the Partnership’s plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due to uncertainties inherent in the valuation process and in the economy, it is reasonably possible that the actual results of operating and disposing of the Partnership’s properties could be materially different than current expectations.

Land held for development is stated at cost unless events or circumstances indicate that cost cannot be recovered, in which case, the carrying value is reduced to estimated fair value. Estimated fair value: (i) is based on the Partnership’s plans for the development of each property; (ii) is computed using estimated sales price, based upon market values for comparable properties; and (iii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnership’s plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing to further develop the properties.

The actual value of the Partnership’s portfolio of properties and land held for development could be significantly higher or lower than their carrying amounts.

Forward Looking Statements; Factors That May Affect Operating Results

This Report on Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Partnership’s expectations, hopes, intentions, beliefs and strategies regarding the future. These forward looking statements include statements relating to:

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All forward-looking statements included in this document are based on information available to the Partnership on the date hereof. Because these forward looking statements involve risk and uncertainty, there are important factors that could cause our actual results to differ materially from those stated or implied in the forward-looking statements. Those important factors include:

The forward-looking statements in this Quarterly Report on Form 10-Q are subject to additional risks and uncertainties further discussed below under Risk Factors. The Partnership assumes no obligation to update any forward looking-statement.

Risk Factors

Market Fluctuations in Rental Rates and Occupancy Could Adversely Affect Our Operations

As leases turn over, our ability to re-lease the space to existing or new tenants at rates equal to or greater than those realized historically is impacted by, among other things, the economic conditions of the market in which a property is located, the availability of competing space (including sublease space offered by tenants who have vacated space in competing buildings prior to the expiration of their lease term), and the level of improvements which may be required at the property. We cannot assure you that the rental rates we obtain in the future will be equal to or greater than those obtained under existing contractual commitments. If we cannot lease all or substantially all of the expiring space at our properties promptly, or if the rental rates are significantly lower than expected, then our results of operations and financial condition could be negatively impacted.

Tenants’ Defaults Could Adversely Affect Our Operations

Our ability to manage our assets is subject to federal bankruptcy laws and state laws that limit creditors’ rights and remedies available to real property owners to collect delinquent rents. If a tenant becomes insolvent or bankrupt, we cannot be sure that we could recover the premises from the tenant promptly or from a trustee or debtor-in-possession in any bankruptcy proceeding relating to that tenant. We also cannot be sure that we would receive rent in the proceeding sufficient to cover our expenses with respect to the premises. If a tenant becomes bankrupt, the federal bankruptcy code will apply, which in some instances may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations to us could adversely affect our results of operations and financial condition.

Potential Liability Due to Environmental Matters

Under federal, state and local laws relating to protection of the environment, or Environmental Laws, a current or previous owner or operator of real estate may be liable for contamination resulting from the presence or discharge of petroleum products

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or other hazardous or toxic substances on the property. These owners may be required to investigate and clean-up the contamination on the property as well as the contamination which has migrated from the property. Environmental Laws typically impose liability and clean-up responsibility without regard to whether the owner or operator knew of, or was responsible for, the presence of the contamination. This liability may be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. In addition, the owner or operator of a property may be subject to claims by third parties based on personal injury, property damage and/or other costs, including investigation and clean-up costs, resulting from environmental contamination. Environmental Laws may also impose restrictions on the manner in which a property may be used or transferred or in which businesses may be operated. These restrictions may require expenditures. Under the Environmental Laws, any person who arranges for the transportation, disposal or treatment of hazardous or toxic substances may also be liable for the costs of investigation or clean-up of those substances at the disposal or treatment facility, whether or not the facility is or ever was owned or operated by that person.

Our tenants generally are required by their leases to operate in compliance with all applicable Environmental Laws, and to indemnify us against any environmental liability arising from their activities on the properties. However, we could be subject to strict liability by virtue of our ownership interest in the properties. Also, tenants may not satisfy their indemnification obligations under the leases. We are also subject to the risk that:

Any one of these conditions could have an adverse effect on our results of operations and financial condition. Moreover, future environmental laws, ordinances or regulations may have an adverse effect on our results of operations and financial condition. Also, the current environmental condition of those properties may be affected by tenants and occupants of the properties, by the condition of land or operations in the vicinity of the properties (such as the presence of underground storage tanks), or by third parties unrelated to us.

Environmental Liabilities May Adversely Affect Operating Costs and Ability to Borrow

The obligation to pay for the cost of complying with existing Environmental Laws as well as the cost of complying with future legislation may affect our operating costs. In addition, the presence of petroleum products or other hazardous or toxic substances at any of our properties, or the failure to remediate those properties properly, may adversely affect our ability to borrow by using those properties as collateral. The cost of defending against claims of liability and the cost of complying with Environmental Laws, including investigation or clean-up of contaminated property, could materially adversely affect our results of operations and financial condition.

General Risks of Ownership of Real Estate

We are subject to risks generally incidental to the ownership of real estate. These risks include:

Should any of these events occur, our results of operations and financial condition could be adversely affected.

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Uninsured Losses May Adversely Affect Operations

We, or in certain instances, tenants of our properties, carry property and liability insurance with respect to the properties. This coverage has policy specification and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Further, certain of the properties are located in areas that are subject to earthquake activity and floods. Should a property sustain damage as a result of an earthquake or flood, we may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, we have elected to obtain insurance coverage for “certified acts of terrorism” as defined in the Terrorism Risk Insurance Act of 2002; however, our policies of insurance may not provide coverage for other acts of terrorism. Any losses from such other acts of terrorism might be uninsured. Should an uninsured loss occur, we could lose some or all of our capital investment, cash flow and anticipated profits related to one or more properties. This could have an adverse effect on our results of operations and financial condition.

Illiquidity of Real Estate May Limit Our Ability to Vary Our Portfolio

Real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio quickly in response to changes in economic or other conditions.

Potential Liability Under the Americans With Disabilities Act

All of our properties are required to be in compliance with the Americans With Disabilities Act. The Americans With Disabilities Act generally requires that places of public accommodation be made accessible to people with disabilities to the extent readily achievable. Compliance with the Americans With Disabilities Act requirements could require removal of access barriers. Non-compliance could result in imposition of fines by the federal government, an award of damages to private litigants and/or a court order to remove access barriers. Because of the limited history of the Americans With Disabilities Act, the impact of its application to our properties, including the extent and timing of required renovations, is uncertain. Pursuant to lease agreements with tenants in certain of the “single-tenant” properties, the tenants are obligated to comply with the Americans With Disabilities Act provisions. If our costs are greater than anticipated or tenants are unable to meet their obligations, our results of operations and financial condition could be adversely affected.

Risks of Litigation

Certain claims and lawsuits have arisen against us in our normal course of business. We believe that such claims and lawsuits will not have a material adverse effect on our financial position, cash flow or results of operations.

Item 3. 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 expects that changes in market interest rates will not have a material impact on the performance or fair value of its portfolio.

For debt obligations, the table below presents principal cash flows and related weighted average interest rates by expected maturity dates.

A change of 1/8% in the index rate to which the Partnership’s variable rate debt is tied would not have a material impact on the annual interest incurred by the Partnership, based upon the balances outstanding on variable rate instruments at March 31, 2005.

As of March 31, 2005, the Partnership had $120,000 in interest-bearing money market funds. The Partnership does not own any derivative instruments.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision of the General Partner’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls

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and procedures. Based on this evaluation, the General Partner’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting him on a timely basis to material information required to be included in this report. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION

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SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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