RANCON REALTY FUND V - FORM 10-K

RANCON REALTY FUND V - FORM 10-K - March 30, 2010

Attached files

Attached files

RANCON REALTY FUND V Reports

file	filename
EX-31 - SECTION 302 CERTIFICATION OF DANIEL L. STEPHENSON, CEO AND CFO - RANCON REALTY FUND V	dex31.htm
EX-32 - SECTION 906 CERTIFICATION OF DANIEL L. STEPHENSON, CEO AND CFO - RANCON REALTY FUND V	dex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the year ended December 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number: 0-16467

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)


California		33-0098488
(State or other jurisdiction Of incorporation or organization)		(I.R.S. Employer Identification No.)

400 South El Camino Real, Suite 1100 San Mateo, California		94402-1708
(Address of principal executive offices)		(Zip Code)

Partnership’s telephone number, including area code (650) 343-9300

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership Interest

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933, as amended. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act of 1934, as amended. Yes ¨ No x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

No market for the Limited Partnership units exists and therefore a market value for such units cannot be determined.

DOCUMENTS INCORPORATED BY REFERENCE:

INDEX

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP


		Page No.
	PART I

Item 1.	Business	3
Item 1A.	Risk Factors	3-5
Item 1B.	Unresolved Staff Comments	5
Item 2.	Properties	6-8
Item 3.	Legal Proceedings	8
Item 4.	[Removed and Reserved]	8

	PART II

Item 5.	Market for Partnership’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-15
Item 7A.	Qualitative and Quantitative Disclosures about Market Risk	15
Item 8.	Financial Statements and Supplementary Data	15
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	16
Item 9A.	Controls and Procedures	16
Item 9A(T).	Controls and Procedures	16
Item 9B.	Other Information	16

	PART III

Item 10.	Directors, Executive Officers, and Corporate Governance	17
Item 11.	Executive Compensation	17
Item 12.	Security Ownership of Certain Beneficial Owners and Management and related Stockholder Matters	17-18
Item 13.	Certain Relationships, Related Transactions, and Director Independence	18
Item 14.	Principal Accountant Fees and Services	18

	PART IV

Item 15.	Exhibits and Financial Statement Schedules	19-20

	SIGNATURES	21

Part I

Item 1.

Business

Rancon Realty Fund V, a California Limited Partnership (“the Partnership”), was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, developing, operating and disposing of real property. The Partnership was organized in 1985 and reached final funding in February 1989. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (“RFC”), hereinafter collectively referred to as the “General Partner”. RFC is wholly-owned by Daniel L. Stephenson. The Partnership has no employees.

The Partnership’s initial acquisition of property in 1985 consisted of approximately 76.21 acres (unaudited) of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of approximately 153 acres known as Tri-City Corporate Centre (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses. Other than two properties which were sold in 2005 to third parties by the Partnership and Rancon Realty Fund IV (“Fund IV”), a limited partnership sponsored by the General Partner of the Partnership, all of the parcels thereof are separately owned by the Partnership and Fund IV. As of December 31, 2009, the Partnership has thirteen properties consisting of nine office properties, and four retail buildings. The Partnership’s properties are more fully described in Item 2.

In November 2005, in connection with a refinancing, the Partnership formed Rancon Realty Fund V Subsidiary LLC (“RRF V SUB”), a Delaware limited liability company, which is wholly owned by the Partnership. The new entity was formed to satisfy certain lender requirements for a loan obtained in the fourth quarter of 2005. The loan is collateralized by seven properties (as discussed in Item 2) which have been contributed to RRF V SUB by the Partnership. Since RRF V SUB is wholly owned by the Partnership, the financial statements of RRF V SUB have been consolidated with those of the Partnership.

In April 2006, the Partnership formed Rancon Realty Fund V Subsidiary Two LLC (“RRF V SUB2”), a Delaware limited liability company which is wholly owned by the Partnership. The new entity was formed to satisfy certain lender requirements for a loan obtained in the second quarter of 2006. The loan is collateralized by four properties (as discussed in Item 2) which have been contributed to RRF V SUB2 by the Partnership. Since RRF V SUB2 is wholly owned by the Partnership, the financial statements of RRF V SUB2 have been consolidated with those of the Partnership.

As of December 31, 2009, there were 83,898 limited partnership units (“Units”) outstanding.

The Partnership commenced on May 8, 1985 and shall continue until December 31, 2015, unless previously terminated in accordance with the provisions of the Partnership agreement.

Competition Within the Market

The Partnership competes in the leasing of its properties primarily with other available properties in the local real estate market. Other than Fund IV, management is not aware of any specific competitors of the Partnership’s properties doing business on a significant scale in the local market. Management believes that characteristics influencing the competitiveness of a real estate project are the geographic location of the property, the professionalism of the property manager, the maintenance and appearance of the property and rental rates, in addition to external factors such as general economic circumstances, trends, and the existence of new competing properties in the vicinity. Additional competitive factors with respect to commercial and industrial properties include the ease of access to the property, the adequacy of related facilities, such as parking, and the ability to provide rent concessions and tenant improvements commensurate with local market conditions. Although management believes the Partnership’s properties are competitive with comparable properties as to those factors within the Partnership’s control, over-building and other external factors could adversely affect the ability of the Partnership to attract and retain tenants. The marketability of the properties may also be affected (either positively or negatively) by these factors as well as by changes in general or local economic conditions, including prevailing interest rates. Depending on market and economic conditions, the Partnership may be required to retain ownership of its properties for periods longer than anticipated, or may need to sell earlier than anticipated or refinance a property at a time or under terms and conditions that are less advantageous than would be the case if unfavorable economic or market conditions did not exist.

Working Capital

The Partnership’s practice is to maintain cash reserves for normal repairs, replacements, working capital and other contingencies.

Item 1A.

Risk Factors

Risks of the Current Economic Environment

Financial markets have recently experienced unusual volatility and uncertainty. Liquidity has tightened in all financial markets, including the debt and equity markets. The Partnership’s ability to fund normal recurring expenses and capital expenditures as well as its ability to repay or refinance debt maturities could be adversely affected by an inability to secure financing at reasonable terms, if at all. If economic conditions persist or deteriorate, the Partnership may experience increases in past due accounts, defaults, lower occupancy and reduced effective rents. These conditions could negatively affect the Partnership’s future net income and cash flows and could adversely affect its ability to fund distributions, debt service payments and tenant improvements.

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 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 environmental assessments of our properties may not have revealed all potential environmental liabilities,

•

any prior owner or prior or current operator of these properties may have created an environmental condition not known to us, or

•

an environmental condition may otherwise exist as to any one or more of these properties.

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.

We are not aware of any current liabilities related to environmental matters that are material to us. However, the foregoing risk factor is provided because such risks are inherent to real estate ownership.

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:

•

changes in general economic or local conditions;

•

changes in supply of or demand for similar or competing properties in an area;

•

the impact of environmental protection laws;

•

changes in interest rates and availability of financing which may render the sale or financing of a property difficult or unattractive;

•

changes in tax, real estate and zoning laws; and

•

the creation of mechanics’ liens or similar encumbrances placed on the property by a lessee or other parties without our knowledge and consent.

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

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 specifications 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 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, as amended and reauthorized to date; 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 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

In 1985, the Partnership acquired a total of 76.21 acres of partially developed land in Tri-City for an aggregate purchase price of $14,118,000. In 1984 and 1985, a total of 76.56 acres within Tri-City were acquired by Fund IV.

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 consists of approximately 24.5 million square feet of office space and 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. According to a fourth quarter 2009 market view report from an independent broker the overall vacancy rate was 22% within the Inland Empire market as of December 31, 2009.

As of December 31, 2009, the Partnership owned thirteen rental properties and approximately 4.4 acres of unimproved land.

Properties

The Partnership’s improved properties are as follows:


Property	Type	Square Footage
One Carnegie Plaza	Two two-story office buildings	107,277
Two Carnegie Plaza	Two-story office building	68,956
Carnegie Business Center II	Two industrial buildings	50,867
Lakeside Tower	Six-story office building	112,715
One Parkside	Four-story office building	70,068
Bally’s Health Club (Bally’s)	Health club facility	25,000
Outback Steakhouse (Outback)	Restaurant	6,500
Palm Court Retail #3	Retail	6,004
Two Parkside	Three-story office building	82,004
Pat & Oscars	Restaurant	5,100
Three Carnegie	Two-story office building	83,661
Brier Corporate Center	Three-story office building	104,348
Three Parkside (Placed into service January 2009)	Two-story office building	30,000

Total		752,500

The office buildings total approximately 710,000 square feet with an average occupancy rate of 81%, and the retail buildings total approximately 43,000 square feet with an average occupancy rate of 100%, as of December 31, 2009.

As of December 31, 2009, there were six tenants occupying substantial portions of leased rental space. These six tenants, in the aggregate, occupy approximately 220,000 square feet of the 753,000 total rentable square feet and account for approximately 36% of the rental income generated for the Partnership for the year ended December 31, 2009.

Occupancy rates for the Partnership’s buildings for each of the five years ended December 31, 2009 were as follows:


	2009		2008		2007		2006		2005
One Carnegie Plaza	72	%	84	%	83	%	82	%	100	%
Two Carnegie Plaza	82	%	90	%	92	%	97	%	95	%
Carnegie Business Center II	100	%	100	%	85	%	95	%	81	%
Lakeside Tower	72	%	79	%	80	%	90	%	94	%
One Parkside	81	%	81	%	94	%	90	%	80	%
Bally’s Health Club	100	%	100	%	100	%	100	%	100	%
Outback Steakhouse	100	%	100	%	100	%	100	%	100	%
Palm Court Retail #3	100	%	100	%	100	%	100	%	100	%
Two Parkside	100	%	100	%	100	%	100	%	100	%
Pat & Oscars	100	%	100	%	100	%	100	%	100	%
Three Carnegie (commenced operations July 2005)	95	%	94	%	75	%	65	%	20	%
Brier Corporate Center (commenced operations February 2006)	84	%	84	%	84	%	84	%	N/A
Three Parkside (Placed into service January 2009)	0	%	N/A		N/A		N/A		N/A
Weighted average occupancy	82	%	88	%	87	%	88	%	84	%

The annual effective rents per square foot for each of the five years ended December 31, 2009 were as follows:


	2009		2008		2007		2006		2005
One Carnegie Plaza	$	20.90	$	20.00	$	19.38	$	18.28	$	17.91
Two Carnegie Plaza	$	21.11	$	20.38	$	19.53	$	18.71	$	18.16
Carnegie Business Center II	$	14.89	$	16.04	$	15.20	$	14.93	$	12.68
Lakeside Tower	$	23.39	$	23.21	$	23.12	$	23.16	$	22.48
One Parkside	$	20.95	$	21.14	$	22.07	$	22.22	$	20.39
Bally’s Health Club	$	18.19	$	18.19	$	18.19	$	13.03	$	11.33
Outback Steakhouse	$	16.75	$	16.75	$	16.75	$	16.75	$	15.23
Palm Court Retail # 3	$	24.23	$	24.23	$	26.35	$	24.79	$	22.98
Two Parkside	$	9.12	$	25.55	$	24.88	$	24.23	$	23.60
Pat & Oscars	$	19.41	$	17.65	$	17.65	$	17.65	$	17.65
Three Carnegie (commenced operations July 2005)	$	20.80	$	22.04	$	21.76	$	21.13	$	20.82
Brier Corporate Center (commenced operations February 2006)	$	23.18	$	22.58	$	21.41	$	21.00		N/A
Three Parkside (Placed into service January 2009)		N/A		N/A		N/A		N/A		N/A

Annual effective rent is calculated by dividing the aggregate of annualized December rental income for each tenant by the total square feet occupied at the property.

The Partnership’s rental properties are owned by the Partnership, in fee, subject to the following notes:

Collateral

Outstanding
balance

Mortgage

Fixed Interest
rate

Monthly payment

Maturity
date

Note payable #1

Seven properties (listed below)

25,218,000

Note

5.46

Principal & Interest

1/1/2016

Note payable #2

Four properties (listed below)

28,433,000

Note

5.61

Principal & Interest

5/1/2016

Note payable #1 is collateralized by Bally’s Health Club, Carnegie Business Center II, Lakeside Tower, Outback Steakhouse, Pat & Oscars, Palm Court Retail #3 and One Carnegie Plaza. Note payable #2 is collateralized by Brier Corporate Center, One Parkside, Two Parkside and Two Carnegie Plaza. There is no debt collateralized by Three Carnegie or Three Parkside as of December 31, 2009.

Land

As of December 31, 2009, the Partnership owned approximately 4.4 acres of land, a portion of which is undeveloped and the remainder is used as parking lots. Although the current market environment is not conducive to office development, the market will continue to be monitored with the intent to position the land for future development.

Item 3.

Legal Proceedings

Certain claims and lawsuits have arisen against the Partnership in its normal course of business. The Partnership believes that such claims and lawsuits will not in the future have a material adverse effect on the Partnership’s financial position, cash flow or results of operations.

Item 4.

[Removed and Reserved]

Part II

Item 5.

Market for Partnership’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

There is no established trading market for the units of limited partnership interest (“Units”) issued by the Partnership.

Holders

As of December 31, 2009, there were 7,618 holders of Units.

Distributions

Distributions are paid from either Cash From Operations or Cash From Sales or Refinancing (as such terms are defined in the Partnership Agreement).

Cash From Operations includes all cash receipts from operations in the ordinary course of business (except for the sale, exchange or other disposition of real property in the ordinary course of business) after deducting payments for operating expenses. All distributions of Cash From Operations are paid in the ratio of 90% to the limited partners and 10% to the General Partner.

Cash From Sales or Refinancing is the net cash realized by the Partnership from the sale, disposition or refinancing of any property after redemption of applicable mortgage debt and all expenses related to the transaction, together with interest on any notes taken back by the Partnership upon the sale of a property. All distributions of Cash From Sales or Refinancing are generally allocated as follows: (i) first, 1 percent to the General Partner and 99 percent to the limited partners until the limited partners have received an amount equal to their capital contributions; (ii) second, 1 percent to the General Partner and 99 percent to the limited partners until the limited partners have received a 12 percent return on their unreturned capital contributions including prior distributions of Cash From Operations; plus their Limited Incremental Preferred Return for the twelve month period following the purchase date of each Unit and following admission as a limited partner; (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 previously made under clauses (ii) and (iii) above, reduced by the amount of prior distributions made to the General Partner under clauses (ii) and (iii); and (iv) fourth, the balance 20 percent to the General Partner and 80 percent to the limited partners. A more detailed statement of the distribution policies is set forth in the Partnership Agreement.

There were no distributions during 2009.

For 2008, the Partnership distributed from operations $2,663,000 to the limited partners and $256,000 to the General Partner. In addition, the Partnership paid a final distribution related to 2007 of $57,000 to the General Partner.

Item 6.

Selected Financial Data

The following is selected financial data for each of the five years ended December 31, 2009 (in thousands, except per unit of limited partnership interest data):


	2009			2008			2007		2006		2005
Operating revenue	$	14,914		$	14,441		$	15,306	$	13,879	$	10,331
(Loss) income before discontinued operations	$	(1,182	)	$	(504	)	$	401	$	175	$	819
Income from discontinued operations	$	—		$	—		$	—	$	—	$	1,255
Net (loss) income	$	(1,182	)	$	(504	)	$	401	$	175	$	2,074
Net (loss) income allocable to Limited Partners	$	(1,064	)	$	(454	)	$	361	$	137	$	1,927
Net (loss) income per Unit	$	(12.68	)	$	(5.59	)	$	4.91	$	1.87	$	21.66
Total assets	$	70,766		$	72,718		$	76,939	$	79,354	$	66,654
Long-term obligations	$	53,651		$	54,539		$	55,380	$	56,175	$	37,824
Cash distributions per Unit	$	—		$	31.74		$	27.60	$	24.48	$	21.48

Effective January 1, 2009, the Partnership adopted guidance which improves the comparability of earnings per unit calculations for master limited partnerships (MLPs) with incentive distribution rights (IDRs). As such, the distributions should impact the calculation of earnings per unit (“EPU”) using the two-class method. The guidance has been applied retroactively to adjust the computation of EPU, in the above table, for the years ended December 31, 2008, 2007, 2006 and 2005.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations, liquidity and capital resources, and financial condition should be read in conjunction with the selected financial data in Item 6 and the Consolidated Financial Statements, including the notes thereto, included in Item 15 of Part IV.

Background

The Partnership’s initial acquisition of property in 1985 consisted of approximately 76.21 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 Corporate Centre (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses. The balance of Tri-City is owned by Rancon Realty Fund IV (“Fund IV”), a limited partnership sponsored by the General Partner of the Partnership. As of December 31, 2009 the Partnership has thirteen properties which consisted of nine office buildings and four retail buildings.

Overview

Leasing activities

During 2009, management executed seven new leases totaling 20,276 square feet of space and renewed sixteen leases totaling 144,672 square feet.

Construction

During the second quarter of 2007, the Partnership began developing Three Parkside, a two-story multi-tenant 30,000 square-foot office building on an approximate 0.6 acre land parcel. The project incurred costs of $5,432,000 and was placed into service in the first quarter of 2009. Management continues to focus on leasing this new building.

Results of Operations

Comparison of the year ended December 31, 2009 to the year ended December 31, 2008

Revenue

Operating revenue increased $473,000, or 3%, for the year ended 2009 compared to the year ended 2008. This was due to increases in rental revenue and recoveries from tenants of $376,000 and $97,000, respectively. Rental revenue increased due to increases in occupancy and rental rates at some of the Partnership’s properties which was partially offset by decreases in occupancy at others. The increase in recoveries correlates with an increase in operating expenses.

Expenses

Property operating expenses increased $742,000, or 12%, for the year ended 2009 compared to the year ended 2008, partially due to costs associated with the start-up of operations at Three Parkside in 2009, which accounts for $188,000. The remaining variance was due to increases in repairs and maintenance costs and property taxes, of $498,000 and $271,000, respectively, partially offset by decreases in insurance and property management fees, of $135,000 and $85,000 respectively.

Depreciation and amortization increased $415,000, or 9%, for the year ended 2009, compared to the year ended 2008, partially due to depreciation of $180,000 associated with Three Parkside, which was placed into service at the beginning of 2009, together with depreciation of capital improvements placed into service in the fourth quarter of 2008 and throughout 2009, primarily at Lakeside Tower, One Carnegie and Three Carnegie.

General and administrative expenses decreased by $90,000 or 9% for the year ended 2009, compared to the year ended 2008, primarily due to lower investor relations related expenses of $71,000. Additionally, asset management fees and tax fees decreased by $42,000 and $48,000 respectively, partially offset by higher audit fees, legal fees and business tax and license fees of $31,000, $21,000 and $24,000 respectively.

Non-operating income / expenses

Interest and other income decreased $131,000, or 91%, during 2009, compared to 2008, primarily due to both lower interest rates and lower investment balances during 2009.

Interest expense decreased $47,000, or 2%, during 2009, compared to 2008, due to a reduction in the balances of the loans due to amortization.

Comparison of the year ended December 31, 2008 to the year ended December 31, 2007

Revenue

Operating revenue decreased $865,000, or 6%, for the year ended 2008 compared to the year ended 2007. This was due to decreases in rental revenue and decreases in recoveries from tenants of $313,000 and $552,000, respectively. Rental revenue decreased due to several factors. Gross effective rental income was higher compared to 2007 due to increases in rental rates, but this favorable variance was more than offset by higher amortization of straight line rents, higher reserves for bad debts and lower lease termination income, which lowered revenue by $229,000, $114,000 and $168,000, respectively. The decrease in recoveries is due to both a decrease for 2008, which correlates with a decrease in operating expenses, and a credit to tenants in 2008 related to prior year recoveries, which lowered revenue by $428,000 compared to 2007. The final recovery true up for 2007 was performed in the second quarter of 2008 and resulted in lower recoveries than estimated at the end of 2007.

Expenses

Property operating expenses decreased $495,000, or 7%, for the year ended 2008 compared to the year ended 2007, primarily due to decreases in property taxes, utilities and insurance of $242,000, $147,000 and $140,000, respectively.

Depreciation and amortization increased $99,000, or 2%, for the year ended 2008, compared to the year ended 2007, primarily due to the depreciation of capital improvements, of approximately $2,841,000, placed into service in the current year.

Non-operating income / expenses

Interest and other income decreased $418,000, or 74%, during 2008, compared to 2007, primarily due to both lower average investment balances and lower interest rates.

Interest expense increased $38,000, or 1%, during 2008, compared to 2007, due to the cessation of interest capitalization, at the end of 2007, related to the development of Three Parkside.

Liquidity and Capital Resources

As of December 31, 2009, the Partnership had cash and cash equivalents of $5,507,000.

The Partnership’s liabilities at December 31, 2009, include two notes payable. The borrowings totaled approximately $53,651,000, collateralized by properties with an aggregate net carrying value of approximately $43,188,000.

The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the amount of $102,000 as of December 31, 2009 for sales that occurred 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 percent per annum on their adjusted invested capital. Since the circumstances under which these commissions would be payable are not met currently, 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, proceeds from property sales, and interest income on money market funds and short-term investments. Cash generated from property sales is generally added to the Partnership’s cash reserves, pending use in development of other properties, leasing costs or distribution to the partners.

Management expects that the Partnership’s cash balance at December 31, 2009, together with cash from operations, sales and financings will be sufficient to finance the Partnership’s and the properties’ continuing 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.

Contractual Obligations

At December 31, 2009, we had contractual obligations as follows (in thousands):


	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
Collateralized mortgage loans	$	938	$	2,040	$	2,278	$	48,395	$	53,651
Interest on indebtedness		2,948		5,734		5,496		3,233		17,411

Total	$	3,886	$	7,774	$	7,774	$	51,628	$	71,062

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

For the year ended December 31, 2009, the Partnership’s cash provided by operating activities totaled $2,938,000. After adding back depreciation and amortization (including amortization of loan fees) the Partnership generated net income of $3,988,000. Other significant operational cash activities included an increase in deferred costs of $459,000 from December 31, 2008 to December 31, 2009, due to lease commissions paid. Secondly, an increase in prepaid expenses and other assets of $652,000 at December 31, 2009, over December 31, 2008, was due to an increase of straight line rent receivables of $662,000, primarily at Three Carnegie and Two Parkside which accounted for $224,000 and $174,000 of the increase, respectively. Additionally, a decrease in accounts payable and other liabilities of $218,000 at December 31, 2009, from the balance at December 31, 2008, was primarily due to payment in 2009 of supplemental or revised property tax assessments accrued in 2008. Finally, an increase in prepaid rents of $325,000 at December 31, 2009, was due to a higher amount of January 2010 rents received in December 2009 of $611,000, as compared to the balance of January 2009 rents received in December 2008 of $286,000.

Investing Activities

During the year ended December 31, 2009, the Partnership’s cash used in investing activities totaled $1,099,000, which primarily consisted of $1,134,000 of additions to real estate investments for building and tenant improvements primarily at Lakeside Tower, One Carnegie and Two Carnegie.

Financing Activities

During the year ended December 31, 2009, the Partnership’s cash used in financing activities totaled $877,000, which primarily consisted of $888,000 of principal payments made on the notes payable.

Cash flows

For the year ended December 31, 2009, cash provided by operating activities was $2,938,000, as compared to $4,416,000 for the same period in 2008. The decrease was primarily due to changes in prepaid expenses and other assets and accounts payable and other liabilities. For 2009 these changes decreased cash provided by operating activities by $870,000, whereas in prior year they increased cash provided by operating activities by $755,000, a variance of $1,625,000. For the year ended December 31, 2009, cash used in investing activities was $1,099,000, as compared to cash used in investing activities of $4,311,000 for the same period in 2008. The change was primarily due to lower investments in real estate due to the completion of Three Parkside in 2008 and lower expenditures for building and tenant improvements. For the year ended December 31, 2009, cash used in financing activities was $877,000, as compared to cash used in financing activities of $3,816,000 for the same period in 2008. The change was primarily due to no distributions being made in 2009.

For the year ended December 31, 2008, cash provided by operating activities was $4,416,000, as compared to $4,900,000 for the same period in 2007. The change was primarily due to a net loss of $504,000 in 2008 compared to net income of $401,000 in 2007, partially offset by changes in certain assets and liabilities. For the year ended December 31, 2008, cash used in investing activities was $4,311,000, as compared to cash provided by investing activities of $3,996,000 for the same period in 2007. The change was primarily due to 2007 including proceeds from the sale of short term investments of $10,290,000, partially offset by lower additions to real estate in 2008 as compared to 2007. For the year ended December 31, 2008, cash used in financing activities was $3,816,000, as compared to cash used in financing activities of $3,314,000 for the same period in 2007. The change was primarily due to higher distributions and payments on the notes payable.

Critical Accounting Policies

Revenue recognized on a straight-line basis

The Partnership recognizes rental revenue on a straight-line basis over the term of its leases. 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. For tenants with percentage rent, the Partnership recognizes revenue when the tenants’ specified sales targets have been met. The reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue on an estimated basis during the current year. The Partnership develops a revised estimate of the amount recoverable from tenants based on updated expenses for the year and amounts to be recovered and records adjustments to income in the current year financial statement accounts. Any final changes in estimate based on lease-by-lease reconciliations and tenant negotiations and collection are recorded in the period those negotiations are settled.

Carrying value of rental properties and land held for development

The Partnership’s rental properties, including the related land, are stated at depreciated cost unless events or circumstances indicate that such amount cannot be recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value 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. 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 is computed using estimated sales price, based upon market values for comparable properties and considers the cost to complete and the estimated fair value of the completed project.

The pre-development costs for a new project include survey fees and consulting fees. Interest, property taxes and insurance related to the new project are capitalized during periods when activities that are necessary to get the project ready for its intended use are in progress. The capitalization ends when the construction is substantially completed and the project is ready for its intended use.

The actual value of the Partnership’s portfolio of properties and land held for development could be different from their carrying amounts.

Fair Value of Investments

The Partnership adopted policies related to the accounting for fair value measurements effective January 1, 2008. The guidance related to accounting for fair value measurements which defines fair value and establishes a framework for measuring fair value in order to meet disclosure requirements for fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This hierarchy describes three levels of inputs that may be used to measure fair value.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation using unobservable inputs. This category generally includes long-term derivative contracts, real estate and unconsolidated joint ventures.

The Partnership adopted policies with respect to the fair value assets and liabilities on January 1, 2008. There was no material impact on the Partnership’s financial position, results of operations and cash flows as a result of adoption.

Recently Issued Accounting Literature

In May 2009, the Financial Accounting Standards Board (the “FASB”) issued guidance related to disclosures of subsequent events which involves accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This adoption did not have any impact on the Partnership’s financial statements.

In June 2009, the FASB issued the FASB Accounting Standards Codification (Codification) which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of an entity’s financial statements that are presented in conformity with GAAP. Effective September 30, 2009, the Partnership adopted the Codification, which did not have a material impact on the Partnership’s financial statements.

In October 2008, the FASB issued guidance related to determining the fair value of a financial asset when the market for that asset is not active. The implementation of this guidance did not have a material impact on the Partnership’s financial position, results of operations and cash flows.

In December 2007, the FASB issued guidance related to business combinations which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The adoption of this guidance by the Partnership did not have a material impact on its financial position, results of operations or cash flows, except that transaction costs will be expensed when and as incurred.

Inflation

Leases at the office properties typically provide for rent adjustment and pass-through of certain operating expenses during the term of the lease. Substantially all of the leases at the office and retail properties provide for pass-through to tenants of certain operating costs, including real estate taxes, common area maintenance expenses, and insurance. We anticipate that these provisions may permit us to increase rental rates or other charges to tenants in response to rising prices and, therefore, serve to reduce our exposure to the adverse effects of inflation.

Forward Looking Statements; Factors That May Affect Operating Results

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

•

Our expectation of making distributions to our partners;

•

Our intent to develop the remaining land to generate more operating income;

•

Our belief that cash and cash generated by operations, sales and financing will be sufficient to meet our operating requirements in both the short and the long-term;

•

Our belief that certain claims and lawsuits which have arisen against us in the normal course of business will not have a material adverse effect on our financial position, cash flow or results of operations;

•

Our belief that our properties are competitive within our market;

•

Our expectation to achieve certain occupancy levels;

•

Our estimation of market strength;

•

Our knowledge of any material environmental matters; and

•

Our expectation that lease provisions may permit us to increase rental rates or other charges to tenants in response to rising prices, and therefore serve to reduce exposure to the adverse effects of inflation.

All forward-looking statements included in this document are based on information available to us 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:

•

market fluctuations in rental rates and occupancy;

•

reduced demand for rental space;

•

availability and creditworthiness of prospective tenants;

•

defaults or non-renewal of leases by customers;

•

differing interpretations of lease provisions regarding recovery of expenses;

•

increased operating costs;

•

changes in interest rates and availability of financing that may render the sale or financing of a property difficult or unattractive;

•

failure to obtain necessary outside financing; and

•

the unpredictability of both the frequency and final outcome of litigation;

Risks of Litigation

Item 7A.

Qualitative and Quantitative Disclosures about Market Risk

Interest Rates

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 by expected maturity dates.


	Expected Maturity Date
	2010		2011		2012		2013		2014		Thereafter		Total
	(in thousands)
Collateralized fixed rate debt at 5.46%	$	452	$	478	$	504	$	532	$	562	$	22,690	$	25,218
Collateralized fixed rate debt at 5.61%		486		514		544		575		609		25,705		28,433

The Partnership does not own any derivative instruments.

Item 8.

Financial Statements and Supplementary Data

For information with respect to this item, see Financial Statements and Schedule as listed in Item 15.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

See Item 9A(T).

Item 9A(T).

Controls and Procedures

The principal executive officer and principal financial officer of the General Partner have evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this annual report. As used herein, the term “disclosure controls and procedures” has the meaning given to the term by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and includes the controls and other procedures of the Partnership that are designed to ensure that information required to be disclosed by the Partnership in the reports that it files with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon his evaluation, the principal executive officer and principal financial officer of the General Partner has concluded that the Partnership’s disclosure controls and procedures were effective such that the information required to be disclosed by the Partnership in this annual report is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms applicable to the preparation of this report and is accumulated and communicated to the General Partner’s management, including the General Partner’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

The report called for by Item 308T(a) of Regulation S-K is incorporated herein by reference to the “Management’s Annual Report on Internal Control Over Financial Reporting” (“Management’s Report”), included in the financial statements included as an exhibit to this report. Management’s Report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.

There have not been any changes in the Partnership’s internal control over financial reporting identified in connection with Management’s Report that occurred during the Partnership’s fourth fiscal quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 9B.

Other Information

None.

Part III

Item 10.

Directors, Executive Officers and Corporate Governance

Daniel L. Stephenson and Rancon Financial Corporation (“RFC”) are the general partners of the Partnership. Mr. Stephenson is the Director, President, Chief Executive Officer and Chief Financial Officer of RFC.

Mr. Stephenson, age 66, founded RFC (formerly known as Rancon Corporation) in 1971 for the purpose of establishing a commercial, industrial and residential property syndication, development and brokerage concern. Mr. Stephenson has, from RFC’s inception, held the position of Director. In addition, Mr. Stephenson was President, Chief Executive Officer and Chief Financial Officer of RFC from 1971 to 1986, from August 1991 to September 1992, and from March 31, 1995 to present. Mr. Stephenson is Chairman of the Board of PacWest Group, Inc., a real estate firm which acquired a portfolio of assets from the Resolution Trust Corporation.

Section 16(a) Beneficial Ownership Reporting Compliance

Based on a review of the copies of beneficial ownership reports filed pursuant to Section 16(a) of the Exchange Act received by the Partnership, the Partnership believes that, during the fiscal year ended December 31, 2009, all such ownership reports were filed on a timely basis.

Code of Ethics

The Partnership has not adopted a “code of ethics” as defined in rules adopted by the SEC. Because neither the Partnership nor the General Partner has any employees other than Daniel L. Stephenson, the Partnership has determined that adopting a code of ethics would not appreciably improve the Partnership’s ability to deter wrongdoing or promote the conduct set forth in such SEC rules.

Item 11.

Executive Compensation

The Partnership has no executive officers. For information relating to fees, compensation, reimbursement and distributions paid to related parties, reference is made to Item 13 below.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners

Title of Class

Name of Beneficial Owner

Amount and Nature of

Beneficial Ownership

Percent

of Class

Units

Glenborough Fund XV LLC

400 South El Camino Real, Suite

1100

San Mateo, CA 94402

11,565 Units

13.78

Security Ownership of Management


Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
Units	Daniel L. Stephenson (IRA) 41391 Kalmia, Suite 200, Murrieta, CA 92562	3 Units (direct)	*

Units	Daniel L. Stephenson (IRA) 41391 Kalmia, Suite 200, Murrieta, CA 92562	100 Units (direct)	*

*	Less than 1 percent

Changes in Control

The limited partners have no right, power or authority to act for or bind the Partnership. However, the limited partners generally have the power to vote upon the following matters affecting the basic structure of the Partnership, passage of each of which requires the approval of limited partners holding a majority of the outstanding Units: (i) amendment of the Partnership Agreement; (ii) termination and dissolution of the Partnership; (iii) sale, exchange or pledge of all or substantially all of the assets of the Partnership; (iv) removal of the General Partner or any successor General Partner; (v) election of a new General Partner or General Partner upon the removal, redemption, death, insanity, insolvency, bankruptcy or dissolution of the General Partner or any successor General Partner; (vi) modification of the terms of any agreement between the Partnership and the General Partner or an affiliate of the General Partner; and (vii) extension of the term of the Partnership.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

During the year ended December 31, 2009 no distributions were made to the General Partner. During the year ended December 31, 2008, the Partnership distributed $313,000 to the General Partner pursuant to the Partnership Agreement. In both 2009 and 2008, the Partnership paid fees, as described in more detail in Note 6 to the consolidated financial statements attached hereto as an exhibit, to Glenborough LLC, an affiliate of Glenborough Fund XV LLC, which holds 13.78% of the Units. Other than the fees paid to Glenborough LLC in 2009 and 2008, and distributions to the General Partner in 2008, the Partnership did not incur any expenses or costs reimbursable to any related person of the Partnership during the fiscal years ended December 31, 2009 and 2008.

Director Independence

The Partnership has no officers of directors. Information on Mr. Stephenson, one of the general partners of the Partnership and Director, President, Chief Executive Officer and Chief Financial Officer of the other general partner of the Partnership, is provided in the first paragraph of this Item 10. Mr. Stephenson is not “independent” within the meaning of relevant SEC and stock exchange definitions of the term.

The Partnership has no “parents” within the meaning of the Exchange Act and the SEC’s rules. See also Item 12 herein, “Security Ownership of Certain Beneficial Owners.”

Item 14.

Principal Accountant Fees and Services

Audit Fees

The Partnership was billed $124,500 and $110,000 for audit services rendered by its current principal accountant during the fiscal years ended December 31, 2009 and 2008, respectively.

Audit-Related Fees

The Partnership did not incur audit-related fees for services provided by its current principal accountant during the fiscal years ended December 31, 2009 and 2008.

Tax Fees

The Partnership did not incur tax fees for services provided by its current principal accountant during the fiscal years ended December 31, 2009 and 2008.

All Other Fees

The Partnership did not incur any other fees for services provided by its current principal accountant during the fiscal years ended December 31, 2009 and 2008.

Part IV

Item 15.

Exhibits and Financial Statement Schedules

(a)

The following documents are filed as part of the report:

Management’s Annual Report on Internal Control over Financial Reporting

(1)

Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2009 and 2008

Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Partners’ Equity for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007

Notes to Consolidated Financial Statements

(2)

Financial Statement Schedule:

Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2009 and Notes thereto

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto

(3)

Exhibits:


		(3.1)		Amended and Restated Agreement of Limited Partnership of the Partnership (included as Exhibit B to the Prospectus dated March 3, 1988, filed pursuant to Rule 424(b), File Number 2-97837, is incorporated herein by reference).

		(3.2)		Third Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated April 1, 1989 (filed as Exhibit 3.2 to the Partnership’s annual report on Form 10-K for the fiscal year ended November 30, 1991, file number 0-16467, is incorporated herein by reference).

		(3.3)		Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated March 11, 1992 (filed as Exhibit 3.3 to the Partnership’s annual report on Form 10-K for the fiscal year ended November 30, 1991, file number 0-16467, is incorporated herein by reference).

		(3.4)		Limited Partnership Agreement of RRF V Tri-City Limited Partnership, A Delaware limited partnership of which Rancon Realty Fund V, A California Limited Partnership is the limited partner (filed as Exhibit 3.4 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-16467, is incorporated herein by reference).

		(10.1)		First Amendment to the Second Amended Management, administration and consulting agreement for services rendered by Glenborough Corporation dated August 31, 1998 (filed as Exhibit 10.1 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1998, file number 0-16467, is incorporated herein by reference).

		(10.2)		Promissory note in the amount of $9,600,000 dated May 9, 1996 secured by Deeds of Trust on three of the Partnership Properties (filed as Exhibit 10.3 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-16467, is incorporated herein by reference).

		(10.3)		Agreement for Acquisition of Management Interests, dated December 20, 1994 (filed as Exhibit 10.3 to the Partnership’s quarterly report on Form 10-Q for the period ended September 30, 2003, file number 0-16467, is incorporated herein by reference).

		(10.4)		Property Management and Services Agreement dated July 30, 2004 (filed as Exhibit 10.4 to the Partnership’s quarterly report on Form 10-Q for the period ended September 30, 2004, is incorporated herein by reference).



		(10.5)		First Amendment to Property Management and Services Agreement dated March 30, 2005 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

		(10.6)		Second Amendment to Property Management and Services Agreement dated December 1, 2005 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

		(10.7)		Third Amendment to Property Management and Services Agreement dated May 1, 2006 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

		(10.8)		Fourth Amendment to Property Management and Services Agreement dated March 1, 2009 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

		(10.9)		Promissory note in the amount of $26,800,000 dated November 15, 2005 secured by Deeds of Trust on seven of the Partnership’s Properties (filed as Exhibit 10.5 to the Partnership’s report on Form 10-K for the year ended December 31, 2005, is incorporated herein by reference).

		(10.10)		Promissory note in the amount of $30,000,000 dated April 13, 2006 secured by Deeds of Trust on four of the Partnership’s Properties (filed as Exhibit 10.6 to the Partnership’s report on Form 10-Q for the quarter ended June 30, 2006, is incorporated herein by reference).

		(31)		Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership.

		(32)		Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership.*

This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not to be deemed “filed” with the SEC or subject to the rules and regulations promulgated by the SEC under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

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.


	RANCON REALTY FUND V, a California Limited Partnership

	By:	Rancon Financial Corporation
		a California corporation its General Partner

Date: March 30, 2010	By:	/s/ DANIEL L. STEPHENSON
		Daniel L. Stephenson, President

Date: March 30, 2010	By:	/s/ DANIEL L. STEPHENSON
		Daniel L. Stephenson, General Partner

INDEX TO FINANCIAL STATEMENTS

AND SCHEDULE


		Page No.

Management’s Annual Report on Internal Control over Financial Reporting		23

Report of Independent Registered Public Accounting Firm		24

Consolidated Balance Sheets as of December 31, 2009 and 2008		25

Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007		26

Consolidated Statements of Partners’ Equity for the years ended December 31, 2009, 2008 and 2007		27

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		28

Notes to Consolidated Financial Statements		29-39

Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2009 and Notes thereto		40-41

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

Management’s Annual Report on Internal Control over Financial Reporting

The Partnership, as such, has no officers or directors, but is managed by the General Partner. The General Partner’s principal officer is responsible for establishing and maintaining adequate internal control over financial reporting for the Partnership. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Partnership’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of the management and directors of the General Partner; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets of the Partnership that could have a material effect on the financial statements of the Partnership.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its assessment, management determined that the Partnership maintained effective internal control over financial reporting as of December 31, 2009.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

This report of management on internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

March 30, 2010

Report of Independent Registered Public Accounting Firm

To The General Partner

Rancon Realty Fund V, a California Limited Partnership

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Rancon Realty Fund V, a California Limited Partnership (the “Partnership”) and its subsidiaries at December 31, 2009 and 2008 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule, listed in the index appearing under Item 15(a)(2), presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2, the Partnership adopted provisions related to calculations of earnings per unit for master limited partnerships and has retroactively adjusted its earnings per unit computations for the years ended December 31, 2008 and 2007.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA

March 30, 2010

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Balance Sheets

December 31, 2009 and 2008

(in thousands, except units outstanding)


	2009			2008
Assets
Investments in real estate:
Rental properties	$	83,672		$	79,083
Accumulated depreciation		(25,941	)		(23,505	)


Rental properties, net		57,731			55,578
Construction in progress		—			5,432
Land held for development		1,494			1,494

Total investments in real estate		59,225			62,504
Cash and cash equivalents		5,507			4,545
Note and accounts receivable, net		70			59
Deferred costs, net of accumulated amortization of $2,234 and $2,137 December 31, 2009 and December 31, 2008, respectively		2,802			3,100
Prepaid expenses and other assets		3,162			2,510

Total assets	$	70,766		$	72,718


Liabilities and Partners’ Equity (Deficit)
Liabilities:
Notes payable	$	53,651		$	54,539
Accounts payable and other liabilities		889			1,107
Prepaid rent		611			286

Total liabilities		55,151			55,932

Commitments and contingent liabilities (Note 7)

Partners’ Equity (Deficit):
General Partner		(1,431	)		(1,324	)
Limited partners, 83,898 limited partnership units outstanding as of December 31, 2009 and December 31, 2008		17,046			18,110

Total partners’ equity		15,615			16,786

Total liabilities and partners’ equity	$	70,766		$	72,718

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

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

Consolidated Statements of Operations

For the years ended December 31, 2009, 2008 and 2007

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


	2009			2008			2007
Operating revenue
Rental revenue and other	$	13,752		$	13,376		$	13,689
Tenant reimbursements		1,162			1,065			1,617

Total operating revenue		14,914			14,441			15,306


Operating expenses
Property operating expenses		7,042			6,300			6,795
Depreciation and amortization		5,089			4,674			4,575
General and administrative		898			988			1,008

Total operating expenses		13,029			11,962			12,378

Operating income		1,885			2,479			2,928

Interest and other income		13			144			562
Interest expense (including amortization of loan fees)		(3,080	)		(3,127	)		(3,089	)

Net (loss) income	$	(1,182	)	$	(504	)	$	401

Basic and diluted net (loss) income per limited partnership unit	$	(12.68	)	$	(5.59	)	$	4.91

Weighted average number of limited partnership units outstanding		83,898			83,898			83,899

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

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Statement of Partners’ Equity

For the years ended December 31, 2009, 2008 and 2007

(in thousands)


	General Partner			Limited Partners			Total
Balance (deficit) at December 31, 2006	$	(801	)	$	23,184		$	22,383
Redemption of limited partnership units		—			(3	)		(3	)
Net income		40			361			401
Distributions ($27.60 per limited partnership unit)		(200	)		(2,315	)		(2,515	)

Balance (deficit) at December 31, 2007		(961	)		21,227			20,266
Net loss		(50	)		(454	)		(504	)
Distributions ($31.74 per limited partnership unit)		(313	)		(2,663	)		(2,976	)

Balance (deficit) at December 31, 2008		(1,324	)		18,110			16,786
Net loss		(118	)		(1,064	)		(1,182	)
Partial return of distribution		11			—			11

Balance (deficit) at December 31, 2009	$	(1,431	)	$	17,046		$	15,615

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

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2009, 2008 and 2007

(in thousands)


	2009			2008			2007
Cash flows from operating activities:
Net (loss) income	$	(1,182	)	$	(504	)	$	401
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		5,089			4,674			4,575
Amortization of loan fees, included in interest expense		81			81			80
Changes in certain assets and liabilities:
Accounts receivable		(46	)		289			325
Deferred costs		(459	)		(774	)		(596	)
Prepaid expenses and other assets		(652	)		224			(65	)
Accounts payable and other liabilities		(218	)		531			59
Prepaid rent		325			(105	)		121

Net cash provided by operating activities		2,938			4,416			4,900


Cash flows from investing activities:
Proceeds from sale of short-term investments		—			—			10,290
Additions to real estate investments		(1,134	)		(4,342	)		(6,322	)
Payments received from tenant improvement note receivable		35			31			28

Net cash (used in) provided by investing activities		(1,099	)		(4,311	)		3,996


Cash flows from financing activities:
Note payable principal payments		(888	)		(841	)		(795	)
Payment of deferred loan fees		—			1			(1	)
Redemption of limited partnership units		—			—			(3	)
Distributions to limited partners		—			(2,663	)		(2,315	)
Return from / (distributions to) General Partner		11			(313	)		(200	)

Net cash used in financing activities		(877	)		(3,816	)		(3,314	)

Net increase (decrease) in cash and cash equivalents		962			(3,711	)		5,582

Cash and cash equivalents at beginning of year		4,545			8,256			2,674

Cash and cash equivalents at end of year	$	5,507		$	4,545		$	8,256


Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $0, $0 and $85 in 2009, 2008 and 2007 respectively)	$	2,999		$	3,046		$	3,009


Supplemental disclosure of non-cash operating activities:
Write-off of fully depreciated rental property assets	$	1,977		$	920		$	1,665

Write-off of fully amortized deferred costs	$	660		$	216		$	279


Supplemental disclosure of non-cash investing activities:
Additions to real estate investments included in construction costs payable	$	—		$	—		$	326

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

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2009, 2008 and 2007

Note 1. ORGANIZATION

Rancon Realty Fund V, a California Limited Partnership, (“the Partnership”), was organized in accordance with the provisions of the California Revised Limited Partnership Act for the purpose of acquiring, developing, operating and disposing of real property. The Partnership was organized in 1985 and reached final funding in February 1989. The general partners of the Partnership are Daniel L. Stephenson and Rancon Financial Corporation (“RFC”), hereinafter collectively referred to as the “General Partner”. RFC is wholly-owned by Daniel L. Stephenson. The Partnership has no employees.

The Partnership’s initial acquisition of property in 1985 consisted of approximately 76.21 acres (unaudited) of partially developed and unimproved land located in San Bernardino, California. The property is part of a master-planned development of approximately 153 acres known as Tri-City Corporate Centre (“Tri-City”) and is zoned for mixed commercial, office, hotel, transportation-related, and light industrial uses. The balance of Tri-City is owned by Rancon Realty Fund IV (“Fund IV”), a limited partnership sponsored by the General Partner of the Partnership. As of December 31, 2009, the Partnership has thirteen properties consisting of nine office properties, a 25,000 square foot (unaudited) health club, two restaurants and a retail space.

In November 2005, in connection with a refinancing, the Partnership formed Rancon Realty Fund V Subsidiary LLC (“RRF V SUB”), a Delaware limited liability company which is wholly owned by the Partnership. The new entity was formed to satisfy certain lender requirements for a note obtained in the fourth quarter of 2005. The note is collateralized by seven properties (see Note 5) which have been contributed to RRF V SUB by the Partnership. Since RRF V SUB is wholly owned by the Partnership, the financial statements of RRF V SUB have been consolidated with those of the Partnership.

In April 2006, the Partnership formed Rancon Realty Fund V Subsidiary Two LLC (“RRF V SUB2”), a Delaware limited liability company which is wholly owned by the Partnership. The new entity was formed to satisfy certain lender requirements for a note obtained in the second quarter of 2006. The note is collateralized by four properties (see Note 5) which have been contributed to RRF V SUB2 by the Partnership. Since RRF V SUB2 is wholly owned by the Partnership, the financial statements of RRF V SUB2 have been consolidated with those of the Partnership.

As of December 31, 2009, there were 83,898 limited partnership interest (“Units”) outstanding.

The Partnership commenced on May 8, 1985 and shall continue until December 31, 2015, unless previously terminated in accordance with the provisions of the Partnership agreement.

Any references to the number of buildings, square footage, customers and occupancy stated in the financial statement footnotes are unaudited.

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 and net losses from operations are allocated 90% to the limited partners and 10% to the General Partner; however, if the limited partners and the General Partner have, as a result of an allocation of net loss, a deficit balance in their capital accounts, net loss shall not be allocated to the limited partners and General Partner in excess of the positive balance until the balances of the limited partners’ and General Partner’s capital accounts are reduced to zero. Capital accounts shall be determined after taking into account the other allocations and distributions for the fiscal year.

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 required 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 12% 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 accounts 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 losses other than net losses from operations are allocated 99% to the limited partners and 1% to the General Partner. Such net losses will be allocated among limited partners as necessary to equalize their capital accounts in proportion to their Units, and thereafter will be allocated in proportion to their Units.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

The terms of the Partnership Agreement call for the General Partner to restore any deficits 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 their absolute discretion that it is in the best interests of the Partnership; and (ii) all distributions are subject to the payment of partnership expenses and maintenance of reasonable reserves for debt service, alterations and 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 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 (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: (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.

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Consolidation

The accompanying consolidated financial statements present the consolidated financial position of the Partnership and its wholly-owned subsidiaries as of December 31, 2009 and 2008, the consolidated statements of operations, of partners’ equity and of cash flows of the Partnership and its wholly-owned subsidiaries for the years ended December 31, 2009, 2008 and 2007. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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 reported results of operations during the reporting period. Actual results could differ from those estimates.

Rental Properties

Rental properties, including the related land, are stated at depreciated cost unless events or circumstances indicate that such amounts cannot be recovered, in which case, the carrying value of the property is reduced to its estimated fair value. Estimated fair value is computed using estimated sales price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates applied to annualized net operating income based upon the age, construction and use of the building. 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. Rental properties are reviewed for impairment whenever there is a triggering event and at least annually. There was no impairment of rental properties as of December 31, 2009.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Depreciation is provided using the straight-line method over the useful lives of the respective assets. The useful lives are as follows:


Building and improvements		5 to 40 years
Tenant improvements		Lesser of the initial term of the related lease, or the estimated useful life of the improvement
Furniture and equipment		5 to 7 years

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 is computed using estimated sales price, based upon market values for comparable properties and considers the cost to complete and the estimated fair value of the completed project. Construction in progress and land held for development are reviewed for impairment whenever there is a triggering event and at least annually. At December 31, 2009, there was no impairment of the Partnership’s land held for development.

The pre-development costs for a new project include survey fees and consulting fees. Interest, property taxes and insurance related to the new project are capitalized during periods that activities which are necessary to get the project ready for its intended use are in progress. The capitalization ends when the construction is substantially completed and the project is ready for its intended use.

Fair Value of Investments

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

The Partnership adopted policies with respect to the fair value assets and liabilities on January 1, 2009 and 2008. There was no material impact on the Partnership’s financial position, results of operations and cash flows as a result of adoption.

Cash and Cash Equivalents

The Partnership considers money market funds with original maturities of less than ninety days when purchased to be cash equivalents.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Deferred Costs

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

Revenues

The Partnership recognizes rental revenue on a straight-line basis over the term of the leases. 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. For tenants with percentage rent, the Partnership recognizes revenue when the tenants’ specified sales targets have been met. The reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized as revenue on an estimated basis during the current year. The Partnership develops a revised estimate of the amount recoverable from tenants based on updated expenses for the year and amounts to be recovered and records adjustments to income in the current year financial statement accounts. Any final changes in estimate based on lease-by-lease reconciliations and tenant negotiations and collection are recorded in the period those negotiations are settled.

Net Income (loss) Per Limited Partnership Unit

Net income (loss) per Unit is calculated using the weighted average number of Units outstanding during the period and the limited partners’ allocable share of the net income (loss).

Net income (loss) per Unit is as follows (in thousands, except for weighted average shares and per share amounts):


	2009						2008						2007
	General Partner			Limited Partners			General Partner			Limited Partners			General Partner			Limited Partners
Loss (Income) Allocation:
Distributed income	$	—		$	—		$	313		$	2,663		$	200		$	2,315

Allocation of excess		(118	)		(1,064	)		(348	)		(3,132	)		(211	)		(1,903	)

Net (loss) income	$	(118	)	$	(1,064	)	$	(35	)	$	(469	)	$	(11	)	$	412

Weighted average number of limited partnership units outstanding during each year					83,898						83,898						83,899

Basic and diluted (loss) income per limited partnership unit				$	(12.68	)				$	(5.59	)				$	4.91

The calculation of net (loss) income per Unit assumes that the income (loss) otherwise allocable to the limited partners is first used to fund distributions to the General Partner. As discussed in Note 1, because distributions of available cash have exceeded cumulative earnings and the General Partner has a deficit, the General Partner would restore that deficit in liquidation. The calculation of net (loss) income per unit does not assume a liquidation in the periods presented and therefore the net (loss) income per limited partner Unit may be less than what would be realized in a liquidation due to the requirement for the General Partner to restore deficits.

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 (loss) income 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, capitalization of development period interest and property taxes, income recognition and provisions for impairment of investments in real estate. There was no material impact related to the Partnership’s adoption of accounting policies related to income tax uncertainties on January 1, 2007.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Concentration risk

One tenant (Northrop Grumman Corporation) represented 15% of operating revenue for the years ended December 31, 2009, 2008 and 2007.

Recently Issued Accounting Literature

Note 3. INVESTMENTS IN REAL ESTATE

Rental properties consisted of the following at December 31, 2009 and 2008 (in thousands):


	2009			2008
Land	$	6,944		$	6,944
Land improvements		1,536			1,536
Buildings		58,644			53,244
Building and tenant improvements		16,548			17,359

		83,672			79,083
Less: accumulated depreciation		(25,941	)		(23,505	)

Total rental properties, net	$	57,731		$	55,578

As of December 31, 2009, the Partnership’s rental properties included nine office properties and four retail properties.

In 2009 and 2008, fully depreciated building and tenant improvements of $1,977,000 and $920,000, respectively, were removed from the balances of such accounts.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Note 4. CONSTRUCTION IN PROGRESS AND LAND HELD FOR DEVELOPMENT

Construction in progress consisted of the following at December 31, 2009 and 2008 (in thousands):

During the second quarter of 2007, the land, pre-development costs and construction costs of Three Parkside were reclassified from land held for development to construction in progress. The Partnership began developing Three Parkside, a two-story multi-tenant 30,000 square-foot office building on an approximate 0.6 acre land parcel. The total cost of the project was $5,432,000, not including tenant improvements and commissions for leasing the project. The project was placed into service in the first quarter of 2009.

Land held for development consisted of the following at December 31, 2009 and 2008 (in thousands):


	2009		2008
Land held for development
East Lake Restaurant Pad (includes approximately 0.3 acres of land with a cost basis of $166 both as of December 31, 2009 and December 31, 2008)	$	451	$	451
Land held for development (approximately 4.1 acres of land both as of December 31, 2009 and December 31, 2008)		1,043		1,043

Total land held for development	$	1,494	$	1,494

The book basis of the land held for development is shown net of an impairment provision of $820,000 at both December 31, 2009 and 2008. The original cost of the land was $1,500,000 and subsequent improvements total $363,000.

Note 5. NOTES PAYABLE

Notes payable as of December 31, 2009 and 2008, were as follows (in thousands):


	2009		2008
Note payable #1 collateralized by first deeds of trust on seven properties. The note has a fixed interest rate of 5.46%, a maturity date of January 1, 2016 with a 30-year amortization requiring monthly principal and interest payments of $151.	$	25,218	$	25,647
Note payable #2 collateralized by first deeds of trust on four properties. The note has a fixed interest rate of 5.61%, a maturity date of May 1, 2016 with a 30-year amortization requiring monthly principal and interest payments of $173.		28,433		28,892

Total notes payable	$	53,651	$	54,539

Note payable #1 is collateralized by Bally’s Health Club, Carnegie Business Center II, Lakeside Tower, Outback Steakhouse, Pat & Oscars, Palm Court Retail #3 and One Carnegie Plaza and Note payable #2 is collateralized by Brier Corporate Center, One Parkside, Two Parkside and Two Carnegie Plaza.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

The annual maturities on the Partnership’s notes payable as of December 31, 2009, are as follows (in thousands):


2010	$	938
2011		992
2012		1,048
2013		1,107
2014		1,171
Thereafter		48,395

Total	$	53,651

Note 6. RELATED PARTY TRANSACTIONS

In May 2006, the Partnership extended the then current Property Management and Services Agreement (the “Agreement”) with Glenborough Properties L.P. (“Glenborough”) through December 31, 2009. On November 29, 2006, due to the merger of Glenborough and a third party, a new entity, Glenborough LLC, was formed and the Partnership Property Management and Service Agreement was transferred from Glenborough to Glenborough LLC. All other terms and conditions remained unchanged. Effective March 1, 2009 the Partnership and Glenborough LLC again amended the Agreement, to reduce certain fees (as noted below) charged by Glenborough LLC, and extend the term of the agreement through December 31, 2015 or earlier, until the completion of sale of all real property assets of the Partnership. The Partnership engaged Glenborough LLC to perform services for the following fees:


		2009		2008		2007
(i)	property management fees of 2.5% effective March 1, 2009, and 3% prior to that, of gross rental revenue which was included in property operating expenses in the accompanying consolidated statements of operations	$	368,000	$	458,000	$	444,000

(ii)	a construction services fee which was capitalized and included in rental properties on the accompanying consolidated balance sheets		117,000		73,000		91,000

(iii)	an asset and Partnership management fee which was included in general and administrative expenses in the accompanying consolidated statements of operations		258,000		300,000		300,000

(iv)	a leasing services fee which was included in the deferred costs on the accompanying consolidated balance sheets		263,000		295,000		232,000

(v)	a sales fee of 1% for all properties, as amended and effective March 1, 2009		—		—		—

(vi)	a financing services fee of 1% of the gross loan amount which was included in the deferred costs on the accompanying consolidated balance sheets		—		—		—

(vii)	a development fee equal to 5% of the hard costs of the development project which was inlcuded in the construction in progress and /or rental properties on the accompanying consolidated balance sheets excluding the cost of the land, the development fee and the general contractor’s fee shall not exceed 11.5%, in the aggregate, of the hard costs of the development fee project		—		—		205,000

(viii)	data processing fees which were included in property operating expenses and general and administrative expenses in the accompanying consolidated statements of operations		87,000		79,000		63,000

(ix)	engineering fees which were included in property operating expenses in the accompanying consolidated statements of operations		24,000		20,000		24,000

As of December 31, 2009, Glenborough Fund XV LLC, an affiliate of Glenborough LLC, held 11,565 or 13.78% of the Units all of which were purchased from unaffiliated third parties.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Note 7. 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 consolidated results of operations and cash flows.

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, as amended and reauthorized to date; 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 General Partner in the amount of $102,000 at December 31, 2009, for sales that occurred 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 not met currently, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes payable.

Note 8. LEASES

The Partnership’s rental properties are leased under non-cancelable operating leases that expire at various dates through December 2019.

In addition to monthly base rents, several of the leases provide for additional contingent rents based upon a percentage of sales levels attained by the tenants. Future minimum rents under non-cancelable operating leases as of December 31, 2009 are as follows (in thousands):


2010	$	12,168
2011		10,214
2012		9,311
2013		7,935
2014		6,068
Thereafter		11,450

Total	$	57,146

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Note 9. TAXABLE INCOME

The Partnership’s tax returns, the qualification of the Partnership as a partnership for federal income tax purposes, and the amount of reported income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes to the Partnership’s taxable income or loss, the tax liability of the partners could change accordingly. The following is a reconciliation for the years ended December 31, 2009, 2008, and 2007, of the net income (loss) for financial reporting purposes to the estimated taxable income determined in accordance with accounting practices used in preparation of federal income tax returns (in thousands):


	2009			2008			2007
Net (loss) income as reported in the accompanying consolidated financial statements	$	(1,182	)	$	(504	)	$	401
Financial reporting depreciation in excess of tax reporting depreciation*		1,929			1,728			1,708
Operating expenses reported in a different period for financial reporting than for income tax reporting, net*		(770	)		653			437

Net (loss) income for federal income tax purposes*	$	(23	)	$	1,877		$	2,546

The following is a reconciliation of partners’ equity for financial reporting purposes to estimated partners’ equity for federal income tax purposes as of December 31, 2009 and 2008 (in thousands):


	2009			2008
Partners’ equity as reported in the accompanying consolidated financial statements	$	15,615		$	16,786
Provision for impairment of investments in real estate		3,643			3,643
Syndication costs*		(1,987	)		(1,987	)
Financial and tax accounting differences related to depreciation, carrying cost methodologies, and initial acquisition/reorganization transaction *		30,391			29,232

Partners’ equity for federal income tax purposes*	$	47,662		$	47,674

Unaudited

Note 10. SUBSEQUENT EVENTS

In preparing the consolidated financial statements, the Partnership evaluated subsequent events occurring through March 30, 2010, the date these financial statements were issued, in accordance with the guidance relating to subsequent events and deemed that no disclosures were necessary.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007

Note 11. UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following represents an unaudited summary of quarterly results of operations for the years ended December 31, 2009 and 2008 (in thousands, except for per unit amounts and units outstanding):


	Quarter Ended (unaudited)
	March 31, 2009			June 30, 2009			Sept. 30, 2009			Dec. 31, 2009
	March 31, 2009			June 30, 2009			Sept. 30, 2009			Dec. 31, 2009
Operating Revenue
Rental revenue and other	$	3,524		$	3,424		$	3,430		$	3,374
Tenant reimbursements		421			317			242			182

Total operating revenue		3,945			3,741			3,672			3,556


Operating Expenses
Property operating		1,573			1,607			2,053			1,809
Depreciation and amortization		1,255			1,292			1,291			1,251
General and administrative		267			247			212			172

Total operating expenses		3,095			3,146			3,556			3,232

Operating income		850			595			116			324

Interest and other income		3			3			3			4
Interest expense		(774	)		(772	)		(768	)		(766	)

Net income (loss)	$	79		$	(174	)	$	(649	)	$	(438	)

Basic and diluted income (loss) per limited partnership unit: *	$	0.85		$	(1.87	)	$	(6.96	)	$	(4.70	)

Weighted average number of limited partnership units outstanding during each period		83,898			83,898			83,898			83,898

*	The sum of the quarterly per unit amounts may not total to the year to date unit amounts due to changes in outstanding partnership units and rounding.

RANCON REALTY FUND V,

A California Limited Partnership and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

December 31, 2009, 2008 and 2007


	Quarter Ended (unaudited)
	March 31, 2008			June 30, 2008			Sept. 30, 2008			Dec. 31, 2008
	March 31, 2008			June 30, 2008			Sept. 30, 2008			Dec. 31, 2008
Operating Revenue
Rental revenue and other	$	3,378		$	3,375		$	3,419		$	3,204
Tenant reimbursements		322			252			397			94

Total operating revenue		3,700			3,627			3,816			3,298


Operating Expenses
Property operating		1,496			1,603			1,938			1,263
Depreciation and amortization		1,161			1,137			1,153			1,223
General and administrative		249			297			203			239

Total operating expenses		2,906			3,037			3,294			2,725

Operating income		794			590			522			573

Interest and other income		63			38			30			13
Interest expense		(786	)		(783	)		(780	)		(778	)

Net income (loss)	$	71		$	(155	)	$	(228	)	$	(192	)

Basic and diluted income (loss) per limited partnership unit: *	$	0.76		$	(2.13	)	$	(2.48	)	$	(1.73	)

Weighted average number of limited partnership units outstanding during each period		83,898			83,898			83,898			83,898

*	The sum of the quarterly per unit amounts may not total to the year to date unit amounts due to changes in outstanding partnership units and rounding.

RANCON REALTY FUND V

A California Limited Partnership, and Subsidiaries

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2009

(In Thousands)


COLUMN A	COLUMN B			COLUMN C					COLUMN D					COLUMN E									COLUMN F		COLUMN G	COLUMN H	COLUMN I
				Initial Cost to Partnership					Cost Capitalized Subsequent to Acquisition					Gross Amount Carried at December 31, 2009
Description	Encumbrances			Land			Buildings and Improvements		Improvements			Carrying Cost		Land			Buildings and Improvements			(a) Total			Accumulated Depreciation		Date Construction Began	Date Acquired	Life Depreciated Over
Rental Properties:
Commercial Office -
One Carnegie Plaza		(B	)	$	1,583		$	—	$	9,026		$	—	$	1,583		$	9,026		$	10,609		$	3,950	Aug-86	6/3/85	3-40 yrs.
Less: Provision for impairment of real estate					—			—		(1,657	)		—		(256	)		(1,401	)		(1,657	)		—
Two Carnegie Plaza		(C	)		873			—		4,689			—		873			4,689			5,562			2,391	Jan-88	6/3/85	3-40 yrs.
Carnegie Business Center II		(B	)		544			—		3,465			—		544			3,465			4,009			1,519	Oct-86	6/3/85	3-40 yrs.
Less: Provision for impairment of real estate					—			—		(299	)		—		(41	)		(258	)		(299	)		—
Lakeside Tower		(B	)		834			—		10,107			—		834			10,107			10,941			4,746	Mar-88	6/3/85	3-40 yrs.
One Parkside		(C	)		529			—		6,210			—		529			6,210			6,739			2,641	Feb-92	6/3/85	5-40 yrs.
Less: Provision for impairment of real estate					—			—		(700	)		—		(65	)		(635	)		(700	)		—
Two Parkside		(C	)		330			—		9,016			—		1,319			8,027			9,346			3,054	Jan-96	6/3/85	5-40 yrs.
Less: Provision for impairment of real estate					(36	)		—		—			—		(36	)		—			(36	)		—
Three Carnegie					480			—		10,779			—		480			10,779			11,259			1,918		6/3/85	5-40 yrs.
Less: Provision for impairment of real estate					(20	)		—		—			—		(20	)		—			(20	)		—
Brier Corporate Center		(C	)		651			—		15,870			—		651			15,870			16,521			3,157	Jan-05	6/3/85	5-40 yrs.
Less: Provision for impairment of real estate					—			—		(436	)		—		—			(436	)		(436	)		—
Three Parkside					—			—		5,400			—		—			5,400			5,400			180	May-07	6/3/85	5-40 yrs.

Commercial Office -
Bally’s Health Club		(B	)		786			—		3,005			—		786			3,005			3,791			1,688	Jan-95	6/3/85	5-40 yrs.
Outback Steakhouse		(B	)		—			—		835			—		161			674			835			217	Jan-96
Palm Court Retail #3		(B	)		249			—		801			—		249			801			1,050			267	Jan-96	6/3/85	15-40 yrs.
Less: Provision for impairment of real estate					—			—		(131	)		—		—			(131	)		(131	)		—
Pat & Oscar’s		(B	)		341			—		548			—		889			—			889			213	Nov-03	6/3/85	15-40 yrs.

		53,651			7,144			—		76,528			—		8,480			75,192			83,672			25,941


Land held for development:
0.3 acres		—			166			—		285			—		451			—			451			—	N/A	6/3/85	N/A
4.1 acres		—			1,500			—		363			—		1,863			—			1,863			—	Feb-07	6/3/85	N/A
Less: Provision for impairment of real estate		—			—			—		(820	)		—		(820	)		—			(820	)		—

		—			1,666			—		(172	)		—		1,494			—			1,494			—

TOTAL	$	53,651		$	8,810		$	—	$	76,356		$	—	$	9,974		$	75,192		$	85,166		$	25,941

(A)	The aggregate cost of land and buildings for federal income tax purposes is $109,786 (unaudited).

(B)	One Carnegie, Carnegie Business Center II, Lakeside Tower, Bally’s Health Club, Outback Steakhouse, Palm Court Retail #3 and Pat & Oscars are collateral for debt in the aggregate amount of $25,218.

(C)	Brier Corporate Center, One Parkside, Two Parkside and Two Carnegie Plaza collateral for debt in the aggregate amount of $28,433.

continued

RANCON REALTY FUND V,

A California Limited Partnership, and Subsidiaries

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

(in thousands)

Reconciliation of gross amount at which real estate was carried for the years ended December 31, 2009, 2008 and 2007:


	2009			2008			2007
Investments in real estate:
Balance at beginning of year	$	86,009		$	82,913		$	77,940
Additions during year		1,134			4,016			6,638
Write-off of fully depreciated rental property		(1,977	)		(920	)		(1,665	)

Balance at end of year	$	85,166		$	86,009		$	82,913


Accumulated Depreciation:
Balance at beginning of year	$	23,505		$	20,418		$	18,142
Additions charged to expense		4,413			4,007			3,941
Write-off of fully depreciated rental property		(1,977	)		(920	)		(1,665	)

Balance at end of year	$	25,941		$	23,505		$	20,418

See accompanying independent registered public accounting firm’s report.

EXHIBIT INDEX


Exhibit No.		Exhibit Title

(3.1)		Amended and Restated Agreement of Limited Partnership of the Partnership (included as Exhibit B to the Prospectus dated March 3, 1988, filed pursuant to Rule 424(b), File Number 2-97837, is incorporated herein by reference).

(3.2)		Third Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated April 1, 1989 (filed as Exhibit 3.2 to the Partnership’s annual report on Form 10-K for the fiscal year ended November 30, 1991, file number 0-16467, is incorporated herein by reference).

(3.3)		Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership, dated March 11, 1992 (filed as Exhibit 3.3 to the Partnership’s annual report on Form 10-K for the fiscal year ended November 30, 1991, file number 0-16467, is incorporated herein by reference).

(3.4)		Limited Partnership Agreement of RRF V Tri-City Limited Partnership, A Delaware limited partnership of which Rancon Realty Fund V, A California Limited Partnership is the limited partner (filed as Exhibit 3.4 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-16467, is incorporated herein by reference).

(10.1)		First Amendment to the Second Amended Management, administration and consulting agreement for services rendered by Glenborough Corporation dated August 31, 1998 (filed as Exhibit 10.1 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1998, file number 0-16467, is incorporated herein by reference).

(10.2)		Promissory note in the amount of $9,600,000 dated May 9, 1996 secured by Deeds of Trust on three of the Partnership Properties (filed as Exhibit 10.3 to the Partnership’s annual report on Form 10-K for the year ended December 31, 1996, file number 0-16467, is incorporated herein by reference).

(10.3)		Agreement for Acquisition of Management Interests, dated December 20, 1994 (filed as Exhibit 10.3 to the Partnership’s quarterly report on Form 10-Q for the period ended September 30, 2003, file number 0-16467, is incorporated herein by reference).

(10.4)		Property Management and Services Agreement dated July 30, 2004 (filed as Exhibit 10.4 to the Partnership’s quarterly report on Form 10-Q for the period ended September 30, 2004, is incorporated herein by reference).

(10.5)		First Amendment to Property Management and Services Agreement dated March 30, 2005 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

(10.6)		Second Amendment to Property Management and Services Agreement dated December 1, 2005 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

(10.7)		Third Amendment to Property Management and Services Agreement dated May 1, 2006 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

(10.8)		Fourth Amendment to Property Management and Services Agreement dated March 1, 2009 (filed as Exhibit 10.7 to the Partnership’s current report on Form 8-K filed with the SEC on February 27, 2009, is incorporated herein by reference).

(10.9)		Promissory note in the amount of $26,800,000 dated November 15, 2005 secured by Deeds of Trust on seven of the Partnership’s Properties (filed as Exhibit 10.5 to the Partnership’s report on Form 10-K for the year ended December 31, 2005, is incorporated herein by reference).

(10.10)		Promissory note in the amount of $30,000,000 dated April 13, 2006 secured by Deeds of Trust on four of the Partnership’s Properties (filed as Exhibit 10.6 to the Partnership’s report on Form 10-Q for the quarter ended June 30, 2006, is incorporated herein by reference).

(31)		Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership.

(32)		Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of the General Partner of the Partnership.*

Large Accelerated Filer

Accelerated Filer

Non-accelerated filer

Smaller reporting company