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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2005



OR



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



Commission file number: 0-16467



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)                          



(650) 343-9300

(Registrants telephone number, including area code)



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Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



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



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



Total number of units outstanding as November 14, 2004: 85,885



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##### Table of Contents

INDEX

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



|           |  |                                                                                                       |  |         
|---------- |  | ----------------------------------------------------------------------------------------------------- |  | --------
|           |  |                                                                                                       |  | Page No.
|           |  |                                                                                                      
|PART I     |  | FINANCIAL INFORMATION                                                                                 |  |         
|           |  |                                                                                                      
|Item 1.    |  | Consolidated Financial Statements of Rancon Realty Fund V (Unaudited):                                |  |         
|           |  |                                                                                                      
|           |  | Consolidated Balance Sheets at September 30, 2005 and December 31, 2004                               |  | 3       
|           |  |                                                                                                      
|           |  | Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004 |  | 4       
|           |  |                                                                                                      
|           |  | Consolidated Statement of Partners Equity for the nine months ended September 30, 2005               |  | 5       
|           |  |                                                                                                      
|           |  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004           |  | 6       
|           |  |                                                                                                      
|           |  | Notes to Consolidated Financial Statements                                                            |  | 7-13    
|           |  |                                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 14-20   
|           |  |                                                                                                      
|Item 3.    |  | Qualitative and Quantitative Information About Market Risk                                            |  | 20-21   
|           |  |                                                                                                      
|Item 4.    |  | Controls and Procedures                                                                               |  | 21      
|           |  |                                                                                                      
|PART II    |  | OTHER INFORMATION                                                                                     |  |         
|           |  |                                                                                                      
|Item 1.    |  | Legal Proceedings                                                                                     |  | 22      
|           |  |                                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                           |  | 22      
|           |  |                                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                                       |  | 22      
|           |  |                                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                   |  | 22      
|           |  |                                                                                                      
|Item 5.    |  | Other Information                                                                                     |  | 22      
|           |  |                                                                                                      
|Item 6.    |  | Exhibits                                                                                              |  | 22      
|           | 
|SIGNATURES |  | 23                                                                                                   



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Balance Sheets

(in thousands, except units outstanding)

(Unaudited)



|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                   |  | September 30,2005 |         |   | December 31,2004 |  
|Assets                                                                                                                             |  |                   |         |   |                  |   |         |  
|                                                                                                                                   |  |                  
|Investments in real estate:                                                                                                        |  |                   |         |   |                  |   |         |  
|Rental properties                                                                                                                  |  | $                 | 56,301  |   |                  | $ | 49,566  |  
|Accumulated depreciation                                                                                                           |  |                   | (14,199 | ) |                  |   | (13,330 | )
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Rental properties, net                                                                                                             |  |                   | 42,102  |   |                  |   | 36,236  |  
|                                                                                                                                   |  |                  
|Construction in progress                                                                                                           |  |                   | 9,987   |   |                  |   | 4,099   |  
|Land held for development                                                                                                          |  |                   | 899     |   |                  |   | 870     |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total investments in real estate                                                                                                   |  |                   | 52,988  |   |                  |   | 41,205  |  
|                                                                                                                                   |  |                  
|Cash and cash equivalents                                                                                                          |  |                   | 1,000   |   |                  |   | 967     |  
|Accounts receivable                                                                                                                |  |                   | 922     |   |                  |   | 832     |  
|Deferred costs, net of accumulated amortization of $1,267 and $1,123 at September 30, 2005 and December 31, 2004,
respectively     |  |                   | 2,137   |   |                  |   | 1,689   |  
|Prepaid expenses and other assets                                                                                                  |  |                   | 1,372   |   |                  |   | 1,001   |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total assets                                                                                                                       |  | $                 | 58,419  |   |                  | $ | 45,694  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Liabilities and Partners Equity                                                                                                   |  |                   |         |   |                  |   |         |  
|                                                                                                                                   |  |                  
|Liabilities:                                                                                                                       |  |                   |         |   |                  |   |         |  
|Notes payable and lines of credit                                                                                                  |  | $                 | 27,643  |   |                  | $ | 17,465  |  
|Accounts payable and other liabilities                                                                                             |  |                   | 853     |   |                  |   | 774     |  
|Construction costs payable                                                                                                         |  |                   | 3,222   |   |                  |   | 1,022   |  
|Prepaid rent                                                                                                                       |  |                   | 114     |   |                  |   | 115     |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                                                                  |  |                   | 31,832  |   |                  |   | 19,376  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Commitments and contingent liabilities (Note 6)                                                                                    |  |                   |         |   |                  |   |         |  
|                                                                                                                                   |  |                  
|Partners Equity:                                                                                                                  |  |                   |         |   |                  |   |         |  
|General partners                                                                                                                   |  |                   | (432    | ) |                  |   | (557    | )
|Limited partners 86,020 and 87,410 limited partnership units outstanding at September 30, 2005 and December 31, 2004,
respectively |  |                   | 27,019  |   |                  |   | 26,875  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total partners equity                                                                                                             |  |                   | 26,587  |   |                  |   | 26,318  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  
|Total liabilities and partners equity                                                                                             |  | $                 | 58,419  |   |                  | $ | 45,694  |  
|                                                                                                                                   |  |                   |         |   |                  |   |         |  



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



3



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statements of Operations

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

(Unaudited)



|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                              |  | Three months endedSeptember 30, |        |   | Nine months ended September 30, |  
|                                                                                                                              |  | 2005                            |        |   | 2004                            |   |        | 2005 |  |   | 2004   |  
|Operating Revenue - Rental income                                                                                             |  | $                               | 2,648  |   |                                 | $ | 2,559  |      |  | $ | 7,695  |   |  | $ | 7,456  |  
|                                                                                                                              |  |                                 |        |  
|Operating Expenses                                                                                                            |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|                                                                                                                              |  |                                 |        |  
|Property operating                                                                                                            |  |                                 | 1,299  |   |                                 |   | 1,135  |      |  |   | 3,254  |   |  |   | 3,092  |  
|Depreciation and amortization                                                                                                 |  |                                 | 769    |   |                                 |   | 652    |      |  |   | 2,155  |   |  |   | 1,900  |  
|Expenses associated with undeveloped land                                                                                     |  |                                 | 38     |   |                                 |   | 35     |      |  |   | 136    |   |  |   | 143    |  
|General and administrative                                                                                                    |  |                                 | 262    |   |                                 |   | 309    |      |  |   | 730    |   |  |   | 927    |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                                                      |  |                                 | 2,368  |   |                                 |   | 2,131  |      |  |   | 6,275  |   |  |   | 6,062  |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                                                              |  |                                 | 280    |   |                                 |   | 428    |      |  |   | 1,420  |   |  |   | 1,394  |  
|                                                                                                                              |  |                                 |        |  
|Interest and other income                                                                                                     |  |                                 | 20     |   |                                 |   | 22     |      |  |   | 66     |   |  |   | 66     |  
|Interest expense                                                                                                              |  |                                 | (285   | ) |                                 |   | (322   | )    |  |   | (857   | ) |  |   | (877   | )
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Income before discontinued operations                                                                                         |  |                                 | 15     |   |                                 |   | 128    |      |  |   | 629    |   |  |   | 583    |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Income from discontinued operations (including gain on sale of real estate of $1,202 in nine months ended September 30,
2005) |  |                                 |       |   |                                 |   | 22     |      |  |   | 1,219  |   |  |   | 55     |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                                                                    |  | $                               | 15     |   |                                 | $ | 150    |      |  | $ | 1,848  |   |  | $ | 638    |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Basic and diluted net income per limited partnership unit                                                                     |  | $                               | 0.16   |   |                                 | $ | 1.53   |      |  | $ | 19.88  |   |  | $ | 6.49   |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Weighted average number of limited partnership units outstanding during each period                                           |  |                                 | 86,130 |   |                                 |   | 88,217 |      |  |   | 86,664 |   |  |   | 88,480 |  
|                                                                                                                              |  |                                 |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  



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



4



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statement of Partners Equity

For the nine months ended September 30, 2005

(in thousands)

(Unaudited)



|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|--------------------------------------------------- |  | --------------- | ---- | - | --------------- | - | ------ | ----- |  | - | ------ | -
|                                                    |  | GeneralPartners |      |   | LimitedPartners |   |        | Total | 
|Balance (deficit) at December 31, 2004              |  | $               | (557 | ) |                 | $ | 26,875 |       |  | $ | 26,318 |  
|Redemption of limited partnership units             |  |                 |     |   |                 |   | (678   | )     |  |   | (678   | )
|Net income                                          |  |                 | 125  |   |                 |   | 1,723  |       |  |   | 1,848  |  
|Distributions ($10.36 per limited partnership unit) |  |                 |     |   |                 |   | (901   | )     |  |   | (901   | )
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  
|Balance (deficit) at September 30, 2005             |  | $               | (432 | ) |                 | $ | 27,019 |       |  | $ | 26,587 |  
|                                                    |  |                 |      |   |                 |   |        |       |  |   |        |  



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



5



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                                                                                                       |  |                                |         |   |      |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                                                                       |  | Nine months endedSeptember 30, |        
|                                                                                                                                       |  | 2005                           |         |   | 2004 |  
|Cash flows from operating activities:                                                                                                  |  |                                |         |   |      |   |        |  
|Net income                                                                                                                             |  | $                              | 1,848   |   |      | $ | 638    |  
|Adjustments to reconcile net income to net cash provided by operating activities:                                                      |  |                                |         |   |      |   |        |  
|Gain on sale of real estate                                                                                                            |  |                                | (1,202  | ) |      |   |       |  
|Depreciation and amortization (including discontinued operations)                                                                      |  |                                | 2,158   |   |      |   | 1,935  |  
|Amortization of loan fees (included in interest expense)                                                                               |  |                                | 115     |   |      |   | 111    |  
|Changes in certain assets and liabilities:                                                                                             |  |                                |         |   |      |   |        |  
|Accounts receivable                                                                                                                    |  |                                | (161    | ) |      |   | 66     |  
|Deferred costs                                                                                                                         |  |                                | (639    | ) |      |   | (479   | )
|Prepaid expenses and other assets                                                                                                      |  |                                | (394    | ) |      |   | (193   | )
|Accounts payable and other liabilities                                                                                                 |  |                                | 79      |   |      |   | 550    |  
|Prepaid rent                                                                                                                           |  |                                | (1      | ) |      |   | (370   | )
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Net cash provided by operating activities                                                                                              |  |                                | 1,803   |   |      |   | 2,258  |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Cash flows from investing activities:                                                                                                  |  |                                |         |   |      |   |        |  
|Net proceeds from sale of rental property                                                                                              |  |                                | 2,032   |   |      |   |       |  
|Additions to real estate investments                                                                                                   |  |                                | (12,144 | ) |      |   | (2,368 | )
|Tenant improvements note receivable                                                                                                    |  |                                | 71      |   |      |   | 85     |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Net cash used for investing activities                                                                                                 |  |                                | (10,041 | ) |      |   | (2,283 | )
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Cash flows from financing activities:                                                                                                  |  |                                |         |   |      |   |        |  
|Draws on Lines of credit                                                                                                               |  |                                | 4,315   |   |      |   | 2,193  |  
|Proceeds from notes payable                                                                                                            |  |                                | 6,028   |   |      |   |       |  
|Principal payments on note payable                                                                                                     |  |                                | (165    | ) |      |   | (150   | )
|Loan fees for construction loan, unsecured note and line of credit                                                                     |  |                                | (328    | ) |      |   | (141   | )
|Redemption of limited partnership units                                                                                                |  |                                | (678    | ) |      |   | (344   | )
|Distributions to limited partners                                                                                                      |  |                                | (901    | ) |      |   | (778   | )
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Net cash provided by financing activities                                                                                              |  |                                | 8,271   |   |      |   | 780    |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Net increase in cash and cash equivalents                                                                                              |  |                                | 33      |   |      |   | 755    |  
|                                                                                                                                       |  |                               
|Cash and cash equivalents at beginning of period                                                                                       |  |                                | 967     |   |      |   | 1,136  |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Cash and cash equivalents at end of period                                                                                             |  | $                              | 1,000   |   |      | $ | 1,891  |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Supplemental disclosure of cash flow information:                                                                                      |  |                                |         |   |      |   |        |  
|Cash paid for interest (excluding capitalized interest of $445 and $0 for the periods ended September 30, 2005 and 2004,
respectively) |  | $                              | 770     |   |      | $ | 847    |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Supplemental disclosure of non-cash investing activities:                                                                              |  |                                |         |   |      |   |        |  
|Completed real estate investment transferred out of construction in progress to rental property                                        |  | $                              | 7,303   |   |      | $ |       |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Redemption of limited partnership units                                                                                                |  | $                              | 55      |   |      | $ | 65     |  
|Redemption payable                                                                                                                     |  |                                | (55     | ) |      |   | (65    | )
|Total                                                                                                                                  |  | $                              |        |   |      | $ |       |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Supplemental disclosure of non-cash operating activities:                                                                              |  |                                |         |   |      |   |        |  
|Write-off of fully depreciated rental property assets                                                                                  |  | $                              | 900     |   |      | $ | 12,201 |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  
|Write-off of fully amortized deferred costs                                                                                            |  | $                              | 299     |   |      | $ | 172    |  
|                                                                                                                                       |  |                                |         |   |      |   |        |  



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



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



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 selling 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 (DLS) and Rancon Financial Corporation (RFC), hereinafter collectively
referred to as the General Partner. RFC is wholly owned by DLS. The Partnership has no employees.



In May 1996, the Partnership formed RRV Tri-City Limited Partnership, a Delaware limited partnership (RRF V Tri-City). The limited partner of RRF V Tri-City is the Partnership and the general partner is
RRF V, Inc. (RRF V, Inc.), a corporation wholly-owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc. and indirectly owns 100% of RRF V Tri-City, the Partnership considers all assets owned by RRF V, Inc. and RRF V
Tri-City to be owned by the Partnership.



During the nine months ended
September 30, 2005, a total of 1,390 units of limited partnership interest (Units) were redeemed at an average price of $488. As of September 30, 2005, there were 86,020 Units outstanding.



In the opinion of the General Partner, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the consolidated financial position of the Partnership as of September 30, 2005 and December 31, 2004, and the related consolidated
statements of operations for the three and nine months ended September 30, 2005 and 2004, partners equity for the nine months ended September 30, 2005, and cash flows for the nine months ended September 30, 2005 and 2004. The
results for the nine months ended September 30, 2005 are not necessarily indicative of the results which may occur for the year ended December 31, 2005.



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 negative 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.



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



Distribution of Cash



The Partnership shall make annual or more frequent distributions of substantially all cash available to be distributed to partners as determined by the General Partner,
subject to the following: (i) distributions may be restricted or suspended for limited periods when the General Partner determines in its absolute discretion that it is in the best interest of the Partnership; and (ii) all distributions
are subject to the 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.



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RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



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; and (iv) the balance, 80 percent to the limited partners,
pro rata in proportion to the number of Units held by each, and 20 percent to the General Partner.



Management Agreement



In January
1995, Glenborough Corporation (GC) entered into a ten-year agreement with the Partnership to manage the Partnerships assets and properties. In October 2000, GC merged into Glenborough Realty Trust Incorporated
(Glenborough). During the ten years ended December 31, 2004, the Partnership paid Glenborough for its services as follows: (i) a specified asset administration fee ($496,000 for the nine months ended September 30, 2004);
(ii) sales fees of 2% for improved properties and 4% for land; (iii) a refinancing fee of 1% ($74,000 for the nine months ended September 30, 2004) and (iv) a management fee of 5% of gross rental receipts. Glenborough is not an
affiliate of RFC or the Partnership.



In July 2004, the Partnership extended
its management relationship with Glenborough through December 31, 2006. The following provides the general terms of the new agreement. Commencing on January 1, 2005 and ending December 31, 2006, the Partnership has engaged Glenborough
to perform services for the following fees: (i) a property management fee of 3% of gross rental revenue; (ii) a construction services fee per certain schedules ($51,000 for the nine months ended September 30, 2005); (iii) a
specified asset and Partnership management fee of $300,000 per year with reimbursements of certain expenses and consulting service fees ($223,000 for the nine months ended September 30, 2005); (iv) a leasing services fee ($177,000 for the
nine months ended September 30, 2005); (v) a sales fee of 2% for improved properties ($43,000 for the nine months ended September 30, 2005) and 4% for unimproved properties; (vi) a financing services fee of 1% of gross loan
amount ($134,000 for the nine months ended September 30, 2005); and (vii) a development fee equal to 5% of the hard costs of the development project ($473,000 for the nine months ended September 30, 2005). The hard costs exclude 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 project.



The new management agreement represents an annual reduction of $361,000 for the asset and Partnership services fee in 2005 and 2006,
compared to the asset and Partnership management fee paid in 2004; as well as a reduction of 2% in the property management fee from 5% in 2004 to 3% in 2005 and 2006, respectively.



Risks and Uncertainties



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



Note 2. SIGNIFICANT ACCOUNTING POLICIES



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



Use of Estimates



The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates.



8



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



Consolidation



In May 1996, the Partnership formed RRF V Tri-City Limited Partnership, a Delaware limited partnership (RRF V Tri-City). The limited partner of RRF V Tri-City
is the Partnership and the general partner is RRF V, Inc. (RRF V, Inc.), a corporation wholly- owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc. and indirectly owns 100% of RRF V Tri-City, the financial statements
of RRF V, Inc. and RRF V Tri-City have been consolidated with those of the Partnership. All intercompany balances and transactions have been eliminated in consolidation.



Rental Properties



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: (i) is based upon the Partnerships plans for the continued operations of each property; and (ii) is computed using estimated sales
price, as determined by prevailing market values for comparable properties and/or the use of capitalization rates applied to annualized net operating income based upon the age, construction and use of the building. The fulfillment of the
Partnerships plans related to each of its properties is dependent upon, among other things, the presence of economic conditions which will enable the Partnership to continue to hold and operate the properties prior to their eventual sale. Due
to uncertainties inherent in the valuation process and in the economy, it is reasonably possible that the actual results of operating and disposing of the Partnerships properties could be materially different than current expectations. Rental
properties are reviewed for impairment whenever there is a triggering event and at least annually.



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 asset
|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: (i) is based on the Partnerships plans for
the development of each property; and (ii) considers the cost to complete and the estimated fair value of the completed project. The fulfillment of the Partnerships plans related to each of its properties is dependent upon, among other
things, the presence of economic conditions which will enable the Partnership to either hold the properties for eventual sale or obtain financing to further develop the properties. Construction in progress and land held for development are reviewed
for impairment whenever there is a triggering event and at least annually.



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.



Cash and Cash Equivalents



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



Fair Value of Financial Instruments



For certain financial instruments, including cash and cash equivalents, accounts receivable,
loans payable, accounts payable, other liabilities, construction costs payable, and lines of credit payable, recorded amounts approximate fair value due to the relatively short maturity period. Based on interest rates available to the Partnership
for debt with comparable maturities and other terms, the estimated fair value of the Partnerships secured notes payable as of September 30, 2005, and December 31, 2004 would be approximately $8,398,000 and $9,259,000, respectively.



Deferred Costs



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



9



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



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. The reimbursements from tenants for real estate taxes are recognized as revenue in the period the expenses are
incurred. Other recoverable operating expenses are recognized as revenue on an estimated basis, and the differences between estimated and actual amounts are recognized as revenue in the subsequent year when the amounts are collected. However, where
actual expenses are significantly different from estimates, the Partnership will accrue the differences in the same period.



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



Net Income Per Limited Partnership Unit



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



Income Taxes



No provision for income taxes is included in the accompanying consolidated financial statements, as the Partnerships results of operations are allocated to the partners for inclusion in their respective income
tax returns. Net income and partners equity 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.



Concentration Risk



One tenant represented 13% and 14% of rental income for the nine months ended September 30, 2005 and 2004, respectively.



Reclassifications



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



Reference to 2004 Audited Consolidated Financial
Statements



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



Note 3. RENTAL PROPERTIES



Rental properties consisted of the following at September 30, 2005 and December 31, 2004 (in thousands):



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2005 |         |   | 2004 |  
|Land                              |  | $    | 6,293   |   |      | $ | 6,246   |  
|Land improvements                 |  |      | 1,536   |   |      |   | 2,372   |  
|Buildings                         |  |      | 40,206  |   |      |   | 32,627  |  
|Buildings and tenant improvements |  |      | 8,266   |   |      |   | 8,321   |  
|                                  |  |      |         |   |      |   |         |  
|                                  |  |      | 56,301  |   |      |   | 49,566  |  
|Less: accumulated depreciation    |  |      | (14,199 | ) |      |   | (13,330 | )
|                                  |  |      |         |   |      |   |         |  
|Total rental properties, net      |  | $    | 42,102  |   |      | $ | 36,236  |  
|                                  |  |      |         |   |      |   |         |  



The Partnerships rental
properties include six office and five retail buildings, aggregating approximately 618,000 rentable square feet, at the Tri-City Corporate Center in San Bernardino, California.



In January 2004, the Partnership entered into a contract with a construction company for $5,900,000 to build a two-story office building at
a one-acre land known as Three Carnegie with a total of 86,200 gross square feet and 83,600 rentable square feet. In July 2005, Three Carnegie was transferred from construction in progress to land and building when the core and shell of the property
was substantially completed and the first tenant moved in during July 2005.



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



In February 2005, the Partnership entered into a contract to sell the property leased to Chuck E. Cheese for a price of $2,157,800. On
March 31 2005, the sale closed and generated net proceeds of approximately $2,032,000 and a gain on sale of approximately $1,202,000. The proceeds were added to the Partnerships cash reserves.



In accordance with SFAS 144 Accounting for the Impairment or Disposal of Long Lived
Assets, net income and gain or loss on sales of real estate for properties sold or classified as held for sale are reflected in the consolidated statements of operations as Discontinued Operations for all periods presented.



Below is a summary of the results of operations of the property leased to
Chuck E. Cheese through its disposition date (dollars in thousands):



|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    
|----------------------------------------- |  | -------------------------------- | - | ------------------------------- | - | -------- |  | ---- | ----- |  | - | ---
|                                          |  | Three months ended September 30, |   | Nine months ended September 30,
|                                          |  | 2005 (1)                         |   | 2004                            |   | 2005 (1) |  | 2004
|Operating Revenue  rental income         |  | $                                |  |                                 | $ | 48       |  | $    | 50    |  | $ | 131
|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    
|Property operating                        |  |                                  |  |                                 |   | 14       |  |      | 30    |  |   | 41 
|Depreciation and amortization             |  |                                  |  |                                 |   | 12       |  |      | 3     |  |   | 35 
|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    
|Total operating expenses                  |  |                                  |  |                                 |   | 26       |  |      | 33    |  |   | 76 
|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    
|Income before gain on sale of real estate |  |                                  |  |                                 |   | 22       |  |      | 17    |  |   | 55 
|Gain on sale of real estate               |  |                                  |  |                                 |   |         |  |      | 1,202 |  |   |   
|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    
|Income from discontinued operations       |  | $                                |  |                                 | $ | 22       |  | $    | 1,219 |  | $ | 55 
|                                          |  |                                  |   |                                 |   |          |  |      |       |  |   |    

---

|(1) | Reflects 2005 operations through date of sale.
|--- | ----------------------------------------------



Note 4. CONSTRUCTION IN PROGRESS AND LAND HELD FOR DEVELOPMENT



Construction in progress consisted of the following at September 30, 2005 and December 31, 2004 (in thousands):



|                                                                                                                                                |  |      |       |      |   |      
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                                                                                |  | 2005 |       | 2004
|Tri-City (approximately 5.5 and 6.5 acres of land with a cost basis of $381 and $841 at September 30, 2005 and December 31, 2004,
respectively) |  | $    | 9,987 |      | $ | 4,099
|                                                                                                                                                |  |      |       |      |   |      



The construction and other costs of
Three Carnegie were transferred to land and building when the core and shell of the property was completed and the first tenant moved in July 2005 (See Note 3 for discussion).



In January 2005, the Partnership entered into another contract with a construction company for $10,300,000 to build a three-story office
building at five-acre land known as Brier Corporate Center with a total of 109,000 gross square feet. The core and shell of the project is estimated to be substantially completed in December 2005. As of September 30, 2005, construction, tenant
improvement and other costs of $9,536,000 had been incurred.



Land held for development consisted of the following at September 30, 2005 and December 31, 2004 (in thousands):



|                                                                                                  |  |      |     |      |   |    
|------------------------------------------------------------------------------------------------- |  | ---- | --- | ---- | - | ---
|                                                                                                  |  | 2005 |     | 2004
|Tri-City (approximately 4 acres of land at September 30, 2005 and December 31, 2004 respectively) |  | $    | 899 |      | $ | 870
|                                                                                                  |  |      |     |      |   |    



Currently one acre of land is undeveloped, and 3.5 acres of land are used as parking lots.



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



Note 5. NOTES PAYABLE AND LINES OF CREDIT



Notes payable and lines of credit as of September 30, 2005 and December 31, 2004, were as follows (in thousands):



|                                                                                                                                                                                                                                                                                                                                                                                         |  |      |        |      |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                                                                                                                                                                                                                                                                                                                                                         |  | 2005 |        | 2004
|Note payable-collateralized by first deeds of trust on Lakeside Tower, One Parkside and Two Carnegie Plaza, a 10-year 9.39% fixed rate loan
with a 25-year amortization, monthly principal and interest payments of $83, and a maturity date of June 1, 2006.                                                                                                                            |  | $    | 8,190  |      | $ | 8,355 
|Note payable (construction loan)-collateralized by Brier Corporate Center, with a variable interest rate of 30-day LIBOR plus 2% (5.84% as of
September 30, 2005), monthly interest-only payments, and a maturity date of April 27, 2007.                                                                                                                                                |  |      | 1,028  |      |   |      
|Note payable-unsecured, with a variable interest rate of Prime Rate (6.5% as of September 30, 2005), monthly interest-only
payments, and a maturity date of December 1, 2005.                                                                                                                                                                                                          |  |      | 5,000  |      |   |      
|Line of credit-collateralized by first deeds of trust on One Carnegie Plaza and Carnegie Business Center II, with a total availability of $10
million, a variable interest rate of Prime Rate plus 0.75% with the floor set at 5.5% (7.25% and 6% as of September 30, 2005 and December 31, 2004, respectively), monthly interest-only payments, and a maturity date of
March 5, 2006. |  |      | 6,000  |      |   | 5,920 
|Line of credit-collateralized by first deed of trust on Two Parkside, with a total availability of $7.425 million, a variable interest rate of
Prime Rate (6.5% and 5.25% as of September 30, 2005 and December 31, 2004), monthly interest-only payments, and a maturity date of April 15, 2007.                                                                                      |  |      | 7,425  |      |   | 3,190 
|                                                                                                                                                                                                                                                                                                                                                                                         |  |      |        |      |   |       
|Total                                                                                                                                                                                                                                                                                                                                                                                    |  | $    | 27,643 |      | $ | 17,465
|                                                                                                                                                                                                                                                                                                                                                                                         |  |      |        |      |   |       



The note payable, collateralized by
Lakeside Tower, One Parkside and Two Carnegie Plaza, may be prepaid with a penalty based on a yield maintenance formula. There is no prepayment penalty if the note is repaid within six months of the maturity date of the note. The Partnership intends
to pay off this note with the proceeds from the pending refinance (as discussed below) when the prepayment penalty period ends on December 1, 2005.



In 2005, a construction loan in the amount of $11,917,000, collateralized by Brier Corporate Center was obtained to provide funding for the construction costs at Brier
Corporate Center. The Partnership is required to pay a minimum equity contribution to the project in the amount of $4,800,000, prior to the first draw from the construction loan. As of September 30, 2005, $1,028,000 was drawn from this
construction loan after the Partnership had fulfilled the contribution requirement in the third quarter of 2005.



During the second and the third quarters of 2005, the Partnership obtained three unsecured notes, which totaled $5,000,000, from Glenborough. One note of $2,000,000 was
paid off in November 2005 from the draw of a line of credit collateralized by One Carnegie and Carnegie Business Center II. The Partnership intends to pay off the remaining note when the pending refinance closes in the fourth quarter of 2005 (as
discussed below).



In the third quarter of 2005, the Partnership extended the
line of credit collateralized by One Carnegie Plaza and Carnegie Business Center II from September 5, 2005 to March 5, 2006, and increased the total availability from $6,000,000 to $10,000,000. The Partnership intends to pay off this line
of credit when the pending refinance closes in the fourth quarter of 2005 (as discussed below).



In 2004, a line of credit of $7.425 million, collateralized by Two Parkside, was obtained to provide funding for the construction costs at Three Carnegie. The construction was completed in July 2005 (See Note 3 for
discussion).



The Partnership intends to refinance the above fixed-rate loan,
the lines of credit and the unsecured notes. In the third quarter of 2005, a loan application was submitted and withdrawn due to disagreement on the loan terms and conditions between the Partnership and the proposed lender. In October 2005, a loan
application was submitted to a different lender. This loan would total $26.8 million, would bear interest at a lower fixed rate of 5.46% with a 10-year term, and would be collateralized by seven properties. This loan would also provide a one-time
loan assumption and a release provision for an individual asset. The loan is estimated to close in the fourth quarter of 2005. No assurance can be made that circumstances will not arise which could impact the closing of the pending refinance to
repay the above two notes and a line of credit at their maturities.



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##### Table of Contents

RANCON REALTY FUND V,

A CALIFORNIA LIMITED PARTNERSHIP



Notes to Consolidated Financial Statements

(Unaudited)



The annual maturities of the Partnerships notes payable and lines of credit subsequent to September 30, 2005, are as follows (in
thousands):



|      |  |   |       
|----- |  | - | ------
|2005  |  | $ | 5,058 
|2006  |  |   | 14,132
|2007  |  |   | 8,453 
|      |  |   |       
|Total |  | $ | 27,643
|      |  |   |       



Note 6. 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 financial position, results of operations and cash flows. There can
be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Partnerships results of operations and cash flows.



General Uninsured Losses



The Partnership carries property and liability insurance with respect to the properties.
This coverage has policy specification and insured limits customarily carried for similar properties. However, certain types of losses (such as from earthquakes and floods) may be either uninsurable or not economically insurable. Should the
properties sustain damage as a result of an earthquake or flood, the Partnership may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses. Additionally, the Partnership has elected to obtain insurance coverage
for certified acts of terrorism as defined in the Terrorism Risk Insurance Act of 2002; however, our insurance policies 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 September 30, 2005 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 limited, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be
recorded when and if it becomes payable.



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##### Table of Contents

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



Background



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 selling 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 (DLS) and Rancon Financial Corporation
(RFC), hereinafter collectively referred to as the General Partner. RFC is wholly-owned by DLS. The Partnership has no employees.



In May 1996, the Partnership formed RRV Tri-City Limited Partnership, a Delaware limited partnership (RRF V Tri-City). The limited partner of RRF V Tri-City
is the Partnership and the general partner is RRF V, Inc. (RRF V, Inc.), a corporation wholly-owned by the Partnership. Since the Partnership owns 100% of RRF V, Inc. and indirectly owns 100% of RRF V Tri-City, the Partnership considers
all assets owned by RRF V, Inc. and RRF V Tri-City to be owned by the Partnership.



Overview



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 partnership sponsored by the General
Partner of the Partnership. Since the acquisition of the land, the Partnership has constructed twelve projects at Tri-City consisting of six office buildings, one industrial building, and five retail buildings. One retail building was sold in 2005.
The Partnerships properties are more fully described below. As of September 30, 2005, the Partnership owned eleven rental properties, and approximately 9.5 acres of land in the Tri-City master-planned development.



Tri-City



In 1985, the Partnership acquired 76.21 acres of partially developed land in Tri-City for a total acquisition price of $14,118,000. Between
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 is generally broken down into two major markets, Inland Empire East and Inland Empire West. Tri-City Corporate Centre is located within the Inland Empire East market, which consists of approximately 12.6 million square feet of office
space and an overall vacancy rate of approximately 10.6% as of September 30, 2005, according to research conducted by an independent broker.



As of September 30, 2005, the Partnership has 524,000 square feet of office space with an average vacancy rate of 18%, 51,000 square feet of industrial space with an
average vacancy rate of 13%, and 43,000 square feet of retail space with no vacancy.



Tri-City Properties



The Partnerships rental properties are as follows:



|                            |  |                                 |  |            
|--------------------------- |  | ------------------------------- |  | -----------
|Property                    |  | Type                            |  | Square Feet
|One Carnegie Plaza          |  | Two, two story office buildings |  | 107,278    
|Two Carnegie Plaza          |  | Two story office building       |  | 68,957     
|Carnegie Business Center II |  | Two industrial buildings        |  | 50,867     
|Lakeside Tower              |  | Six story office building       |  | 112,791    
|One Parkside                |  | Four story office building      |  | 70,068     
|Ballys Health Club         |  | Health club facility            |  | 25,000     
|Outback Steakhouse          |  | 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              |  | Office                          |  | 83,635     



These eleven properties total
approximately 618,000 rentable square feet and offer a wide range of office, retail and industrial product to the market.



14



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##### Table of Contents

Occupancy rates at the Partnerships rental properties as of September 30,
2005 were as follows:



|                                      |  |      |   |  |      |  
|------------------------------------- |  | ---- | - |  | ---- | -
|                                      |  | 2005 |   |  | 2004 |  
|One Carnegie Plaza                    |  | 99   | % |  | 91   | %
|Two Carnegie Plaza                    |  | 95   | % |  | 100  | %
|Carnegie Business Center II           |  | 87   | % |  | 87   | %
|Lakeside Tower                        |  | 96   | % |  | 93   | %
|One Parkside                          |  | 87   | % |  | 100  | %
|Ballys Health Club                   |  | 100  | % |  | 100  | %
|Outback Steakhouse                    |  | 100  | % |  | 100  | %
|Palm Court Retail #3                  |  | 100  | % |  | 100  | %
|Two Parkside                          |  | 100  | % |  | 100  | %
|Pat & Oscars                          |  | 100  | % |  | 100  | %
|Three Carnegie (commencing July 2005) |  | 6    | % |  |     |  
|                                      |  |     
|Weighted average occupancy            |  | 83   | % |  | 95   | %



Weighted average occupancy decreased
primarily as a result of an increase in vacancy at One Parkside and at a newly constructed property, Three Carnegie (as discussed below), offset by increases in occupancy at One Carnegie Plaza.



At One Carnegie Plaza, approximately 8,600 square feet of office spaces previously vacant
were leased to three tenants in the fourth quarter of 2004.



At One Parkside, a
tenant that occupied 21,000 square-feet office space relocated to Vanderbilt Plaza, a new building developed by Fund IV. A new tenant leased and occupied 7,000 square feet of this vacant space in August 2005. Management is actively marketing the
available office spaces to minimize the extended vacancy period.



Three
Carnegie commenced operation in July 2005. The construction started in January 2004, and the cost was transferred to land and building when the core and shell of the property was substantially completed and the first tenant moved in during July
2005. The property is a two-story office building with a total of 86,200 gross square feet. Three new leases with a total of approximately 29,700 square feet of office spaces were signed during the third quarter of 2005. These leases will increase
the occupancy rate to 20% in the fourth quarter of 2005 and 42% in the first quarter of 2006.



As of September 30, 2005, tenants at Tri-City occupying substantial portions of leased rental space included: (i) Computer Associates with a lease through November 2005; (ii) Paychex with a lease
through July 2006; (iii) Chicago Title with leases through May 2007 and February 2009; (iv) First Franklin Financial with a lease through February 2009; (v) Gresham, Savage, Nolan & Tilden with a lease through March 2009;
(vi) Arrowhead Central Credit Union with two leases through September 2006 and September 2010; (vii) Holiday Spa Health Club with a lease through December 2010; and (viii) Lewis, Damato, Brisbois and Bisgaard, LLP with a lease
through December 2012. These eight tenants, in the aggregate, occupy approximately 209,000 square feet of the 618,000 total rentable square feet at Tri-City and account for approximately 47% of the rental income generated at Tri-City for the
Partnership as of September 30, 2005.



Computer Associates at One Carnegie
Plaza will relocate to Vanderbilt Plaza, a new building developed by Fund IV, when their lease expires in November 2005.



The Partnerships rental properties are owned by the Partnership, subject to the following notes and two lines of credit:



|                                                    |  |                    |           |          |                |               |                              |                |   |               |  |        
|--------------------------------------------------- |  | ------------------ | --------- | -------- | -------------- | ------------- | ---------------------------- | -------------- | - | ------------- |  | -------
|Security                                            |  | Outstandingbalance |           | Mortgage |                | Interest rate |                              | Monthlypayment |   | Maturitydate 
|Lakeside Tower, One Parkside and Two Carnegie Plaza |  | $                  | 8,190,000 |          | Note           |               | 9.39%                        |                | $ | 83,142        |  | 6/1/06 
|                                                    |  |                    |           |          |               
|Brier Corporate Center                              |  | $                  | 1,028,000 |          | Note           |               | LIBOR plus 2% (5.84%)        |                |   | Interest-only |  | 4/27/07
|                                                    |  |                    |           |          |               
|Unsecured note                                      |  | $                  | 5,000,000 |          | Note           |               | Prime rate (6.5%)            |                |   | Interest-only |  | 12/1/05
|                                                    |  |                    |           |          |               
|One Carnegie Plaza & Carnegie Business Center II    |  | $                  | 6,000,000 |          | Line of credit |               | Prime rate plus .75% (7.25%) |                |   | Interest-only |  | 3/5/06 
|                                                    |  |                    |           |          |               
|Two Parkside                                        |  | $                  | 7,425,000 |          | Line of credit |               | Prime rate (6.5%)            |                |   | Interest-only |  | 4/15/07



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##### Table of Contents

The note payable, collateralized by Lakeside Tower, One Parkside and Two Carnegie Plaza, may be prepaid with a penalty
based on a yield maintenance formula. There is no prepayment penalty if the note is repaid within six months of the maturity date of the note. The Partnership intends to pay off this note with the proceeds from the pending refinance (as discussed
below) when the prepayment penalty period ends on December 1, 2005.



In
2005, a construction loan in the amount of $11,917,000, collateralized by Brier Corporate Center was obtained to provide funding for the construction costs at Brier Corporate Center. The Partnership is required to pay a minimum equity contribution
to the project in the amount of $4,800,000, prior to the first draw from the construction loan. As of September 30, 2005, $1,028,000 was drawn from this construction loan after the Partnership had fulfilled the contribution requirement in the
third quarter of 2005.



During the second and the third quarters of 2005, the
partnership obtained three unsecured notes, which totaled $5,000,000, from Glenborough. One note of $2,000,000 was paid off in November 2005 from the draw of a line of credit collateralized by One Carnegie and Carnegie Business Center II. The
Partnership intends to pay off the remaining note when the pending refinance closes in the fourth quarter of 2005 (as discussed below).



In the third quarter of 2005, the Partnership extended the line of credit collateralized by Carnegie One and Carnegie Business Center II from September 5, 2005 to
March 5, 2006, and increased the total availability from $6,000,000 to $10,000,000. The Partnership intends to pay off this line of credit when the pending refinance closes in the fourth quarter of 2005 (as discussed below).



In 2004, a line of credit of $7.425 million, collateralized by Two Parkside, was obtained to
provide funding for the construction costs at Three Carnegie. The construction was completed in July 2005 (See Note 3 for discussion).



The Partnership intends to refinance the above fixed-rate loan, the lines of credit and the unsecured notes. In the third quarter of 2005, a loan application was
submitted and withdrawn due to disagreement on the loan terms and conditions between the Partnership and the lender. In October 2005, a loan application was submitted to a different lender. This loan would total $26.8 million, would bear interest at
a lower fixed rate of 5.46% with a 10-year term, and would be collateralized by seven properties. This loan would also provide a one-time loan assumption and a release provision for an individual asset. The loan is estimated to close in the fourth
quarter of 2005. No assurance can be made that circumstances will not arise which could impact the closing of the pending refinance to repay the above two notes and a line of credit at their maturities.



Tri-City Land



As of September 30, 2005, the Partnership owned approximately 9.5 acres of land, 5.5 acres are under construction and 3.5 acres are
currently used as parking lots. The remaining is undeveloped. The Partnerships plan is to develop the remaining acre of land to generate more operating income for the Partnership in this fast-growing market.



In January 2005, the Partnership entered into a contract with a construction company for
$10,300,000 to build a three-story office building at a 5-acre land known as Brier Corporate Center with a total of 109,000 gross square feet and 104,000 rentable square feet. The core and shell of the project is estimated to be substantially
completed in December 2005. As of September 30, 2005, construction and other costs of $9,536,000 had been incurred. A new lease with a ten-year term for office space of approximately 87,000 square feet at Brier Corporate Center was signed in
the first quarter of 2005. This tenant should occupy the new building in January 2006. This new lease should increase the occupancy rate to 84% at the commencement of operations at Brier Corporate Center in January 2006.



In January 2004, the Partnership entered into a contract with a construction company for
$5,900,000 to build a two-story office building known as Three Carnegie with a total of 86,200 gross square feet. In July 2005, Three Carnegie was transferred from construction in progress to land and building when the core and shell of the property
was substantially completed and the first tenant moved in during July 2005.



Results of Operations



Comparison of the three
months ended September 30, 2005 to the three months ended September 30, 2004



Revenue



Rental income increased
$89,000, or 3%, for the three months ended September 30, 2005, compared to the three months ended September 30, 2004, primarily due to increases in occupancy at Three Carnegie which commenced operations in July 2005, as well as an increase
in occupancy at One Carnegie Plaza, offset by a decrease in occupancy at One Parkside (as discussed above).



Expenses



Operating expenses increased
$164,000, or 14%, for the three months ended September 30, 2005, compared to the three months ended September 30, 2004, primarily due to increases in utility costs, earthquake insurance, property taxes expenses resulting from the
reassessment value of Carnegie Business Center I, as well as the commencement of operations at Three Carnegie, offset by a reduction in property management fees from 5% in 2004 to 3% in 2005.



16



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##### Table of Contents

Depreciation and amortization increased $117,000, or 18%, for the three months ended September 30, 2005, compared to
the three months ended September 30, 2004, primarily due to depreciation of one new building, land improvements and tenant improvements placed into service in 2005.



General and administrative expenses decreased $47,000, or 15%, for the three months ended September 30, 2005, compared to the three
months ended September 30, 2004, primarily due to a reduction in asset and Partnership management fees in 2005, offset by an increase in the expenses related to the refinance which was withdrawn in the third quarter of 2005 (See Note 5 of the
financial statements).



Non-operating income / expenses



Interest expense decreased $37,000, or 11%, during the three months ended September 30,
2005, compared to the three months ended September 30, 2004, primarily due to capitalization of interest to Three Carnegie and Brier Corporate Center during the construction period, offset by an increase in interest rates from the lines of
credit.



Income from discontinued operations during the three months ended
September 30, 2004, reflected the net operating income from one sold property (See Note 3 of the financial statements).



Comparison of the nine months ended September 30, 2005 to the nine months ended September 30, 2004



Revenue



Rental income increased $239,000, or 3%, for the nine months ended September 30, 2005, compared to the nine months ended
September 30, 2004, primarily due to an increase in occupancy at Three Carnegie which commenced operations in July 2005, as well as an increase in occupancy at One Carnegie Plaza, offset by decrease in occupancy at One Parkside (as discussed
above).



Expenses



Operating expenses increased $162,000, or 5%, for the nine months ended September 30,
2005, compared to the nine months ended September 30, 2004, primarily due to an increase in utility costs, earthquake insurance and property taxes expenses resulting from the reassessment value of Carnegie Business Center I, as well as the
commencement of operations at Three Carnegie, offset by a reduction in property management fees from 5% in 2004 to 3% in 2005.



Depreciation and amortization increased $255,000, or 13%, for the nine months ended September 30, 2005, compared to the nine months ended September 30, 2004,
primarily due to depreciation of one new building, land improvements and tenant improvements placed into service in 2005.



Expenses associated with undeveloped land decreased $7,000, or 5%, for the nine months ended September 30, 2005, compared to the nine months ended September 30,
2004, primarily due to capitalization of property taxes and insurance at three Carnegie and Brier Corporate Center during their construction periods.



General and administrative expenses decreased $197,000, or 21%, for the nine months ended September 30, 2005, compared to the nine months ended September 30,
2004, primarily due to a reduction in asset and Partnership management fees in 2005, offset by an increase in the expenses related to the refinance which was withdrawn in the third quarter of 2005 (See Note 5 of the financial statements).



Non-operating income / expenses



Interest expense decreased $20,000, or 2%, during the nine months ended September 30,
2005, compared to the nine months ended September 30, 2004, primarily due to capitalization of interest at Three Carnegie and Brier Corporate Center during construction, offset by an increase in interest rates from the lines of credit.



Income from discontinued operations during the nine months ended
September 30, 2005, resulted from the sale of the property leased to Chuck E. Cheese, as well as the net operating income from the sold property. Income from discontinued operations during the nine months ended September 30, 2004,
reflected the net operating income from the sold property (See Note 3 of the financial statements).



Liquidity and Capital Resources



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



17



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##### Table of Contents

The Partnerships liabilities at September 30, 2005, included a note payable, a construction loan, an unsecured
note and two lines of credit. The note payable and the two lines of credit totaled approximately $21,615,000, collateralized by properties with an aggregate net book value of approximately $29,616,000. The note payable requires monthly principal and
interest payments of $83,000, bears a fixed interest rate of 9.39%, and has a maturity date of June 1, 2006. One line of credit with a total availability of $10,000,000 requires monthly interest-only payments, bears an interest rate of prime
plus 0.75% with a floor set at 5.5% (7.25% and 6% as of September 30, 2005 and December 31, 2004, respectively), and has a maturity date of March 5, 2006. Another line of credit with a total availability of $7,425,000 requires monthly
interest-only payments, bears an interest rate of prime rate (6.5% and 5.25% as of September 30, 2005 and December 31, 2004, respectively), and has a maturity date of April 15, 2007. The construction loan requires monthly
interest-only payments (currently the interest payments are drawn from the interest reserve), with a variable interest rate of LIBOR Rate plus 2% (5.84% as of September 30, 2005) collateralized by Brier Corporate Center, and has a
maturity date of April 27, 2007 (See Note 5 for discussion).



During the
second and the third quarters of 2005, the partnership obtained three unsecured notes, which totaled $5,000,000, from Glenborough. One note of $2,000,000 was paid off in November 2005 from the draw of a line of credit collateralized by One Carnegie
and Carnegie Business Center II. The Partnership intends to pay off the remaining note when the pending refinance closes in the fourth quarter of 2005 (as discussed below).



In the third quarter of 2005, the Partnership extended the line of credit collateralized by Carnegie One and Carnegie Business Center II
from September 5, 2005 to March 5, 2006, and increased the total availability from $6,000,000 to $10,000,000. The Partnership intends to pay off this line of credit when the pending refinance closes in the fourth quarter of 2005 (as
discussed below).



The Partnership intends to refinance the above fixed-rate
loan, the lines of credit and the unsecured notes. In the third quarter of 2005, a loan application was submitted and withdrawn due to disagreement on the loan terms and conditions between the Partnership and the lender. In October 2005, a loan
application was submitted to a different lender. This loan would total $26.8 million, would bear interest at a lower fixed rate of 5.46% with a 10-year term, and would be collateralized by seven properties. This loan would also provide a one-time
loan assumption and a release provision for an individual asset. The loan is estimated to close in the fourth quarter of 2005. No assurance can be made that circumstances will not arise which could impact the closing of the pending refinance to
repay the above two notes and a line of credit at their maturities.



In
February 2005, the Partnership entered into a contract to sell the property leased to Chuck E. Cheese for a price of $2,157,800. On March 31, 2005, the sale closed and generated net proceeds of approximately $2,032,000 and a gain on sale of
approximately $1,202,000. The proceeds were added to the Partnerships cash reserves.



The Partnership is contingently liable for subordinated real estate commissions payable to the General Partner in the amount of $102,000 at September 30, 2005 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 limited, the liability has not been recognized in the accompanying consolidated financial statements; however, the amount will be recorded when and if it becomes
payable.



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



Management expects that the Partnerships cash balance at September 30, 2005, 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 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



As of September 30, 2005, we had contractual obligations as follows (in thousands):



|                                                   |  |                 |       |              |   |              |  |                  |    |       |   |    |  |   |       
|-------------------------------------------------- |  | --------------- | ----- | ------------ | - | ------------ |  | ---------------- | -- | ----- | - | -- |  | - | ------
|                                                   |  | Less than 1year |       | 1 to 3 years |   | 3 to 5 years |  | More than 5years |    | Total
|Secured mortgage loan                              |  | $               | 58    |              | $ | 8,132        |  | $                |   |       | $ |   |  | $ | 8,190 
|Secured bank lines of credit and construction loan |  |                 |      |              |   | 14,453       |  |                  |   |       |   |   |  |   | 14,453
|Unsecured note                                     |  |                 | 5,000 |              |   |              |  |                  |   |       |   |   |  |   | 5,000 
|Interest on indebtedness(1)                        |  |                 | 498   |              |   | 1,238        |  |                  |   |       |   |   |  |   | 1,736 
|Construction contract commitment(2)                |  |                 | 2,200 |              |   |             |  |                  |   |       |   |   |  |   | 2,200 
|                                                   |  |                 |       |              |   |              |  |                  |    |       |   |    |  |   |       
|Total                                              |  | $               | 7,756 |              | $ | 23,823       |  | $                |  |       | $ |  |  | $ | 31,579
|                                                   |  |                 |       |              |   |              |  |                  |    |       |   |    |  |   |       

---

|(1) | For variable rate loans, this represents estimated interest expense based on outstanding balances and interest rates at September 30, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | In January 2005, the Partnership entered into a contract with a construction company for $10,300,000 to build a three-story office building with a total of 109,000 gross square
feet, known as Brier Corporate Center. The core and shell of the project is estimated to be substantially completed in December 2005. As of September 30, 2005, the contract costs of $8,100,000 had been incurred. The construction contract for
Three Carnegie was completed in July 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Partnership knows
of no other 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 and unsecured debt that would constrain
its ability to obtain additional capital.



Operating Activities



For the nine months ended September 30, 2005, the Partnerships
cash provided by operating activities totaled $1,803,000.



The $161,000
increase in accounts receivable at September 30, 2005, compared to December 31, 2004, was primarily due to the timing of receipts for tenant rents.



The $639,000 increase in deferred costs at September 30, 2005, compared to December 31, 2004, was primarily due to lease commissions paid for Three Carnegie and
Brier Corporate Center.



The $394,000 increase in prepaid expenses and other
assets at September 30, 2005, compared to December 31, 2004, was primarily due to an increase in straight line rent receivable, offset by a decrease in prepaid insurance and impound account related to the note payable.



The $79,000 increase in accounts payable and other liabilities at September 30, 2005,
compared to December 31, 2004, was primarily due to accruals of property operating expenses, investor service expenses and redemptions, offset by the payment of distributions to the General Partner, which were accrued in 2004.



Investing Activities



During the nine months ended September 30, 2005, the Partnerships cash used for investing activities totaled $10,041,000, which
consisted of $2,032,000 in net proceeds from the sale of the property leased to Chuck E. Cheese, and the partial collection of $71,000 from a note receivable related to tenant improvements, offset by $1,347,000 used for building and tenant
improvements, and $10,797,000 used for construction costs at Three Carnegie and Brier Corporate Center.



Financing Activities



During the nine
months ended September 30, 2005, the Partnerships cash provided by financing activities totaled $8,271,000, which consisted of $4,315,000 from draws on lines of credit, and $6,028,000 from draws on the construction loan and unsecured note
(as discussed above), offset by $165,000 in principal payments on the note payable, $328,000 in payments of loan fees for the construction loan and lines of credit, $678,000 in payment of redemption for 1,390 limited partnership units, and $901,000
in payment of distributions to limited partners.



Cash flows



For the nine months ended September 30, 2005, cash provided by operating activities
was $1,803,000, as compared to $2,258,000 for the same period in 2004. The change was primarily due to increases in building operating expenses and timing of rental income receipts. For the nine months ended September 30, 2005, cash used for
investing activities was $10,041,000, as compared to $2,283,000 for the same period in 2004. The change was primarily due to cash paid for construction costs at Three Carnegie and Brier Corporate Center, offset by proceeds from the property sale in
2005. For the nine months ended September 30, 2005, cash provided by financing activities was $8,271,000, as compared to $780,000 for the same period in 2004. The change was primarily due to an increase in borrowings from lines of credit and
unsecured notes in 2005.



Forward Looking Statements; Factors That May
Affect Operating Results



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



| |  | The Partnerships intent to refinance existing debt and pay off certain existing notes after the pre-payment periods expire;
|- |  | ----------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships expectation to make annual or more frequent cash distributions to partners;
|- |  | ---------------------------------------------------------------------------------------------



| |  | The Partnerships plan to develop its remaining one acre of land to generate more operating income;
|- |  | ---------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | The Partnerships belief that its cash balance and cash generated by its operations, sales and financings will be sufficient to meet its operating requirements in both the
short and the reasonably foreseeable long-term;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships expectation that changes in market interest rates will not have a material impact on the performance or fair value of its portfolio; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Partnerships belief that certain claims and lawsuits which have arisen against it in the normal course of business will not have a material adverse effect on its financial
position, cash flow or results of operations.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All
forward-looking statements included in this document are based on information available to the Partnership on the date hereof. It is important to note that the Partnerships actual results could differ materially from those stated or implied in
such forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:



| |  | unanticipated inability to close financing that currently is in process in the amount expected on or before the date expected;
|- |  | ------------------------------------------------------------------------------------------------------------------------------



| |  | failure to obtain anticipated outside financing;
|- |  | ------------------------------------------------



| |  | market fluctuations in rental rates, concessions and occupancy;
|- |  | ---------------------------------------------------------------



| |  | reduced demand for rental space;
|- |  | --------------------------------



| |  | defaults or non-renewal of leases by customers;
|- |  | -----------------------------------------------



| |  | availability and credit worthiness of prospective tenants and our ability to execute lease deals with them;
|- |  | -----------------------------------------------------------------------------------------------------------



| |  | differing interpretations of lease provisions regarding recovery of expenses;
|- |  | -----------------------------------------------------------------------------



| |  | increased operating costs;
|- |  | --------------------------



| |  | risks and uncertainties affecting property development and construction including construction delays, cost overruns, our inability to obtain permits and public opposition to these
activities;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  | the unpredictability of both the frequency and final outcome of litigation.
|- |  | ---------------------------------------------------------------------------



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



Item 3. Qualitative and Quantitative Information About Market Risk



Interest Rates



The
Partnerships primary market risk exposure is to changes in 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 and interest rates by expected maturity dates.



|                                                           |  |                        |                |   |      |   |       |      |  |   |       |   |  |            |        |   |  |   |       
|---------------------------------------------------------- |  | ---------------------- | -------------- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---------- | ------ | - |  | - | ------
|                                                           |  | Expected Maturity Date |                |   |      |   |       |     
|                                                           |  | 2005                   |                |   | 2006 |   |       | 2007 |  |   | Total |   |  | Fair Value
|                                                           |  |                        | (in thousands) |   |      |   |       |      |  |   |      
|Secured Fixed Rate Debt                                    |  | $                      | 58             |   |      | $ | 8,132 |      |  | $ |      |   |  | $          | 8,190  |   |  | $ | 8,398 
|Average interest rate                                      |  |                        | 9.39           | % |      |   | 9.39  | %    |  |   |      |   |  |            | 9.39   | % |  |   |       
|                                                           |  |                        |                |   |     
|Secured Variable Rate-line of credit and construction note |  | $                      |               |   |      | $ | 6,000 |      |  | $ | 8,453 |   |  | $          | 14,453 |   |  | $ | 14,453
|Average interest rate                                      |  |                        |              | % |      |   | 7.25  | %    |  |   | 6.42  | % |  |            | 6.76   | % |  |   |       
|                                                           |  |                        |                |   |     
|Unsecured Variable Rate-note                               |  | $                      | 5,000          |   |      | $ |      |      |  | $ |      |   |  | $          | 5,000  |   |  | $ | 5,000 
|Average interest rate                                      |  |                        | 6.5            | % |      |   |      | %    |  |   |      | % |  |            | 6.5    | % |  |   |       



20



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##### Table of Contents

A change of 1/8% in the index rate to which the Partnerships variable rate debt is tied would change the annual
interest the Partnership incurred by approximately $25,000, based upon the balances outstanding on variable rate instruments at September 30, 2005.



As of September 30, 2005, the Partnership had no investments in interest-bearing certificates of deposit. The Partnership does not own any derivative instruments.



Item 4. Controls and procedures



As of the
end of the period covered by this report, we carried out an evaluation, under the supervision of the General Partners Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on this evaluation, the General Partners Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting him on a timely basis to material
information required to be included in this report. There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially
affect our internal control over financial reporting.



21



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##### Table of Contents

Part II. OTHER INFORMATION



Item 1. 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 have a material adverse effect on the Partnerships financial position,
cash flow or results of operations.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



None.



Item 3. Defaults Upon Senior Securities



None.



Item 4. Submission of Matters to a Vote of Security Holders



None.



Item 5. Other information



None.



Item 6. Exhibits



|     |  |                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Section 302 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.
|     | 
|32.1 |  | Section 906 Certification of Daniel L. Stephenson, Chief Executive Officer and Chief Financial Officer of General Partnership.



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##### Table of Contents

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: November 14, 2005 |  | By:                              |  | /s/ Daniel L. Stephenson             
|                        |  |                                  |  | Daniel L. Stephenson, President      
|                        |  |                                 
|Date: November 14, 2005 |  | By:                              |  | /s/ Daniel L. Stephenson             
|                        |  |                                  |  | Daniel L. Stephenson, General Partner



23