FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter ended	June 30, 2001

Commission file number	0-11068

SIERRA PACIFIC DEVELOPMENT FUND
(A Limited Partnership)

State of California		95-3643693

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


5850 San Felipe, Suite 450 Houston, Texas		77057

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:	(713) 706-6271

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 ý No o.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The following financial statements are submitted in the next pages:

Consolidated Balance Sheets – June 30, 2001 and December 31, 2000
Consolidated Statements of Operations – For the Six Months and for the Three Months Ended June 30, 2001 and 2000
Consolidated Statements of Changes in Partners’ Equity – For the Year Ended December 31, 2000 and for the Six Months Ended June 30, 2001
Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2001 and 2000
Notes to Consolidated Financial Statements

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(a)

OVERVIEW

The following discussion should be read in conjunction with the Sierra Pacific Development Fund’s (the Partnership) Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q.

The Partnership currently owns a 100% interest in the Sierra Creekside Partnership, which operates the Sierra Creekside property (the Property) in San Diego, CA.

(b)	RESULTS OF OPERATIONS

Rental income for the six months and three months ended June 30, 2001 rose by approximately $113,000, or 23%, and by approximately $56,000, or 22%, respectively, in comparison to the same periods in 2000. This increase was principally due to higher rental rates obtained as a result of tenant rollover at the Property. In addition, several tenants renewed or extended their leases at higher rental rates. The Property was 100% occupied at June 30, 2001 and 2000.

Operating expenses for the six months ended June 30, 2001 increased by approximately $88,000, or 33%, in comparison to the corresponding period in the prior year. This increase was primarily due to higher maintenance and repair costs and utilities incurred during the period. In addition, management fees rose as a result of the increase in rental revenue. Further, insurance, accounting and auditing costs, and other operating expenses increased during the period. Operating expenses for the three months ended June 30, 2001, increased by approximately $22,000 or 20%, principally due to higher utility costs and management fees incurred during the quarter.

Depreciation and amortization expenses for the six months and three months ended June 30, 2001, decreased by approximately $11,000, or 7%, and by approximately $2,000, or 2%, respectively, primarily due to fully depreciated capitalized tenant improvements when compared to the same periods in the prior year.

Interest expense for the six months ended June 30, 2001 increased by approximately $7,000, or 4%, when compared to the corresponding period in the prior year. As stated below, the Partnership refinanced its mortgage loan on the Property in January 2000. Interest expense for the quarter ended June 30, 2001 decreased by approximately $12,000 or 13%, principally as a result of lower interest rates.

An extraordinary loss of approximately $46,000 was recorded in the first quarter of the prior year due to the write-off of deferred loan costs associated with the payoff of the mortgage loan with Home Federal Savings.

(c)	LIQUIDITY AND CAPITAL RESOURCES

In January 2000, the Partnership paid its loan balance of $1,669,000 to Home Federal Savings and entered into a loan agreement with General Electric Capital Corporation (GECC) in the principal amount of $4,250,000. The lender funded $4,050,000 at closing and held back $200,000 to be drawn upon to help finance future tenant improvements and leasing costs. The Partnership received net proceeds of $2,222,000 as a result of the new loan. The loan is secured by the Property and bears interest at 2.75% above the GECC Composite Commercial Paper Rate. Principal and interest payments are due monthly based on a 30-year amortization. The loan matures January 31, 2005. The majority of the loan proceeds were distributed to the minority owner of the property, Sierra Mira Mesa Partners (SMMP).

During the six months ended June 30, 2001, the Partnership generated cash flows from operations of approximately $83,000 and paid approximately $187,000 for property additions and lease commissions.

The Partnership is in an illiquid position at June 30, 2001 with cash and billed receivables of approximately $99,000 and current liabilities of approximately $143,000. A secondary source of cash is available through contributions from SMMP. Management expects these contributions will be adequate to meet the financial obligations of the Partnership in the foreseeable future. During the six months ended June 30, 2001, SMMP contributed $95,000 to the Partnership and received distributions of $88,000 from the Partnership.

The Partnership’s primary capital requirements are for the construction of new tenant space and debt obligations. It is anticipated that these requirements will be funded from the operations of the Property, the $200,000 tenant improvement/lease commission holdback, and contributions from SMMP.

Inflation:

The Partnership does not expect inflation to be a material factor in its operations in 2001.

The Partnership considered the provision of Financial Reporting Release No. 48 A Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments. The Partnership had no holdings of derivative financial or commodity instruments at June 30, 2001. A review of the Partnership's other financial instruments and risk exposures at that date revealed that the Partnership had minor exposure to interest rate risk due to the floating rate note payable of $4,010,918. The Partnership utilized sensitivity analyses to assess the potential effect of this risk and concluded that near-term changes in interest rates should not materially adversely affect the Partnership's financial position, results of operations or cash flows.

SIERRA PACIFIC DEVELOPMENT FUND (A Limited Partnership) CONSOLIDATED BALANCE SHEETS June 30, 2001 and December 31, 2000



				June 30, 2001 (Unaudited)			December 31, 2000


	ASSETS

	Cash and cash equivalents			$	42,616		$	47,822
	Receivables:
		Unbilled rent		55,981			45,968
		Billed rent		0			23,154
	Income-producing property - net of accumulated depreciation and valuation allowance of $3,354,431 and $3,321,820, respectively			2,340,048			2,354,368
	Other assets - net of accumulated amortization of $209,322 and $188,798, respectively			344,709			303,252
	Excess distributions to minority partner			2,533,963			2,540,963


	Total Assets			$	5,317,317		$	5,315,527


	LIABILITIES AND PARTNERS' EQUITY

	Accrued and other liabilities			$	232,226		$	141,487
	Note payable			4,010,918			4,025,544


	Total Liabilities			4,243,144			4,167,031


	Partners' equity (deficit):
		General Partner		(83,839		)	(83,096		)
		Limited Partners:
			30,000 units authorized, 29,354 issued and outstanding	1,158,012			1,231,592


	Total Partners' equity			1,074,173			1,148,496


	Total Liabilities and Partners' equity			$	5,317,317		$	5,315,527

See Accompanying Notes

SIERRA PACIFIC DEVELOPMENT FUND (A Limited Partnership)

CONSOLIDATED STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2001 and 2000 and for the Three Months Ended June 30, 2001 and 2000



			Six Months Ended June 30,						Three Months Ended June 30,


			2001			2000			2001		2000
			(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)

REVENUES:
	Rental income		$	602,808		$	489,777		$	316,571	$	260,337


		Total revenues	602,808			489,777			316,571		260,337


EXPENSES:
	Operating expenses		356,843			268,936			137,152		114,756
	Depreciation and amortization		149,289			160,035			77,209		78,993
	Interest		170,999			164,372			79,342		91,491


		Total costs and expenses	677,131			593,343			293,703		285,240


(LOSS) INCOME BEFORE EXTRAORDINARY LOSS			(74,323		)	(103,566		)	22,868		(24,903		)

EXTRAORDINARY LOSS FROM WRITE-OFF
OF DEFERRED LOAN COSTS			0			(46,020		)	0		0


(LOSS) INCOME BEFORE MINORITY INTEREST'S
SHARE OF CONSOLIDATED JOINT VENTURE
LOSS			(74,323		)	(149,586		)	22,868		(24,903		)


MINORITY INTEREST'S SHARE OF
CONSOLIDATED JOINT VENTURE LOSS			0			7,599			0		1,265


NET (LOSS) INCOME			$	(74,323	)	$	(141,987	)	$	22,868	$	(23,638	)


Per limited partnership unit:
	(Loss) income before extraordinary loss		$	(2.51	)	$	(3.24	)	$	0.77	$	(0.80	)
	Extraordinary loss		0			(1.55		)	0		0

Net (loss) income per limited partnership unit			$	(2.51	)	$	(4.79	)	$	0.77	$	(0.80	)

See Accompanying Notes

SIERRA PACIFIC DEVELOPMENT FUND (A Limited Partnership) CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) For the Year Ended December 31, 2000 and for the Six Months Ended June 30, 2001










	Limited Partners									Total
							General			Partners'
	Per Unit			Total			Partner			Equity


Proceeds from sale of partnership units	$	500.00		$	14,677,000					$	14,677,000
Underwriting commissions and other organization expenses	(60.29		)	(1,769,862		)				(1,769,862		)
Cumulative net (loss) income (to December 31, 1999)	(225.92		)	(6,631,704		)	$	14,600		(6,617,104		)
Cumulative distributions (to December 31, 1999)	(166.75		)	(4,894,473		)	(14,600		)	(4,909,073		)


Partners' equity - January 1, 2000	47.04			1,380,961			0			1,380,961
Transfer among general partner and limited partners	2.75			80,771			(80,771		)	0
Net loss	(7.84		)	(230,140		)	(2,325		)	(232,465		)


Partners' equity (deficit) - December 31, 2000 (audited)	41.95			1,231,592			(83,096		)	1,148,496
Net loss (unaudited)	(2.51		)	(73,580		)	(743		)	(74,323		)


Partners' equity (deficit) - June 30, 2001 (unaudited)	$	39.44		$	1,158,012		$	(83,839	)	$	1,074,173

See Accompanying Notes

SIERRA PACIFIC DEVELOPMENT FUND (A Limited Partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2001 and 2000



			2001			2000
			(Unaudited)			(Unaudited)


CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(74,323	)	$	(141,987	)
	Adjustments to reconcile net loss to cash provided by operating activities:
	Depreciation and amortization		149,289			160,035
	Extraordinary loss from write-off of deferred loan costs		0			46,020
	Minority interest's share of consolidated joint venture loss		0			(7,599		)
	Decrease (increase) in receivables		13,141			(7,097		)
	Increase in other assets		(95,631		)	(18,339		)
	Increase in accrued and other liabilities		90,739			43,521


		Net cash provided by operating activities	83,215			74,554


CASH FLOWS FROM INVESTING ACTIVITIES:
	Payments for property additions		(80,795		)	0


	Net cash used in investing activities		(80,795		)	0


CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from note payable secured by property		0			4,050,000
	Principal payments on note payable		(14,626		)	(1,682,968		)
	Additions to deferred loan costs		0			(112,436		)
	Contributions from minority partner		95,000			78,091
	Distributions to minority partner		(88,000		)	(2,432,547		)


	Net cash used in financing activities		(7,626		)	(99,860		)


NET DECREASE IN CASH AND CASH EQUIVALENTS			(5,206		)	(25,306		)

CASH AND CASH EQUIVALENTS
	Beginning of period		47,822			134,154


CASH AND CASH EQUIVALENTS
	End of period		$	42,616		$	108,848



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

	Cash paid during the period for real estate taxes		$	41,866		$	36,473


	Cash paid during the period for interest		$	179,396		$	146,360

See Accompanying Notes

SIERRA PACIFIC DEVELOPMENT FUND AND SUBSIDIARY
(A Limited Partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. ORGANIZATION

In February 1994, Sierra Pacific Development Fund (the Partnership) created a general partnership (Sierra Creekside Partners (SCP)) with Sierra Mira Mesa Partners (SMMP) to facilitate cash contributions by SMMP for the continued development and operation of the Sierra Creekside property. The percentage interests of the Partnership and SMMP are to be adjusted each year on January 1 during the term of SCP, beginning January 1, 1995 and ending December 31, 2013 unless terminated sooner, based upon the relative net contributions and distributions since inception through the preceding December 31. In 2000, SCP made distributions to SMMP in excess of SMMP’s net cumulative contributions. Accordingly, on January 1, 2001, the Partnership’s interest in SCP was increased to 100% from 94.92%. The excess distributions made to SMMP and cumulative loss allocated to SMMP is reported as an asset in the Partnership’s balance sheet. Under the terms of the SCP joint venture agreement, SMMP would be obligated to contribute to the Partnership any negative balance standing in its capital account upon liquidation of the Partnership.

2. BASIS OF FINANCIAL STATEMENTS

The accompanying unaudited consolidated condensed financial statements include the accounts of the Partnership and SCP at June 30, 2001. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of the Partnership’s management, these unaudited financial statements reflect all adjustments which are necessary for a fair presentation of its financial position at June 30, 2001 and results of operations and cash flows for the periods presented. All adjustments included in these statements are of a normal and recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Annual Report of the Partnership for the year ended December 31, 2000.

3. RELATED PARTY TRANSACTIONS

Included in the financial statements for the six months ended June 30, 2001 and 2000 are affiliate transactions as follows:

	June 30

	2001		2000

Management fees	$	30,612	$	21,235
Administrative fees	21,788		20,398
Leasing fees	66,263		0
Construction fees	6,746		0

On April 16, 2001, the combined financial statements of the parent of the general partner and other affiliates, including the general partner, (the Company) were issued. The independent public accountants report on such statements contained an explanatory paragraph relating to the ability of the Company to continue as a going concern. The Company experienced losses in the periods presented and has a net capital deficiency. Certain entities in the combined financial statements have not made debt payments when due and various lenders placed $10,520,000 of debt in default. Certain entities also needed to pay or refinance a significant amount of debt coming due in the next twelve months. These factors raise substantial doubt about the ability of the combined entities to continue as a going concern.

Management of the Company has plans related to these matters, which include, in addition to those items discussed above, obtaining additional loans from shareholders, obtaining extensions from lenders or refinancing all debts through the completion of the transaction discussed in Note 5. In addition, if necessary, management believes it could sell properties to generate cash to pay debt. The Partnership does not believe that the effect of the ultimate outcome of the circumstances surrounding the Company will have a material adverse effect on its results of operations or financial position.

4. PARTNERS’ EQUITY

Equity and net loss per limited partnership unit is determined by dividing the limited partners’ share of the Partnership’s equity and net loss by the number of limited partnership units outstanding, 29,354.

During 2000, an amount was transferred between the partners’ equity accounts such that 99% of cumulative operating income, gains, losses, deductions and credits of the Partnership was allocated among the limited partners and 1% was allocated to the general partner. Management does not believe that the effect of this transfer was significant.

5. PENDING TRANSACTION

CGS Real Estate Company, Inc. (CGS), an affiliate of the corporate general partner of the Partnership, is continuing the development of a plan which will combine the Partnership’s property with the properties of other real estate partnerships managed by CGS and its affiliates. These limited partnerships own office properties, industrial properties, shopping centers and residential apartment properties. It is expected that the acquiror, American Spectrum Realty, Inc. (ASR), would qualify in the future as a real estate investment trust. Limited partners would receive shares of common stock in ASR, which would be listed on a national securities exchange.

The Partnership’s participation in this plan will require the consent of its limited partners. ASR filed a registration statement on Form S-4 August 14, 2000 relating to the solicitation of consents with the Securities and Exchange Commission (SEC). The registration statement was amended February 14, 2001, April 24, 2001, June 26, 2001, and August 7, 2001 and was declared effective by the SEC on August 8, 2001. The plan and the benefits and risks thereof were described in detail in the final prospectus/consent solicitation statement included in the registration statement filed under the Securities Act of 1933 at the time it was declared effective by the SEC. Solicitation materials will be provided to limited partners in connection with the solicitation of the consent of the limited partners. There can be no assurances that the plan described above will be consummated.

6. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 133 requires a company to recognize all derivative instruments (including certain derivative instruments embedded in other contracts) as assets or liabilities in its balance sheet and measure them at fair value. The statement requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended, is effective for fiscal years beginning after June 15, 2000. The Partnership adopted the accounting provisions of SFAS No. 133 in 2001. The implementation of SFAS No. 133 did not have a significant effect on the Partnership’s financial conditions or results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101), on Revenue Recognition in Financial Statements, which summarizes certain of the SEC staff’s views on applying generally accepted accounting principles to revenue recognition in financial statements. The Partnership adopted the accounting provisions of SAB 101 in 2000. The implementation of SAB 101 did not have a significant effect on the Partnership’s financial condition or results of operations.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None

(b) Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report be signed on its behalf by the undersigned thereunto duly authorized.

		SIERRA PACIFIC DEVELOPMENT FUND a Limited Partnership S-P PROPERTIES, INC. General Partner


Date:	August 13, 2001	/s/ Thomas N. Thurber

		Thomas N. Thurber President and Director


Date:	August 13, 2001	/s/ G. Anthony Eppolito

		G. Anthony Eppolito Chief Accountant

SIERRA PACIFIC DEVELOPMENT FUND 10-Q