Secured Income L P 10-Q 2007 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, DC

FORM 10-Q

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

For the quarterly period ended June 30, 2007

OR

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

For the transition period from ________________ to ________________

Commission file number 0-17412

Secured Income L.P.

(Exact name of Registrant as specified in its charter)

Delaware	06-1185846
State or other jurisdiction of incorporation or organization	(IRS Employer Identification No.)

340 Pemberwick Road Greenwich, Connecticut	06831
(Address of principal executive offices)	Zip Code

Registrant's telephone number, including area code: (203) 869-0900

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 o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filer oNon-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of August 14, 2007, there are 984,369 units of limited partnership interest outstanding.

SECURED INCOME L.P. AND SUBSIDIARIES

Part I - Financial Information

Table of Contents

		Page
Item 1	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3	Quantitative and Qualitative Disclosure about Market Risk	10
Item 4	Controls and Procedures	10

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SECURED INCOME L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,  2007  (Unaudited)			December 31,  2006
ASSETS
Cash and cash equivalents	$	1,641,489		$	1,884,450
Restricted assets and funded reserves		855,556			621,928
Accounts receivable		2,411			30,715
Prepaid expenses		4,181			174,442
Intangible assets, net of accumulated amortization		34,342			37,464
Assets held for sale		4,461,367			4,450,674
	$	6,999,346		$	7,199,673
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses	$	129,220		$	149,044
Due to general partners and affiliates		47,566			88,016
Liabilities related to assets held for sale		8,701,642			8,800,206
		8,878,428			9,037,266
Partners' equity (deficit)
Limited partners		1,901,037			1,943,182
General partners		(3,780,119	)		(3,780,775	)
		(1,879,082	)		(1,837,593	)
	$	6,999,346		$	7,199,673

See notes to consolidated financial statements.

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SECURED INCOME L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2007 AND 2006

(Unaudited)

	Three Months  Ended  June 30, 2007			Six Months  Ended  June 30, 2007			Three Months  Ended  June 30, 2006			Six Months  Ended  June 30, 2006
OPERATIONS
REVENUE
Interest	$	15,797		$	33,750		$	23,081		$	45,335
EXPENSES
Administrative and management		54,959			97,776			16,356			66,401
Amortization		1,561			3,122			7,875			15,750
TOTAL EXPENSES		56,520			100,898			24,231			82,151
LOSS FROM CONTINUING OPERATIONS		(40,723	)		(67,148	)		(1,150	)		(36,816	)
DISCONTINUED OPERATIONS
REVENUE
Rental		662,706			1,334,136			2,180,258			4,343,436
EXPENSES
Administrative and management		89,880			189,064			175,816			391,141
Operating and maintenance		138,607			267,073			324,548			695,509
Taxes and insurance		97,387			201,078			511,505			1,018,345
Financial		143,387			286,987			549,084			1,070,342
Amortization		3,867			7,735			20,420			40,841
TOTAL EXPENSES		473,128			951,937			1,581,373			3,216,178
INCOME FROM DISCONTINUED OPERATIONS		189,578			382,199			598,885			1,127,258
NET INCOME	$	148,855		$	315,051		$	597,735		$	1,090,442
NET INCOME ATTRIBUTABLE TO
Limited partners	$	147,366		$	311,900		$	591,758		$	1,079,538
General partners		1,489			3,151			5,977			10,904
	$	148,855		$	315,051		$	597,735		$	1,090,442
NET INCOME ALLOCATED PER UNIT OF LIMITED PARTNERSHIP INTEREST	$	.15		$	.32		$	.60		$	1.10

 

–continued–

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SECURED INCOME L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2007 AND 2006

(Unaudited)

	Three Months  Ended  June 30, 2007			Six Months  Ended  June 30, 2007			Three Months  Ended  June 30, 2006			Six Months  Ended  June 30, 2006
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED PER UNIT OF LIMITED PARTNERSHIP INTEREST	$	(.04	)	$	(.07	)	$	(.00	)	$	(.04	)

See notes to consolidated financial statements.

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SECURED INCOME L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(Unaudited)

	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	315,051		$	1,090,442
Adjustments to reconcile net income to net cash provided by operating activities
Amortization		10,857			56,591
Increase in restricted assets and funded reserves		(233,628	)		(937,675	)
Increase in tenant security deposits		(18,428	)		(30,989	)
Decrease in accounts receivable		28,304			8,904
Decrease in prepaid expenses		170,261			164,605
Increase (decrease) in accounts payable and accrued expenses		(19,824	)		704,107
Increase (decrease) in tenant security deposits payable		3,735			(576	)
Increase (decrease) in due to general partners and affiliates		(40,450	)		21,671
Net cash provided by operating activities		215,878			1,077,080
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners		(356,540	)		(797,888	)
Principal payments on mortgages		(102,299	)		(327,907	)
Net cash used in financing activities		(458,839	)		(1,125,795	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(242,961	)		(48,715	)
Cash and cash equivalents at beginning of period		1,884,450			2,800,279
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,641,489		$	2,751,564
SUPPLEMENTAL INFORMATION
Financial expenses paid	$	263,668		$	1,093,459
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net cash provided by operating activities	$	322,553		$	1,106,410
Net cash used in financing activities	$	(184,049	)	$	(1,083,145	)

See notes to consolidated financial statements.

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SECURED INCOME L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

1. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. They do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The results of operations are impacted significantly by the results of operations of the Carrollton Partnership and, in fiscal 2006, the Columbia Partnership as well (see discussion below), which is provided on an unaudited basis during interim periods. Accordingly, the accompanying consolidated financial statements are dependent on such unaudited information. In the opinion of the General Partners, the consolidated financial statements include all adjustments necessary to reflect fairly the results of the interim periods presented. All adjustments are of a normal recurring nature. No significant events have occurred subsequent to December 31, 2006 and no material contingencies exist which would require additional disclosure in the report under Regulation S-X, Rule 10-01 paragraph A-5.

In July 2006, the Columbia Partnership sold its operating complex (“The Westmont”) and the Partnership made distributions to its partners in 2006 and 2007 from proceeds received in connection with such sale. Since April 2006, the Carrollton Partnership has entered into three Agreements of Purchase and Sale to sell its operating complex (“Fieldpointe”) at prices ranging from $25,500,000 to $27,100,000; however, the purchasers did not consummate the transactions. The Carrollton Partnership is continuing its effort to sell the Complex and has received several additional offers. In addition, affiliates of Wilder Richman Resources Corporation (“WRRC”), one of the Partnership’s General Partners, are considering submitting a bid to purchase Fieldpointe at a price in the range of bids previously received. Although there can be no assurance that a sale will take place, it is possible that a transaction can be consummated in 2007. The disposition of The Westmont and Fieldpointe by their respective owners is consistent with the plan of liquidation and winding up of the business of the Partnership. Following a sale of Fieldpointe, if consummated, the Partnership intends to distribute the net proceeds to which it is entitled under the Carrollton Partnership’s partnership agreement to its limited and general partners, in accordance with the terms and conditions of the Partnership’s limited partnership agreement (the “Partnership Agreement”). After the final distribution is paid, the Partnership intends to dissolve. The previous offers for Fieldpointe indicate that the carrying amount of the associated long-lived assets is recoverable based on applying the standard accounting tests for impairment. Due to the sale of The Westmont and the potential sale of Fieldpointe and the Partnership’s plans to dissolve upon such sales and the winding up of the business of the Partnership, certain assets and liabilities of the Complexes are classified as held for sale in the accompanying consolidated balance sheets. Accordingly, the operations of the Columbia Partnership and the Carrollton Partnership (collectively the “Operating Partnerships”) are reported as discontinued operations for the periods presented in the accompanying consolidated statements of operations. That classification resulted in the cessation of depreciation of those assets as of January 1, 2006. However, as the dissolution of the Partnership was not imminent as of June 30, 2007, the consolidated financial statements are presented assuming that the Partnership will continue as a going concern.

The results of operations for the six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the entire year.

2. Additional information, including the audited December 31, 2006 Consolidated Financial Statements and the Summary of Significant Accounting Policies, is included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 on file with the Securities and Exchange Commission.

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SECURED INCOME L.P. AND SUBSIDIARIES

Item 2.Management's Discussion and Analysis of Financial Con-dition and Results of Operations

Liquidity and Capital Resources

In July 2006, the Columbia Partnership sold The Westmont. Registrant received distributions totaling $45,216,246 in July 2006 and an additional $81,750 in the first quarter of 2007, which represents Registrant’s share of the sales proceeds after retirement of certain mortgage obligations, payment of expenses and distributions to the general partners of the Columbia Partnership. In May 2006 and July 2006, Registrant made distributions of approximately 8% annualized to Unit holders of record as of March 31, 2006 and June 30, 2006, respectively. In connection with the sale of The Westmont, Registrant distributed an aggregate of $42.10 per Unit in August 2006 and December 2006 to the Unit holders of record as of July 14, 2006. Because the distributions in connection with the sale of The Westmont included a full return of Unit holders’ invested capital, originally $20.00 per Unit, quarterly cash distributions were paid at an annualized rate of 8% through August 4, 2006, the date Unit holders received the return of their invested capital. On or about April 4, 2007, Registrant made a distribution to Unit holders of record as of December 31, 2006 that included the 8% annualized return from July 1, 2006 through August 4, 2006, the final distribution received by Registrant in connection with the sale of The Westmont and the remainder of the cash distribution received from the Carrollton Partnership in 2006. Since April 2006, the Carrollton Partnership has entered into three Agreements of Purchase and Sale to sell Fieldpointe at prices ranging from $25,500,000 to $27,100,000; however, the purchasers did not consummate the transactions.  The Carrollton Partnership is continuing its effort to sell the Complex and has received several additional offers. In addition, affiliates of Wilder Richman Resources Corporation (“WRRC”), one of Registrant’s General Partners, are considering submitting a bid to purchase Fieldpointe at a price in the range of bids previously received. Although there can be no assurance that a sale will take place, it is possible that a transaction can be consummated in 2007. At this time, Registrant does not intend to make any further quarterly cash distributions, but may reconsider this position depending upon future events. The disposition of The Westmont and Fieldpointe by their respective owners is consistent with the plan of liquidation and winding up of the business of Registrant. Following a sale of Fieldpointe, if consummated, Registrant intends to distribute the net proceeds to which it is entitled under the Carrollton Partnership’s partnership agreement to its limited and general partners, less a small reserve, in accordance with the terms and conditions of the Partnership Agreement. After the final distribution is paid, Registrant intends to dissolve. Due to the sale of The Westmont and the potential sale of Fieldpointe and Registrant’s plans to dissolve upon such sales and the winding up of the business of Registrant, certain assets and liabilities of the Complexes are classified as held for sale in the accompanying consolidated balance sheets. Accordingly, the operations of the Operating Partnerships are reported as discontinued operations for the periods presented in the accompanying consolidated statements of operations. Such classification resulted in the cessation of depreciation of those assets as of January 1, 2006. However, as the dissolution of Registrant was not imminent as of June 30, 2007, the consolidated financial statements are presented assuming that Registrant will continue as a going concern.

Registrant's primary sources of funds are currently rents generated by Fieldpointe and interest derived from deposits, certain of which are restricted in accordance with the terms of Fieldpointe’s mortgage. Registrant's investment would normally be considered highly illiquid if not for the potential sale of Fieldpointe.

In the event a sale of Fieldpointe does not take place, Registrant is not expected to have access to additional sources of financing. Accordingly, if unforeseen contingencies arise that cause Fieldpointe to require capital in addition to that contributed by Registrant and any equity of the Carrollton Partnership’s general partners, potential sources from which such capital needs will be able to be satisfied (other than reserves) would be additional equity contributions or voluntary loans of the Carrollton Partnership’s general partners (which general partners are not required to fund such amounts) or other reserves, if any, which could adversely affect distributions from the Carrollton Partnership to Registrant of operating cash flow and any sale or refinancing proceeds.

Registrant generated cash from operations during the six months ended June 30, 2007; however, cash and cash equivalents decreased by approximately $243,000 during the period primarily as a result of a distribution to the limited partners of approximately $354,000 in April 2007 (see discussion above). Mortgage payable (included in liabilities related to assets held for sale in the accompanying consolidated balance sheets) decreased due to principal amortization of approximately $102,000. Property and equipment (included in assets held for sale in the accompanying consolidated balance sheets) are no longer being depreciated, under accounting principles generally accepted in the United States of America, as a result of their classification as held for sale. Prepaid expenses decreased while restricted assets and funded reserves increased in the ordinary course of operations.

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SECURED INCOME L.P. AND SUBSIDIARIES

Item 2.Management's Discussion and Analysis of Financial Con-dition and Results of Operations (continued)

Results of Operations

The consolidated statements of operations in the accompanying financial statements are presented based on the determination that the Complexes owned by the Operating Partnerships are held for sale (and therefore reflect the operating activity of the Operating Partnerships as discontinued operations). If Fieldpointe is sold, Registrant intends to dissolve upon making final distributions to its partners. However, there is no assurance that Fieldpointe will ultimately be sold pursuant to the plan. Accordingly, discussion of the consolidated results of operations in the next section is presented without effect to the presentation of discontinued operations.

Six Months Ended June 30, 2007

During the six months ended June 30, 2007, the Carrollton Partnership's operations resulted in net income of approximately $413,000, which includes financial expenses and amortization of approximately $287,000 and approximately $8,000, respectively. As noted above under Liquidity and Capital Resources, there is no depreciation expense for the six months ended June 30, 2007 as a result of the property and equipment of Fieldpointe being classified as held for sale. Accordingly, the Carrollton Partnership generated income from operating activities prior to financial expenses and amortization of approximately $708,000. Mortgage principal payments during the period for the Carrollton Partnership were approximately $102,000. After considering the respective mandatory mortgage principal payments and required deposits to mortgage escrows, among other things, Fieldpointe generated cash flow of approximately $299,000 during the six months ended June 30, 2007; such amount represents cash flow from discontinued operations. There can be no assurance that the level of cash flow generated by Fieldpointe during the six months ended June 30, 2007 is indicative of the results to be expected for the entire year.

Taking into account that the results of operations for the six months ended June 30, 2007 do not include any operating results from the Columbia Partnership as a result of the sale of The Westmont in July 2006, Registrant’s results of operations are comparable to the six months ended June 30, 2006.

As of June 30, 2007, the occupancy of Fieldpointe was approximately 98%. In the event the sale of Fieldpointe does not take place, the future operating results of Fieldpointe will be extremely dependent on market conditions and therefore may be subject to significant volatility.

Six Months Ended June 30, 2006

During the six months ended June 30, 2006, the Columbia Partnership's and the Carrollton Partnership's operations resulted in net income of approximately $755,000 and approximately $403,000, respectively. The Columbia Partnership's income includes financial expenses and amortization of approximately $776,000 and approximately $33,000, respectively, while the Carrollton Partnership's income includes financial expenses and amortization of approximately $294,000 and approximately $8,000, respectively. As noted above under Liquidity and Capital Resources, there is no depreciation expense for the six months ended June 30, 2006 as a result of the property and equipment of the Operating Complexes being classified as held for sale. Accordingly, the Columbia Partnership and the Carrollton Partnership generated income from operating activities prior to financial expenses and amortization of approximately $1,564,000 and approximately $705,000, respectively. Mortgage principal payments during the period for the Columbia Partnership and the Carrollton Partnership were approximately $232,000 and approximately $96,000, respectively. After considering the respective mandatory mortgage principal payments and required deposits to mortgage escrows, among other things, the Complexes generated combined cash flow of approximately $884,000 during the six months ended June 30, 2006; such amount represents cash flow from discontinued operations. As of June 30, 2006, the occupancy of Fieldpointe was approximately 100% and the occupancy of The Westmont was 100% as to residential units and approximately 88% as to commercial space as a result of one of the commercial tenants breaking its lease in the second quarter of 2003.

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SECURED INCOME L.P. AND SUBSIDIARIES

Item 2.Management's Discussion and Analysis of Financial Con-dition and Results of Operations (continued)

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, which requires Registrant to make certain estimates and assumptions. The following section is a summary of certain aspects of those accounting policies that may require subjective or complex judgments and are most important to the portrayal of Registrant’s financial condition and results of operations. Registrant believes that there is a low probability that the use of different estimates or assumptions in making these judgments would result in materially different amounts being reported in the consolidated financial statements.

Registrant records its real estate assets at cost less accumulated depreciation and, if there are indications that impairment exists, adjusts the carrying value of those assets in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." See discussion under Liquidity and Capital Resources above regarding the disposition of The Westmont and the possible disposition of Fieldpointe. Under SFAS No. 144, the long-lived assets of the Operating Partnerships are classified as held for sale as of December 31, 2006 and 2005 and are measured at the lower of their carrying amount or fair value less cost to sell. Once classified as held for sale, depreciation of the assets ceases; the accompanying consolidated statements of operations do not include any depreciation.

Item 3.Quantitative and Qualitative Disclosure about Market Risk

As a result of the sale of The Westmont (see discussion above), Registrant no longer has market risk sensitivity with regard to financial instruments concerning potential interest rate fluctuations in connection with the low floater rates associated with the Columbia Partnership's first mortgage.

Item 4. Controls and Procedures

As of June 30, 2007, under the direction of the Chief Executive Officer and Chief Financial Officer of WRRC, Registrant evaluated the effectiveness of its disclosure controls and procedures and concluded that (i) Registrant’s disclosure controls and procedures were effective as of June 30, 2007, and (ii) there has been no change in Registrant’s internal control over financial reporting during the quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, Registrant’s internal control over financial reporting.

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SECURED INCOME L.P. AND SUBSIDIARIES

Part II - Other Information

Item 1.        Legal Proceedings

Registrant is not aware of any material legal proceedings.

Item 1A.        Risk Factors

There have been no material changes from the risk factors previously disclosed in Item 1A of Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.

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

Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

Exhibit 32.1 Section 1350 Certification of Chief Executive Officer

Exhibit 32.2 Section 1350 Certification of Chief Financial Officer

11

SIGNATURES

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

Date: August 14, 2007

SECURED INCOME L.P.
By:	Wilder Richman Resources Corporation, General Partner
	By:	/s/Richard Paul Richman
		Richard Paul Richman - Chief Executive Officer
	By:	/s/Neal Ludeke
		Neal Ludeke - Chief Financial Officer
By:	WRC-87A Corporation, General Partner
	By:	/s/Richard Paul Richman
		Richard Paul Richman - Executive Vice President and Treasurer

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