FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
Commission file number 0-16798
SECURED INVESTMENT RESOURCES FUND, L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3451000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4200 Blue Ridge Blvd., Ste LH-06, K.C., MO 664133
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (816) 353-6500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests ("Units")
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 such shorter periods 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
SECURED INVESTMENT RESOURCES FUND, L.P. II
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited):
Balance Sheets -- June 30, 1999 and
December 31, 1998 3-4
Statements of Operations -- Three and Six
Months Ended June 30, 1999 and 1998 5
Statements of Partnership Capital --
Six Months Ended June 30, 1999
and the Year Ended December 31, 1998 6
Statements of Cash Flows -- Six Months
Ended June 30, 1999 and 1998 7-8
Notes to Financial Statements 9-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS
June 30,
1999 December 31,
(Unaudited) 1998
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 30,458,599 $ 30,458,599
Furniture, fixtures and equipment 1,885,024 1,695,055
32,343,623 32,153,654
Less accumulated depreciation
and allowance for losses 12,367,030 11,856,495
19,976,593 20,297,159
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 456,343 582,668
Restricted Deposits 28,750 28,750
1,995,093 2,121,418
OTHER ASSETS
Cash 713,273 550,176
Rents and other receivables,
less allowance of $127,764
in 1999 and $113,963 in 1998 139,398 37,613
Due from related parties (Note C) 269,046 269,046
Prepaid expenses 157,911 224,996
Debt issuance costs, net of
accumulated amortization of
$444,019 in 1999 and $406,256
in 1998 290,829 178,158
Commercial commissions, deposits
and other 85,886 69,699
1,656,343 1,329,557
TOTAL ASSETS $ 23,628,029 $ 23,748,135
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
June 30,
1999 December 31,
(Unaudited) 1998
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 22,416,638 22,415,582
Deferred interest (Note B) 737,370 737,370
Accrued interest 75,936 58,398
Accounts payable and accrued
expenses 490,182 271,425
Unearned revenue 8,270 32,415
Tenant security deposits 100,537 110,315
TOTAL LIABILITIES 23,828,933 23,625,505
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (187,852) (184,615)
(186,852) (183,615)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,916,062) (8,595,586)
(14,052) (306,245)
TOTAL PARTNERSHIP CAPITAL (200,902) 122,630
$ 23,628,029 $ 23,748,135
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
REVENUES
Rents $2,575,277 $2,535,562 $1,316,741 $1,293,183
Maintenance escalations
and other 43,653 51,665 15,461 29,949
2,618,930 2,587,227 1,332,201 1,138,141
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,084,104 1,044,801 557,985 522,366
General and
administrative
expenses 47,824 66,805 23,247 36,837
Professional services 127,074 82,443 55,497 50,154
Management fees 121,451 110,176 63,180 55,445
Depreciation and
amortization 548,299 544,289 274,235 272,145
1,928,752 1,848,514 974,194 936,947
NET OPERATING INCOME 690,178 738,713 358,007 201,194
NON-OPERATING EXPENSES
Interest 1,013,710 991,075 518,749 512,895
PARTNERSHIP INCOME (LOSS) $ (323,532) $ (252,361) $ (160,742) $ (311,701)
Allocation of income (loss):
General Partner (3,235) (2,524) (1,609) (3,117)
Limited Partner (320,297) (249,837) (159,313) (308,584)
$ (323,532) $ (252,361) $ (160,742) $ (311,701)
Partnership income (loss)
per limited partnership
unit $ (6.03) $ (4.70) $ (3.00) $ (5.75)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Six Months Ended June 30, 1999 (Unaudited) and
the Years Ended December 31, 1998 and 1997
General Limited
Partner Partner Total
Balances at December 31, 1997 $ (194,875) $ (489,741) $ (684,616)
Partnership profit 11,290 1,117,742 1,129,032
Distribution 0 (321,786) (321,786)
Balances at December 31, 1998 (183,585) 306,245 122,630
Partnership Loss (3,235) (320,297) (323,532)
Balances at June 30, 1999 $ (186,820) $ (14,052) $ (200,902)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
1999 1998
OPERATING ACTIVITIES
Partnership income $ (323,532) $ (252,361)
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 548,166 544,289
Amortization of bond discount 75,600 75,600
Provision for losses on rents
and other receivables 13,801 19,367
Changes in assets and liabilities:
Rents and other receivables (115,586) (20,812)
Prepaid expenses 67,085 (99,012)
Commercial commissions, deposits
and other (16,187) (327)
Accounts payable
and accrued expenses 218,757 105,306
Accrued interest 17,538 0
Unearned revenue (24,144) (7,768)
Tenant security deposits (9,778) 4,422
NET CASH PROVIDED BY
OPERATING ACTIVITIES 451,719 121,139
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (189,969) (183,916)
Release(Purchase) of restricted
bond cash reserves 126,325 (31,120)
NET CASH USED IN
INVESTING ACTIVITIES (63,644) (215,036)
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Six Months Ended
June 30,
1999 1998
FINANCING ACTIVITIES
Principal payments on
long-term debt $ (74,544) $ (19,030)
Debt Issuance Costs (150,434) 0
Due (to) from related
parties 0 75,000
NET CASH USED IN
FINANCING ACTIVITIES (224,978) (55,970)
INCREASE DECREASE IN CASH
AND CASH EQUIVALENTS 163,097 (142,184)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 550,176 867,658
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 713,273 $ 679,731
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1999
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1999. For further information, refer
to the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-K for the year ended December 31, 1998.
NOTE B--MORTGAGE DEBT
Mortgage debt consists of the following:
June 30, December 31,
1999 1998
Collateralized by Investment
Property
First Mortgages:
Oak Terrace Active Retirement
Center and Healthcare Center $ 12,800,000 $ 12,800,000
less bond discount (1,823,842) (1,899,442)
Sunwood Village Apartments 7,904,312 7,940,528
Forest Park Shopping Ctr. 1,004,950 1,025,797
Bayberry Crossing Shopping Ctr. 2,531,218 2,547,699
$ 22,416,638 $ 22,415,582
Interest expense totaled $1,013,710 and $991,075 during the first half of
1999 and 1998, respectively.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--MORTGAGE DEBT--CONT'D.
The Partnership has the option to currently pay or defer payment of interest
due on the hedged portion ($10,700,000) of the Oak Terrace Active Retirement
Center financing. As of June 30, 1999 and December 31, 1998, $737,370 of
deferred interest has been accrued and is reflected in long-term accrued
interest.
NOTE C--RELATED PARTY TRANSACTIONS
SPECS, Inc., a Kansas Corporation in which the individual General Partner has
a minority interest, receives property management fees for providing property
management services. SPECS, Inc. also performs various professional services
for the Partnership, primarily tax accounting, audit preparation, SEC 10Q and
10K preparation, and investor services. Property management fees paid by the
Partnership to SPECS, Inc. are as follows:
Six Months Ended
June 30,
1999 1998
Property Management Fees $ 121,451 $ 110,176
Amounts due from related parties consist of the following:
June 30, December 31,
1999 1998
Secured Investment Resources
II, Inc. $ 174,423 $ 174,423
Secured Investment Resources
Fund, L.P. 94,623 94,623
$ 269,046 $ 269,046
The amount due from SIR II, Inc. represents excess syndication costs.
NOTE D--CASH DISTRIBUTIONS
No cash distributions have been made since October, 1998. Future distributions
will only be made from excess cash flow not needed for working capital
reserves.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first six months of 1999 increased by $31,703 (1.2%) compared
to the same period of last year. The commercial property at Forest Park Center
in St. Louis remained strong, the rental income at Bayberry Center decreased
due to vacancy and bad debt. The Partnership has increased the rental rates
at Oak Terrace. The Partnership feels that the strong market at Oak Terrace
will continue through 1999.
Operating and Administrative expenses increased $20,322 (2.0%) when comparing
the first six months of 1999 with the same period of 1998. Higher property
operating expenses are primarily due to higher resident turnover. Professional
services increased $44,628 over the same period in the prior year due primarily
to legal expenses incurred in connection with planned refinancing of the loan
on the Oak Terrace properties.
Interest expense for the first six months increased $22,635 (2.3%) over the
1998 first six months expense.
The Partnership anticipates that operating results for the first six months
will be representative of the results for the remainder of the year.
Liquidity and Capital Reserves
During the first six months $451,719 of cash was provided by operating
activities, $63,644 was used for investing activities and $224,978 was used to
reduce long term debt and incur loan fees.
It is the General Partner's intent to evaluate the Partnership's portfolio to
determine if it is prudent to offer one or more properties for sale or
possible restructure of the related financing packages. Any unleveraged
portion of the net sale proceeds or favorable refinancing terms could generate
additional working capital.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Inapplicable.
Item 2. CHANGES IN SECURITIES
Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Inapplicable.
Item 5. OTHER INFORMATION
Inapplicable.
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended June 30,
1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SECURED INVESTMENT RESOURCES FUND, L.P. II
A Delaware Limited Partnership
(Registrant)
By:
James R. Hoyt
as Individual General Partner
Date: January 10, 2002
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: January 10, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SECURED INVESTMENT RESOURCES FUND, L.P. II
A Delaware Limited Partnership
(Registrant)
By:
James R. Hoyt
as Individual General Partner
Date: January 10, 2002
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: January 10, 2002