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 September 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 64133
(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 - September 30, 1999 and
December 31, 1998 3-4
Statements of Operations -- Three and Nine
Months Ended June 30, 1999 and 1998 5
Statements of Partnership Capital --
Nine Months Ended September 30, 1999
and the Year Ended December 31, 1998 6
Statements of Cash Flows - Nine Months
Ended September 30, 1999 and 1998 7-8
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12-13
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS
September 30,
1999 December 31,
(Unaudited) 1998
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 30,458,599 $ 30,458,599
Furniture, fixtures and equipment 2,032,403 1,695,055
32,491,002 32,153,654
Less accumulated depreciation
and allowance for losses 12,622,383 11,856,495
19,868,619 20,297,159
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 481,729 582,668
Restricted Deposits 28,750 28,750
2,020,479 2,121,418
OTHER ASSETS
Cash 808,348 550,176
Rents and other receivables,
less allowance of $151,537
in 1999 and $113,963 in 1998 143,259 37,613
Due from related parties (Note C) 269,046 269,046
Prepaid expenses 165,100 224,966
Debt issuance costs, net of
accumulated amortization of
$462,902 in 1999 and $406,256
in 1998 325,202 178,058
Commercial commissions, deposits and other 80,414 69,699
1,791,369 1,329,558
TOTAL ASSETS $ 23,680,467 $ 23,748,135
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONTINUED
September 30,
1999 December 31,
(Unaudited) 1998
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 22,393,368 $ 22,415,582
Deferred interest (Note B) 737,370 737,370
Accrued interest 58,398 58,398
Accounts payable and accrued expenses 530,663 271,425
Unearned revenue 6,748 32,415
Tenant security deposits 104,196 110,315
TOTAL LIABILITIES 23,830,743 23,625,505
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (211,876) (184,585)
(210,876) (183,585)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,841,231) (18,595,616)
60,600 306,215
TOTAL PARTNERSHIP CAPITAL (150,276) 122,630
$ 23,680,467 $ 23,748,135
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1999 1998 1999 1998
REVENUES
Rents $ 4,048,880 $ 4,583,500 $ 1,473,603 $ 2,047,938
Maintenance escalations
and other 67,871 69,347 24,218 17,682
4,116,751 4,652,847 1,497,821 2,065,620
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,601,312 2,097,814 517,208 1,053,013
General and administrative
expenses 75,492 102,222 27,368 35,417
Professional services 167,248 145,684 40,174 63,241
Management fees 185,956 194,112 64,505 83,926
Depreciation and amortization 822,534 816,433 274,235 272,144
2,852,542 3,356,265 923,490 1,507,751
NET OPERATING INCOME 1,264,209 1,296,582 574,331 557,869
NON-OPERATING EXPENSES
Interest 1,537,115 1,457,997 523,405 466,922
Gain on sale of property - 1,567,326 - 1,567,326
PARTNERSHIP INCOME (LOSS) (272,906) 1,405,911 50,926 1,658,273
Allocation of income (loss):
General Partner (27,291) 14,059 509 16,583
Limited Partner (245,615) 1,391,852 50,417 1,641,690
$ (272,906) $ 1,405,911 $ 50,926 $ 1,658,273
Partnership income (loss)
per limited partnership
unit $ (5.08) $ (25.96) $ .95 $ 30.61
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended September 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 - (321,786) (321,786)
Balances at December 31, 1998 (183,585) 306,215 122,630
Partnership Loss (27,291) (245,615) (272,906)
Balances at September 30, 1999 $ (210,876) $ 60,600 $ (150,276)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
1999 1998
OPERATING ACTIVITIES
Partnership income (loss) $ (272,906) $ 1,405,911
Adjustments to reconcile partnership loss to net cash
provided by operating activities:
Depreciation and amortization 822,534 816,433
Amortization of bond discount 113,400 113,400
Gain on debt restructuring - -
Provision for losses on rents
and other receivables 37,574 22,717
Changes in assets and liabilities:
Rents and other receivables (143,220) (125,023)
Prepaid expenses 59,866 (85,489)
Commercial commissions, deposits and other (10,715) (2,915)
Accounts payable and accrued expenses 259,238 (32,214)
Accrued interest - (722,760)
Unearned revenue (25,667) (3,356)
Tenant security deposits (6,119) (32,559)
NET CASH PROVIDED BY OPERATING ACTIVITIES 833,985 1,354,145
INVESTING ACTIVITIES
Purchases of and improvements to investment properties (337,348) (213,734)
Release (purchase) of restricted bond cash reserves 100,939 (46,975)
NET CASH USED IN INVESTING ACTIVITIES (236,409) (260,709)
FINANCING ACTIVITIES
Principal payments on long-term debt (135,614) (851,414)
Debt Issuance Costs (203,790) 56,646
Distributions to limited partners - (318,862)
NET CASH USED IN FINANCING ACTIVITIES (339,404) (1,113,630)
INCREASE IN CASH AND CASH EQUIVALENTS 258,172 (20,194)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 550,176 867,658
CASH AND CASH EQUIVALENTS END OF PERIOD $ 808,348 $ 847,464
See Notes to Financial Statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
SEPTEMBER 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 nine month period
ended September 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:
September 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 (1,786,042) (1,899,442)
Sunwood Village Apartments 7,885,612 7,940,528
Forest Park Shopping Ctr. 971,931 1,026,797
Bayberry Crossing Shopping Ctr. 2,521,867 2,547,699
$ 22,393,368 $ 22,415,582
Interest expense totaled $1,537,115 and $1,457,997 during the first nine
months of 1999 and 1998, respectively.
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 September 30, 1999 and December 31, 1998, $737,370 of
deferred interest has been accrued.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONTINUED
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:
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
Property Management Fees $ 185,956 $ 194,122
Amounts due from related parties consist of the following:
September 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 (excluding $727,123 in 1998 relating to Thomasbrook Apartments which
was sold in September 1998) for the first nine months of 1999 increased by
$191,027 (4.8%) 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 and occupancy at Sunwood Village has
increase. The Partnership feels that the strong market at Oak Terrace and
Sunwood Village will continue through 1999.
Operating and Administrative expenses increased $68,163 (2.4%) when comparing
the first nine months of 1999 with the same period of 1998 (expenses for 1998
included $572,186 for Thomasbrook Apartments). Higher property operating
expenses are primarily due to higher resident turnover. Professional services
increased $21,564 (1.5%) over the same period in the prior year due to legal
expenses incurred in connection with the planned refinancing of the loan on
the Oak Terrace properties. Professional services in the prior year were
incurred in connection with the foreclosure proceedings and subsequent sale of
Thomasbrook Apartments.
Interest expense for the first nine months increased $79,118 (5.0%) over the
1998 first nine months expense.
The Partnership anticipates that operating results for the first nine months
will be representative of the results for the remainder of the year.
Liquidity and Capital Reserves
During the first nine months $833,985 of cash was provided by operating
activities, $236,409 was used for investing activities and $339,404 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