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, 1995
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.)
5453 W. 61st Place, Mission, Kansas 66205
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (913) 384-5700
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, 1995 and
December 31, 1994 3-4
Statements of Operations -- Three and Nine
Months Ended September 30, 1995 and 1994 5
Statements of Partnership Capital --
Nine Months Ended September 30, 1995
and the Years Ended December 31, 1994,
and 1993 6
Statements of Cash Flows -- Nine Months
Ended September 30, 1995 and 1994 7-8
Notes to Financial Statements 9-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS
September 30,
1995 December 31,
(Unaudited) 1994
ASSETS
INVESTMENT PROPERTIES--Note
Land and buildings $ 36,199,730 $ 36,167,642
Furniture, fixtures and equipment 1,755,046 1,488,893
__________ __________
37,954,776 37,656,535
Less accumulated depreciation
and allowance for losses 10,411,553 9,529,532
__________ __________
27,543,223 28,127,003
__________ __________
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 429,549 424,464
__________ __________
1,939,549 1,934,464
OTHER ASSETS
Cash 483,644 284,224
Rents and other receivables,
less allowance of $52,230
in 1995 and $47,282 in 1994 54,068 21,472
Due from related parties--Note B 171,133 173,996
Prepaid expenses 104,463 130,672
Debt issuance costs, net of
accumulated amortization of
$118,652 in 1995 and $88,602
in 1994 100,691 129,775
Commercial commissions, deposits
and other 157,133 161,674
__________ __________
1,071,132 901,813
__________ __________
$ 30,553,904 $ 30,963,280
__________ __________
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
September 30,
1995 December 31,
(Unaudited) 1994
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt--Note D $ 27,599,267 $ 28,555,529
Deferred interest--Note D 1,108,465 1,108,465
Accrued interest 536,499 368,403
Accounts payable and accrued
expenses 443,017 391,988
Unearned revenue 10,152 14,012
Tenant security deposits 138,341 129,306
__________ __________
TOTAL LIABILITIES 29,835,741 30,567,703
__________ __________
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (181,847) (185,073)
__________ __________
(180,847) (184,073)
__________ __________
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,002,821) (18,322,181)
__________ __________
899,010 579,650
__________ __________
TOTAL PARTNERSHIP CAPITAL 718,163 395,577
__________ __________
$ 30,553,904 $ 30,963,280
__________ __________
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,
1995 1994 1995 1994
REVENUES
Rents $4,297,759 $4,161,990 $1,456,618 $1,402,677
Maintenance
escalations
and other 92,786 67,006 28,624 22,607
__________ __________ __________ __________
4,390,545 4,228,996 1,485,242 1,425,284
__________ __________ __________ __________
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,800,462 1,735,879 627,363 631,580
General and
administrative
expenses 95,413 95,839 31,701 29,482
Professional services 67,178 91,688 33,077 22,267
Management fees and
reimbursed direct
expenses 203,298 197,230 68,135 67,191
__________ __________ __________ __________
2,166,351 2,120,636 760,276 750,520
__________ __________ __________ __________
NET OPERATING INCOME 2,224,194 2,108,360 724,966 674,764
NON-OPERATING EXPENSES
Interest 1,879,903 1,709,349 685,057 593,693
Depreciation and
amortization 912,071 1,040,189 228,424 346,713
Gain on Debt
Restructure (890,366)
__________ __________ __________ __________
1,901,608 2,749,538 913,481 940,406
__________ __________ __________ __________
PARTNERSHIP INCOME
(LOSS) $ 322,586 $ (641,178) $ (188,515) $ (265,642)
__________ __________ __________ __________
Allocation of loss:
General Partner 3,226 (6,412) (1,885) (2,656)
Limited Partner 319,360 (634,766) (186,630) (262,986)
__________ __________ __________ __________
$ 322,586 $ (641,178) $ (188,515) $ (265,642)
__________ __________ __________ __________
Partnership loss per
limited partnership
unit $ (5.95) $ (11.83) $ (3.48) $ (4.90)
__________ __________ __________ __________
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited) and
the Years Ended December 31, 1994 and 1993
General Limited
Partner Partner Total
Balances at January 1, 1993 $ (186,964) $ 293,378 $ 106,414
Partnership income 11,783 1,166,558 1,178,341
________ _________ _________
Balances at December 31, 1993 (175,181) 1,459,936 1,284,755
Partnership loss (8,892) (880,286) (889,178)
________ _________ _________
Balances at December 31, 1994 (184,073) 579,650 395,577
Partnership loss 3,226 319,360 322,586
________ _________ _________
Balances at September 30, 1995 $ (180,847) $ 899,010 $ 718,163
________ _________ _________
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES
Partnership income (loss) $ 322,586 $ (641,178)
Adjustments to reconcile
partnership loss to net cash
provided by (used in) operating
activities:
Depreciation and amortization 923,488 1,040,189
Amortization of bond discount 113,400 ---
Gain on debt restructuring (890,366) ---
Provision for losses on rents
and other receivables (188,879) 45,610
Changes in assets and liabilities:
Rents and other receivables 156,283 (32,193)
Prepaid expenses 26,210 65,058
Due from related parties 2,863 (1,367)
Debt issuance costs (965) (7,675)
Commercial commissions, deposits
and other (6,876) 23,576
Accounts payable
and accrued expenses 51,028 32,122
Accrued interest 283,462 70,765
Unearned revenue (3,860) 6,297
Tenant security deposits 9,035 (1,369)
________ _________
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 797,409 599,835
________ _________
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (298,242) (175,497)
Purchase of restricted bond
cash reserves (5,085) (2,217)
________ _________
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (303,327) (177,714)
________ _________
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Nine Months Ended
September 30,
1995 1994
FINANCING ACTIVITIES
Deferral of long-term
interest payable $ --- $ 128,931
Principal payments on
long-term debt (294,662) (228,090)
________ _________
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (294,662) (99,159)
________ _________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 199,420 322,962
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 284,224 208,515
________ _________
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 483,644 $ 531,477
________ _________
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 1995
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, 1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. 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,
1994.
NOTE B--DUE FROM RELATED PARTY
Affiliates of the General Partner are entitled to receive payments from
the Partnership for management and other services. SPECS, INC. (a
corporation in which the General Partner has a minority interest)
receives property management fees for providing property management
services and direct cost reimbursements based upon time allocated to
performing certain Partnership functions. Amounts paid or accrued by
the Partnership to affiliates of the General Partner are as follows:
Nine Months Ended
September 30,
1995 1994
Property Management Fees $ 203,298 $ 197,230
________ _________
Amounts due from related parties consist of the following:
September 30, December 31,
1995 1994
Secured Investment Resources
II, Inc. (Excess
Syndication Costs) $ 124,422 $ 124,422
Secured Investment Resources
II, Inc. 45,054 49,574
________ _________
$ 169,476 173,996
________ _________
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--RELATED PARTY TRANSACTIONS--CONT'D.
The net amount due from related parties represents excess syndication
costs, management fees payable and other advances. The terms of
repayment are discretionary and have not been formalized at this time.
The General Partner is entitled to receive a Partnership Management Fee
equal to 5% of Cash Flow From Operations (as defined) for managing the
normal operations of the Partnership. There was no management fee due
as of September 30, 1995 or December 31, 1994.
NOTE C--CASH DISTRIBUTIONS
No cash distributions have been made since April 1990. Future
distributions will only be made from excess cash flow not needed for
working capital reserves.
NOTE D--MORTGAGE DEBT
Mortgage debt consists of the following:
September 30, December 31,
1995 1994
Collateralized by Investment
Property:
First Mortgages:
Sunwood Village Apartments $ 8,169,886 $ 8,264,056
Bayberry Crossing Shopping Ctr. 826,551 835,292
Thomasbrook Apartments 4,979,550 4,995,784
Oak Terrace Active Retirement
Center and Healthcare Center 12,800,000 12,800,000
Less bond discount (2,390,842) (2,504,242)
Forest Park Shopping Ctr. 1,310,805 1,383,627
Second Mortgages:
Bayberry Crossing Shopping Ctr. 1,903,317 1,931,012
Thomasbrook Apartments -0- 850,000
__________ __________
$27,599,267 $28,555,529
__________ __________
Related to the Sunwood Village Apartments purchase money note is a credit
enhancement fee which is due at maturity. As of September 30, 1995 and
December 31, 1994, $371,095 of credit enhancement fees have been accrued
and are reflected in long-term accrued interest.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE D--MORTGAGE DEBT--CONT'D.
Related to the Thomasbrook Apartments the second mortgage of $850,000
was paid in full on May 25, 1995 for the discounted amount of $75,000.
That payment fully retired the principal amount of $850,000 as well as
accrued interest in the amount of $40,366 resulting in a gain to the
Partnership of $890,366.
The Partnership has the option to currently pay or defer payment of
interest due on the hedged portion ($8,400,000) of the Oak Terrace
Active Retirement Center and Healthcare Center bond financing. As of
September 30, 1995 and December 31, 1994, $737,370 of deferred interest
has been accrued and is reflected in long-term accrued interest.
Cash paid for interest totaled $1,710,692 and $1,539,819 during the
first three quarters of 1995 and 1994, respectively.
(The remainder of this page intentionally left blank.)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first nine months of 1995 increased by $161,500
(3.8%) compared to the same period of last year. The stronger
apartment markets allowed the Partnership to continue increasing
rental rates, discontinue rent concessions and maintain high
occupancy levels. The commercial property remained strong at
Forest Park Center in St Louis, the rental income at Bayberry
Center increased due to several new leases being completed in the
first nine months. The Partnership has also increased the rental
rates at Oak Terrace, resulting in higher revenue, but also
higher vacancy rates. The Partnership feels that the strong
apartment market will continue through 1995 into 1996.
Operating and Administrative expenses increased $64,000 (3.5%) when
comparing the first nine months of 1995 with the same period of 1994.
Higher property operating expenses are primarily due to higher resident
turnover, professional services declined $24,500 (26.7%) from the same
period in 1994.
Interest expense for the first nine months increased $170,500 (10%)
over the 1994 first nine months expense. This is due primarily to
higher interest rates, and increased bond collateral fees.
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 nine months $797,500 of cash was provided by operating
activities, $303,500 was used for investing activities and $294,500
was used to reduce long term debt.
The second mortgage on Thomasbrook Apartments was paid in full on
May 25, 1995. The partnership paid the principal balance of $850,000
and accrued interest of $40,366 in full for a single payment of $75,000.
Although the cash position has improved,the Partnership is past due
on the Thomasbrook Apartment first mortgage. The General Partner
believes that working capital will be available during the remainder
of the year to reduce this past due balance and fund known, on-going
operating and capital requirements. The General Partner also
anticipates that 1995 cash flow from operations will continue to
improve because of strong occupancy, continued rental rate increases,
and stabilized expenses.
It is the General Partner's intent to evaluate the Partnership's
portfolio to determine if it is prudent to offer one or more
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.-- Cont'd.
Liquidity & Capital Reserves -- Cont'd.
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.
At the present time, contract negotiations are continuing with a
potential buyer for Sunwood Village Apartments.
The General Partner has determined it prudent to discontinue cash
distributions until such time that adequate working capital and
capital improvement reserves are in place.
(The remainder of this page intentionally left blank.)
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
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 September 30,
1995.
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: November 15, 1995
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: November 15, 1995