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, 1997
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 -- June 30, 1997 and
December 31, 1996 3-4
Statements of Operations -- Three and Six
Months Ended June 30, 1997 and 1996 5
Statements of Partnership Capital --
Six Months Ended June 30, 1997
and the Years Ended December 31, 1996,
and 1995 6
Statements of Cash Flows -- Six Months
Ended June 30, 1997 and 1996 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,
1997 December 31,
(Unaudited) 1996
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 36,358,777 $ 36,354,615
Furniture, fixtures and equipment 2,025,987 1,983,816
38,384,764 38,338,431
Less accumulated depreciation
and allowance for losses 12,560,770 11,946,482
25,823,994 26,391,949
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 489,341 455,125
Restricted Deposits 28,750 28,750
2,028,091 1,993,875
OTHER ASSETS
Cash 855,016 561,667
Rents and other receivables,
less allowance of $86,125
in 1997 and $54,600 in 1996 30,272 14,431
Due from related parties (Note C) 179,423 179,423
Prepaid expenses 114,529 96,982
Debt issuance costs, net of
accumulated amortization of
$276,491 in 1997 and $218,729
in 1996 324,323 365,585
Commercial commissions, deposits
and other 76,594 98,307
1,580,157 1,316,395
TOTAL ASSETS $ 29,432,242 $ 29,702,219
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
June 30,
1997 December 31,
(Unaudited) 1996
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 27,458,624 $ 27,473,556
Deferred interest (Note B) 737,370 737,370
Accrued interest 776,161 684,139
Accounts payable and accrued
expenses 585,397 471,568
Unearned revenue 7,004 36,302
Tenant security deposits 145,855 148,462
TOTAL LIABILITIES 29,710,411 29,551,397
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (191,811) (187,521)
(190,811) (186,521)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,989,189) (18,564,488)
(87,358) 337,343
TOTAL PARTNERSHIP CAPITAL (278,169) 150,822
$ 29,432,242 $ 29,702,219
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,
1997 1996 1997 1996
REVENUES
Rents $2,958,583 $3,022,151 $1,484,493 $1,519,123
Maintenance escalations
and other 59,482 53,490 29,972 25,338
3,018,065 3,075,641 1,514,465 1,544,461
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,295,485 1,255,014 669,034 645,458
General and
administrative
expenses 75,977 72,123 39,899 35,991
Professional services 51,602 45,883 26,009 32,787
Management fees 130,088 141,900 65,575 71,096
1,553,152 1,514,920 800,517 785,332
NET OPERATING INCOME 1,464,913 1,560,721 713,948 759,129
NON-OPERATING EXPENSES
Interest 1,221,854 1,200,718 615,597 589,899
Depreciation and
amortization 672,050 621,671 336,025 310,800
1,893,904 1,822,389 951,622 900,699
Partnership Loss before
extra ordinary item $ (428,991) (261,668) (237,674) (141,570)
Extraordinary Gain on
debt restructuring--
(Note B) --- 352,227 --- 352,227
PARTNERSHIP INCOME (LOSS) $ (428,991) $ 90,559 $ (237,674) $ 210,657
Allocation of income (loss):
General Partner (4,290) 906 (2,377) 2,107
Limited Partner (424,701) 89,653 (235,297) 208,550
$ (428,991) $ 90,559 $ (237,674) $ 210,657
Partnership income (loss)
per limited partnership
unit $ (7.91) $ 1.67 $ (4.38) $ 3.89
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Six Months Ended June 30, 1997 (Unaudited) and
the Years Ended December 31, 1996 and 1995
General Limited
Partner Partner Total
Balances at January 1, 1995 $ (184,073) $ 579,650 $ 395,577
Partnership loss (513) (50,782) (51,295)
Balances at December 31, 1995 (184,586) 528,868 344,282
Partnership loss (1,935) (191,525) (193,460)
Balances at December 31, 1996 (186,521) 337,343 150,822
Partnership loss (4,290) (424,701) (428,991)
Balances at June 30, 1997 $ (190,811) $ (87,358) $ (278,169)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
1997 1996
OPERATING ACTIVITIES
Partnership income $ (428,991) $ 90,559
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 672,050 631,002
Amortization of bond discount 75,600 75,600
Gain on debt restructuring 0 (352,227)
Provision for losses on rents
and other receivables 31,525 (5,230)
Changes in assets and liabilities:
Rents and other receivables (47,367) 1,256
Prepaid expenses (17,547) (2,726)
Commercial commissions, deposits
and other 21,713 18,185
Accounts payable
and accrued expenses 113,829 125,227
Accrued interest 92,022 (3,213)
Unearned revenue (29,298) 3,583
Tenant security deposits (2,606) 4,833
NET CASH PROVIDED BY
OPERATING ACTIVITIES 480,930 586,849
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (46,333) (215,620)
Purchase of restricted bond
cash reserves (34,216) (29,500)
NET CASH USED IN
INVESTING ACTIVITIES (80,549) (245,120)
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Six Months Ended
June 30,
1997 1996
FINANCING ACTIVITIES
Principal payments on
long-term debt $ (90,532) $ (100,167)
Debt Issuance Costs (16,500) (352,348)
Due (to) from related
parties 0 (5,000)
NET CASH USED IN
FINANCING ACTIVITIES (107,032) (457,515)
INCREASE IN CASH
AND CASH EQUIVALENTS 293,349 (115,786)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 561,667 522,835
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 855,016 $ 407,049
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1997
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, 1997 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997.
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, 1996.
NOTE B--MORTGAGE DEBT
Mortgage debt consists of the following:
June 30, December 31,
1997 1996
Collateralized by Investment
Property
First Mortgages:
Oak Terrace Active Retirement
Center and Healthcare Center $ 12,800,000 $ 12,800,000
less bond discount (2,126,242) (2,201,842)
Sunwood Village Apartments 8,040,290 8,070,786
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,157,877 1,201,571
Bayberry Crossing Shopping Ctr. 2,602,520 2,618,862
$ 27,458,624 $ 27,473,556
Interest expense totaled $1,221,854 and $1,200,718 during the first half of
1997 and 1996, respectively.
On May 17, 1996 the Partnership refinanced the matured first mortgage on
Sunwood Village Apartments. The terms of the new mortgage are $8,100,000
at 8.625% interest with monthly principal and interest payments in the
amount of $63,000 through the loan maturity date of June 1, 2001 (5 years).
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--MORTGAGE DEBT--CONT'D.
The Partnership recognized a gain of $352,227 upon payment of the refinanced
note due the forgiveness of all the deferred interest relating to the original
note.
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 financing. As of June 30, 1997 and December 31, 1996, $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,
1997 1996
Property Management Fees $ 130,088 $ 141,900
Amounts due from related parties consist of the following:
June 30, December 31,
1997 1996
Secured Investment Resources
II, Inc. $ 174,423 $ 174,423
Secured Investment Resources
Fund, L.P. 5,000 5,000
$ 179,423 $ 179,423
The amount due from SIR II, Inc. represents excess syndication
costs.
NOTE D--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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first six months of 1997 decreased by $57,600 (1.9%) 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, resulting in increased revenue of $59,300.
The Partnership feels that the strong market at Oak Terrace will continue
through 1997.
The weaker apartment market has caused a decrease in rental income of $26,800
when comparing the first six months of 1997 to the same period of 1996.
Operating and Administrative expenses increased $44,300 (3.3%) when comparing
the first six months of 1997 with the same period of 1996. Higher property
operating expenses are primarily due to higher resident turnover.
Interest expense for the first six months increased $21,100 (1.8%) over the
1996 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 $480,900 of cash was provided by operating
activities, $80,500 was used for investing activities and $107,000 was used
to reduce long term debt.
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 1997 cash flow from
operations will improve because of stronger occupancy and rental rate increases.
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
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 June 30, 1997.
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: August 15, 1997
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: August 15, 1997
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: /s/ James R. Hoyt
James R. Hoyt
as Individual General Partner
Date: August 15, 1997
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: August 15, 1997