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, 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 --September 30, 1997 and
December 31, 1996 3-4
Statements of Operations -- Three and Nine
Months Ended September 30, 1997 and 1996 5
Statements of Partnership Capital --
Nine Months Ended September 30, 1997
and the Years Ended December 31, 1996,
and 1995 6
Statements of Cash Flows -- Nine Months
Ended September 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
September 30,
1997 December 31,
(Unaudited) 1996
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 36,366,077 $ 36,354,615
Furniture, fixtures and equipment 2,074,291 1,983,816
38,440,368 38,338,431
Less accumulated depreciation
and allowance for losses 12,867,914 11,946,482
25,572,454 26,391,949
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 504,490 455,125
Restricted Deposits 28,750 28,750
2,043,240 1,993,875
OTHER ASSETS
Cash 910,742 561,667
Rents and other receivables,
less allowance of $103,900
in 1997 and $54,600 in 1996 78,937 14,431
Due from related parties (Note C) 179,423 179,423
Prepaid expenses 115,057 96,982
Debt issuance costs, net of
accumulated amortization of
$305,372 in 1997 and $218,729
in 1996 295,442 365,585
Commercial commissions, deposits
and other 67,782 98,307
1,647,383 1,316,395
TOTAL ASSETS $ 29,263,077 $ 29,702,219
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
September 30,
1997 December 31,
(Unaudited) 1996
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 27,450,997 $ 27,473,556
Deferred interest (Note B) 737,370 737,370
Accrued interest 790,010 684,139
Accounts payable and accrued
expenses 617,322 471,568
Unearned revenue 7,279 36,302
Tenant security deposits 146,550 148,462
TOTAL LIABILITIES 29,749,528 29,551,397
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (193,894) (187,521)
(192,894) (186,521)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (19,195,388) (18,564,488)
(293,557) 337,343
TOTAL PARTNERSHIP CAPITAL (486,451) 150,822
$ 29,263,077 $ 29,702,219
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,
1997 1996 1997 1996
REVENUES
Rents $4,462,368 $4,559,968 $1,503,785 $1,537,817
Maintenance escalations
and other 101,315 86,660 41,833 33,170
4,563,683 4,646,628 1,545,618 1,570,987
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,962,135 1,897,995 666,650 642,981
General and
administrative
expenses 107,401 104,976 31,424 32,853
Professional services 89,114 54,966 37,512 9,083
Management fees 197,467 210,200 67,379 68,300
2,356,117 2,268,137 802,965 753,217
NET OPERATING INCOME 2,207,566 2,378,491 742,653 817,770
NON-OPERATING EXPENSES
Interest 1,836,763 1,792,476 614,909 591,758
Depreciation and
amortization 1,008,076 950,548 336,026 328,877
2,844,839 2,743,024 950,935 920,635
Partnership Loss before
extra ordinary item $ (637,273) (364,533) (208,282) (102,865)
Extraordinary Gain on
debt restructuring--
(Note B) --- 352,227 --- ---
PARTNERSHIP INCOME (LOSS) $ (637,273) $ (12,306) $ (208,282) $ (102,865)
Allocation of income (loss):
General Partner (6,373) (123) (2,083) (1,029)
Limited Partner (630,900) (12,183) (206,199) (101,836)
$ (637,273) $ (12,306) $ (208,282) $ (102,865)
Partnership income (loss)
per limited partnership
unit $ (11.76) $ (.23) $ (3.84) $ (1.90)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended September 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 (6,373) (630,900) (637,273)
Balances at September 30, 1997 $ (192,894) $ (293,557) $ (486,451)
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
1997 1996
OPERATING ACTIVITIES
Partnership income $ (637,273) $ (12,306)
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 1,008,076 963,595
Amortization of bond discount 113,400 113,400
Gain on debt restructuring 0 (352,227)
Provision for losses on rents
and other receivables 49,300 675
Changes in assets and liabilities:
Rents and other receivables (113,807) (14,128)
Prepaid expenses (18,075) 20,236
Commercial commissions, deposits
and other 30,526 24,300
Accounts payable
and accrued expenses 145,754 38,811
Accrued interest 105,871 4,251
Unearned revenue (29,024) (4,059)
Tenant security deposits (1,911) 9,281
NET CASH PROVIDED BY
OPERATING ACTIVITIES 652,837 791,829
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (101,937) (266,203)
Purchase of restricted bond
cash reserves (49,365) (39,351)
NET CASH USED IN
INVESTING ACTIVITIES (151,302) (305,554)
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Nine Months Ended
September 30,
1997 1996
FINANCING ACTIVITIES
Principal payments on
long-term debt $ (135,960) $ (146,419)
Debt Issuance Costs (16,500) (356,509)
Due (to) from related
parties 0 (5,000)
NET CASH USED IN
FINANCING ACTIVITIES (152,460) (507,928)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 349,075 (21,653)
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 561,667 522,835
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 910,742 $ 501,182
See notes to financial statements.
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 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 nine month period ended September 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:
September 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 (2,088,442) (2,201,842)
Sunwood Village Apartments 8,024,543 8,070,786
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,136,031 1,201,571
Bayberry Crossing Shopping Ctr. 2,594,686 2,618,862
$ 27,450,997 $ 27,473,556
Interest expense totaled $1,836,763 and $1,792,476 during the
first nine months 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:
Nine Months Ended
September 30,
1997 1996
Property Management Fees $ 197,467 $ 210,200
Amounts due from related parties consist of the following:
September 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 nine months of 1997 decreased by $82,900
(1.8%) 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, resulting in increased revenue of $92,700. 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 $165,100 when comparing the first nine months of 1997 to the
same period of 1996.
Operating and Administrative expenses increased $66,600 (3.3%)
when comparing the first nine 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 nine months increased $44,300
(2.5%) over the 1996 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 $652,900 of cash was provided by
operating activities, $151,300 was used for investing activities
and $152,500 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 September 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: November 15, 1997
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: November 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: November 15, 1997
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: November 15, 1997