SECURITIES AND EXCHANGE COMMISSION
Washington, DC
_________________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-17412
Secured Income L.P.
(Exact name of Registrant as specified in its charter)
Delaware State or 06-1185846
other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 West Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
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 for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
SECURED INCOME L.P. AND SUBSIDIARIES
Part I - Financial Information
Table of Contents
Item 1. Financial Statements Page
Consolidated Balance Sheets as
of June 30, 1996(Unaudited) and
December 31, 1995 3
Consolidated Statements of Operations
for the three and six month periods
ended June 30, 1996 (Unaudited) and
June 30, 1995 (Unaudited) 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 1996
(Unaudited) and June 30, 1995 (Unaudited) 5
Notes to Consolidated Financial Statements
as of June 30, 1996 (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
2
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996
ASSETS Notes (Unaudited) December 31, 1995
Property and equipment (net of
accumulated depreciation of
$12,190,896 and $11,431,970) $ 31,809,809 $ 32,568,735
Cash and cash equivalents 947,493 776,227
Cash restricted for tenants'
security deposits 430,396 424,470
Restricted assets and funded
reserves 4,040,065 3,487,938
Investments - guaranteed
investment contract 125,489 158,394
Interest and accounts receivable 62,875 57,859
Prepaid expenses 17,657 425,513
Other assets, net of accumulated
amortization 2,326,167 2,559,539
---------- ----------
$39,759,951 $40,458,675
=========== ===========
LIABILITIES AND PARTNERS'
EQUITY (DEFICIT)
LIABILITIES
Mortgages payable $35,953,011 $36,589,220
Accounts payable and accrued
expenses 270,170 248,310
Tenants' security deposits
payable 432,085 421,946
Due to general partners and
affiliates 3,881,513 3,774,483
Deferred income 200,138 176,322
---------- --------
40,736,917 41,210,281
========== ==========
COMMITMENTS AND CONTINGENCIES 3
PARTNERS' EQUITY (DEFICIT)
Limited partners' equity - -
General partners' deficit (976,966) (751,606)
---------- ---------
(976,966) (751,606)
---------- ---------
$ 39,759,951 $ 40,458,675
============ ============
See notes to consolidated financial statements.
3
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
REVENUE
Rental $ 1,540,886 $ 3,047,439 $ 1,448,997 $ 2,896,612
Interest 39,851 71,456 23,287 53,026
----------- ---------- ----------- ----------
1,580,737 3,118,895 1,472,284 2,949,638
----------- --------- ----------- ----------
EXPENSES
Administrative
and management 203,476 358,766 151,266 283,542
Operating and
maintenance 290,795 584,063 261,668 460,595
Taxes and insurance 256,819 529,838 241,400 490,676
Interest 449,164 879,290 498,078 987,609
Depreciation and
amortization 496,150 992,298 498,116 996,231
---------- --------- ----------- ---------
1,696,404 3,344,255 1,650,528 3,218,653
---------- --------- ----------- ---------
NET LOSS $ (115,667) $(225,360) $ (178,244) $ (269,015)
=========== ========= ========== ==========
NET LOSS ATTRIBUTABLE TO
Limited Partners $ - $ - $ - $ -
General Partners (115,667) (225,360) (178,244) (269,015)
---------- ---------- ---------- --------
$ (115,667) $ (225,360) $ (178,244) $ (269,015)
========== =========== ========== =========
NET LOSS ALLOCATED PER
UNIT OF LIMITED
PARTNERSHIP INTEREST $ - $ - $ - $ -
=========== =========== ========= =========
See notes to consolidated financial statements.
4
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (225,360) $ (269,015)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 992,298 996,231
Decrease (increase) in assets
Restricted assets and
funded reserves (552,127) (713,505)
Tenants' security deposit (5,926) (2,152)
Interest and accounts
receivable (5,016) 3,943
Prepaid expenses 407,856 390,453
Increase in liabilities:
Accounts payable and accrued
expenses 21,860 3,427
Tenants' security deposits
payable 10,139 4,543
Due to general partners and
affiliates 107,030 69,506
Deferred income 23,816 9,281
-------- ------
Net cash provided by
operating activities 774,570 492,712
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed
investment contracts 32,905 243,918
Distribution of guaranteed investment
contract installments to partners _______ (217,097)
--------
Net cash provided by
investing activities 32,905 26,821
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on permanent
financing (636,209) (325,413)
--------- --------
Net cash used in
financing activities (636,209) (325,413)
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 171,266 194,120
CASH AND CASH EQUIVALENTS, beginning of
period 776,227 660,578
---------- --------
CASH AND CASH EQUIVALENTS, end of period $ 947,493 $ 854,698
========== =========
SUPPLEMENTAL INFORMATION
Interest paid $ 791,776 $ 894,780
========== =========
See notes to consolidated financial statements.
5
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. They do not include all information
and footnotes required by generally accepted accounting principles for
complete financial statements. The results of operations are impacted
significantly by the results of operations of the Carrollton and
Columbia Partnerships, which is provided on an unaudited basis during
interim periods. Accordingly, the accompanying consolidated financial
statements are dependent on such unaudited information. In the opinion
of the General Partners, the consolidated financial statements include
all adjustments necessary to reflect fairly the results of the interim
periods presented. All adjustments are of a normal recurring nature.
No significant events have occurred subsequent to December 31, 1995
and no material contingencies exist which would require additional
disclosure in the report under Regulation S-X, Rule 10-01 paragraph
A-5, except as disclosed in Note 3 below.
The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the results to be expected for the entire
year.
2. Additional information, including the audited December 31, 1995
Consolidated Financial Statements and the Summary of Significant
Accounting Policies, is included in Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 on file with the
Securities and Exchange Commission.
3. Commitments and Contingencies
A holder of the bonds issued in connection with the original Carrollton
mortgage served a complaint on or about March 22, 1994 against the
Carrollton Partnership, the Carrollton Operating General Partners and
the trustee alleging damages in the amount of $1,015,000 arising from
the redemption of such bonds. The Carrollton Operating General
Partners are vigorously contesting the allegations in the complaint
and no provision for such claim is reflected in the consolidated
financial statements. Discovery on this case has been completed and
the parties have filed cross motions for summary judgement. The court
has not yet ruled on these motions.
6
SECURED INCOME L.P. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material changes in financial condition and results of operations.
The results of operations of Secured Income L.P. and Subsidiaries (the
"Partnership") for the first six months of 1996 were comparable to the first six
months of 1995. Changes in assets and liabilities are comprised of periodic
quarterly transactions and adjustments, including payments from the remaining
guaranteed investment contract and depreciation and amortization. During the six
month period ended June 30, 1996, the Complexes generated net cash flow before
scheduled principal reduction on the mortgages and, in the case of the Colombia
Partnership, prior to mandatory deposits to the Pledged Cap Account (see
discussion below) and the Bond Retirement Escrow of approximately $839,000. Such
amount reflects cash flow after replacement reserve activity and capital
expenditures and excludes proceeds from the remaining guaranteed investment
contract. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $584,000 and
$52,000, respectively. During the six months ended June 30, 1996, the Columbia
Partnership deposited approximately $238,000 to the Pledged Cap Account and
approximately $315,000 to the Bond Retirement Escrow. Restricted assets and
funded reserves as of June 30,1996 include Columbia Partnership deposits in the
Pledged Cap Account, Operating Deficit Escrow and Bond Retirement Escrow of
approximately $1,503,000, approximately $502,000 and approximately $185,000,
respectively. To the extent the future cash flow of the Columbia Partnership is
not utilized to fund the Operating Deficit Reserve or Pledged Cap Account, such
cash flow, under the Citibank loan terms, will be deposited to the Bond
Retirement Escrow to make additional mortgage principal payments. Such
additional payments amounted to $400,000 during the six months ended June 30,
1996. Prepaid expenses decreased in the ordinary course of operations. Due to
general partners and affiliates increased principally due to accrued interest on
advances provided by the Columbia General Partners and the accrual of investor
service fees. Administrative and management expenses increased for the six month
period ended June 30, 1996 as compared to the six month period ended June 30,
1995 due to an increase in leasing commissions of the Columbia Partnership,
among other things. Operating and maintenance expenses increased for the six
month period ended June 30, 1996 as compared to the six month period ended June
30, 1995, partially due to weather related activity in 1996 and also due to an
increase in planned improvements and repairs in 1996 as compared to 1995.
Interest expense decreased for the six month period ended June 30, 1996 as
compared to the six month period ended June 30, 1995 due to a decrease in the
low floater rate on the Columbia Partnership's mortgage and lower outstanding
balances on the mortgages. The 1993 mortgage modification of the Columbia
Partnership has substantially improved the financial condition of that
partnership; however, there can be no assurance that interest rates on the
adjustable rate bonds underlying the Columbia Partnership's mortgage will remain
at current low levels. The weighted average interest rate on the Columbia
Partnership debt was approximately 3.28% and approximately 3.76% during the six
months ended June 30, 1996 and 1995, respectively. Although the properties are
currently generating cash flow, the General Partners do not anticipate
significant future cash flow distributions from the properties given the
distribution restriction on the Columbia Partnership resulting from the
restructuring of its debt.
The date on or before which the Pledged Cap Account must be utilized for its
intended purpose of purchasing an interest rate cap is October 15, 1996. The
general partner of the Columbia Partnership has commenced discussions with the
lender in order to address other potential users of such account. However, there
can be no assurance that the lender would approve any alternate utilization of
such account.
As of June 30, 1996, the occupancy of the Fieldpointe Complex (owned by the
Carrollton Partnership) was approximately 97% and the occupancy of the Westmont
Complex (owned by the Columbia Partnership) was approximately 96% as to
residential units and 100% as to commercial space. Rental revenue of the
Complexes increased by approximately 5% due to higher average residential
occupancy during the first six months of 1996 and the commencement of lease
payments on commercial space that was vacant during most of 1995. The future
operating results of the Complexes will be extremely dependent on market
conditions and interest rate fluctuations and therefore may be subject to
significant volatility.
7
SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
A holder of the bonds issued in connection with the original Carrollton mortgage
served a complaint on or about March 22, 1994 against the Carrollton
Partnership, the Carrollton Operating General Partners and the trustee alleging
damages in the amount of $1,015,000 arising from the redemption of such bonds.
The Carrollton Operating General Partners are vigorously contesting the
allegations in the complaint and no provision for such claim is reflected in the
consolidated financial statements. Discovery on this case has been completed and
the parties have filed cross motions for summary judgement. The court has not
yet ruled on these motions.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
8
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 INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: August 14, 1996
Richard Paul Richman
President, Chief Executive Officer
and Director
9
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 INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: August 14, 1996 /s/ Richard Paul Richman
Richard Paul Richman
President, Chief Executive Officer
and Director
9