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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 March 31, 2000
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 No. 0 - 16856
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3368726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Cambridge Center, 9th Floor
Cambridge Massachusetts 02142
(Address of principal executive offices)
(617) 234-3000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by checkmark 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 such filing
requirements for the past 90 days.
Yes /x/ No / /
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RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 2000 and December 31, 1999 .............. 1
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 2000 and 1999 ......................................... 2
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 2000 .................................................. 3
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 2000 and 1999 ......................................... 4
NOTES TO FINANCIAL STATEMENTS ...................................... 5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................... 8
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 9
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K .............................. 10
SIGNATURES................................................................ 11
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS
March 31, December 31,
2000 1999
---- ----
ASSETS
Investments in mortgage loan, net $15,979,355 $15,979,355
Cash and cash equivalents 4,278,446 4,276,843
Other receivable 45,844 32,525
----------- -----------
$20,303,645 $20,288,723
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LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 81,079 $ 99,954
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (187,919 units
issued and outstanding) 19,717,027 19,684,075
General partners' equity 505,539 504,694
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Total partners' equity 20,222,566 20,188,769
----------- -----------
$20,303,645 $20,288,723
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See notes to financial statements.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
STATEMENTS OF INCOME
For the three months ended
March 31,
---------
2000 1999
---- ----
Revenues
Short term investment interest $56,694 $32,095
Other income -- 46,070
------- -------
56,694 78,165
------- -------
Costs and expenses
General and administrative expenses 22,897 18,815
------- -------
Net income $33,797 $59,350
======= =======
Net income attributable to
Limited partners $32,952 $57,866
General partners 845 1,484
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$33,797 $59,350
======= =======
Net income per unit of limited partnership
interest (187,919 units outstanding) $ .18 $ .31
======= =======
See notes to financial statements.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------ ------ ------
Balance, January 1, 2000 $ 504,694 $19,684,075 $20,188,769
Net income for the three months ended
March 31, 2000 845 32,952 33,797
----------- ----------- -----------
Balance, March 31, 2000 $ 505,539 $19,717,027 $20,222,566
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See notes to financial statements.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
---------
2000 1999
---- ----
INCREASE IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income $ 33,797 $ 59,350
Changes in operating assets and liabilities
Other receivable (13,319) (622)
Accounts payable and accrued expenses (18,875) 120,420
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Net cash provided by operating activities 1,603 179,148
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Cash flows from investing activities
Payments received from sale of mortgage loan, net -- 800,000
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Net increase in cash and cash equivalents 1,603 979,148
Cash and cash equivalents, beginning of period 4,276,843 2,992,413
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Cash and cash equivalents, end of period $ 4,278,446 $ 3,971,561
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See notes to financial statements.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The summarized financial information of Resources Accrued Mortgage
Investors 2, L.P. (the "Partnership") contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussions should be read in conjunction with
the financial statements, footnotes and discussions contained in the
Partnership's annual report on Form 10-K for the year ended December 31,
1999. The accounting policies used in preparing these financial statements
are consistent with those described in the December 31, 1999 financial
statements. The results of operations for the three months ended March 31,
2000, are not necessarily indicative of the results to be expected for the
year ending December 31, 2000.
2 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, RAM Funding, Inc. and the
Associate General Partner, Presidio AGP Corp. are wholly-owned
subsidiaries of Presidio Capital Corp. ("Presidio"). The General Partners
and certain affiliates of the General Partners, are general partners in
several other limited partnerships which are also affiliated with
Presidio, and which are engaged in businesses that are, or may be in the
future, in direct competition with the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
indirect ownership of the General Partners. Presidio is indirectly
controlled by NorthStar Capital Investment Corp. ("NorthStar"), a Maryland
Corporation.
For the three months ended March 31, 2000 and 1999 reimbursable expenses
due to an affiliate of Presidio from the Partnership amounted to $0 and
$1,000, respectively.
On October 21, 1999, Presidio entered into a Services Agreement with
AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was retained to
provide asset management and investor relation services to the Partnership
and other entities affiliated with the Partnership.
As a result of this agreement, the Agent has the duty to direct the day to
day affairs of the Partnership, including, without limitation, reviewing
and analyzing potential sale, financing or restructuring proposals
regarding the Partnership's assets, preparation of all Partnership
reports, maintaining Partnership records and maintaining bank accounts of
the Partnership. The Agent is not permitted, however, without the consent
of Presidio, or as otherwise required under the terms of the Partnership's
Agreement of Limited Partnership (the "Partnership Agreement") to, among
other things, cause the Partnership to sell or acquire an asset or file
for bankruptcy.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
2 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
In order to facilitate the provision by the Agent of the asset management
services and the investor relation services, effective October 25,1999,
the officers and directors of the General Partner resigned and nominees of
the Agent were elected as the officers and directors of the General
Partner. The Agent is an affiliate of Winthrop Financial Associates, a
Boston based company that provides asset management services, investor
relation services and property management services to over 150 limited
partnerships which own commercial property and other assets. The General
Partner does not believe that this transaction will have a material effect
on the operations of the Partnership.
As of March 31, 2000, an affiliate of Presidio has acquired 17,771 units
of limited partnership interest of the Partnership. These units represent
9.45% of the issued and outstanding limited partnership units.
3 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
The Partnership originally invested in zero-coupon, nonrecourse senior and
junior mortgage loans and currently holds an interest in one outstanding
mortgage loan. Collection of the amounts due on the Partnership's junior
mortgage loan is solely dependent upon the sale or refinancing of the
underlying property at an amount sufficient to satisfy the Partnership's
mortgage note after payment of the senior mortgage.
The Partnership's mortgage note contains a provision, which requires the
borrower to provide a current appraisal based upon certain conditions or
in some cases upon request.
The Partnership has prepared an internal valuation for the property which
secures its one remaining loan. This loan contains a provision which
requires that if an appraisal indicates the value of all indebtedness
senior to and including the Partnership's loan, taking into account
principal plus accrued interest in excess of 5% per annum, exceeds 85% of
the then current appraisal, the borrower must repay the indebtedness to a
point where the 85% loan to value ratio is restored. Based upon an
internal valuation, management does not believe that the loan to value
ratio has been exceeded.
Summary of mortgage loan activity is as follows:
Three months ended Year ended
March 31, 2000 December 31, 1999
------------------------------------------ --------------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
------------ ------------ ------------ ------------ ------------ ------------
Opening balance $ -- $ 15,979,355 $ 15,979,355 $ 800,000 $ 16,216,033 $ 17,016,033
Recovery of loan losses -- -- -- -- 99,156 99,156
Payments received, net -- -- -- (800,000) (335,834) (1,135,834)
------------ ------------ ------------ ------------ ------------ ------------
Ending balance $ -- $ 15,979,355 $ 15,979,355 $ -- $ 15,979,355 $ 15,979,355
============ ============ ============ ============ ============ ============
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
NOTES TO FINANCIAL STATEMENTS
3 INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's mortgage loan is as follows:
Original Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased
Description Rate % Period Type Date Date Advanced Interest
- ----------- ------ ------ ---- ---- ---- -------- --------
Shopping Centers
Sierra Marketplace 11.220 Monthly 1st 10-Feb-89 28-Feb-01 $ 6,500,000 $ --
Reno, Nevada =========== ========
Interest recognized Carrying value
Mortgage -------------------- --------------
Placement March 31, 1999 and Reserves/ March 31, December 31,
Description Fees 2000 Prior Write-offs Proceeds 2000 1999
- ----------- ---- ---- ----- ---------- -------- ---- ----
Shopping Centers
Sierra Marketplace $ 385,757 $ -- $ 9,093,598 $ -- $ -- $ 15,979,355 $ 15,979,355
Reno, Nevada ========= ======== =========== ======== ====== ============ ============
Contractual balance
-------------------
March 31, December 31,
Description 2000 1999
- ------------ ---- ----
Shopping Centers
Sierra Marketplace $ 22,551,207 $ 21,916,707
Reno, Nevada ============ ============
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this form 10-Q contain certain forward-looking
statements and involve risks uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Partnership from time to
time. The discussion of the Partnership's liquidity, capital resources and
results of operations, including forward looking statements pertaining to
such matters, does not take into account the effects of any changes to the
Partnership's operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as a
result of a number of factors, including those identified herein.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in the report.
Liquidity and Capital Resources
The Partnership initially invested the net proceeds of its public offering
in four zero coupon first and junior mortgage loans aggregating
$23,300,000. These loans were secured by properties owned principally by
privately and publicly syndicated limited partnerships originally
sponsored by affiliates of the general partners. The Partnership currently
retains an investment in one of the original four mortgage loans which had
an initial principal balance of approximately $6,500,000. At March 31,
2000, the contractual balance of principal and accrued interest on this
loan was $22,551,207 and the Partnership had a carrying value in this loan
of $15,979,355.
The Partnership's level of liquidity based on cash and cash equivalents
increased by $1,603 to $4,287,446 during the three months ended March 31,
2000 as compared to December 31, 1999. The increase is due to cash
provided by operating activities. Cash and cash equivalents are invested
in short-term instruments and are expected to be sufficient to pay
administrative expenses during the term of the Partnership.
On March 1, 1999, the Twin Oak Property was sold for a gross purchase
price of approximately $4,150,000 (subject to customary adjustments at
closing). The Twin Oak Borrower used the proceeds from the sale to repay
the first mortgage to Southern Life Mortgage and on May 5, 1999, the
Partnership received approximately $237,000 representing the carrying
value of the Twin Oak loan. During December 31, 1999, the Partnership
received an additional $99,156 representing residual proceeds from The
Twin Oak sale and recorded such amount as loan loss recovery in 1999.
During the latter part of 1998 and continuing into 1999, the Partnership
attempted to arrange for financing in order to satisfy the underlying
First Mortgage encumbering Harbor Plaza, the property underlying the
Harborista Loan, and protect the Partnership's interest in the Harborista
Loan. The Partnership was unable to obtain financing and, on March 29,
1999, the Partnership sold its interest in the Harborista Loan to the
holder of the First Mortgage for gross proceeds of $1,000,000, exclusive
of legal and other costs related to the transaction of approximately
$200,000.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Results of Operations
Net income decreased for the three-month period ended March 31, 2000 as
compared to the same periods in 1999, due to a decrease in revenue and, to
a lesser extent, an increase in costs and expenses.
Revenues decreased for the three month period ended March 31, 2000 as
compared to the same periods in 1999, principally due to a decrease in
other income items partially offset by an increase in short term
investment interest resulting from larger cash balances available for
short term investment.
Costs and expenses increased for the three month period ended March 31,
2000, as compared to the same periods in 1999 principally due to higher
professional fees.
Inflation has not had a material effect on the Partnership's recent
operations or financial condition and is not expected to have a material
effect in the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual funds. The
Partnership has no loans outstanding.
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 2000
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27. Financial Data Schedule
(b) Reports on form 8-K: None
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.
RESOURCES ACCRUED MORTGAGE
INVESTORS 2 L.P.
By: RAM Funding, Inc.
Managing General Partner
Dated: May 14, 2000 By: /S/ Michael L. Ashner
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Michael L. Ashner
President and Director
(Principal Executive Officer)
Dated: May 14, 2000 By: /S/ Carolyn B. Tiffany
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Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and
Accounting Officer)