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, 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 number 0-17412
Secured Income L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 06-1185846
State or 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 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3 Quantitative and Qualitative Disclosure about
Market Risk 8
2
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000
(Unaudited) December 31, 1999
----------- -----------------
ASSETS
Property and equipment (net of accumulated depreciation
of $18,297,719 and $17,536,766) $ 26,089,848 $ 26,850,801
Cash and cash equivalents 12,311,781 1,910,060
Restricted assets and funded reserves 1,152,237 5,358,448
Tenant security deposits 521,978 514,405
Accounts receivable 82,511 69,569
Prepaid expenses 39,562 597,046
Intangible assets, net of accumulated amortization 2,928,239 1,503,273
------------ ------------
$ 43,126,156 $ 36,803,602
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 42,515,008 $ 33,479,624
Accounts payable and accrued expenses 431,950 231,790
Tenant security deposits payable 521,978 512,762
Due to general partners and affiliates 828,646 3,963,807
Deferred revenue 128,506 128,506
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44,426,088 38,316,489
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Partners' deficit
Limited partners' equity - -
General partners' deficit (1,299,932) (1,512,887)
------------ ------------
(1,299,932) (1,512,887)
------------ ------------
$ 43,126,156 $ 36,803,602
============ ============
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, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
REVENUE
Rental $ 1,925,793 $ 3,813,622 $ 1,783,116 $ 3,562,570
Interest 135,685 178,001 17,466 34,181
-------------- ------------- ------------ ------------
TOTAL REVENUE 2,061,478 3,991,623 1,800,582 3,596,751
-------------- ------------- ------------ ------------
EXPENSES
Administrative and management 178,272 366,962 195,812 396,685
Operating and maintenance 363,615 640,841 343,176 590,445
Taxes and insurance 329,906 652,967 305,187 622,428
Financial 652,069 1,239,915 570,004 1,105,613
Depreciation and amortization 438,992 877,983 435,752 871,504
-------------- ------------- ------------ ------------
TOTAL EXPENSES 1,962,854 3,778,668 1,849,931 3,586,675
-------------- ------------- ------------ ------------
NET EARNINGS (LOSS) $ 98,624 $ 212,955 $ (49,349) $ 10,076
============== ============= ============ ============
NET EARNINGS (LOSS) ATTRIBUTABLE TO
Limited partners $ - $ - $ - $ -
General partners 98,624 212,955 (49,349) 10,076
-------------- ------------- ------------ -------------
$ 98,624 $ 212,955 $ (49,349) $ 10,076
============== ============= ============ ============
NET EARNINGS (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
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 212,955 $ 10,076
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation and amortization 877,983 871,504
Decrease (increase) in restricted assets and funded reserves 4,206,211 (843,799)
Increase in tenant security deposits (7,573) (12,373)
Decrease (increase) in accounts receivable (12,942) 8,933
Decrease in prepaid expenses 557,484 74,281
Increase in accounts payable and accrued expenses 200,160 30,305
Increase in tenant security deposits payable 9,216 15,249
Increase (decrease) in due to general partners and affiliates (3,135,161) 121,801
------------- ------------
Net cash provided by operating activities 2,908,333 275,977
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CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage proceeds 32,750,000
Payment of financing costs (1,541,996)
Payments of principal on permanent financing (23,714,616) (239,124)
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Net cash provided by (used in) financing activities 7,493,388 (239,124)
------------- ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 10,401,721 36,853
Cash and cash equivalents at beginning of period 1,910,060 1,885,257
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,311,781 $ 1,922,110
============= ============
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 2,703,533 $ 1,017,289
============= ===========
See notes to consolidated financial statements.
5
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(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, 1999 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 described below in Note
3.
The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of the results to be expected for the entire year.
2. Additional information, including the audited December 31, 1999
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, 1999 on file with the Securities and
Exchange Commission.
3. On June 7, 2000, the Columbia Partnership's mortgages were refinanced with
the Federal Home Loan Mortgage Corporation ("Freddie Mac") replacing
Citibank as the credit enhancer. Credit enhancement has been provided for
$24.2 million in tax exempt bonds and an $8.55 million conventional
mortgage. The Columbia Partnership was able to utilize the mortgage escrows
that had been restricted previously and the cash distribution restrictions
no longer apply. After the payment of costs incurred in connection with the
refinancing and the establishment of certain reserves, the Columbia
Partnership had a surplus of approximately $12.5 million. The Columbia
Partnership utilized approximately $3,246,000 to repay the Columbia
Operating General Partners for operating deficit loans and accrued interest
thereon. During July 2000, the Partnership received a distribution from the
Columbia Partnership of approximately $9,063,000 and accrued investor
service fees of approximately $183,000. The Partnership made a distribution
in July 2000 of approximately $8,219,000, representing $8.35 per Unit, to
Unit holders of record as of June 30, 2000.
6
SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rents generated by the Operating
Partnerships and interest derived from investments and deposits which are
restricted in accordance with the terms of the mortgages of the Operating
Partnerships. The Partnership's investments are highly illiquid.
On June 7, 2000, the Columbia Partnership's mortgages were refinanced with the
Federal Home Loan Mortgage Corporation ("Freddie Mac") replacing Citibank as the
credit enhancer. Credit enhancement has been provided for $24.2 million in tax
exempt bonds and an $8.55 million conventional mortgage. The Columbia
Partnership was able to utilize the mortgage escrows that had been restricted
previously and the cash distribution restrictions no longer apply. After the
payment of costs incurred in connection with the refinancing and the
establishment of certain reserves, the Columbia Partnership had a surplus of
approximately $12.5 million. The Columbia Partnership utilized approximately
$3,246,000 to repay the Columbia Operating General Partners for operating
deficit loans and accrued interest thereon. During July 2000, the Partnership
received a distribution from the Columbia Partnership of approximately
$9,063,000 and accrued investor service fees of approximately $183,000. The
Partnership made a distribution in July 2000 of approximately $8,219,000,
representing $8.35 per Unit, to Unit holders of record as of June 30, 2000.
The Partnership is not expected to have access to additional sources of
financing. Accordingly, if unforeseen circumstances arise that cause an
Operating Partnership to require additional capital, potential sources from
which such capital needs will be able to be satisfied (other than reserves)
would be additional equity contributions of the Operating General Partners or
other equity reserves, if any, which could adversely impact the distribution
from the Operating Partnerships to the Partnership of operating cash flow and
sale or refinancing proceeds.
During the six months ended June 30, 2000, as a result of the Columbia
Partnership's mortgage refinancing and cash flows generated by the operations of
the Complexes, cash and cash equivalents increased by approximately $10,402,000
and restricted assets and funded reserves decreased by approximately $4,206,000.
Mortgages payable increased due to the mortgage proceeds in connection with the
refinancing, partially offset by regular principal amortization of approximately
$243,000. Due to general partners and affiliates decreased primarily as a result
of the repayment of the advances provided by the Columbia Operating General
Partners and accrued interest thereon. Property and equipment decreased by
approximately $761,000 due to depreciation, while intangible assets increased by
approximately $1,425,000 due to costs incurred in connection with the
refinancing of the Columbia Partnership's mortgages of approximately $1,542,000,
partially offset by amortization of approximately $117,000. Property and
equipment and intangible assets are expected to decrease annually as the cost of
these assets is allocated to future periods over their remaining lives. Prepaid
expenses decreased while accounts payable and accrued expenses increased in the
ordinary course of operations.
Results of Operations
Six Months Ended June 30, 2000
During the six months ended June 30, 2000, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities of
approximately $1,846,000 and approximately $503,000, respectively. Mortgage
principal payments during the period for the Columbia Partnership and the
Carrollton Partnership were approximately $176,000 and approximately $67,000,
respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow
during the period, prior to the refinancing of the Columbia Partnership's
mortgages, were approximately $278,000 and approximately $339,000, respectively.
Pursuant to the terms of the Columbia Partnership's mortgages, the former lender
was entitled to a credit enhancement fee of 2.5% per annum based on the
outstanding loan balance. During the six months ended June 30, 2000, the
Columbia Partnership incurred approximately $270,000 in connection with such
fee. After considering the respective mandatory mortgage principal payments,
required deposits to mortgage escrows and payments for the credit enhancement
fee, among other things, the Complexes generated combined cash flow of
approximately $373,000 during the six months ended June 30, 2000. However, there
can be no assurance that the level of cash flow generated by the Complexes
during the six months ended June 30, 2000 will continue in future periods.
7
SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of operations improved for the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999. Financial expenses increased
primarily as a result of an increase in the weighted average interest rate on
the Columbia Partnership's mortgages from approximately 2.78% during the six
months ended June 30, 1999 to approximately 3.79% during the six months ended
June 30, 2000. Interest revenue increased during the six months ended June 30,
2000 as compared to the six months ended June 30, 1999 as a result of the timely
recording of interest on restricted assets and funded reserves in 2000.
Operating and maintenance expenses increased for the six months ended June 30,
2000 as compared to the six months ended June 30, 1999 as a result of scheduled
repairs and improvements.
As of June 30, 2000, the occupancy of Fieldpointe Apartments was approximately
98% and the occupancy of The Westmont was approximately 99% as to residential
units and 100% as to commercial space. The future operating results of the
Complexes will be extremely dependent on market conditions and therefore may be
subject to significant volatility. The Complexes are generally in good physical
condition and are being managed by experienced management companies.
Six Months Ended June 30, 1999
During the six months ended June 30, 1999, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities of
approximately $1,565,000 and approximately $470,000, respectively. Mortgage
principal payments during the period for the Columbia Partnership and the
Carrollton Partnership were approximately $176,000 and approximately $63,000,
respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow
during the period were approximately $314,000 and approximately $15,000,
respectively. During the six months ended June 30, 1999, the Columbia
Partnership incurred approximately $310,000 in connection with the credit
enhancement fee. After considering the respective mandatory mortgage principal
payments, required deposits to mortgage escrows and payments for the credit
enhancement fee, among other things, the Complexes generated combined cash flow
of approximately $391,000 during the six months ended June 30, 1999. As of June
30, 1999, the occupancy of Fieldpointe Apartments was approximately 96% and the
occupancy of The Westmont was approximately 98% as to residential units and 100%
as to commercial space.
Year 2000 Compliance
The Partnership successfully completed a program to ensure Year 2000 readiness.
As a result, the Partnership had no Year 2000 problems that affected its
business, results of operations or financial condition.
Item 3 Quantitative and Qualitative Disclosure about Market Risk
The Partnership has market risk sensitivity with regard to financial instruments
concerning potential interest rate fluctuations in connection with the low
floater rates associated with the Columbia Partnership's first mortgage.
Accordingly, an increase in the low-floater interest rates could have a material
adverse impact on the Partnership's results of operations.
8
SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
None
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
A Current Report on Form 8-K, dated June 7, 2000, was filed relating
to the refinancing of the Columbia Partnership's mortgages (see
discussion in Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations).
A Current Report on Form 8-K, dated July 31, 2000, was filed relating
to the distribution of $8.35 per Unit of limited partnership interest
to Unit holders of record as of June 30, 2000 (see discussion in Item
2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations).
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 11, 2000 /s/ Richard Paul Richman
--------------------------------
Richard Paul Richman
President, Chief Executive Officer
and Director
10