SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
0-17412
(Commission File Number)
Secured Income L.P.
-------------------
(Exact name of registrant as specified in its governing instruments)
Delaware 06-1185846
- -------------------------------------------- -----------------------------
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
Wilder Richman Resources Corporation
599 W. Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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Securities registered pursuant to Section 12(b) of the Act:
None
- ---------------------------
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of Class)
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 such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate sales price of the units of limited partnership interest held by
non-affiliates of the Registrant is $19,687,380. There is currently no public
market for the units of limited partnership interest and, accordingly, such
figure does not represent the market value for the units.
Documents incorporated by reference:
The Prospectus of the Registrant, dated March 5, 1987 as supplemented and filed
pursuant to Rule 424(b) and (c) under the Securities Act of 1933, is
incorporated by reference into Parts I, II and III of this Annual Report on Form
10-K.
PART I
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Item 1 Business
General Development of Business
Registrant (also referred to as the "Partnership") is a limited partnership
which was formed under the Delaware Revised Uniform Limited Partnership Act on
October 10, 1986. The general partners of the Partnership (the "General
Partners") are Wilder Richman Resources Corporation, a Delaware corporation,
Real Estate Equity Partners L.P., a Delaware limited partnership and WRC-87A
Corporation, a Delaware corporation.
The Partnership was organized to invest in multi-family residential housing
complexes (the "Complexes") by acquiring approximately 99% of the limited
partnership interest (the "Operating Partnership Interest") in limited
partnerships that own and operate such Complexes (the "Operating Partnerships").
WRC-87A Corporation is a special limited partner of each Operating Partnership
and has certain rights in connection therewith. Pursuant to Rule 12b-23 of the
Securities and Exchange Commission's General Rules and Regulations promulgated
under the Securities Exchange Act of 1934, as amended, the description of
Registrant's business set forth under the heading "Investment Objectives and
Policies" at pages 20 through 30 of the prospectus, dated March 5, 1987, (the
"Prospectus") is incorporated herein by reference.
Pursuant to Registrant's Prospectus, as supplemented on October 2, 1987,
December 15, 1987 and March 29, 1988, Registrant offered up to $50 million of
units of limited partnership interest in Registrant (the "Units") at an offering
price of $20 per Unit. The Units were registered under the Securities Act of
1933 pursuant to a Registration Statement on Form S-11 (Registration No.
33-9602).
Registrant terminated the offering of Units (the "Offering") on February 29,
1988 upon raising sufficient capital from the sale of Units to fund the
acquisition of the two properties specified for investment by Registrant. The
Offering raised $19,687,380 from the sale of 984,369 Units. After payment of
$1,378,117 of selling commissions and $1,378,116 of organization and offering
expenses and acquisition fees, the net proceeds available for investment were
$16,931,147. Of such net proceeds, $16,734,273 was allocated to the acquisition
of investments in the Operating Partnerships (the "Operating Partnership
Interests") which included investments in guaranteed investment contracts. The
remaining net proceeds of $196,874 was designated as working capital to be used
for operating expenses of Registrant.
Competition
Information regarding competition, general risks, tax risks and partnership
risks is set forth under the heading "Risk Factors" at pages 37 through 48 of
the Prospectus, which is incorporated herein by reference.
Compliance with Environmental Protection Provisions
Registrant is not aware of any non-compliance by the Operating Partnerships with
respect to federal, state and local provisions regulating the discharge of
material into the environment or otherwise relating to the protection of the
environment, and is not aware of any condition that would have a material effect
on the capital expenditures or competitive position of Registrant.
Employees of Registrant
Registrant employs no personnel and incurs no payroll costs. An affiliate of
Wilder Richman Resources Corporation employs individuals who perform accounting,
secretarial, transfer and other services on behalf of Registrant as are
necessary in the ordinary course of business. Such individuals also perform
similar services for other affiliates of Wilder Richman Resources Corporation.
2
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue
Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget
Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget
Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief
Extension Act of 1998 and Tax Relief Extension Act of 1999 (collectively the
"Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax
entity which does not, itself, pay federal income tax. However, the partners of
Registrant who are subject to federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investments. Registrant does
not anticipate that the Tax Acts will currently have a material adverse impact
on Registrant's business operations, capital resources and plans or liquidity.
Item 2 Properties
The following table sets forth information regarding the Complexes owned by the
Operating Partnerships as of December 31, 2000.
Number of
Property Location Dwelling Units
-------- -------- --------------
Fieldpointe Apartments Frederick, MD 252
The Westmont New York, NY 163
Fieldpointe Apartments, which is owned by Carrollton X Associates Limited
Partnership (the "Carrollton Partnership"), is comprised of 252 apartment units
totaling approximately 235,000 square feet with approximately 500 parking
spaces. On-site amenities include a clubhouse building with locker room and
on-site management office, a swimming pool and two tennis courts. The apartments
feature numerous amenities, including dishwashers, disposals and fireplaces.
Registrant acquired its interest as a limited partner in the Carrollton
Partnership by making a capital contribution of $3,121,995. Of this amount,
$1,373,039 was invested in guaranteed investment contracts and $1,748,956 was
contributed upon the Partnership's acquisition of the Operating Partnership
Interest, including the amount due upon the achievement of sustaining rental
revenue.
The mortgage financing of the Carrollton Partnership was financed from the sale
of tax-exempt bonds pursuant to the terms of Section 103(b)(4)(a) of the
Internal Revenue Code. The mortgage in the original amount of $10,494,100,
bearing fixed 6.09% interest and maturing in February 2028, is insured by the
United States Department of Housing and Urban Development ("HUD") under Section
221(d)(4) of the National Housing Act, as amended. Under the terms of the
financing, 80% of the units are permitted market rate rents and 20% of the units
are to be rented to people earning no more than the low or moderate income
levels within the meaning of Section 103(b)(4)(a) of the Internal Revenue Code.
The Fieldpointe Apartments occupancy rate was approximately 96% as of December
31, 2000.
The Westmont, which is owned by Columbia Westmont Associates, L.P., formerly
Columbia Associates (the "Columbia Partnership"), contains 163 apartment units,
9,415 square feet of commercial space, 46 garage parking spaces, and a penthouse
with an exercise center and health club which offers exercise equipment, steam
room, sauna, jacuzzi and a large terrace. The apartments feature numerous luxury
amenities, including security systems, microwave ovens, dishwashers and hardwood
floors.
Registrant acquired its interest as a limited partner in the Columbia
Partnership by making a capital contribution of $12,571,634. Of this amount,
$6,651,323 was invested in guaranteed investment contracts (which had a value of
$5,610,679, including net accrued interest of $18,918, at the time of the
acquisition as a result of principal amortization from the dates of purchase of
such guaranteed investment contracts to the closing of the Columbia Partnership
acquisition), $5,921,104 was contributed upon Registrant's acquisition of the
Operating Partnership Interest in the Columbia Partnership and $1,039,851 was
contributed to the Columbia Partnership upon the achievement of sustaining
rental revenue.
3
The Columbia Partnership's mortgages were refinanced on June 7, 2000. The first
mortgage, in the amount of $24.2 million, is subject to interest based on a
variable low floater index with credit enhancement provided by the Federal Home
Loan Mortgage Corporation ("Freddie Mac") and matures in July 2030. The second
mortgage, in the amount of $8.55 million and payable to Freddie Mac, is subject
to fixed interest at 8.07% and matures in July 2015. Under the terms of the
refinancing, 20% of the residential units in The Westmont will be maintained for
occupancy by low or moderate income tenants through July 2004. The Westmont's
occupancy rate as of December 31, 2000 was approximately 99% as to residential
dwelling units and 100% as to commercial space.
As of December 31, 2000, the market rental rates of the Complexes were
approximately as follows:
Fieldpointe The
Apartments Westmont
---------- --------
Monthly Rental Rates:
Studio $1,889-$2,300
One-Bedroom $660-$700 $1,718-$3,196
Two-Bedroom $680-$830 $2,706-$4,125
Three-Bedroom $885-$960 $3,847-$4,773
The low and moderate income rental rates as of December 31, 2000 for Fieldpointe
Apartments fall within the ranges noted above. Such rates for The Westmont range
from $705 to $995.
Further information regarding the Complexes and Registrant's interest therein is
set forth under the heading Specified Investments at pages 30 through 36 of the
Prospectus, and in the supplements to the Prospectus dated October 2, 1987 and
March 29, 1988.
Item 3 Legal Proceedings
None
Item 4 Submission of Matters to a Vote of Security Holders
None
4
PART II
Item 5 Market for Registrant's Common Equity and Related Unit Matters
Market
There is no developed public market for the purchase and sale of Units and
Registrant does not anticipate that such a market will develop.
Holders
As of December 31, 2000, there were approximately 1,004 record holders of Units
(the "Limited Partners") holding an aggregate of 984,369 Units in the
Partnership.
Distributions
The Agreement of Limited Partnership of Registrant (the "Partnership Agreement")
provides that all Cash Available for Distribution (as defined therein) be
distributed quarterly to the partners in specified proportions. As part of the
June 2000 restructuring of the Columbia Partnership's financing, the Columbia
Partnership distributed approximately $9,104,000 to the Partnership. 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.
Prior to the mortgage restructuring, the Columbia Partnership was prohibited
from distributing cash flow from operations. See Item 7 herein, Management's
Discussion and Analysis of Financial Condition and Results of Operations, for
further discussion. There were no distributions to the Limited Partners declared
during the year ended December 31, 1999.
Item 6 Selected Financial Data
The following table summarizes certain selected consolidated financial
information concerning Registrant and should be read in conjunction with the
consolidated financial statements and the related notes thereto:
Year Ended December 31,
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
Total revenue $ 8,138,955 $ 7,501,288 $ 7,078,399 $ 6,787,161 $ 6,434,698
Net earnings (loss) (167,210)* 121,017 (216,504) (596,273) (69,521)
Net loss allocated
per unit of limited
partnership interest -- -- -- -- --
At year end:
Total assets 34,099,609 36,803,602 38,958,954 38,149,194 39,322,376
Mortgages payable 42,321,643 33,479,624 33,973,813 34,449,756 35,320,565
Long-term debt -- -- -- -- --
* Includes extraordinary loss of $509,899 in connection with the write-off of
unamortized mortgage costs. See Management's Discussion and Analysis of
Financial Condition and Results of Operations.
5
Item 7 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, certain of
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 (the
"Refinancing") with the Federal Home Loan Mortgage Corporation ("Freddie Mac")
replacing Citibank N.A. ("Citibank") as the credit enhancer. Credit enhancement
has been provided for $24.2 million in tax exempt bonds (the "First Mortgage")
and an $8.55 million conventional mortgage due to Freddie Mac (the "Second
Mortgage"). The First Mortgage matures in July 2030 and requires monthly
payments of interest only until the maturity of the Second Mortgage (see below).
The interest rate is based on a weekly variable low floater index, which varied
from 3.1% to 5.25% during 2000. As a result of having a variable interest rate
associated with First Mortgage, the Columbia Partnership purchased an interest
rate cap, such that the rate cannot exceed 6.54% through June 1, 2005. In
addition to the interest, monthly fees totaling approximately $24,000 are
required, which fees include the credit enhancement fee and approximately $4,000
that is deposited to an escrow for the purchase of a future interest rate cap.
The Second Mortgage bears interest at 8.07% and requires monthly principal and
interest payments of $82,054 through maturity in July 2015. As a result of the
Refinancing, 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 $12.6 million. The Columbia Partnership utilized
approximately $9,281,000 as a distribution to the Partnership (including accrued
investor service fees of approximately $177,000) and approximately $3,285,000 to
repay the Columbia Operating General Partners for advances, operating deficit
loans and accrued interest thereon. 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 contingencies arise that cause an
Operating Partnership to require capital in addition to that contributed by the
Partnership and any equity of the Operating General Partners, 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 affect the distribution
from the Operating Partnerships to the Partnership of operating cash flow and
any sale or refinancing proceeds.
During 2000, as a result of the Refinancing, the Partnership's distribution to
Unit holders and cash flows generated by the operations of the Complexes, cash
and cash equivalents increased by approximately $2,410,000 and restricted assets
and funded reserves decreased by approximately $4,827,000. Mortgages payable
increased due to the mortgage proceeds in connection with the Refinancing,
partially offset by regular principal amortization of approximately $407,000.
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 and the payment of approximately $186,000 by the
Partnership for investor services fees. As of December 31, 2000, the Partnership
owes approximately $390,000 to an affiliate of certain General Partners for
accrued investor services fees.
Property and equipment decreased by approximately $1,235,000 due to capitalized
improvements of approximately $299,000, exceeded by depreciation of
approximately $1,534,000. Intangible assets increased by approximately $846,000
due to costs incurred in connection with the Refinancing of approximately
$1,535,000, partially offset by the write-off of unamortized financing costs at
the date of the Refinancing of approximately $510,000 and amortization of
approximately $179,000. 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.
6
Results of Operations
Year Ended December 31, 2000
During 2000, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $3,560,000 and approximately
$1,049,000, respectively. Mortgage principal payments during 2000 for the
Columbia Partnership and the Carrollton Partnership were approximately $271,000
and approximately $136,000, respectively. Deposits to the Pledged Cap Account
and the Bond Retirement Escrow during 2000, prior to the Refinancing, were
approximately $167,000 and approximately $331,000, respectively. Pursuant to the
terms of the Columbia Partnership's prior mortgages, the prior lender was
entitled to a credit enhancement fee of 2.5% per annum based on the outstanding
loan balance. During 2000, the Columbia Partnership incurred $270,242 in
connection with such fee prior to the Refinancing. 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 $995,000 during 2000.
However, there can be no assurance that the level of cash flow generated by the
Complexes in 2000 will continue in future years.
Results of operations improved in 2000 as compared to 1999, with the exception
of the write-off of unamortized financing costs of $509,899 in connection with
the Refinancing, which charge had no impact on Registrant's cash flow. Financial
expenses increased primarily as a result of an increase in the weighted average
interest rate on the Columbia Partnership's first mortgage from approximately
3.04% in 1999 to approximately 3.95% in 2000 and the increase in mortgages
payable resulting from the Refinancing. Operating and maintenance expenses were
higher during the year ended December 31, 2000 primarily due to scheduled
maintenance.
As of December 31, 2000, the occupancy of Fieldpointe Apartments was
approximately 96% 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.
Year Ended December 31, 1999
During 1999, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $3,265,000 and approximately
$1,001,000, respectively. Mortgage principal payments during 1999 for the
Columbia Partnership and the Carrollton Partnership were approximately $366,000
and approximately $128,000, respectively. Deposits to the Pledged Cap Account
and the Bond Retirement Escrow during 1999 were approximately $674,000 and
approximately $35,000, respectively. During 1999, the Columbia Partnership
incurred $624,293 in connection with the lender 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
$763,000 during 1999.
Results of operations improved in 1999 as compared to 1998. Financial expenses
decreased as a result of savings realized from the decrease in the weighted
average interest rate on the Columbia Partnership's mortgages from approximately
3.23% in 1998 to approximately 3.04% in 1999. Operating and maintenance expenses
were higher during the year ended December 31, 1998 primarily due to scheduled
maintenance. Interest revenue for the year ended December 31, 1999 was
comparable to the year ended December 31, 1998 and was generated primarily from
Partnership deposits and escrows established in connection with the Columbia
Partnership's mortgages. As of December 31, 1999, the occupancy of Fieldpointe
Apartments was approximately 97% and the occupancy of The Westmont was
approximately 99% as to residential units and 100% as to commercial space.
7
Year Ended December 31, 1998
During 1998, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $2,884,000 and approximately
$1,063,000, respectively. Mortgage principal payments during 1998 for the
Columbia Partnership and the Carrollton Partnership were approximately $356,000
and approximately $120,000, respectively. Deposits to the Pledged Cap Account
and the Bond Retirement Escrow during 1998 were approximately $572,000 and
approximately $213,000, respectively. During 1998, the Columbia Partnership
incurred $627,694 in connection with the lender credit enhancement fee. After
considering the respective mandatory mortgage principal payments, required
deposits to mortgage escrows, accelerated principal payments on the Columbia
Mortgages and payments for the credit enhancement fee, among other things, the
Complexes generated combined cash flow of approximately $304,000 during 1998.
Results of operations improved in 1998 as compared to 1997. Financial expenses
decreased as a result of costs being incurred in 1997 by the Columbia
Partnership in connection with attempts to refinance its mortgages and savings
realized from the decrease in the weighted average interest rate on the Columbia
Partnership's mortgages from approximately 3.56% in 1997 to approximately 3.23%
in 1998. Operating and maintenance expenses were higher during the year ended
December 31, 1997 primarily due to scheduled maintenance in 1997. Taxes and
insurance expenses increased in 1998 due primarily to an increase in the
Columbia Partnership's real estate taxes, which includes charges for 1997 taxes
not billed until 1998, net of a refund of certain prior years' taxes. Interest
revenue for the year ended December 31, 1998 was comparable to the year ended
December 31, 1997 and was generated primarily from Partnership deposits and
escrows established in connection with the Columbia Partnership's mortgages. As
of December 31, 1998, the occupancy of Fieldpointe Apartments was approximately
95% and the occupancy of The Westmont was approximately 100% as to both
residential units and commercial space.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. Adoption of SFAS No. 133 is not expected to have a material impact on the
Partnership's financial statement presentation or disclosures.
Item 7A Quantitative and Qualitative Disclosures 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, a fluctuation in the low-floater interest rates of .25% would have
a $60,500 annualized impact on the Partnership's results of operations.
Item 8 Financial Statements and Supplementary Data
Set forth in the financial statements listed on page F-2 is the financial
information required in response to Item 8. Such financial statements and
schedules appear on pages F-1 to F-16 and are incorporated herein by reference.
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
8
PART III
Item 10 Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers.
The General Partners are Wilder Richman Resources Corporation, a Delaware
corporation (the "WRC General Partner"), Real Estate Equity Partners L.P., a
Delaware limited partnership and an affiliate of Apartment Investment and
Management Company (the "AIMCO General Partner") and WRC-87A Corporation, a
Delaware corporation (the "A/WRC General Partner"). The A/WRC General Partner is
currently one-half owned by Real Estate Equity Partners Inc., the corporate
general partner of the AIMCO General Partner, and one-half owned by the
shareholders of the WRC General Partner.
The WRC General Partner
-----------------------
The directors and certain officers of the WRC General Partner are set forth
below:
Name Age Office
---- --- ------
Richard Paul Richman 53 President and Director
Robert H. Wilder, Jr. 55 Executive Vice President and Director
Each of such directors and officers has served in such capacity since the
company's formation.
Richard Paul Richman is President and Director of the WRC General Partner. Mr.
Richman graduated from the Columbia University Law School with a Juris Doctor
degree, the Columbia University Graduate School of Business Administration with
a Master of Business Administration degree and Syracuse University with a
Bachelor of Arts degree in Political Science. Mr. Richman has over ten years of
extensive experience in both the development and management of residential
properties. From 1973 until 1979, Mr. Richman practiced corporate law in New
York City with the law firm of Greenbaum, Wolff & Ernst and then as a partner of
Shipley, Richman & Nierenberg. For over six years, Mr. Richman acted as a lawyer
in connection with the development, syndication and tax issues relating to real
estate. Since 1988, Mr. Richman has been the President and majority stockholder
of The Richman Group, Inc. In recent years, Mr. Richman has devoted full time to
the syndication and development of real estate. Mr. Richman was a vice president
and shareholder of Related Housing Companies Incorporated, New York, New York
from 1978 until mid-1979 with responsibility for that company's project
acquisition and syndication activities. Mr. Richman has been a member of the
National Advisory Board of the Housing and Development Reporter, a bi-weekly
publication of the Bureau of National Affairs, Inc., a frequent speaker on real
estate syndication, has been a member of the New York State Historic Credit Task
Force, the National Leased Housing Association, the Coalition to Preserve the
Low-Income Tax Credit and the Minority Developer Assistance Corporation (which
was established by the New York State Battery Park Commission).
Robert H. Wilder, Jr. is Executive Vice President and Director of the WRC
General Partner. Mr. Wilder graduated from the University of Michigan with a
Bachelor of Arts degree in Economics and from the Columbia University Graduate
School of Business with a Master of Business Administration degree. After
graduation in 1968, Mr. Wilder joined James D. Landauer Associates, Inc., a
national real estate consulting firm, where his responsibilities included
feasibility studies, market analyses, land use studies, portfolio valuations and
appraisals of industrial, office, commercial and multi-family properties. From
1973 until mid-1979, Mr. Wilder was executive vice president and shareholder of
Related Housing Companies Incorporated, New York, New York, and was responsible
for mortgage financing and construction loan placement and the supervision of
the development of the company's projects. Since 1988, Mr. Wilder has been the
President and sole shareholder of Wilder Property Companies Inc. Mr. Wilder is
also a licensed real estate broker in New York and Connecticut.
9
The AIMCO General Partner
Certain officers of Real Estate Equity Partners Inc. are set forth below.
Name Age Office
---- --- ------
Terry Considine 53 Chairman of the Board of Directors &
Chief Executive Officer
Peter K. Kompaniez 56 Vice Chairman of the Board of
Directors & President
Terry Considine has been Chairman of the Board of Directors and Chief Executive
Officer of AIMCO since July 1994. Mr. Considine graduated with a Juris Doctor
degree from Harvard University in 1971 and with a Bachelor of Arts degree, also
from Harvard University, in 1968. Mr. Considine serves as Chairman and director
of American Land Lease, Inc. (formerly Asset Investors Corporation and
Commercial Assets, Inc.), a public real estate investment trust. Mr. Considine
has been and remains involved as a principal in a variety of other business
activities.
Peter K. Companiez has been Vice Chairman of the Board of Directors of AIMCO
since July 1994 and was appointed President in July 1997. Mr. Kompaniez
graduated from Yale University with a Bachelor of Arts degree in 1966 and from
the University of California with a Juris Doctor degree in 1969. Mr. Kompaniez
has also served as Chief Operating Officer of NHP Incorporated, which was
acquired by AIMCO in December 1997. From 1986 to 1993, he served as President
and Chief Executive Officer of Heron Financial Corporation ("HFC"), a United
States holding company for Heron International N.V.'s real estate and related
assets. While at HFC, Mr. Kompaniez administered the acquisition, development
and disposition of approximately 8,150 apartment units (including 6,217 units
that have been acquired by AIMCO) and 3.1 million square feet of commercial real
estate.
The A/WRC General Partner
-------------------------
The directors and officers of the A/WRC General Partner are as follows:
Name Office
---- ------
Terry Considine President and Director
Richard Paul Richman Executive Vice President, Secretary,
Treasurer and Director
Mr. Considine's biography is included above under the AIMCO General Partner. Mr.
Richman's biography is included above under the WRC General Partner.
Item 11 Executive Compensation
The Partnership is not required to pay the officers, directors or partners of
the General Partners any direct compensation and no such compensation was paid
during the fiscal year ended December 31, 2000.
10
Item 12 Security Ownership of Certain Beneficial Owners and Management
a) No person or group is known by the Partnership to be the owner of
record of more than 5% of the outstanding units as of December 31, 2000, except
as discussed below.
b) Security ownership by the General Partners is as follows:
Percentage of
Amount and Outstanding
Nature of General
Beneficial Partners'
Title of Class Name of Beneficial Owner Ownership Interest*
- ---------------------------- ------------------------ ------------- ------------------
General Real Estate Equity $3.33 33.3%
Partners' Partners L.P.
Interest in
Secured Income L.P. Wilder Richman $3.33 33.3%
Resources Corporation
WRC-87A Corporation $3.34 33.4%
* General Partners as a class have a 1% interest in all profits, losses and
distributions of the Partnership.
West Putnam Housing Partners II LLC, an affiliate of Wilder Richman
Resources Corporation, WRC 87-A Corporation and certain of the Carrollton and
Columbia Operating General Partners filed a tender offer dated June 26, 2000,
offering to acquire up to 451,235 Units of limited partnership interest at
$15.75 per Unit. The offering price was increased to $17 per Unit on July 21,
2000 and to $20 per Unit on July 28, 2000 and the offer expired, as extended, on
August 18, 2000. Each offering price was subject to reduction for any
distribution made to the investors subsequent to the date of the offer and
resulted in 186,217 Units being tendered, representing approximately 18.9% of
the outstanding Units of limited partnership interest. In addition, West Putnam
Housing Partners LLC, the sole managing member of West Putnam Housing Partners
II LLC, owns 41,711 Units, or approximately 4.2% of the outstanding Units,
virtually all of which were acquired in a tender offer consummated in August
1998.
Effective January 1, 2001, an affiliate of Real Estate Equity Partners
L.P. acquired 154,106 Units of Registrant in a private transaction at a price of
$13.25 per Unit. Such acquisition represents approximately 15.7% of the
outstanding Units. The majority of such Units were acquired from affiliates of
MacKenzie Patterson, Inc., with offices at 1640 School Street, Moraga,
California, which owned approximately 120,327 Units as of December 31, 2000, or
approximately 12.2% of the outstanding Units.
c) Registrant knows of no arrangements which may, at a subsequent date,
result in a change of control of Registrant. Article VI of the Partnership
Agreement describes the circumstances under which changes in General Partners
can occur.
d) There is no family relationship between any of the foregoing directors
and executive officers.
e) Involvement in certain legal proceedings with respect to the foregoing
directors and executive officers: None.
Item 13 Certain Relationships and Related Transactions with Management
The General Partners and their affiliates are entitled to receive certain
compensation, fees and reimbursements of expenses. The Partnership incurred
investor services fees in the amount of $98,437, of which $84,348 is payable to
an affiliate of the General Partners for the year ended December 31, 2000.
Information regarding such compensation is set forth under the heading
"Compensation And Fees To General Partners And Affiliates" at pages 13 through
19 of the Prospectus, which is incorporated herein by reference.
11
The financial interests in Registrant of the General Partners and Special
Limited Partner are set forth under the heading "Profits, Losses and
Distributions" at pages 64 through 67 of the Prospectus, which is incorporated
herein by reference.
The taxable loss generated by Registrant during the year ended December 31, 2000
allocated to each of the General Partners was approximately $5,200.
Transactions with Affiliates of Management
Wilder Richman Management Corp. ("WRMC"), an affiliate of certain General
Partners, is the managing agent of Fieldpointe Apartments. In connection with
these services, WRMC earned management and reporting fees of $97,471 in 2000.
Indebtedness of Management
No officer or director of the General Partners or any affiliate of the foregoing
was indebted to Registrant at any time during the fiscal year ended December 31,
2000.
12
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1 Financial Statements - The list of Financial Statements appears on
page F-2.
2 Schedules - All schedules are omitted because the required
information is inapplicable or it is presented in the consolidated
financial statements or the notes thereto.
3 Exhibits:
3(A) Form of Amended and Restated Agreement of Limited Partnership of
Secured Income L.P., incorporated by reference to Exhibit A to the
Prospectus contained in the Partnership's Registration Statement
on Form S-11 (No. 33-9602) (the "Form S-11").
3(B) Certificate of Limited Partnership of Secured Income L.P.,
incorporated by reference to Exhibit 3(B) of Form S-11.
10(A) Escrow Agreement between Registrant and FirsTier Bank N.A.,
incorporated by reference to Exhibit 10(A) of Form S-11.
10(B) Carrollton Partnership Interest Acquisition Agreement,
incorporated by reference to Exhibit 10(B) of Form S-11.
10(C) Carrollton Partnership Agreement, as amended, and guarantees to
certain obligations by Carrollton Developer General Partner,
incorporated by reference to Exhibit 10(C) of Form S-11.
10(D) Carrollton Property Management Agreement, as amended, incorporated
by reference to Exhibit 10(D) of Form S-11.
10(E) Fieldpointe Complex Financing Documents, incorporated by reference
to Exhibit 10(B) of Form S-11.
10(F) Form of Guaranteed Investment Contract Escrow Agreement,
incorporated by reference to Exhibit 10(F) of Form S-11.
10(G) Columbia Partnership Interest Acquisition Agreement, incorporated
by reference to Exhibit 10(G) of Form S-11.
10(H) Columbia Partnership Agreement and guarantee of certain
obligations of Columbia Developer General Partner, incorporated by
reference to Exhibit 10(H) of Form S-11.
10(I) Columbia Property Management Agreement, incorporated by reference
to Exhibit 10(I) of Form S-11.
10(J) Columbia Construction and Development Agreement, incorporated by
reference to Exhibit 10(J) of Form S-11.
10(K) Westmont Complex Financing Documents, incorporated by reference to
Exhibit 10(K) of Form S-11.
10(L) Westmont Complex Financing Restructuring Agreement, incorporated
by reference to Form 10-K for fiscal year ended December 31, 1992.
10(M) Columbia Partnership Cost-Sharing and Indemnity Agreement in
connection with the mortgage modification dated May 27, 1993,
incorporated by reference to Form 10-K for fiscal year ended
December 31, 1993.
10(N) Amendment of Partnership Agreement of Columbia Partnership dated
May 27, 1993, incorporated by reference to Form 10-K for fiscal
year ended December 31, 1993.
13
10(O) Amendment of Guaranty Agreement of Columbia Partnership dated May
27, 1993, incorporated by reference to Form 10-K for fiscal year
ended December 31, 1993.
10(P) Columbia Partnership Financing Agreement dated May 27, 1993,
incorporated by reference to Form 10-K for fiscal year ended
December 31, 1993.
10(Q) Carrollton Partnership Assignment and Modification of Deed of
Trust dated August 30, 1993, incorporated by reference to Form
10-K for fiscal year ended December 31, 1993.
10(R) Columbia Partnership Assignment and Intercreditor Agreement
dated as of June 1, 2000.
10(S) Columbia Partnership Mortgage Note dated as of June 1, 2000.
10(T) Columbia Partnership Multifamily Note (Multistate) dated as of
June 1, 2000.
(24) Power of Attorney, incorporated by reference to Exhibit 25 of Form
S-11.
(27) Financial Data Schedule.
(28) Market Analysis dated February 1, 1985 of REDE Associates,
incorporated by reference to Exhibit 28 of Form S-11.
Other Exhibits
(b) Reports on Form 8-K
Registrant filed a Form 8-K on June 8, 2000 with respect to the refinancing of
the Columbia Partnership's mortgages. Registrant subsequently filed a Form 8-K
on July 31, 2000 which attached as an exhibit Registrant's press release
concerning a distribution of $8.35 per Unit being made to Unit holders in
connection with such refinancing.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized on the 2nd day of April
2001.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation, General Partner
By: /s/ Richard Paul Richman
------------------------------------
Richard Paul Richman - President
By: WRC-87A Corporation, General Partner
By: /s/ Richard Paul Richman
--------------------------------------------
Richard Paul Richman - Executive Vice President
15
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
SECURED INCOME L.P. AND SUBSIDIARIES
DECEMBER 31, 2000, 1999 AND 1998
SECURED INCOME L.P. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents Page
Independent Auditors' Report F-3
Consolidated Financial Statements
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Partners' Deficit F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-2
INDEPENDENT AUDITORS' REPORT
To the Partners
Secured Income L.P. and Subsidiaries
We have audited the consolidated balance sheets of Secured
Income L.P. and Subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, partners' deficit and
cash flows for each of the three years in the period ended December 31,
2000. These consolidated financial statements are the responsibility of
the partnership's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Secured Income L.P. and Subsidiaries as of December 31,
2000 and 1999, and the results of their operations, changes in their
partners' deficit and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with generally
accepted accounting principles.
By: /s/ Reznick Fedder & Silverman
-------------------------------
Bethesda, Maryland
March 26, 2001
F-3
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
Notes 2000 1999
------------ ---------------- ---------------
ASSETS
Property and equipment, net of accumulated
depreciation 2,5 $ 25,616,176 $ 26,850,801
Cash and cash equivalents 8,9 4,320,459 1,910,060
Restricted assets and funded reserves 4,5,9 531,606 5,358,448
Tenant security deposits 565,654 514,405
Interest and accounts receivable 9 87,403 69,569
Prepaid expenses 628,819 597,046
Intangible assets, net of accumulated amortization 3 2,349,492 1,503,273
------------- ---------------
$ 34,099,609 $ 36,803,602
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable 5,8 $ 42,321,643 $ 33,479,624
Accounts payable and accrued expenses 466,091 231,790
Tenant security deposits payable 535,568 512,762
Due to general partners and affiliates 6 651,871 3,963,807
Deferred revenue 116,552 128,506
---------------- ----------------
44,091,725 38,316,489
--------------- --------------
Commitments and contingencies 5,6,8
Partners' deficit 7
Limited partners (984,369 units issued and outstanding) (8,219,480) -
General partners (1,772,636) (1,512,887)
---------------- ----------------
(9,992,116) (1,512,887)
---------------- ----------------
$ 34,099,609 $ 36,803,602
================ ================
See notes to consolidated financial statements.
F-4
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Notes 2000 1999 1998
--------- --------------- -------------- --------------
REVENUE
Rental $ 7,690,883 $ 7,201,954 $ 6,830,701
Interest 333,137 247,360 204,262
Other 114,935 51,974 43,436
------------- ------------- ------------
TOTAL REVENUE 8,138,955 7,501,288 7,078,399
------------- ------------- ------------
EXPENSES
Administration and management 6 811,754 810,314 747,937
Operating and maintenance 1,468,310 1,263,405 1,144,623
Taxes and insurance 1,294,555 1,251,001 1,285,099
Financial 5,6 2,509,088 2,282,652 2,355,796
Depreciation and amortization 2,3 1,712,559 1,772,899 1,761,448
------------- ------------- ------------
TOTAL EXPENSES 7,796,266 7,380,271 7,294,903
------------- ------------- ------------
Earnings (loss) before extraordinary item 342,689 121,017 (216,504)
Extraordinary item - write-off of unamortized
mortgage costs 3 509,899
------------- ------------- -------------
NET EARNINGS (LOSS) $ (167,210) $ 121,017 $ (216,504)
============ ============ ============
NET EARNINGS (LOSS) ATTRIBUTABLE TO
General partners 7 $ (167,210) $ 121,017 $ (216,504)
Limited partners 7 - - -
------------- ------------- -------------
$ (167,210) $ 121,017 $ (216,504)
============ ============ ============
NET EARNINGS (LOSS) ALLOCATED PER
UNIT OF LIMITED PARTNERSHIP
INTEREST 7 $ - $ - $ -
============ ============ ============
Weighted number of units outstanding 984,369 984,369 984,369
============ ============ ============
See notes to consolidated financial statements.
F-5
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Limited General
Total partners partners
--------------- ------------------ ---------------
Partners' deficit, December 31, 1997 $ (1,417,400) $ - $ (1,417,400)
Net loss (216,504) - (216,504)
--------------- ------------------ ---------------
Partners' deficit, December 31, 1998 (1,633,904) - (1,633,904)
Net earnings 121,017 - 121,017
--------------- ------------------ ---------------
Partners' deficit, December 31, 1999 (1,512,887) - (1,512,887)
Distributions to partners (8,312,019) (8,219,480) (92,539)
Net loss (167,210) - (167,210)
--------------- ------------------ ---------------
Partners' deficit, December 31, 2000 $ (9,992,116) $ (8,219,480) $ (1,772,636)
--------------- ------------------ ---------------
See notes to consolidated financial statements.
F-6
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (167,210) $ 121,017 $ (216,504)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Depreciation and amortization 1,712,559 1,772,899 1,761,448
Write-off of unamortized mortgage costs 509,899
Decrease (increase) in restricted assets
and funded reserves 4,826,842 (1,414,129) 336,266
Increase in tenant security deposits (51,249) (23,749) (24,047)
Decrease (increase) in accounts receivable (17,834) 1,512 20,216
Increase in prepaid expenses (31,773) (33,916) (125,297)
Increase in intangible assets (13,609) (35,197)
Increase (decrease) in accounts payable
and accrued expenses 84,455 70,635 (293,927)
Increase in tenant security deposits payable 22,806 22,646 29,934
Increase (decrease) in due to general partners and affiliates (1,581,256) 158,280 56,367
Decrease in deferred revenue (11,954) (11,954) (11,954)
------------ ------------ ------------
Net cash provided by operating activities 5,295,285 649,632 1,497,305
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed investment contract 19,499
Capital expenditures (149,407) (108,640) (72,815)
------------ ------------
Net cash used in investing activities (149,407) (108,640) (53,316)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage principal payments (23,907,981) (494,189) (475,943)
Mortgage proceeds 32,750,000
Distributions to partners (8,312,019)
Payment of mortgage costs (1,534,799) (22,000) (100,246)
Repayment of general partner advances (1,730,680) (300,000)
------------ ------------ ------------
Net cash used in financing activities (2,735,479) (516,189) (876,189)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 2,410,399 24,803 567,800
Cash and cash equivalents at beginning of year 1,910,060 1,885,257 1,317,457
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,320,459 $ 1,910,060 $ 1,885,257
============ ============ ============
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 3,923,168 $ 2,110,181 $ 2,180,042
============ ============ ============
See notes to consolidated financial statements.
F-7
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
Note 1 - Organization and Summary of Significant Accounting Policies
Secured Income L.P. (the "Partnership"), was formed on October 10, 1986 under
the Revised Uniform Limited Partnership Act of the State of Delaware for the
purpose of acquiring real estate limited partnership interests. The Partnership
filed a Form S-11 registration statement with the Securities and Exchange
Commission effective March 5, 1987 covering an offering of up to 2,500,000
limited partnership units at $20 per unit. The admission of limited partners
occurred on October 9, 1987 (at which time operations commenced), December 18,
1987 and April 12, 1988.
Carrollton X Associates Limited Partnership ("Carrollton") was organized under
the laws of the District of Columbia on December 18, 1985 for the purpose of
constructing and operating a residential rental apartment complex and related
facilities under Section 221(d)4 of the National Housing Act. The Partnership
acquired a 98.9% limited partner interest in Carrollton in October 1987. The
complex consists of 252 units located in Frederick, Maryland and operates under
the name of Fieldpointe Apartments.
Columbia Westmont Associates, L.P., formerly Columbia Associates ("Columbia")
was formed as a limited partnership on February 6, 1985 to acquire an interest
in real property located in New York, New York and to construct and operate
thereon a 163 unit apartment complex which also includes a parking garage and
approximately 9,400 square feet of commercial space. The Partnership acquired a
98.9% limited partner interest in Columbia in December 1988. The complex
operates under the name of The Westmont.
Columbia and Carrollton have underlying mortgages which qualify for tax-exempt
financing as a result of restricting at least 20% of their apartment units for
low to moderate income tenants as defined in applicable guidelines.
Principles of Consolidation
The consolidated financial statements include the assets, liabilities and
results of operations which relate to the business of the Partnership,
Carrollton and Columbia. All significant inter-partnership balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Property, Equipment and Depreciation
Land, buildings and improvements are carried at the lower of cost or net
realizable value. Net realizable value represents the net cash flow necessary to
recover costs exclusive of debt service. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives by use of the straight-line method over a 25-year life.
Personal property is carried at cost and is depreciated over its estimated
service life of 5-7 years using the straight-line method. Improvements are
capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred. Upon disposal of depreciable property, the appropriate
property accounts are reduced by the related costs and accumulated depreciation
and the resulting gains or losses are reflected in the consolidated statements
of operations.
Other Assets and Amortization
Mortgage costs are amortized over the terms of the respective loans using the
effective interest method. Acquisition fees are amortized over the useful lives
of the respective property and equipment using the straight-line method. Leasing
costs are amortized over the period of the applicable leases, which range from 5
to 12 years using the straight-line method.
F-8
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Deferred Revenue
Deferred revenue consists of a fee received by Columbia for the extension of a
parking garage lease that expires September 30, 2011. Such fee is being accreted
to revenue over the lease term.
Leases
Tenant leases are treated as operating leases. Rental revenue is reported when
earned and expenses are charged to operations as incurred.
Income Taxes
No provision or benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable by,
the partners individually.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be cash
equivalents.
Net Loss per Unit of Limited Partnership Interest
Net loss per unit of limited partnership interest is calculated based upon the
weighted average number of units outstanding, 984,369 for each of the years
2000, 1999 and 1998. Losses are allocated to limited partners until such time as
the limited partners' equity reaches zero.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. Adoption of SFAS No. 133 is not expected to have a material impact on the
Partnership's financial statement presentation or disclosures.
Note 2 - Property and Equipment
Property and equipment as of December 31, 2000 and 1999 are summarized as
follows:
2000 1999
----------- -----------
Land $ 6,057,940 $ 6,057,940
Buildings and improvements 37,008,053 36,708,800
Furniture and equipment 1,620,827 1,620,827
----------- -----------
44,686,820 44,387,567
Less accumulated depreciation 19,070,644 17,536,766
----------- -----------
$25,616,176 $26,850,801
=========== ===========
F-9
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Depreciation for the years 2000, 1999 and 1998 was $1,533,878, $1,522,040 and
$1,517,537, respectively.
Note 3 - Intangible Assets
Intangible assets as of December 31, 2000 and 1999 are summarized as follows:
2000 1999
---------- ----------
Acquisition fees $ 787,495 $ 787,495
Mortgage costs 2,159,285 4,883,818
Leasing costs 269,265 269,265
---------- ----------
3,216,045 5,940,578
Less accumulated amortization 866,553 4,437,305
---------- ----------
$2,349,492 $1,503,273
========== ==========
Amortization for the years 2000, 1999 and 1998 was $178,680, $250,859 and
$243,911, respectively. In addition, unamortized mortgage costs in the amount of
$509,899 were expensed during 2000 in connection with the refinancing of
Columbia's mortgages (see Note 5).
Note 4 - Restricted Assets and Funded Reserves
Restricted assets and funded reserves (see Note 5) as of December 31, 2000 and
1999 are summarized as follows:
2000 1999
---------- ----------
Escrows held by mortgage lenders $ 501,155 $1,134,328
Interest rate cap account 30,451 3,439,077
Operating deficit reserve -- 503,295
Bond retirement escrow -- 281,748
---------- ----------
$ 531,606 $5,358,448
========== ==========
Note 5 - Mortgages Payable
Carrollton
Carrollton is obligated under the terms of a note in the original amount of
$10,494,100, which note was financed through tax exempt revenue bonds issued by
the City of Frederick, Maryland ("Frederick") and is insured by the United
States Department of Housing and Urban Development ("HUD"). The note bears
interest at 6.09% with monthly payments of principal and interest of $60,900 due
through maturity in February 2028. The note is collateralized by the underlying
value
F-10
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
of the real estate plus other amounts on deposit with the lender. Pursuant
to agreements, Carrollton is required to make monthly escrow deposits for taxes,
insurance and replacement of project assets, and is subject to restrictions as
to operating policies, rental charges, operating expenditures and distributions
to partners. The balance of the mortgage payable at December 31, 2000 and 1999
is $9,696,082 and $9,831,873, respectively.
Note 5 - Mortgages Payable (continued)
Columbia
On June 7, 2000, the Columbia Partnership's mortgages were refinanced (the
"Refinancing") with the Federal Home Loan Mortgage Corporation ("Freddie Mac")
replacing Citibank, N.A. ("Citibank") as the credit enhancer. Credit enhancement
has been provided for $24.2 million in tax exempt bonds (the "First Mortgage")
and an $8.55 million conventional mortgage (the "Second Mortgage") payable to
Freddie Mac. The First Mortgage matures in July 2030 and requires monthly
payments of interest only until the maturity of the Second Mortgage (see below).
After such maturity, a monthly principal reserve fund deposit will be required
in an amount to be determined at that time. The interest rate is based on a
weekly variable low floater index, which varied from 3.1% to 5.25% during 2000.
In connection with the First Mortgage, the Columbia Partnership purchased an
interest rate cap (included in intangible assets - see Note 3), such that the
rate cannot exceed 6.54% through June 1, 2005. In addition to the interest,
monthly fees totaling approximately $24,000 are required, which fees include the
credit enhancement fee and approximately $4,000 that is deposited to an escrow
for the purchase of a future interest rate cap. The Second Mortgage bears
interest at 8.07% and requires monthly principal and interest payments of
$82,054 through maturity in July 2015. The balance of the First Mortgage and the
Second Mortgage as of December 31, 2000 are $24,200,000 and $8,425,561,
respectively.
As a result of the Refinancing, 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 $12.6 million, from which the
Columbia Partnership made a distribution to the Partnership totaling
approximately $9,104,000 and paid accrued investor service fees of approximately
$177,000. The Partnership made a distribution to the Limited Partners in July
2000 of approximately $8,219,000, representing $8.35 per Unit, to Unit holders
of record as of June 30, 2000. In addition, the Columbia Partnership satisfied
outstanding operating loans made by its general partners (see Note 6).
The original financing of Columbia was provided by the New York City Housing
Development Corporation ("HDC"), which issued $32,497,691 of bonds in February
1985. The funds provided by the bond issue were loaned to Columbia in the form
of two mortgage loans (the "Original Columbia Mortgages"). In connection with
the issuance of such bonds, Citibank issued a letter of credit in the amount of
$33,018,629 to guarantee payment of principal and interest on the bonds. The
Original Columbia Mortgages were modified during 1993 (the "Modified Columbia
Mortgages"), at which time new tax-exempt bonds were issued (which bore a
floating interest rate, adjusted weekly) with an initial note rate of 4.66%. In
addition to monthly payments of interest, monthly principal amortization of
$29,367 was to be required through February 2003, after which principal would be
paid sufficient to fund the sinking requirements of the underlying bonds.
Pursuant to agreements, any savings realized on the difference between the 4.66%
initial note rate and the actual low floater rate (approximately 3.70% and 3.04%
weighted average rate in 2000 prior to the Refinancing and 1999, respectively)
were to be deposited in an account to be used to purchase an interest rate cap
(the "Pledged Cap Account") by October 1996. During April 1998, the lender
agreed to restructure the original terms concerning the Pledged Cap Account
whereby the account could be utilized for potential debt service shortfalls (in
the event the low floater rate was higher than the stated note rate of 4.66%),
but not cause the Pledged Cap Account to decline below a balance of $1,000,000.
An interest rate cap could be purchased upon the Pledged Cap Account reaching
such minimum threshold or in the event the low floater rate rose above 7% for 90
consecutive days or 7.5% for 30 consecutive days. In addition, the lender agreed
to eliminate and reduce certain partner guarantees, thereby releasing certain
restricted assets of approximately $1,000,000, of which $300,000 was repaid to
the Columbia general partners in 1998 (see Note 6). The balance in the Pledged
Cap Account was $3,439,077 as of December 31, 1999 (see Note 4). The balance of
the Modified Columbia Mortgages as of December 31, 1999 was $23,647,751.
The Modified Columbia Mortgages further provided that any cash flow generated by
Columbia above the note rate, servicing fees and principal amortization would be
applied first to fund and maintain an interest-bearing operating deficit reserve
account (the "Operating Deficit Reserve") until it accumulated to $500,000.
Thereafter, such cash flow would be deposited into the Operating Deficit Reserve
to the extent necessary to maintain a balance of $500,000 and then into a
segregated account to be used to retire the underlying bonds (the "Bond
Retirement Escrow") at the earliest possible dates in minimum denominations of
$100,000 in excess of the scheduled principal amortization of approximately
$352,000 per annum. Amounts deposited in the Operating Deficit Reserve would
generally be utilized to fund operating deficits, pay for maintenance, repairs
and replacements and to pay debt service and other amounts due under the loan
documents.
F-11
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 5 - Mortgages Payable (continued)
As part of the modification of the Original Columbia Mortgages, Citibank agreed
to extend its letter of credit from February 1997 to February 2003. Citibank was
entitled to a letter of credit fee for providing credit support for the new
bonds in the amount of 2.5% per annum of the outstanding principal balance of
the new bonds, payable on a current or deferred basis at Columbia's option.
Except as described above, the obligation to pay the letter of credit fee was
with full recourse as to the assets of Columbia, but without recourse to any of
the partners, including the Partnership. If the letter of credit fee was not
fully paid from available proceeds from the sale or refinancing of Columbia or
the Columbia general partners' guaranty of payment, any such unpaid balance
would be deemed fully discharged and neither Columbia nor its partners would
have any further obligation with respect thereto. For the period in 2000 prior
to the Refinancing and for the year ended December 31, 1999, Columbia incurred a
fee in connection with the Citibank letter of credit in the amount of $270,242
and $624,293, respectively, which fee was paid currently on a monthly basis.
Aggregate annual mandatory maturities on the Carrollton and Columbia Mortgages
as of December 31, 2000 are as follows:
2001 $ 460,530
2002 498,357
2003 536,857
2004 578,382
2005 623,162
Thereafter 39,624,355
--------------
$ 42,321,643
=============
The carrying amount of the mortgages approximates fair value.
Note 6 - Related Party Transactions
Due to general partners and affiliates as of December 31, 2000 and 1999 consists
of cash advances and other payables as follows:
2000 1999
---------- ----------
Carrollton general partners and their affiliates $ 65,154 $ 65,154
Columbia general partners and their affiliates
(including accrued interest of $1,472,738) 3,203,418
Wilder Richman Management Corp. 196,313 202,779
WRC-87A Corporation 390,404 492,456
---------- ----------
$ 651,871 $3,963,807
========== ==========
The management agent for Fieldpointe Apartments is Wilder Richman Management
Corp. ("WRMC"), an affiliate of two of the general partners and one of the
Carrollton general partners. During each of the three years ended December 31,
2000, WRMC was entitled to property management fees equal to 4% of residential
income collected. In addition, WRMC was entitled to a reporting fee of $5 per
unit per month for bookkeeping and reporting services. The maximum annual
management and reporting fees may not exceed 5% of gross collections. Such fees
of $97,471, $92,468 and $89,958 were charged to operations during 2000, 1999 and
1998, respectively. Accrued management and reporting fees as of December 31,
2000 and 1999 are $30,313 and $36,779, respectively.
F-12
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 6 - Related Party Transactions (continued)
The management agent for The Westmont is an affiliate of one of the Columbia
general partners and receives property management fees calculated at 3% of
rental income for each of the three years ended December 31, 2000. The charges
to operations amounted to $169,723, $156,343 and $146,837 during 2000, 1999 and
1998, respectively. As of December 31, 2000, $56,016 is due from the management
agent.
An affiliate of two of the general partners provides investor services for which
a fee is incurred by Columbia and Carrollton in the amounts of $80,072 and
$18,365, respectively, and which is based on .5% of the gross proceeds from the
offering of Partnership units allocable to each such investment. The fee is
payable quarterly from cash flow and shall be adjusted annually by increases in
the Consumer Price Index. The consolidated statements of operations include
charges to operations for the investor services fee of $98,437 for each of the
three years ended December 31, 2000. These amounts are paid or payable to the
affiliate to the extent that such services are not provided by an independent
third party. Amounts payable to the affiliate as of December 31, 2000 and 1999,
representing the unpaid investor services fee for the year, were $84,439 and
$87,072, respectively. The Partnership paid the affiliate $186,401 and $100,000
during 2000 and 1999, respectively, for investor services fees incurred in prior
years.
A shareholder of two of the general partners provided debt financing for the
capitalization of LaMere Associates, Inc. ("LaMere"). In connection with such
debt financing, the shareholder received 20% of the stock of LaMere. LaMere was
paid premiums in connection with property, workers compensation, liability and
umbrella insurance coverage provided to Carrollton. In connection with such
insurance coverage, Carrollton incurred $37,408, $40,654 and $41,359 in premiums
for the years ended December 31, 2000, 1999 and 1998, respectively.
Carrollton owes WRMC $166,000 as of December 31, 2000 and 1999 for prior years'
operating advances. Carrollton also owes its general partners and affiliates
$65,154 as of December 31, 2000 and 1999 for various advances. All such advances
are unsecured, non-interest bearing and payable from Carrollton cash flow.
During 1998, Columbia paid an affiliate a fee of $60,750 for services rendered
in connection with the modification of the terms of the Pledged Cap Account (see
Note 5) and paid $43,121 in connection with repair services provided by an
affiliate of one of its general partners.
Pursuant to an operating deficit guarantee agreement dated December 21, 1988,
the Columbia general partners guaranteed to loan to Columbia any funds required
to satisfy its operating deficits up to $2,000,000. As of December 31, 1999,
loans of $1,700,680 remained payable by Columbia. All outstanding loans and
accrued interest thereon were repaid during 2000 in connection with the
Refinancing (see Note 5). The loans bore interest at PNC Bank's prime rate plus
2% (10.5% at December 31, 1999) in accordance with the terms of the Columbia
partnership agreement. In connection with the modification of the terms of the
Pledged Cap Account (see Note 5), $300,000 was repaid to the Columbia general
partners during 1998. The amount of interest charged to operations during 2000,
1999 and 1998 was $81,210, $170,026 and $176,646, respectively. Accrued interest
as of December 31, 1999 was $1,472,738.
Columbia was obligated in the amount of $30,000 as of December 31, 1999 to
certain of its partners for development advances. The non-interest bearing
advances were repaid in connection with the Refinancing.
Management believes it is not practicable to estimate the fair value of the
loans and advances from related parties because loans and advances with similar
characteristics are not currently available to the Partnership, Columbia and
Carrollton.
F-13
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 7 - Partners' Deficit
Partnership Allocation
Profits and losses of the Partnership are allocated 1% and 99% to the general
partners and limited partners, respectively, until such time as the limited
partners' capital reaches zero, after which all losses are allocated to the
general partners.
Partnership Distributions
In accordance with the respective partnership agreements, to the extent that
Carrollton and Columbia generate net operating cash flow in any year at a level
sufficient, when distributed to the Partnership, to enable the Partnership to
satisfy the allocable portion of the limited partners' 8% preferred return for
such year without utilizing amounts generated from guaranteed investment
contracts (the last of which matured in January 1998), the excess amounts
generated from the guaranteed investment contracts would be paid or distributed
to the general partners of Carrollton and/or Columbia, whichever generate(s)
such level(s) of operating cash flow. No such excess distributions were
generated during the term of the guaranteed investment contract periods. As part
of the Refinancing, the Columbia Partnership distributed approximately
$9,104,000 to the Partnership. 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. Due to restrictions concerning distributions from
operating cash flow of Columbia prior to the Refinancing (see Note 5), there
were no cash distributions from Columbia in 1999.
Note 8 - Commitments and Contingencies
Lender Restrictions and Requirements
Carrollton and Columbia are subject to various financing requirements and
restrictions, including (i) the rental of not less than 20% of the dwelling
units to individuals or families who qualify as low or moderate income tenants;
(ii) restrictions on the sale of the apartment complexes; and (iii) restrictions
on the amount of cash flow which may be distributed to the partners.
Concentration of Credit Risk
As of December 31, 2000, the Partnership has $2,083,724 in cash and cash
equivalents which are deposited in interest-bearing accounts with an institution
which is not insured by the Federal Deposit Insurance Corporation ("FDIC"). As
of December 31, 2000, Carrollton has $489,782 in excess of FDIC insurance limits
at two banks.
Long-term Leases
The commercial space and parking garage at Columbia are leased to tenants under
the terms of noncancellable operating leases expiring on various dates through
2011. Future minimum rental payments as of December 31, 2000 are as follows:
2001 $ 749,000
2002 786,000
2003 801,000
2004 814,000
2005 705,000
Thereafter 4,090,000
------------
$ 7,945,000
============
Income recognized under the garage and commercial space for the years 2000, 1999
and 1998 was $752,001, $744,075 and $692,983, respectively.
F-14
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 9 - Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value of amounts have
been determined using available market information, assumptions, estimates and
valuation methodologies.
Cash and Cash Equivalents and Restricted Assets and Funded Reserves
The carrying amount approximates fair value.
Accounts Receivable
The carrying amount approximates fair value due to the short-term nature of the
receivable.
The estimated fair values of the Partnership's financial instruments as of
December 31, 2000 and 1999 are disclosed elsewhere in the financial statements.
Note 10 - Reconciliation of Taxable Income (Loss) and Bases of Assets
A reconciliation of the financial statement net earnings (loss) to the income
tax income (loss) of the Partnership for each of the years ended December 31,
2000, 1999 and 1998 is as follows:
2000 1999 1998
----------- ----------- -----------
Financial statement net earnings (loss) $ (167,210) $ 121,017 $ (216,504)
Excess depreciation for income tax purposes
based on estimated useful life (250,276) (262,030) (266,599)
Excess depreciation for financial reporting
purposes due to purchase accounting treatment 439,590 438,444 436,460
Deferred revenue (11,954) (11,954) (11,954)
Accrual (payment) of related party expense items
not deductible until paid for tax purposes
under Internal Revenue Code Section 267 (1,629,526) 168,461 10,083
Amounts allocated to other partners of
Carrollton and Columbia and other 51,029 (7,239) (15,174)
----------- ----------- -----------
Income (loss) as shown on tax return $(1,568,347) $ 449,699 $ (63,688)
=========== =========== ===========
F-15
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 2000, 1999 AND 1998
Note 10 - Reconciliation of Taxable Income (Loss) and Bases of Assets
(continued)
A reconciliation of the financial statement carrying amount of total assets to
the tax basis as of December 31, 2000 and 1999 is as follows:
2000 1999
------------ ------------
Financial statement carrying amount of assets $ 34,099,609 $ 36,803,602
Difference which consists principally of the
utilization of purchase accounting for financial
statement purposes (15,069,091) (13,967,731)
------------ ------------
Tax basis of assets $ 19,030,518 $ 22,835,871
============ ============
F-16