FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17412
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Secured Income L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 06-1185846
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 West 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
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
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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 Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
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and Results of Operations 7
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Item 3 Quantitative and Qualitative Disclosure about Market Risk 8
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2
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2001
(Unaudited) December 31, 2000
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ASSETS
Property and equipment (net of accumulated
depreciation of $19,833,581 and $19,070,644) $ 24,853,239 $ 25,616,176
Cash and cash equivalents 4,723,389 4,320,459
Restricted assets and funded reserves 1,161,735 531,606
Tenant security deposits 573,360 565,654
Accounts receivable 38,364 87,403
Prepaid expenses 50,898 628,819
Intangible assets, net of accumulated
amortization 2,287,383 2,349,492
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$ 33,688,368 $ 34,099,609
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LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 42,095,652 $ 42,321,643
Accounts payable and accrued expenses 218,760 466,091
Tenant security deposits payable 573,360 535,568
Due to general partners and affiliates 514,882 651,871
Deferred revenue 116,552 116,552
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43,519,206 44,091,725
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Partners' deficit
Limited partners (8,514,791) (8,219,480)
General partners (1,316,047) (1,772,636)
(9,830,838) (9,992,116)
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$ 33,688,368 $ 34,099,609
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See notes to consolidated financial statements.
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
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REVENUE
Rental $2,068,166 $4,078,100 $1,925,793 $3,813,622
Interest 36,485 73,176 135,685 178,001
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TOTAL REVENUE 2,104,651 4,151,276 2,061,478 3,991,623
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EXPENSES
Administrative and management 180,738 345,656 178,272 366,962
Operating and maintenance 332,629 700,110 363,615 640,841
Taxes and insurance 320,247 645,685 329,906 652,967
Financial 598,559 1,175,470 652,069 1,239,915
Depreciation and amortization 412,524 825,046 438,992 877,983
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TOTAL EXPENSES 1,844,697 3,691,967 1,962,854 3,778,668
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NET EARNINGS $ 259,954 $ 459,309 $ 98,624 $ 212,955
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NET EARNINGS ATTRIBUTABLE TO
Limited partners $ -- $ -- $ -- $ --
General partners 259,954 459,309 98,624 212,955
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$ 259,954 $ 459,309 $ 98,624 $ 212,955
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NET EARNINGSALLOCATED
PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ -- $ -- $ -- $ --
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See notes to consolidated financial statements.
4
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 459,309 $ 212,955
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation and amortization 825,046 877,983
Decrease (increase) in restricted assets and funded reserves (630,129) 4,206,211
Increase in tenant security deposits (7,706) (7,573)
Decrease (increase) in accounts receivable 49,039 (12,942)
Decrease in prepaid expenses 577,921 557,484
Increase (decrease) in accounts payable and accrued expenses (247,331) 200,160
Increase in tenant security deposits payable 37,792 9,216
Decrease in due to general partners and affiliates (136,989) (3,135,161)
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Net cash provided by operating activities 926,952 2,908,333
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CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage proceeds 32,750,000
Payment of financing costs (1,541,996)
Distributions to partners (298,031)
Principal payments on mortgages (225,991) (23,714,616)
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Net cash provided by (used in) financing activities (524,022) 7,493,388
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Net increase in cash and cash equivalents 402,930 10,401,721
Cash and cash equivalents at beginning of period 4,320,459 1,910,060
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,723,389 $ 12,311,781
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SUPPLEMENTAL INFORMATION
Financial expenses paid $ 1,176,512 $ 2,703,533
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See notes to consolidated financial statements.
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SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(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 June 30, 2001 and no material contingencies exist which would
require additional disclosure in the report under Regulation S-X, Rule 10-01
paragraph A-5.
The results of operations for the six months ended June 30, 2001 are not
necessarily indicative of the results to be expected for the entire year.
2. Additional information, including the audited December 31, 2000 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, 2000 on file with the Securities and Exchange Commission.
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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, a portion of
which are restricted in accordance with the terms of the mortgages of the
Operating Partnerships. The Partnership's investments are highly illiquid.
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 operating cash
flow of the Operating Partnerships.
During the six months ended June 30, 2001, as a result of the cash flows
generated by the operations of the Complexes, cash and cash equivalents
increased by approximately $403,000. Mortgages payable decreased due to
principal amortization of approximately $226,000. Property and equipment
decreased by approximately $763,000 due to depreciation, while intangible assets
decreased by approximately $62,000 due to amortization. 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 and accounts payable and accrued expenses decreased in the ordinary
course of operations. Due to general partners and affiliates decreased as a
result of the payment of accrued investor service fees.
The Partnership made a quarterly distribution in May 2001 of approximately $.30
per Unit to Unit holders of record as of March 31, 2001, resulting primarily
from operating cash flow generated by the Operating Partnerships. The
Partnership anticipates making another quarterly distribution on or about August
15, 2001 of approximately $.33 per Unit to Unit holders of record as of June 30,
2001, resulting primarily from operating cash flow generated by the Operating
Partnerships. The Partnership intends to make regular quarterly distributions on
an ongoing basis to the extent distributions are received from the Operating
Partnerships. There can be no assurance that the Operating Partnerships will
continue to generate cash flow sufficient to make regular quarterly
distributions or that future distributions will be in similar amounts.
Results of Operations
Six Months Ended June 30, 2001
During the six months ended June 30, 2001, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities, before
financial expenses, of approximately $1,838,000 and approximately $622,000,
respectively. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $155,000 and
approximately $71,000, respectively. After considering the respective mandatory
mortgage principal payments and required deposits to mortgage escrows, among
other things, the Complexes generated combined cash flow of approximately
$1,016,000 during the six months ended June 30, 2001. The increase in cash flow
as compared to the six months ended June 30, 2000 (see discussion below) is
primarily attributable to a decrease in required deposits to mortgage escrows of
approximately $600,000. However, there can be no assurance that the level of
cash flow generated by the Complexes during the six months ended June 30, 2001
will continue in future periods.
Results of operations improved for the six months ended June 30, 2001 as
compared to the six months ended June 30, 2000. Although certain fees incurred
in connection with the Columbia Partnership's mortgages have been significantly
reduced as a result of the June 2000 refinancing (the "Refinancing"), the
savings was offset by the interest incurred on the additional borrowings in
connection with the Refinancing. Operating and maintenance expenses increased
for the six months ended June 30, 2001 as compared to the six months ended June
30, 2000 primarily as a result of scheduled repairs and improvements.
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SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
As of June 30, 2001, the occupancy of Fieldpointe Apartments (Carrollton) was
approximately 98% and the occupancy of The Westmont (Columbia) 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.
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, before
financial expenses, 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. Prior to the Refinancing, Columbia was
required to deposit certain operating cash flows to prescribed escrow accounts
held by the lender to be utilized as described in the mortgage documents and the
lender was entitled to a credit enhancement fee of 2.5% per annum based on the
outstanding loan balance. Deposits to such escrows during the six months ended
June 30, 2000, prior to the Refinancing, were approximately $616,000 and the
Columbia Partnership incurred approximately $270,000 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 $373,000 during the six months ended June 30, 2000.
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.
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, a fluctuation in the low-floater interest rates of .25% would have
a $60,500 annualized impact on the Partnership's results of operations.
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SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
Registrant is not aware of any material legal proceedings.
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
Registrant filed a Form 8-K on April 30, 2001 concerning a distribution
of approximately $0.30 per Unit expected to be made on or about May 15,
2001 to Unit holders of record as of March 31, 2001.
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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 10, 2001 /s/ Richard Paul Richman
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By: Richard Paul Richman
President, Chief Executive Officer
and Director
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