SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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
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Table of Contents
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Item 1 Financial Statements Page
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Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
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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
September 30, 2001
Unaudited) December 31, 2000
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ASSETS
Property and equipment (net of accumulated depreciation
of $20,215,049 and $19,070,644) $ 24,471,771 $ 25,616,176
Cash and cash equivalents 5,056,295 4,320,459
Restricted assets and funded reserves 719,504 531,606
Tenant security deposits 563,986 565,654
Accounts receivable 45,658 87,403
Prepaid expenses 515,428 628,819
Intangible assets, net of accumulated amortization 2,256,330 2,349,492
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$ 33,628,972 $ 34,099,609
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LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 41,979,173 $ 42,321,643
Accounts payable and accrued expenses 248,341 466,091
Tenant security deposits payable 562,669 535,568
Due to general partners and affiliates 509,869 651,871
Deferred revenue 116,552 116,552
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43,416,604 44,091,725
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Partners' deficit
Limited partners (8,834,711) (8,219,480)
General partners (952,921) (1,772,636)
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(9,787,632) (9,992,116)
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$ 33,628,972 $ 34,099,609
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See notes to consolidated financial statements.
3
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Threee Months Three Months Nine Months
Ended Ended Ended Ended
September 30, December 30, September 30, September 30,
2001 2001 2000 2000
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REVENUE
Rental $ 2,094,335 $ 6,172,435 $ 1,960,282 $ 5,773,904
Interest 38,998 112,174 103,601 281,602
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TOTAL REVENUE 2,133,333 6,284,609 2,063,883 6,055,506
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EXPENSES
Administrative and management 190,879 536,535 189,831 556,793
Operating and maintenance 332,990 1,033,100 426,470 1,067,311
Taxes and insurance 318,790 964,475 310,179 963,146
Financial 511,669 1,687,139 709,263 1,949,178
Write-off of financing costs 444,322 444,322
Depreciation and amortization 412,521 1,237,567 392,259 1,270,242
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TOTAL EXPENSES 1,766,849 5,458,816 2,472,324 6,250,992
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NET EARNINGS (LOSS) $ 366,484 $ 825,793 $ (408,441) $ (195,486)
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NET EARNINGS (LOSS) ATTRIBUTABLE TO
Limited partners $ - - - -
General partners 366,484 825,793 (408,441) (195,486)
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$ 366,484 $ 825,793 $ (408,441) $ (195,486)
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NET EARNINGS (LOSS) ALLOCATED
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
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 825,793 $ (195,486)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities
Depreciation and amortization 1,237,567 1,270,242
Write-off of financing costs 444,322
Decrease (increase) in restricted assets and funded reserves (187,898) 4,471,286
Decrease (increase) in tenant security deposits 1,668 (16,508)
Decrease (increase) in accounts receivable 41,745 (15,675)
Decrease in prepaid expenses 113,391 310,509
Increase in intangible assets (1,534,798)
Increase (decrease) in accounts payable and accrued expenses (217,750) 98,600
Increase in tenant security deposits payable 27,101 15,104
Decrease in due to general partners and affiliates (142,001) (1,450,730)
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Net cash provided by operating activities 1,699,616 3,396,866
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CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage proceeds 9,249,082
Repayment of general partner advances (1,700,680)
Distributions to partners (621,310) (8,320,742)
Payments of principal on permanent financing (342,470) (297,176)
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Net cash used in financing activities (963,780) (1,069,516)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 785,836 2,327,350
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 $ 5,056,295 $ 4,237,410
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SUPPLEMENTAL INFORMATION
Financial expenses paid $ 1,688,718 $ 3,421,916
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NON-CASH FINANCING ACTIVITY
Reduction in mortgages payable with refinancing proceeds $ 23,500,918
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See notes to consolidated financial statements.
5
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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 nine months ended September 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 the 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
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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 nine months ended September 30, 2001, as a result of the cash flows
generated by the operations of the Complexes, cash and cash equivalents
increased by approximately $736,000. Mortgages payable decreased due to
principal amortization of approximately $342,000. Property and equipment
decreased by approximately $1,144,000 due to depreciation, while intangible
assets decreased by approximately $93,000 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 quarterly distributions in May 2001 and August 2001
totaling $621,301, resulting primarily from operating cash flow generated by the
Operating Partnerships. The Partnership anticipates making another quarterly
distribution on or about November 15, 2001 of approximately $.575 per Unit to
Unit holders of record as of September 30, 2001. Such distribution will result
in an annualized return to the limited partners of 8% for the period January 1,
2001 through September 30, 2001. The Partnership intends to make quarterly
distributions on an ongoing basis, dependent upon the operating results of the
Operating Partnerships, including the level of interest rates. There can be no
assurance that the Operating Partnerships will continue to generate cash flow
sufficient to make quarterly distributions or that future distributions will be
in any specific amounts. The recent events of September 11, 2001 have increased
the risk that the operations of the Properties may be adversely impacted as a
result of the effect of these events on the economy in general and because the
Properties are located in New York City and near Washington, D.C.
Results of Operations
Nine Months Ended September 30, 2001
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During the nine months ended September 30, 2001, the Columbia Partnership and
the Carrollton Partnership generated income from operating activities, before
financial expenses, of approximately $2,808,000 and approximately $950,000,
respectively. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $235,000 and
approximately $107,000, 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
$1,663,000 during the nine months ended September 30, 2001. The increase in cash
flow as compared to the nine months ended September 30, 2000 (see discussion
below) is due in part to a decrease in required deposits to mortgage escrows of
approximately $582,000. However, there can be no assurance that the level of
cash flow generated by the Complexes during the nine months ended September 30,
2001 will continue in future periods.
Results of operations improved for the nine months ended September 30, 2001 as
compared to the nine months ended September 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") and the weighted average interest rate on the Columbia
Partnership's first mortgage decreased from approximately 3.86% during the nine
months ended September 30, 2000 to approximately 2.94% during the nine months
ended September 30, 2001, the savings was partially offset by the interest
incurred on the additional borrowings in connection with the Refinancing. The
write-off of unamortized financing costs of $444,322 during the nine months
ended September 30, 2000 was in connection with the Refinancing.
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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)
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As of September 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.
Nine Months Ended September 30, 2000
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During the nine months ended September 30, 2000, the Columbia Partnership and
the Carrollton Partnership generated income from operating activities, before
financial expenses, of approximately $2,741,000 and approximately $744,000,
respectively. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $196,000 and
approximately $101,000, 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 nine months ended
September 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 $695,000 during the nine months ended September 30,
2000. As of September 30, 2000, the occupancy of Fieldpointe Apartments was
approximately 98% and the occupancy of The Westmont was 100% as to both
residential units and commercial space.
Item 3 Quantitative and Qualitative Disclosure about Market Risk
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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
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Item 1 Legal Proceedings
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Registrant is not aware of any material legal proceedings.
Item 2 Changes in Securities
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None
Item 3 Defaults upon Senior Securities
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None
Item 4 Submission of Matters to a Vote of Security Holders
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None
Item 5 Other Information
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None
Item 6 Exhibits and Reports on form 8-K
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None
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: November 13, 2001 /s/ Richard Paul Richman
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Richard Paul Richman
President, Chief Executive Officer and Director
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