FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
Commission file number 0-14542
SECURED INVESTMENT RESOURCES FUND, L.P.
(Exact name of registrant as specified in its charter)
Kansas 48-0979566
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5453 W. 61st Place, Mission, Kansas 66205
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (913) 384-5700
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests ("Units")
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 such shorter periods 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
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
Index
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets --
June 30, 1998 and December 31, 1997 3-4
Consolidated Statements of Operations --
Three and Six Months Ended June 30,
1998 and 1997 5
Consolidated Statements of Partnership
Capital -- Six Months Ended June 30, 1998
and the Years Ended December 31, 1997,
and 1996 6
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1998 and 1997 7-8
Notes to Consolidated Financial Statements 9-10
Item 2. Managements Discussion and Analysis
of Financial Condition and Results
of Operations 11-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED BALANCE SHEETS
June 30,
1998 December 31,
(Unaudited) 1997
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 11,756,659 $ 11,750,152
Furniture, fixtures and equipment 945,566 910,967
12,702,226 12,661,119
Less accumulated depreciation
and allowance for losses 5,390,112 5,191,706
7,312,114 7,469,413
OTHER ASSETS
Cash 252,087 217,424
Rents and other receivables, less
allowance of $37,000 in 1998
$36,950 in 1997 (6,969) 15,425
Prepaid expenses 14,331
Debt issuance costs, net of
accumulated amortization of
$99,532 in 1998 and $95,733
in 1997 120,485 124,284
Commercial commissions,
deposits and other 9,863 7,415
Restricted deposits 36,526 20,626
426,321 385,174
TOTAL ASSETS $ 7,738,435 $ 7,854,587
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SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED BALANCE SHEETS--CONT'D.
June 30,
1998 December 31,
(Unaudited) 1997
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 8,177,292 $ 8,246,117
Accrued interest 128,422 93,187
Accounts payable and accrued
expenses 196,503 157,071
Due to related parties (Note C) 30,492 62,630
Unearned revenue 6,027 9,561
Tenant security deposits 54,173 56,924
TOTAL LIABILITIES 8,592,909 8,625,489
PARTNERSHIP CAPITAL
General Partners
Capital contribution 1,000 1,000
Partnership deficit (64,642) (63,806)
(63,642) (62,806)
Limited Partners
Capital contributions 5,608,838 5,608,838
Partnership deficit (6,399,670) (6,316,934)
(790,832) (708,096)
TOTAL PARTNERSHIP CAPITAL (854,474) (770,902)
$ 7,738,435 $ 7,854,587
See notes to consolidated financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Six months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
REVENUES
Rents $ 878,854 $1,109,730 $ 441,103 $ 571,929
Interest 1,983 1,738 1,015 901
Maintenance
escalations 20,070 34,728 6,174 17,031
900,907 1,146,196 448,292 589,861
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 295,958 383,543 151,843 201,890
General and
administrative
expenses 17,170 22,326 8,232 11,621
Professional services 36,084 45,527 21,995 22,550
Management Fees 44,366 56,673 21,672 29,524
393,578 508,069 203,742 265,585
NET OPERATING INCOME 507,327 638,127 244,549 324,276
NON-OPERATING EXPENSES
Interest 388,696 559,163 197,612 282,576
Depreciation and
amortization 202,205 296,489 101,103 148,245
590,901 855,652 298,715 430,821
PARTNERSHIP LOSS $ (83,572) $ (217,525) $ (54,166) $(106,545)
Allocation of loss:
General Partners (836) (2,175) (542) (1,065)
Limited Partners (82,736) (215,350) (53,624) (105,480)
$ (83,572) $(217,525) $ (54,166) $ (106,545)
Partnership loss per
limited partnership
unit $ (3.36) $ (8.66) $ (2.19) $ (4.24)
See notes to consolidated financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED STATEMENTS OF PARTNERSHIP CAPITAL
Six months Ended June 30, 1998 (Unaudited) and
the Years Ended December 31, 1997 and 1996
General Limited
Partners Partners Total
Balances at January 1, 1996 $ (54,545) 109,818 $ 55,273
Partnership loss (5,244) (519,183) (524,427)
Balances at December 31, 1996 (59,789) (409,365) (469,154)
Partnership loss (3,017) (298,731) (301,748)
Balances at December 31, 1997 (62,806) (708,096) (770,902)
Partnership loss (836) (82,736) (83,572)
Balances at June 30, 1998 (63,642) $ (790,832) $ (854,474)
See notes to consolidated financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
1998 1997
OPERATING ACTIVITIES
Partnership loss $ (83,572) $ (217,525)
Adjustments to reconcile
partnership loss to net cash
provided by (used in) operating
activities:
Depreciation and amortization 202,205 303,015
Provision for losses on rents
and other receivables 50 (8,500)
Changes in assets and liabilities:
Rents and other receivables 22,344 3,785
Prepaid expenses (14,331) (34,244)
Commercial commission, deposits
and other (2,448) (10,291)
Account payable and
accrued expenses 39,433 97,357
Accrued interest 35,236 46,563
Unearned revenue (3,534) (7,129)
Tenant security deposits (2,750) 3,937
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 192,631 176,968
INVESTING ACTIVITIES
Purchase of and improvements
to investment property (41,107) (32,818)
Restricted deposits (15,900) (4,482)
NET CASH USED IN
INVESTING ACTIVITIES (57,007) (37,300)
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Six Months Ended
June 30,
1998 1997
FINANCING ACTIVITIES
Mortgage Proceeds $ 0 $ 0
Due To (From) Related Parties (32,138) 2,525
Principal payments on
long-term debt (68,824) (85,923)
Debt Issuance Cost 0 (5,632)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (100,962) (89,030)
INCREASE IN CASH
AND CASH EQUIVALENTS 34,662 50,638
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 217,424 206,974
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 252,086 $ 257,612
See notes to consolidated financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-K for the year ended December 31, 1997.
NOTE B--MORTGAGE DEBT
Mortgage debt consists of the following:
June 30, December 31,
1998 1997
Collateralized by Investment
Property:
First Mortgages:
The Colony Apartments $ 3,597,148 $ 3,619,623
Cascade Apartments 1,808,167 1,831,609
The Market S.C./Hidden Valley
Exchange S.C. 1,558,635 1,577,536
Hidden Valley Exchange S.C. 803,342 807,348
Second Mortgages:
The Market S.C./Hidden Valley
Exchange S.C. 410,000 410,000
$ 8,177,292 $ 8,246,116
Interest expense totaled $388,696 and $559,163 for the six months ending June
30, 1998 and 1997, respectively.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
NOTES TO FINANCIAL STATEMENTS--CONT'D.
NOTE B--MORTGAGE DEBT--CONT'D.
The mortgage for Cascade Apartments matured March 1, 1995. The present
mortgage holder has agreed to temporarily extend the mortgage on a
month-to-month basis and the Partnership continues to make principal and
interest payments of $18,900 to said mortgage holder.
On May 28, 1996, the Partnership signed a note, collateralized by a second
mortgage on The Market and Hidden Valley Exchange, in the amount of $410,000
at 7% interest. The Partnership will make consolidated monthly principal and
interest payments on this and the first mortgage in the amount of $11,426 per
month until June 25, 1998 when the entire amount becomes due and payable. The
proceeds of this note were used to pay delinquent real estate taxes for The
Market and Hidden Valley Exchange as well as accrued interest and related loan
costs.
NOTE C--RELATED PARTY TRANSACTIONS
SPECS, Inc., a Kansas Corporation in which the individual General Partner has
a minority interest, receives property management fees for providing property
management services. SPECS, Inc. also performs various professional services
for the Partnership, primarily tax accounting, audit preparation, SEC 10Q and
10K preparation, and investor services. Property management fees paid by the
Partnership to SPECS, Inc. are as follows:
Six Months Ended
June 30,
1998 1997
Property management fees $ 44,366 $ 56,673
Amounts due (to) from related parties consist of the following:
June 30, Dec. 31,
1998 1997
Secured Investment Resources
Fund, L.P. III $ (89,623) (85,693)
Secured Investment Resources
Fund, L.P. II (5,000) (5,000)
SIR, Inc. 29,131 28,063
The Colony Apartments 40,000
Cascade Apartments (5,000)
$ 30,492 $ (62,630)
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P.
NOTE D--CASH DISTRIBUTIONS
No distributions have been made since January 1990. Future distributions will
be made only from excess cash flow not needed for working capital reserves.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first six months of 1998 decreased by $245,289 (21.4%)
compared with the same period last year. Residential rentals increased
$38,408, commercial properties decreased $263,060, and miscellaneous revenues
decreased $20,637 during that same period. The residential market has not
allowed the Partnership to increase rental rates. Several smaller leases
have been negotiated at Foothills Shopping Center which has raised occupancy.
Total operating and administrative expenses decreased $114,491 (22.6%) when
comparing the first six months of 1998 to the first six months of 1997.
The Partnership anticipates that operating results for the year ending
December 31, 1998 will show a continued increase in revenues due to new
leases signed on the commercial properties.
Liquidity and Capital Resources
During the first six months of 1998 $ 192,631 of cash was provided by
operating activities, $57,007 was used for investing activities and $100,962
was used in financing activities.
In May 1996, a $410,000 note, collateralized by Hidden Valley and The Market,
was signed. This loan matures June 25, 1998 and the interest rate is 7%.
The mortgage for Cascade Apartments matured in March, 1995. The existing
mortgage holder has agreed to extend this note on a month-to-month basis and
the Partnership makes monthly principal and interest payments of $18,900.
The General Partners also anticipate that 1998 cash flow from operations will
continue to improve because of strong occupancy, rental rate increases,
stabilized expenses, and new leases signed on commercial properties.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.--Cont'd.
The General Partners have the option of offering one or more properties for
sale. Any net proceeds in excess of the outstanding mortgage balance could
be used to generate additional additional working capital.
The General Partners have determined it prudent to discontinue cash
distributions until such time that adequate working capital and capital
improvement reserves are in place.
(The remainder of this page intentionally left blank.)
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Inapplicable.
Item 5. OTHER INFORMATION
Inapplicable.
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended June 30, 1997.
<PAGE>
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 INVESTMENT RESOURCES FUND, L.P.
A Kansas Limited Partnership
(Registrant)
By:
James R. Hoyt
as Individual General Partner
Date: May 28, 1999
By: Secured Investment Resources, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: May 28, 1999
<PAGE>
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 INVESTMENT RESOURCES FUND, L.P.
A Kansas Limited Partnership
(Registrant)
By: /s/ James R. Hoyt
James R. Hoyt
as Individual General Partner
Date: May 28, 1999
By: Secured Investment Resources, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: May 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 252,087
<SECURITIES> 0
<RECEIVABLES> 30,031
<ALLOWANCES> (37,000)
<INVENTORY> 0
<CURRENT-ASSETS> 426,321
<PP&E> 12,702,226
<DEPRECIATION> 5,390,112
<TOTAL-ASSETS> 7,738,435
<CURRENT-LIABILITIES> 415,617
<BONDS> 8,177,292
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,738,435
<SALES> 0
<TOTAL-REVENUES> 900,907
<CGS> 0
<TOTAL-COSTS> 393,578
<OTHER-EXPENSES> 202,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 388,696
<INCOME-PRETAX> (83,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (83,572)
<EPS-BASIC> (3.36)
<EPS-DILUTED> 0
</TABLE>
