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, 1996
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 0-16798
SECURED INVESTMENT RESOURCES FUND, L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3451000
(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. II
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited):
Balance Sheets -- June 30, 1996 and
December 31, 1995 3-4
Statements of Operations -- Three and Six Months
Ended June 30, 1996 and 1995 5
Statements of Partnership Capital --
Six Months Ended June 30, 1996
and the Years Ended December 31, 1995,
and 1994 6
Statements of Cash Flows -- Six Months
Ended June 30, 1996 and 1995 7-8
Notes to Financial Statements 9-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS
June 30,
1996 December 31,
(Unaudited) 1995
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 36,333,451 $ 36,217,082
Furniture, fixtures and equipment 1,896,773 1,797,522
__________ __________
38,230,224 38,014,604
Less accumulated depreciation
and allowance for losses 11,327,217 10,725,975
__________ __________
26,903,007 27,288,629
__________ __________
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 459,424 429,924
__________ __________
1,969,424 1,939,924
OTHER ASSETS
Cash 407,049 522,835
Rents and other receivables,
less allowance of $40,245
in 1996 and $45,475 in 1995 16,043 12,069
Due from related parties--Note B 179,423 174,423
Prepaid expenses 113,787 111,061
Debt issuance costs, net of
accumulated amortization of
$150,283 in 1996 and $129,854
in 1995 421,408 89,487
Commercial commissions, deposits
and other 109,315 155,700
__________ __________
1,247,025 1,065,575
__________ __________
TOTAL ASSETS $ 30,119,456 $ 30,294,128
__________ __________
<PAGE>
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
June 30,
1996 December 31,
(Unaudited) 1995
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt--Note B $ 27,556,918 $ 27,581,485
Deferred interest--Note B 755,118 1,126,213
Accrued interest 685,255 688,468
Accounts payable and accrued
expenses 524,224 398,997
Unearned revenue 17,942 14,358
Tenant security deposits 145,158 140,325
__________ __________
TOTAL LIABILITIES 29,684,615 29,949,846
__________ __________
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (184,680) (185,586)
__________ __________
(183,680) (184,586)
__________ __________
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,283,310) (18,372,963)
__________ __________
618,521 528,868
__________ __________
TOTAL PARTNERSHIP CAPITAL 434,841 344,282
__________ __________
$ 30,119,456 $ 30,294,128
__________ __________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
REVENUES
Rents $3,022,151 $2,841,141 $1,519,123 $1,408,413
Maintenance escalations
and other 53,490 64,162 25,338 41,714
________ _________ _______ _______
3,075,641 2,905,303 1,544,461 1,450,127
________ _________ _______ _______
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,255,014 1,173,099 645,458 601,115
General and
administrative
expenses 72,123 63,712 35,991 34,118
Professional services 45,883 34,101 32,787 16,927
Management fees 141,900 135,163 71,096 68,242
________ _________ _______ _______
1,514,920 1,406,075 785,332 720,402
________ _________ _______ _______
NET OPERATING INCOME 1,560,721 1,499,228 759,129 729,725
NON-OPERATING EXPENSES
Interest 1,200,718 1,194,846 589,899 675,776
Depreciation and
amortization 621,671 683,647 310,800 266,223
________ _________ _______ _______
1,822,389 1,878,493 900,699 941,999
________ _________ _______ _______
Partnership Loss before
extra ordinary item (261,668) (379,265) (141,570) (212,274)
Extraordinary Gain on
debt restructuring--
Note B 352,227 890,366 352,227 890,366
________ _________ _______ _______
PARTNERSHIP INCOME $ 90,559 $ 511,101 $ 210,657 $ 678,092
________ _________ _______ _______
Allocation of income:
General Partner 906 5,111 2,107 6,781
Limited Partner 89,653 505,990 208,550 671,311
________ _________ _______ _______
$ 90,559 $ 511,101 $ 210,657 $ 678,092
________ _________ _______ _______
Partnership income per
limited partnership
unit $ 1.67 $ 9.43 $ 3.89 $ 12.51
________ _________ _______ _______
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Six Months Ended June 30, 1996 (Unaudited) and
the Years Ended December 31, 1995 and 1994
General Limited
Partner Partner Total
Balances at January 1, 1994 $ (175,181) $1,459,936 $1,284,755
Partnership loss (8,892) (880,286) (889,178)
________ _________ __________
Balances at December 31, 1994 (184,073) 579,650 395,577
Partnership loss (513) (50,782) (51,295)
________ _________ __________
Balances at December 31, 1995 (184,586) 528,868
344,282
Partnership Income 906 89,653 90,559
________ _________ __________
Balances at June 30, 1996 $ (183,680) $ 618,521 $ 434,841
________ _________ __________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
1996 1995
OPERATING ACTIVITIES
Partnership income $ 90,559 $ 511,101
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 631,002 615,427
Amortization of bond discount 75,600 75,600
Gain on debt restructuring (352,227) (890,366)
Provision for losses on rents
and other receivables (5,230) (193,129)
Changes in assets and liabilities:
Rents and other receivables 1,256 194,136
Prepaid expenses (2,726) 21,101
Due from related parties (5,000) 4,520
Debt issuance costs (352,348) ---
Commercial commissions, deposits
and other 18,185 (13,896)
Accounts payable
and accrued expenses 125,227 219,004
Accrued interest (3,213) 134,830
Unearned revenue 3,583 2,203
Tenant security deposits 4,833 2,133
________ _________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 229,501 682,664
________ _________
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (215,620) (166,229)
Purchase of restricted bond
cash reserves (29,500) (4,710)
________ _________
NET CASH USED IN
INVESTING ACTIVITIES (245,120) (170,939)
________ _________
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Six Months Ended
June 30,
1996 1995
FINANCING ACTIVITIES
Principal payments on
long-term debt (100,167) (221,033)
________ _________
NET CASH USED IN
FINANCING ACTIVITIES (100,167) (221,033)
________ _________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (115,786) 290,692
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 522,835 284,224
________ _________
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 407,049 $ 574,916
________ _________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 1996
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, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. 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, 1995.
NOTE B--MORTGAGE DEBT
Mortgage debt consists of the following:
June 30, December 31,
1996 1995
Collateralized by Investment
Property
First Mortgages:
Oak Terrace Active Retirement
Center and Healthcare Center $ 12,800,000 $ 12,800,000
less bond discount (2,277,442) (2,353,042)
Sunwood Village Apartments 8,100,000 8,136,792
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,245,264 1,288,958
Bayberry Crossing Shopping Ctr. 831,023 831,023
Second Mortgages:
Bayberry Crossing Shopping Ctr. 1,873,893 1,893,575
__________ __________
$ 27,556,917 $ 27,581,485
__________ __________
Interest expense totaled $1,200,718 and $1,194,846 during the first half
of 1996 and 1995, respectively.
On May 17, 1996 the Partnership refinanced the matured first mortgage on
Sunwood Village Apartments. The terms of the new mortgage are $8,100,000
at 8.625% interest with monthly principal and interest payments in the amount
of $63,000 through the loan maturity date of June 1, 2000 (5 years).
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--MORTGAGE DEBT--CONT'D.
The Partnership incurred a gain of $352,227 upon payment of the refinanced
note due the forgiveness of all the deferred interest relating to the original
note.
The Partnership has the option to currently pay or defer payment of interest
due on the hedged portion ($8,400,000) of the Oak Terrace Active Retirement
Center financing. As of June 30, 1996 and December 31, 1995, $737,370 of
deferred interest has been accrued and is reflected in long-term accrued
interest.
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,
1996 1995
Property Management Fees $ 141,900 $ 135,163
_________ ________
Amounts due from related parties consist of the following:
June 30, December 31,
1996 1995
Secured Investment Resources
II, Inc. $ 174,423 $ 174,423
Secured Investment Resources
Fund, L.P. 5,000 ---
_________ ________
$ 179,423 $ 174,423
_________ ________
The amount due from SIR II, Inc. represents excess syndication
costs.
NOTE D--CASH DISTRIBUTIONS
No cash distributions have been made since April 1990. Future
distributions will only be made from excess cash flow not needed
for working capital reserves.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first six months of 1996 increased by $170,000 (5.9%)
compared to the same period of last year. The stronger apartment markets
allowed the Partnership to continue increasing rental rates, discontinue
rent concessions and maintain high occupancy levels. The commercial property
at Forest Park Center in St Louis remained strong, the rental income at
Bayberry Center increased due to current tenants rental rate increases. The
Partnership has also increased the rental rates at Oak Terrace, resulting in
higher revenue, but also higher vacancy rates. The Partnership feels that the
strong apartment market will continue through 1996 into 1997.
Operating and Administrative expenses increased $90,300 (6.8%) when comparing
the first six months of 1996 with the same period of 1995. Higher property
operating expenses are primarily due to higher resident turnover.
Interest expense for the first six months increased $5,900 (0.5%) over the
1995 first six months expense.
The Partnership anticipates that operating results for the first six months
will be representative of the results for the remainder of the year.
Liquidity and Capital Reserves
During the first six months $229,500 of cash was provided by operating
activities, $245,100 was used for investing activities and $100,200 was used
to reduce long term debt.
Although the cash position has improved, the Partnership is past due on the
Thomasbrook Apartment first mortgage. The General Partner believes that
working capital will be available during the remainder of the year to reduce
this past due balance and fund known, on-going operating and capital
requirements. The General Partner also anticipates that 1996 cash flow from
operations will continue to improve because of strong occupancy and continued
rental rate increases.
It is the General Partner's intent to evaluate the Partnership's portfolio to
determine if it is prudent to offer one or more properties for sale or
possible restructure of the related financing packages. Any unleveraged
portion of the net sale proceeds or favorable refinancing terms could
generate additional working capital.
<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, 1996.
<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. II
A Delaware Limited Partnership
(Registrant)
By:
James R. Hoyt
as Individual General Partner
Date: August 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: August 15, 1996
<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. II
A Delaware Limited Partnership
(Registrant)
By: /s/ James R. Hoyt
James R. Hoyt
as Individual General Partner
Date: August 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: August 15, 1996
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Unaudited.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 407,049
<SECURITIES> 1,969,424
<RECEIVABLES> 56,288
<ALLOWANCES> 40,245
<INVENTORY> 0
<CURRENT-ASSETS> 1,247,025
<PP&E> 38,230,224
<DEPRECIATION> 11,327,217
<TOTAL-ASSETS> 30,119,456
<CURRENT-LIABILITIES> 2,127,697
<BONDS> 27,556,918
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,119,456
<SALES> 0
<TOTAL-REVENUES> 3,075,641
<CGS> 0
<TOTAL-COSTS> 1,514,920
<OTHER-EXPENSES> 621,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,200,718
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,559
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 0
</TABLE>
