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 September 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 -- September 30, 1996 and
December 31, 1995 3-4
Statements of Operations -- Three and Nine Months
Ended September 30, 1996 and 1995 5
Statements of Partnership Capital --
Nine Months Ended September 30, 1996
and the Years Ended December 31, 1995,
and 1994 6
Statements of Cash Flows -- Nine Months
Ended September 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
September 30,
1996 December 31,
(Unaudited) 1995
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 36,352,565 $ 36,217,082
Furniture, fixtures and equipment 1,928,241 1,797,522
__________ __________
38,280,806 38,014,604
Less accumulated depreciation
and allowance for losses 11,627,704 10,725,975
__________ __________
26,653,102 27,288,629
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 440,525 429,924
Restricted Deposits 28,750 ---
__________ __________
1,979,275 1,939,924
OTHER ASSETS
Cash 501,181 522,835
Rents and other receivables,
less allowance of $46,150
in 1996 and $45,475 in 1995 25,522 12,069
Due from related parties--Note C 179,423 174,423
Prepaid expenses 90,825 111,061
Debt issuance costs, net of
accumulated amortization of
$178,673 in 1996 and $129,854
in 1995 397,179 89,487
Commercial commissions, deposits
and other 99,485 155,700
__________ __________
1,293,615 1,065,575
TOTAL ASSETS $ 29,925,992 $ 30,294,128
__________ __________
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
September 30,
1996 December 31,
(Unaudited) 1995
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt--Note B $ 27,548,466 $ 27,581,485
Deferred interest--Note B 755,118 1,126,213
Accrued interest 692,719 688,468
Accounts payable and accrued
expenses 437,808 398,997
Unearned revenue 10,299 14,358
Tenant security deposits 149,606 140,325
__________ __________
TOTAL LIABILITIES 29,594,016 29,949,846
__________ __________
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (185,709) (185,586)
__________ __________
(184,709) (184,586)
__________ __________
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,385,146) (18,372,963)
__________ __________
516,685 528,868
__________ __________
TOTAL PARTNERSHIP CAPITAL 331,976 344,282
__________ __________
$ 29,925,992 $ 30,294,128
__________ __________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
REVENUES
Rents $4,559,968 $4,297,759 $1,537,817 $1,456,618
Maintenance escalations
and other 86,660 92,786 33,170 28,624
__________ __________ _________ _________
4,646,628 4,390,545 1,570,987 1,485,242
__________ __________ _________ _________
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 1,897,995 1,800,462 642,981 627,363
General and
administrative
expenses 104,976 95,413 32,853 31,701
Professional services 54,966 67,178 9,083 33,077
Management fees 210,200 203,298 68,300 68,135
__________ __________ _________ _________
2,268,137 2,166,351 753,217 760,276
__________ __________ _________ _________
NET OPERATING INCOME 2,378,491 2,224,194 817,770 724,966
NON-OPERATING EXPENSES
Interest 1,792,476 1,879,903 591,758 685,057
Depreciation and
amortization 950,548 912,071 328,877 228,424
2,743,024 2,791,974 920,635 913,481
Partnership Loss before
extra ordinary item (364,533) (567,780) (102,865) (188,515)
Extraordinary Gain on
debt restructuring--
Note B 352,227 890,366 --- ---
__________ __________ _________ _________
PARTNERSHIP INCOME $ (12,306) $ 322,586 $ (102,865) $ (188,515)
__________ __________ _________ _________
Allocation of income:
General Partner (123) 3,226 (1,029) (1,885)
Limited Partner (12,183) 319,360 (101,836) (186,630)
__________ __________ _________ _________
$ (12,306) $ 322,586 $ (102,865) $ (188,515)
__________ __________ _________ _________
Partnership income per
limited partnership
unit $ (.23) $ 5.95 $ (1.90) $ (3.48)
__________ __________ _________ _________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended September 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 (123) (12,183) (12,306)
__________ _________ _________
Balances at September 30, 1996 $ (184,709) $ 516,685 $ 331,976
__________ _________ _________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
1996 1995
OPERATING ACTIVITIES
Partnership income $ (12,306) $ 322,586
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 963,595 923,488
Amortization of bond discount 113,400 113,400
Gain on debt restructuring (352,227) (890,366)
Provision for losses on rents
and other receivables 675 (188,879)
Changes in assets and liabilities:
Rents and other receivables (14,128) 156,283
Prepaid expenses 20,236 26,210
Due from related parties (5,000) 2,863
Debt issuance costs (356,509) (965)
Commercial commissions, deposits
and other 24,300 (6,876)
Accounts payable
and accrued expenses 38,811 51,028
Accrued interest 4,251 283,462
Unearned revenue (4,059) (3,860)
Tenant security deposits 9,281 9,035
_________ _________
NET CASH PROVIDED BY
OPERATING ACTIVITIES 430,320 797,409
_________ _________
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (266,203) (298,242)
Purchase of restricted bond
cash reserves (39,351) (5,085)
_________ _________
NET CASH USED IN
INVESTING ACTIVITIES (305,554) (303,327)
_________ _________
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Nine Months Ended
September 30,
1996 1995
FINANCING ACTIVITIES
Principal payments on
long-term debt (146,419) (294,662)
_________ _________
NET CASH USED IN
FINANCING ACTIVITIES (146,419) (294,662)
_________ _________
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (21,653) 199,420
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 522,835 284,224
_________ _________
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 501,182 $ 483,644
_________ _________
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 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 nine
month period ended September 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:
September 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 (2,239,642) (2,353,042)
Sunwood Village Apartments 8,085,550 8,136,792
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,223,418 1,288,958
Bayberry Crossing Shopping Ctr. 831,023 831,023
Second Mortgages:
Bayberry Crossing Shopping Ctr. 1,863,938 1,893,575
__________ __________
$ 27,548,466 $ 27,581,485
__________ __________
Interest expense totaled $1,792,476 and $1,879,903 during the first
three quarters 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, 2001 (5 years).
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--MORTGAGE DEBT--CONT'D.
The Partnership recognized 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 September 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:
Nine Months Ended
September 30,
1996 1995
Property Management Fees $ 210,200 $ 203,298
__________ __________
Amounts due from related parties consist of the following:
September 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 nine months of 1996 increased by $256,000
(5.8%) 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 $107,100 (5.6%) when
comparing the first nine 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 nine months decreased $87,400 (4.7%)
over the 1995 first nine months expense.
The Partnership anticipates that operating results for the first
nine months will be representative of the results for the remainder
of the year.
Liquidity and Capital Reserves
During the first nine months $430,300 of cash was provided by
operating activities, $305,500 was used for investing activities and
$146,400 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 September 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: November 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: November 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: November 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: November 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Unaudited.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 501,181
<SECURITIES> 1,979,275
<RECEIVABLES> 71,672
<ALLOWANCES> (46,150)
<INVENTORY> 0
<CURRENT-ASSETS> 1,293,615
<PP&E> 38,280,806
<DEPRECIATION> 11,627,704
<TOTAL-ASSETS> 29,925,992
<CURRENT-LIABILITIES> 2,045,550
<BONDS> 27,548,466
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,925,992
<SALES> 0
<TOTAL-REVENUES> 4,646,628
<CGS> 0
<TOTAL-COSTS> 2,268,137
<OTHER-EXPENSES> 950,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,792,476
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,306)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> 0
</TABLE>
