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 March 31, 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 -- March 31, 1996 and
December 31, 1995 3-4
Statements of Operations -- Three Months
Ended March 31, 1996 and 1995 5
Statements of Partnership Capital --
Three Months Ended March 31, 1996
and the Years Ended December 31, 1995,
and 1994 6
Statements of Cash Flows -- Three Months
Ended March 31, 1996 and 1995 7-8
Notes to Financial Statements 9-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS
March 31,
1996 December 31,
(Unaudited) 1995
ASSETS
INVESTMENT PROPERTIES--Note
Land and buildings $ 36,232,238 $ 36,217,082
Furniture, fixtures and equipment 1,846,845 1,797,522
38,079,083 38,014,604
Less accumulated depreciation
and allowance for losses 11,026,631 10,725,975
27,052,452 27,288,629
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 430,299 429,924
1,940,299 1,939,924
OTHER ASSETS
Cash 579,160 522,835
Rents and other receivables,
less allowance of $42,950
in 1996 and $45,475 in 1995 74,338 12,069
Due from related parties--Note B 179,422 174,423
Prepaid expenses 140,413 111,061
Debt issuance costs, net of
accumulated amortization of
$140,069 in 1996 and $129,854
in 1995 113,714 89,487
Commercial commissions, deposits
and other 140,069 155,700
1,227,116 1,065,575
TOTAL ASSETS $ 30,219,867 $ 30,294,128
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
March 31,
1996 December 31,
(Unaudited) 1995
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt--Note D $ 27,553,670 $ 27,581,485
Deferred interest--Note D 1,126,213 1,126,213
Accrued interest 694,808 688,468
Accounts payable and accrued
expenses 466,587 398,997
Unearned revenue 11,578 14,358
Tenant security deposits 142,827 140,325
TOTAL LIABILITIES 29,995,683 29,949,846
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (186,787) (185,586)
(185,787) (184,586)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,491,860) (18,372,963)
409,971 528,868
TOTAL PARTNERSHIP CAPITAL 224,184 344,282
$ 30,219,867 $ 30,294,128
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
1996 1995
REVENUES
Rents $1,503,028 $1,432,728
Maintenance
escalations
and other 28,152 22,448
1,531,180 1,455,176
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 609,556 571,984
General and
administrative
expenses 36,132 29,594
Professional services 13,096 17,174
Management fees and
reimbursed direct
expenses 70,804 66,921
729,588 685,673
NET OPERATING INCOME 801,592 769,503
NON-OPERATING EXPENSES
Interest 610,819 594,670
Depreciation and
amortization 310,871 341,824
921,690 936,494
PARTNERSHIP INCOME
(LOSS) $ (120,098) $ (166,991)
Allocation of loss:
General Partner (1,201) (1,670)
Limited Partner (118,897) (165,321)
$ (120,098) $ (166,991)
Partnership loss per
limited partnership
unit $ (2.22) $ (3.08)
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended March 31, 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 loss (1,201) (118,897) (120,098)
Balances at March 31, 1996 $ (185,787) $ 409,971 $ 224,184
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31,
1996 1995
OPERATING ACTIVITIES
Partnership income (loss) $ (120,098) $ (166,991)
Adjustments to reconcile
partnership loss to net cash
provided by (used in) operating
activities:
Depreciation and amortization 348,671 341,824
Provision for losses on rents
and other receivables (2,525) 7,500
Changes in assets and liabilities:
Rents and other receivables (59,744) (58,719)
Prepaid expenses (29,353) (24,308)
Due from related parties (5,000) (2,162)
Debt issuance costs (34,440) ---
Commercial commissions, deposits
and other 15,631 (8,297)
Accounts payable
and accrued expenses 67,591 133,614
Accrued interest 6,340 101,768
Unearned revenue (2,780) 256
Tenant security deposits 2,502 432
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 186,795 324,917
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (64,480) (68,223)
Purchase of restricted bond
cash reserves (375) (4,335)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (64,855) (72,558)
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Three Months Ended
March 31,
1996 1995
FINANCING ACTIVITIES
Deferral of long-term
interest payable $ --- $ ---
Principal payments on
long-term debt (65,615) (66,044)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (65,615) (66,044)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 56,325 186,315
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 522,835 284,224
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 579,160 $ 470,539
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 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 three month period
ended March 31, 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--DUE FROM RELATED PARTY
Through December 31, 1994, property management services were provided by The
Hoyt Group, a Kansas Corporation in which the individual General Partner had
a majority interest. As of January 1, 1995, 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. Amounts paid by the Partnership to They Hoyt Group and SPECS,
Inc. are as follows:
Three Months Ended
March 31,
1996 1995
Property Management Fees $ 70,804 $ 66,921
Professional services 2,500 -0-
$ 73,304 $ 66,921
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE B--RELATED PARTY TRANSACTIONS--CONT'D.
Amounts due from related parties consist of the following:
March 31, 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 net amount due from related parties represents excess syndication
costs.
NOTE C--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.
NOTE D--MORTGAGE DEBT
Mortgage debt consists of the following:
March 31, 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 (2,315,242) (2,353,042)
Sunwood Village Apartments 8,102,961 8,136,792
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,267,111 1,288,958
Bayberry Crossing Shopping Ctr. 831,023 831,023
Second Mortgages:
Bayberry Crossing Shopping Ctr. 1,883,638 1,893,575
$ 27,553,670 $ 27,581,485
Related to the Sunwood Village Apartments purchase money note is a credit
enhancement fee which is due at maturity. As of March 31, 1996 and December
31, 1995, $371,095 of credit enhancement fees have been accrued and are
reflected in long-term accrued interest.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)--CONT'D.
NOTE D--MORTGAGE DEBT--CONT'D.
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 and Healthcare Center bond financing. As of March 31, 1996 and
December 31, 1995, $737,370 of deferred interest has been accrued and is
reflected in long-term accrued interest.
Interest expense totaled $610,819 and $594,670 during the first quarter of
1996 and 1995, respectively.
(The remainder of this page intentionally left blank.)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Revenues for the first three months of 1996 increased by $76,000 (5.2%)
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
remained strong at Forest Park Center in St Louis, the rental income at
Bayberry Center increased due to new leases. 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 $44,000 (7.3%) when comparing
the first three months of 1996 with the same period of 1995. Higher property
operating expenses are primarily due to higher resident turnover.
Professional services declined $4,000 (23.7%) from the same period in 1995.
Interest expense for the first three months increased $16,000 (2.7%) over the
1995 first three months expense. This is due primarily to higher interest
rates, and increased bond collateral fees.
The Partnership anticipates that operating results for the first three months
will be representative of the results for the remainder of the year.
Liquidity and Capital Reserves
During the three months $187,000 of cash was provided by operating activities,
$65,000 was used for investing activities and $66,000 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
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.-- Cont'd.
Liquidity & Capital Reserves -- Cont'd.
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.
The General Partner has 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 March 31, 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: May 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: May 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: May 15, 1996
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: May 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Unaudited.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 579,160
<SECURITIES> 1,940,299
<RECEIVABLES> 117,288
<ALLOWANCES> 42,950
<INVENTORY> 0
<CURRENT-ASSETS> 1,227,116
<PP&E> 38,079,083
<DEPRECIATION> 11,026,631
<TOTAL-ASSETS> 30,219,867
<CURRENT-LIABILITIES> 2,442,013
<BONDS> 27,553,670
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,219,867
<SALES> 0
<TOTAL-REVENUES> 1,531,180
<CGS> 0
<TOTAL-COSTS> 729,588
<OTHER-EXPENSES> 310,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 610,819
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,098)
<EPS-PRIMARY> (2.22)
<EPS-DILUTED> 0
</TABLE>
