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, 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 0-16798
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, 1998 and
December 31, 1997 3-4
Statements of Operations -- Three and Nine
Months Ended September 30, 1998 and 1997 5
Statements of Partnership Capital --
Nine Months Ended September 30, 1998
and the Years Ended December 31, 1997,
and 1996 6
Statements of Cash Flows -- Nine Months
Ended September 30, 1998 and 1997 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,
1998 December 31,
(Unaudited) 1997
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 30,454,750 $ 36,499,895
Furniture, fixtures and equipment 1,665,985 2,095,962
32,120,735 38,595,857
Less accumulated depreciation
and allowance for losses 11,586,803 13,184,260
20,533,932 25,411,597
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 566,742 519,567
Restricted Deposits 28,750 28,750
2,105,492 2,058,517
OTHER ASSETS
Cash 847,464 867,658
Rents and other receivables,
less allowance of $145,067
in 1998 and $122,350 in 1997 158,274 55,968
Due from related parties (Note C) 179,423 179,423
Prepaid expenses 207,702 117,532
Debt issuance costs, net of
accumulated amortization of
$387,374 in 1998 and $330,728
in 1997 196,940 253,586
Commercial commissions, deposits
and other 58,915 60,679
1,648,718 1,534,846
TOTAL ASSETS $ 24,288,142 $ 29,004,960
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
September 30,
1998 December 31,
(Unaudited) 1997
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 22,429,287 $ 27,442,267
Deferred interest (Note B) 737,370 737,370
Accrued interest 76,518 799,278
Accounts payable and accrued
expenses 516,051 548,265
Unearned revenue 9,380 12,736
Tenant security deposits 117,103 149,662
TOTAL LIABILITIES 23,885,709 29,689,578
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (180,817) (195,875)
(180,816) (194,875)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (18,318,582) (19,391,572)
583,249 (489,741)
TOTAL PARTNERSHIP CAPITAL 402,433 (684,618)
$ 24,288,142 $ 29,702,219
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,
1998 1997 1998 1997
REVENUES
Rents $4,583,500 $4,462,368 $2,047,938 $1,503,785
Maintenance escalations
and other 69,347 101,315 17,682 41,833
4,652,847 4,563,683 2,065,620 1,545,618
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 2,097,814 1,962,135 1,053,013 666,650
General and
administrative
expenses 102,222 107,401 35,417 31,424
Professional services 145,684 89,114 63,241 37,512
Management fees 194,112 197,467 83,926 67,379
2,539,832 2,356,117 1,235,607 802,965
NET OPERATING INCOME 2,113,015 2,207,566 830,013 742,653
NON-OPERATING EXPENSES
Interest 1,457,997 1,836,763 466,922 614,909
Depreciation and
amortization 816,433 1,008,076 272,144 336,026
2,274,430 2,844,839 739,066 950,935
Partnership Loss before
extra ordinary item $ (161,415) (637,273) 90,947 (208,282)
Extraordinary Gain on
debt restructuring--
(Note B) 1,567,326 0 1,567,326 0
PARTNERSHIP INCOME (LOSS) $1,405,911 $ (637,273) $ 1,658,273 $ (208,282)
Allocation of income (loss):
General Partner 14,059 (6,373) 16,583 (2,083)
Limited Partner 1,391,852 (630,900) 1,641,690 (206,199)
$1,405,911 $ (637,273) $ 1,658,273 $ (208,282)
Partnership income (loss)
per limited partnership
unit $ 25.96 $ (11.76) $ 30.61 $ (3.84)
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Nine Months Ended September 30, 1998 (Unaudited) and
the Years Ended December 31, 1997 and 1996
General Limited
Partner Partner Total
Balances at January 1, 1996 $ (184,586) $ 528,868 $ 344,282
Partnership loss (1,935) (191,525) (193,460)
Balances at December 31, 1996 (186,521) 337,343 150,822
Partnership loss (8,354) (827,084) (835,438)
Balances at December 31, 1997 (194,875) (489,741) (684,616)
Partnership profit 14,059 1,391,852 1,405,911
Distribution 0 (318,862) (318,862)
Balances at September 30, 1998 $ (180,816) $ 583,249 $ 402,433
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
1998 1997
OPERATING ACTIVITIES
Partnership income $ 1,405,911 $ (637,273)
Adjustments to reconcile
partnership income to net cash
provided by operating
activities:
Depreciation and amortization 816,433 1,008,076
Amortization of bond discount 113,400 113,400
Gain on debt restructuring 0 0
Provision for losses on rents
and other receivables 22,717 49,300
Changes in assets and liabilities:
Rents and other receivables (125,023) (113,807)
Prepaid expenses (85,489) (18,075)
Commercial commissions, deposits
and other (2,915) 30,526
Accounts payable
and accrued expenses (32,214) 145,754
Accrued interest (722,760) 105,871
Unearned revenue (3,356) (29,024)
Tenant security deposits (32,559) (1,911)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,354,145 652,837
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (213,734) (101,937)
Purchase of restricted bond
cash reserves (46,975) (49,365)
NET CASH USED IN
INVESTING ACTIVITIES (260,709) (151,302)
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Nine Months Ended
September 30,
1998 1997
FINANCING ACTIVITIES
Principal payments on
long-term debt $ (851,414) $ (135,960)
Debt Issuance Costs 56,646 (16,500)
Due (to) from related
parties 0 0
NET CASH USED IN
FINANCING ACTIVITIES (794,768) (152,460)
DISTRIBUTIONS OT LIMITED PARTNERS (318,862) 0
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (20,194) 349,075
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 867,658 561,667
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 847,464 $ 910,742
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 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 nine month period ended September 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:
September 30, December 31,
1998 1997
Collateralized by Investment
Property
First Mortgages:
Oak Terrace Active Retirement
Center and Healthcare Center $ 12,800,000 $ 12,800,000
less bond discount (1,937,242) (2,050,642)
Sunwood Village Apartments 7,958,101 8,008,454
Thomasbrook Apartments 4,984,179
Forest Park Shopping Ctr. 1,048,644 1,114,184
Bayberry Crossing Shopping Ctr. 2,559,785 2,586,092
$ 22,429,287 $ 27,442,267
Interest expense totaled $1,457,997 and $1,836,763 during the
first nine months of 1998 and 1997, 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>
SECURED INVESTMENT RESOURCES FUND, L.P. II
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 June 30, 1997 and December
31, 1996, $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,
1998 1997
Property Management Fees $ 194,122 $ 197,467
Amounts due from related parties consist of the following:
September 30, December 31,
1998 1997
Secured Investment Resources
II, Inc. $ 174,423 $ 174,423
Secured Investment Resources
Fund, L.P. 5,000 5,000
$ 179,423 $ 179,423
The amount due from SIR II, Inc. represents excess syndication costs.
NOTE D--CASH DISTRIBUTIONS
In May, 1998, the Partnership made a distribution of $321,966 to
limited partners only. Prior to May, 1998, no distributions had
been made since April, 1990. The General Partners determined that
adequate cash flow and working capital is available to fund the
operations, and as a result, were able to approve the cash
distribution. 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 1998 increased by $89,164
(1.9%) compared to the same period of last year. The commercial
property at Forest Park Center in St Louis remained strong, the
rental income at Bayberry Center decreased due to vacancy and bad
debt.
Operating and Administrative expenses increased $183,716 (7.7%)
when comparing the first nine months of 1998 with the same period
of 1997. Higher property operating expenses are primarily due to
higher resident turnover.
Interest expense for the first nine months decreased $378,766
(10.8%) over the 1997 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 $1,354,145 of cash was provided by
operating activities, $260,709 was used for investing activities
and $851,414 was used to reduce long term debt.
During the quarter ended September 30, 1998, the Partnership
completed the sale of the Thomasbrook Apartments. The sale
occurred during a foreclosure action and the third party buyer
paid cash to the partnership and assumed the outstanding
indebtedness against the property.
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, 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. II
A Delaware Limited Partnership
(Registrant)
By:
James R. Hoyt
as Individual General Partner
Date: July 30, 1999
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By:
James R. Hoyt, President
Date: July 30, 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. II
A Delaware Limited Partnership
(Registrant)
By: /s/ James R. Hoyt
James R. Hoyt
as Individual General Partner
Date: July 30, 1999
By: Secured Investment Resources II, Inc.
as Corporate General Partner
By: /s/ James R. Hoyt
James R. Hoyt, President
Date: July 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Unaudited.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 847,464
<SECURITIES> 2,105,492
<RECEIVABLES> 303,341
<ALLOWANCES> 145,067
<INVENTORY> 0
<CURRENT-ASSETS> 642,980
<PP&E> 32,120,735
<DEPRECIATION> 11,586,803
<TOTAL-ASSETS> 24,288,142
<CURRENT-LIABILITIES> 1,456,422
<BONDS> 22,429,287
0
0
<COMMON> 0
<OTHER-SE> 402,433
<TOTAL-LIABILITY-AND-EQUITY> 24,288,142
<SALES> 0
<TOTAL-REVENUES> 6,220,173
<CGS> 0
<TOTAL-COSTS> 2,539,832
<OTHER-EXPENSES> 816,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,457,997
<INCOME-PRETAX> 1,405,911
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,405,911
<EPS-BASIC> (25.96)
<EPS-DILUTED> 0
</TABLE>
