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, 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 -- March 31, 1998 and
December 31, 1997 3-4
Statements of Operations -- Three Months
Ended March 31, 1998 and 1997 5
Statements of Partnership Capital --
Three Months Ended March 31, 1998
and the Years Ended December 31, 1997,
and 1996 6
Statements of Cash Flows -- Three Months
Ended March 31, 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
March 31,
1998 December 31,
(Unaudited) 1997
ASSETS
INVESTMENT PROPERTIES
Land and buildings $ 36,516,166 $ 36,499,895
Furniture, fixtures and equipment 2,136,023 2,095,962
38,652,190 38,595,857
Less accumulated depreciation
and allowance for losses 13,437,523 13,184,260
25,214,667 25,411,597
RESTRICTED DEPOSITS
Bond cash reserves 1,510,000 1,510,000
Bond principal reduction reserves 535,245 519,567
Restricted Deposits 28,750 28,750
2,073,995 2,058,517
OTHER ASSETS
Cash 933,593 867,658
Rents and other receivables,
less allowance of $142,367
in 1998 and $122,350 in 1997 44,162 55,968
Due from related parties (Note C) 179,423 179,423
Prepaid expenses 173,365 117,532
Debt issuance costs, net of
accumulated amortization of
$349,610 in 1998 and $330,728
in 1997 234,704 253,586
Commercial commissions, deposits
and other 60,227 60,679
1,625,474 1,534,846
TOTAL ASSETS $ 28,914,136 $ 29,004,960
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
BALANCE SHEETS--CONT'D.
March 31,
1998 December 31,
(Unaudited) 1997
LIABILITIES AND PARTNERSHIP CAPITAL
Mortgage debt (Note B) $ 27,432,422 $ 27,442,267
Deferred interest (Note B) 737,370 737,370
Accrued interest 799,278 799,278
Accounts payable and accrued
expenses 588,421 548,265
Unearned revenue 8,863 12,736
Tenant security deposits 153,059 149,662
TOTAL LIABILITIES 29,719,413 29,689,578
PARTNERSHIP CAPITAL
General Partner
Capital contribution 1,000 1,000
Partnership deficit (197,082) (195,875)
(196,082) (194,874)
Limited Partner
Capital contributions 18,901,831 18,901,831
Partnership deficit (19,511,026) (19,391,572)
(609,195) (489,741)
TOTAL PARTNERSHIP CAPITAL (805,277) (684,618)
$ 28,914,136 $ 29,004,960
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
1998 1997
REVENUES
Rents $1,242,370 $1,474,090
Maintenance escalations
and other 26,716 29,510
1,269,086 1,503,600
OPERATING AND
ADMINISTRATIVE EXPENSES
Property operating
expenses 522,435 626,451
General and
administrative
expenses 29,968 36,078
Professional services 32,289 25,593
Management fees 54,731 64,513
639,423 752,635
NET OPERATING INCOME 629,663 750,965
NON-OPERATING EXPENSES
Interest 478,180 606,257
Depreciation and
amortization 272,144 336,025
750,324 942,282
PARTNERSHIP LOSS $ (120,661) $ (191,317)
Allocation of loss:
General Partner (1,207) (1,913)
Limited Partner (119,454) (189,404)
$ (120,661) $ (191,317)
Partnership loss per
limited partnership
unit $ (2.23) $ (3.53)
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF PARTNERSHIP CAPITAL (Unaudited)
Three Months Ended March 31, 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 loss (1,207) (117,454) (120,661)
Balances at March 31, 1998 $ (196,082) $ (609,195) $ (805,277)
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II,
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31,
1998 1997
OPERATING ACTIVITIES
Partnership income $ (120,661) $ (191,317)
Adjustments to reconcile
partnership loss to net cash
provided by operating
activities:
Depreciation and amortization 272,145 373,825
Amortization of bond discount 37,800
Provision for losses on rents
and other receivables 20,017 24,000
Changes in assets and liabilities:
Rents and other receivables (8,210) (31,628)
Prepaid expenses (55,833) (43,363)
Commercial commissions, deposits
and other 452 10,857
Accounts payable
and accrued expenses 40,156 112,102
Accrued interest 0 44,304
Unearned revenue (3,873) (24,325)
Tenant security deposits 3,398 (2,939)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 185,391 271,516
INVESTING ACTIVITIES
Purchases of and improvements
to investment properties (56,332) (15,316)
Purchase of restricted bond
cash reserves (15,478) (19,320)
NET CASH USED IN
INVESTING ACTIVITIES (71,810) (34,636)
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
STATEMENTS OF CASH FLOWS (Unaudited)--CONT'D.
Three Months Ended
March 31,
1998 1997
FINANCING ACTIVITIES
Principal payments on
long-term debt $ (47,645) $ (45,610)
Debt Issuance Costs 0 (7,500)
Due (to) from related
parties 0 0
NET CASH USED IN
FINANCING ACTIVITIES (47,645) (53,110)
INCREASE IN CASH
AND CASH EQUIVALENTS 65,936 183,770
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 867,657 561,667
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 933,593 $ 745,437
See notes to financial statements.
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. II
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 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 three month period
ended March 31, 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 Fm 10-K for the year ended December 31, 1997.
NOTE B--MORTGAGE DEBT
Mortgage debt consists of the following:
March 31, 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 (2,012,842) (2,050,642)
Sunwood Village Apartments 7,992,016 8,008,454
Thomasbrook Apartments 4,984,179 4,984,179
Forest Park Shopping Ctr. 1,092,337 1,114,184
Bayberry Crossing Shopping Ctr. 2,576,732 2,586,092
$ 27,432,422 $ 27,442,267
Interest expense totaled $478,180 and $606,257 during the first quarter 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 March 31, 1998 and December 31, 1997, $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:
Three Months Ended
March 31,
1998 1997
Property Management Fees $ 54,731 $ 64,513
Amounts due from related parties consist of the following:
March 31, December 31,
1998 1997
Secured Investment Resources
II, Inc. $ (174,723) $ 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
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 three months of 1998 decreased by $234,514 (16.6%)
compared to the same period of last year. Residential revenues decreased by
$231,855 during that same period. Likewise, commercial rentals and
miscellaneous revenues decreased by $1,531 and $1,128 respectively.
Operating and Administrative expenses decreased $113,212 (15.0%) when
comparing the first three 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 three months decreased $128,077 (21.3%) over
the 1997 first three months expense.
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 first three months $185,391 of cash was provided by operating
activities, $71,800 was used for investing activities and $47,645 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 Partnership is negotiating with the
first mortgage lender to either restructure the existing debt, offer the
property in exchange for the debt or allow a third party to assume the debt
and acquire the property. The General Partner also anticipates that 1998 cash
flow from operations will continue to improve because of stronger 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
The first mortgage lender for Thomasbrook Apartments
has initiated a foreclosure proceeding and has requested
that a receiver be appointed to manage the property.
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, 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: May 28,1999
By: Secured Investment Resources II, 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. II
A Delaware Limited Partnership
(Registrant)
By: /s/ James R. Hoyt
James R. Hoyt
as Individual General Partner
Date: May 28,1999
By: Secured Investment Resources II, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 933,593
<SECURITIES> 2,073,995
<RECEIVABLES> 186,529
<ALLOWANCES> 142,367
<INVENTORY> 0
<CURRENT-ASSETS> 1,625,474
<PP&E> 38,652,190
<DEPRECIATION> 13,437,523
<TOTAL-ASSETS> 28,914,136
<CURRENT-LIABILITIES> 2,286,991
<BONDS> 27,432,422
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,914,136
<SALES> 0
<TOTAL-REVENUES> 1,269,086
<CGS> 0
<TOTAL-COSTS> 639,423
<OTHER-EXPENSES> 272,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 478,180
<INCOME-PRETAX> (120,661)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,661)
<EPS-BASIC> (2.28)
<EPS-DILUTED> 0
</TABLE>
