SECURITIES AND EXCHANGE COMMISSION
Washington, DC
_________________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period 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 from to
Commission file number 0-17412
Secured Income L.P.
(Exact name of Registrant as specified in its charter)
Delaware 06-1185846
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 West Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
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 for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes X No
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SECURED INCOME L.P. AND SUBSIDIARIES
Part I - Financial Information
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Table of Contents
Item 1. Financial Statements Page
Consolidated Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995 3
Consolidated Statements of Operations for the three
and nine month periods ended September 30, 1996
(Unaudited) and September 30, 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 (Unaudited) and
September 30, 1995 (Unaudited) 5
Notes to Consolidated Financial Statements as of June
30, 1996 (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
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2
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996
Notes (Unaudited) December 31, 1995
ASSETS
<S> <C> <C>
Property and equipment (net
of accumulated depreciation
of $12,570,358 and $11,431,970) $ 31,430,347 $ 32,568,735
Cash and cash equivalents 986,634 776,227
Cash restricted for tenants'
security deposit 437,060 424,470
Restricted assets and funded
reserves 4,270,282 3,487,938
Investments - guaranteed
investment contract 109,036 158,394
Interest and accounts
receivable 76,093 57,859
Prepaid expenses 106,647 425,513
Other assets, net of
accumulated amortization 2,209,481 2,559,539
$ 39,625,580 $ 40,458,675
LIABILITIES AND PARTNERS'
EQUITY (DEFICIT)
Liabilities
Mortgages payable $ 35,837,222 $ 36,589,220
Accounts payable and accrued
expenses 354,327 248,310
Tenants' security deposits
payable 438,199 421,946
Due to general partners
and affiliates 3,921,153 3,774,483
Deferred income 193,499 176,322
40,744,400 41,210,281
Commitments and contingencies 3
Partners' equity (deficit)
Limited partners' equity - -
General partners' deficit (1,118,820) (751,606)
(1,118,820) (751,606)
$ 39,625,580 $ 40,458,675
See notes to consolidated financial statements.
3
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30,September 30,September 30, September 30,
1996 1996 1995 1995
<S> <C> <C> <C> <C>
REVENUE
Rental $ 1,572,440 $ 4,619,879 $ 1,469,574 $ 4,366,186
Interest 32,372 103,828 57,166 110,192
1,604,812 4,723,707 1,526,740 4,476,378
EXPENSES
Administrative
and management 190,177 548,943 194,423 477,965
Operating and
maintenance 336,496 920,559 255,538 716,133
Taxes and insurance 275,046 804,884 242,275 732,951
Interest 448,799 1,328,089 480,652 1,468,261
Depreciation and
amortization 496,148 1,488,446 498,116 1,494,347
1,746,666 5,090,921 1,671,004 4,889,657
NET LOSS $ (141,854) $ (367,214) $ (144,264) $ (413,279)
NET LOSS ATTRIBUTABLE TO
Limited Partners $ - $ - $ - $ -
General Partners (141,854) (367,214) (144,264) (413,279)
$ (141,854) $ (367,214 $ (144,264) $ (413,279)
NET LOSS ALLOCATED PER
UNIT OF LIMITED
PARTNERSHIP INTEREST $ - $ - $ - $ -
See notes to consolidated financial statements.
4
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (367,214) $ (413,279)
Adjustments to reconcile net
loss to net cash provided
by operating activities
Depreciation and amortizatio 1,488,446 1,494,347
Decrease (increase) in assets
Restricted assets and
funded reserves (782,344) (788,516)
Tenants' security deposits (12,590) (17,210)
Interest and accounts
receivable (18,234) 11,040
Prepaid expenses 318,866 253,605
Increase in liabilities
Accounts payable and
accrued expenses 106,017 42,318
Tenants' security deposits
payable 16,253 18,593
Due to general partners
and affiliates 146,670 139,143
Deferred income 17,177 3,295
Net cash provided by
operating activities 913,047 743,336
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed
investment contracts 49,358 257,328
Distribution of guaranteed investment
contract installments to partners (217,097)
Net cash provided by
investing activities 49,358 40,231
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on permanent
financing (751,998) (538,756)
Net cash used in
financing activities (751,998) (538,756)
NET INCREASE IN CASH AND CASH EQUIVALENTS 210,407 244,811
CASH AND CASH EQUIVALENTS, beginning of
period 776,227 660,578
CASH AND CASH EQUIVALENTS, end of period $ 986,634 $ 905,389
SUPPLEMENTAL INFORMATION
Interest paid $ 1,196,995 $ 1,329,281
See notes to consolidated financial statements.
5
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SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. They do not include all information
and footnotes required by generally accepted accounting principles for
complete financial statements. The results of operations are impacted
significantly by the results of operations of the Carrollton and
Columbia Partnerships, which is provided on an unaudited basis during
interim periods. Accordingly, the accompanying consolidated financial
statements are dependent on such unaudited information. In the opinion
of the General Partners, the consolidated financial statements include
all adjustments necessary to reflect fairly the results of the interim
periods presented. All adjustments are of a normal recurring nature.
No significant events have occurred subsequent to December 31, 1995
and no material contingencies exist which would require additional
disclosure in the report under Regulation S-X, Rule 10-01 paragraph
A-5, except as disclosed in Note 3 below. The results of operations
for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the entire year. 2.
Additional information, including the audited December 31, 1995
Consolidated Financial Statements and the Summary of Significant
Accounting Policies, is included in Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 on file with the
Securities and Exchange Commission. 3. Commitments and Contingencies A
holder of the bonds issued in connection with the original Carrollton
mortgage served a complaint on or about March 22, 1994 against the
Carrollton Partnership, the Carrollton Operating General Partners and
the trustee alleging damages in the amount of $1,015,000 arising from
the redemption of such bonds. On September 27, 1996 the court ruled in
favor of the defendants. A former employee of the Columbia Partnership
has brought a lawsuit against the Columbia Partnership and the former
site manager of the property alleging wrongful termination in
violation of the Americans with Disabilities Act. Attorneys for the
plaintiff have offered to settle the lawsuit in exchange for a payment
of $75,000. Management of the Columbia Partnership, with counsel,
are currently reviewing the facts and merits of the lawsuit. No
provision for such claim is reflected in the consolidated financial
statements.
6
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SECURED INCOME L.P. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material changes in financial condition and results of operations.
The results of operations of Secured Income L.P. and Subsidiaries (the
"Partnership") for the first nine months of 1996 were comparable to the first
nine months of 1995. Changes in assets and liabilities are comprised of periodic
transactions and adjustments, including payments from the remaining guaranteed
investment contract and depreciation and amortization. During the nine months
ended September 30, 1996, the Complexes generated net cash flow before scheduled
principal reduction on the mortgages and, in the case of the Columbia
Partnership, prior to mandatory deposits to the Pledged Cap Account (see
discussion below) and the Bond Retirement Escrow of approximately $1,260,000.
Such amount reflects cash flow after replacement reserve activity and capital
expenditures and excludes proceeds from the remaining guaranteed investment
contract. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $673,000 and
$79,000, respectively. During the nine months ended September 30, 1996, the
Columbia Partnership deposited approximately $359,000 to the Pledged Cap Account
and approximately $500,000 to the Bond Retirement Escrow. Restricted assets and
funded reserves as of September 30, 1996 include Columbia Partnership deposits
in the Pledged Cap Account, Operating Deficit Escrow and Bond Retirement Escrow
of approximately $1,623,000, approximately $502,000 and approximately $370,000,
respectively. To the extent the future cash flow of the Columbia Partnership is
not utilized to fund the Operating Deficit Reserve or Pledged Cap Account, such
cash flow, under the Citibank loan terms, will be deposited to the Bond
Retirement Escrow to make additional mortgage principal payments. Such
additional payments amounted to $400,000 during the nine months ended September
30, 1996. In October 1996, $200,000 was utilized from the Bond Retirement Escrow
for such additional payments. Prepaid expenses decreased in the ordinary course
of operations. Due to general partners and affiliates increased principally due
to accrued interest on advances provided by the Columbia General Partners and
the accrual of investor service fees, partially offset by the payment of accrued
management fees of the Carrollton Partnership. Administrative and management
expenses increased for the nine months ended September 30, 1996 as compared to
the nine months ended September 30, 1995 due to an increase in leasing
commissions of the Columbia Partnership, among other things. Operating and
maintenance expenses increased for the nine months ended September 30, 1996 as
compared to the nine months ended September 30, 1995, partially due to weather
related activity in 1996 and also due to an increase in planned improvements,
repairs and replacements in 1996 as compared to 1995. Interest expense decreased
for the nine months ended September 30, 1996 as compared to the nine months
ended September 30, 1995 due to a decrease in the low floater rate associated
with the Columbia Partnership's mortgage and lower outstanding balances on the
mortgages. The 1993 mortgage modification of the Columbia Partnership has
substantially improved the financial condition of that partnership; however,
there can be no assurance that interest rates on the adjustable rate bonds
underlying the Columbia Partnership's mortgage will remain at current low
levels. The weighted average interest rate on the Columbia Partnership debt was
approximately 3.24% and approximately 3.70% during the nine months ended
September 30, 1996 and 1995, respectively. Although the properties are currently
generating cash flow, the General Partners do not anticipate significant future
cash flow distributions from the properties given the distribution restriction
on the Columbia Partnership resulting from the restructuring of its debt.
The mortgage modification documents of the Columbia Partnership call for
the Pledged Cap Account to be utilized for its intended purpose on or before
October 15, 1996, although the lender did not enforce such provisions at that
time. The Columbia General Partners are continuing discussions with the lender
in order to address other potential uses of such account, including utilizing
such funds for costs in connection with the potential refinancing of the
mortgage with another lender. However, there can be no assurance that the lender
would approve any alternative utilization of such account or that the Columbia
General Partners will locate suitable alternative financing.
As of September 30, 1996, the occupancy of the Fieldpointe Complex (owned
by the Carrollton Partnership) was approximately 98% and the occupancy of the
Westmont Complex (owned by the Columbia Partnership) was approximately 99% as to
residential units and 100% as to commercial space. Rental revenue of the
Complexes increased by approximately 6% due to higher average residential
occupancy during the first nine months of 1996 and the commencement of lease
payments on commercial space that was vacant during most of 1995. The future
operating results of the Complexes will be extremely dependent on market
conditions and interest rate fluctuations and therefore may be subject to
significant volatility.
7
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SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1. Legal Proceedings
A holder of the bonds issued in connection with the original Carrollton mortgage
served a complaint on or about March 22, 1994 against the Carrollton
Partnership, the Carrollton Operating General Partners and the trustee alleging
damages in the amount of $1,015,000 arising from the redemption of such bonds.
On September 27, 1996 the court ruled in favor of the defendants. A former
employee of the Columbia Partnership has brought a lawsuit against the Columbia
Partnership and the former site manager of the property alleging wrongful
termination in violation of the Americans with Disabilities Act. Attorneys for
the plaintiff have offered to settle the lawsuit in exchange for a payment of
$75,000. Management of the Columbia Partnership, with counsel, are currently
reviewing the facts and merits of the lawsuit. No provision for such claim is
reflected in the consolidated financial statements.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
8
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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 INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: November 13, 1996 Richard Paul Richman
President, Chief Executive Officer
and Director
9
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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 INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: November 13, 1996 /s/ Richard Paul Richman
Richard Paul Richman
President, Chief Executive Officer
and Director
9
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<LEGEND>
This schedule contains summary information extracted from the nine months ended
September 30, 1996 Form 10-Q consolidated Balance Sheets and Consolidated
Statements of Operations as of September 30, 1996 and is qualified in is
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000804217
<NAME> Neal Ludeke
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.00
<CASH> 986,634
<SECURITIES> 0
<RECEIVABLES> 76,093
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 44,000,705
<TOTAL-ASSETS> (12,570,358)
<CURRENT-LIABILITIES> 39,625,580
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,118,820)
<TOTAL-LIABILITY-AND-EQUITY> 39,625,580
<SALES> 4,619,879
<TOTAL-REVENUES> 4,723,707
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,762,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,328,089
<INCOME-PRETAX> (367,214)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,214)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
