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 March 31, 1998
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
Table of Contents
<S> <C>
Item 1 Financial Statements Page
Consolidated Balance Sheets as of March 31, 1998
(Unaudited) and December 31, 1997 3
Consolidated Statements of Operations for the three months
ended March 31, 1998 and 1997 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and 1997 (Unaudited) 5
Notes to Consolidated Financial Statements as of March 31, 1998
(Unaudited) 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998
(Unaudited) December 31, 1997
ASSETS
<S> <C> <C>
Property and equipment (net of accumulated depreciation
of $14,874,987 and $14,497,189) $ 29,331,125 $ 29,708,923
Cash and cash equivalents 1,200,018 1,317,457
Tenant security deposits 461,369 466,609
Restricted assets and funded reserves 4,781,861 4,280,585
Investment in guaranteed investment contract 19,499
Interest and accounts receivable 85,674 91,297
Prepaid expenses 226,248
437,833
Intangible assets, net of accumulated amortization 1,769,608 1,826,991
-----------------------------
$ 37,855,903 $ 38,149,194
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 34,332,272 $ 34,449,756
Accounts payable and accrued expenses 177,569 395,028
Tenant security deposits payable 462,591 460,182
Due to general partners and affiliates 4,154,024 4,109,214
Deferred revenue 152,919
---------------
152,414
39,279,375 39,566,594
Partners' Deficit
Limited partners' equity - -
General partners' deficit (1,423,472) (1,417,400)
-------------- -------------
(1,423,472) (1,417,400)
$ 37,855,903 $ 38,149,194
============ ============
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See notes to consolidated financial statements.
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
------------------------ --------------
<S> <C> <C>
REVENUE
Rental $ 1,672,742 $ 1,622,602
Interest 31,668 43,577
-------------- --------------
TOTAL REVENUE 1,704,410 1,666,179
------------ ------------
EXPENSES
Administrative and management 168,750 151,045
Operating and maintenance 279,382 369,345
Taxes and insurance 255,952 282,951
Financial 571,217 425,744
Depreciation and amortization 435,181 495,695
------------- ------------
TOTAL EXPENSES 1,710,482 1,724,780
------------ -----------
NET LOSS $ (6,072) $ (58,601)
============== ============
NET LOSS ATTRIBUTABLE TO
Limited partners $ - $ -
General partners (6,072) (58,601)
--------------- -------------
$ (6,072) $ (58,601)
============== ============
NET LOSS ALLOCATED PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ - $ -
=================================
See notes to consolidated financial statements.
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SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
--------------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (6,072) $ (58,601)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities
Depreciation and amortization 435,181 495,695
Decrease in tenant security deposits 5,240
Increase in restricted assets and funded reserves(501,276) (196,005)
Decrease (increase) in interest and accounts receivable 5,623
(2,159)
Decrease (increase) in prepaid expenses 211,585 (39,793)
Decrease in other assets 34,708
Decrease in accounts payable and accrued expenses(217,459) (55,224)
Increase in tenant security deposits payable 2,409 1,225
Increase in due to general partners and affiliates44,810 5,562
Increase in deferred revenue 505 6,678
---------------- ---------------
Net cash provided by (used in) operating activities (19,454) 192,086
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed
investment contract 19,499 16,890
------------- -------------
Net cash provided by investing activities 19,499 16,890
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on permanent financing (117,484) (116,193)
----------- -----------
Net cash used in financing activities (117,484) (116,193)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (117,439) 92,783
Cash and cash equivalents at beginning of period 1,317,457 896,433
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,200,018 $ 989,216
=========== ==========
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 526,574 $ 382,164
============ ==========
See notes to consolidated financial statements.
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SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1997 and no material contingencies exist which
would require additional disclosure in the report under Regulation S-X, Rule
10-01 paragraph A-5.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year.
2. Additional information, including the audited December 31, 1997 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, 1997 on file with the Securities and Exchange Commission.
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SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rents generated by the Operating
Partnerships and interest derived from investments and deposits which are
restricted in accordance with the terms of the mortgages of the Operating
Partnerships. As of January 15, 1995, the guaranteed investment contracts which
were acquired to provide distributions to the Limited Partners were fully
amortized. One guaranteed investment contract, owned by the Columbia Partnership
became fully amortized on January 15, 1998, the proceeds of which were utilized
for investor service charges of the Columbia Partnership through December 1997.
The Partnership's investments are highly illiquid.
The Partnership is not expected to have access to additional sources of funds.
Accordingly, if unforeseen occurences arise that cause an Operating Partnership
to experience operating deficits, potential sources from which such needs will
be able to be satisfied (other than reserves) would be limited, if any. Prior to
the modification of the mortgages of the respective Operating Partnerships
during 1993, the rents generated by the Operating Partnerships were generally
not sufficient to fully cover the operating expenses and debt service
requirements of the Operating Partnerships. Although the Operating Partnerships
were successful in refinancing their respective mortgages with significantly
lower mandatory payment terms, certain restrictions were placed on the
respective Operating Partnerships in connection with distributions, among other
things. Prior to the refinancings, the respective Operating General Partners
provided funds necessary to cover operating deficits in the form of advances and
fee deferrals; however, there can be no assurance that the respective Operating
General Partners would provide funds to the extent they may be needed.
During the three months ended March 31, 1998, investment in guaranteed
investment contract decreased by approximately $19,000 as a result of the
amortization of principal from the final quarterly payment from such contract.
The payments of principal and interest from such contracts were previously
utilized by the Partnership to make distributions to the partners (through
December 1994) and cover a portion of the investor services expenses incurred by
the Partnership (through December 1997). Virtually all distributions to partners
to date have been generated from the investment in guaranteed investment
contracts. The General Partners do not anticipate significant cash flow
distributions from the properties given the restrictions on cash flow
distributions of the Columbia Partnership resulting from the restructuring of
its financing in 1993.
During the three months ended March 31, 1998, cash and cash equivalents
decreased by approximately $117,000 while accounts payable and accrued expenses
decreased by approximately $217,000 and mortgages payable decreased due to
principal amortization of approximately $117,000. Due to general partners and
affiliates increased primarily as a result of accrued interest on advances
provided by the Columbia Operating General Partners. Property and equipment
decreased by approximately $378,000 due to depreciation, while intangible assets
decreased by approximately $57,000 due to amortization. Property and equipment
and intangible assets are expected to decrease annually as the cost of these
assets is allocated to future periods over their remaining lives. Prepaid
expenses decreased in the ordinary course of operations.
As of March 31, 1998, the balance in the Columbia Partnership's Pledged Cap
Account (see discussion below) is approximately $2,318,000. Although the
original outside date for the Pledged Cap Account to be utilized for its
intended purpose was October 1996, the Columbia Operating General Partners have
been conducting ongoing discussions with the lender in order to address other
potential uses of such account, including utilizing such funds for costs in
connection with a potential refinancing of the mortgages with another lender.
Although the Columbia Operating General Partners have been conducting
discussions with other potential credit enhancers and continue to explore
alternatives in order to obtain a lower effective borrowing rate, there can be
no assurance that the lender would approve any alternative utilization of such
account, or that the Columbia Operating General Partners will procure suitable
alternative financing.
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SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
During the three months ended March 31, 1998, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities of
approximately $763,000 and approximately $242,000, respectively. Mortgage
principal payments during the three months ended March 31, 1998 for the Columbia
Partnership and the Carrollton Partnership were approximately $88,000 and
approximately $29,000, respectively. In the case of the Columbia Partnership,
the maximum amount permitted to be deposited to the Operating Deficit Reserve
($500,000) was achieved during 1994; accordingly, no additional deposits to the
Operating Deficit Reserve are required other than to maintain the account at a
balance of $500,000. No amounts were utilized from the Operating Deficit Reserve
during the three months ended March 31, 1998. Deposits to the Pledged Cap
Account and the Bond Retirement Escrow during the three months ended March 31,
1998 were approximately $125,000 and approximately $29,000, respectively.
Pursuant to the terms of the Columbia Partnership's mortgages, the lender is
entitled to a credit enhancement fee of 2.5% per annum based on the outstanding
loan balance commencing February 1, 1997. During the three months ended March
31, 1998, the Columbia Partnership incurred approximately $158,000 in connection
with such fee. After considering the respective mandatory mortgage principal
payments, required deposits to mortgage escrows and payments for the credit
enhancement fee, among other things, the Complexes generated combined cash flow
of approximately $201,000 during the three months ended March 31, 1998. Any
savings realized on the difference between the initial note rate on the Columbia
Partnership's mortgages of 4.66% and the actual low floater rate (approximately
3.11% weighted average rate during the three months ended March 31, 1998) are
deposited into the Pledged Cap Account. To the extent the future cash flow
generated by the Columbia Partnership is not utilized to fund the Operating
Deficit Reserve or Pledged Cap Account, such cash flow, under the Citibank loan
terms, must be deposited to the Bond Retirement Escrow to make additional
mortgage principal payments. However, there can be no assurance that the level
of operating income generated by the Complexes during the three months ended
March 31, 1998 will continue in future periods.
During the three months ended March 31, 1997, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities of
approximately $612,000 and approximately $242,000, respectively. Mortgage
principal payments during the three months ended March 31, 1997 for the Columbia
Partnership and the Carrollton Partnership were approximately $88,000 and
approximately $28,000, respectively. No amounts were utilized from the Operating
Deficit Reserve during the three months ended March 31, 1997. Deposits to the
Pledged Cap Account and the Bond Retirement Escrow during the three months ended
March 31, 1997 were approximately $140,000 and $73,000, respectively. The
Complexes generated combined cash flow of approximately $149,000 during the
three months ended March 31, 1997.
Although the Complexes generated cash flow during the three months ended March
31, 1998, results of operations declined as compared to the three months ended
March 31, 1997 primarily as a result of the commencement of the credit
enhancement fee in connection with the Columbia Partnership's mortgages.
Operating and maintenance expenses decreased during the three months ended March
31, 1998 primarily due to scheduled maintenance expenditures in 1997. As of
March 31, 1998, the occupancy of Fieldpointe Apartments was approximately 99%
and the occupancy of The Westmont was approximately 98% as to residential units
and 100% as to commercial space. The future operating results of the Complexes
will be extremely dependent on market conditions and therefore may be subject to
significant volatility. The Complexes are generally in good physical condition
and are being managed by experienced management companies.
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SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
None
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
<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 INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: May 15, 1998 /s/ Richard Paul
----------------------------
Richman
Richard Paul Richman
President, Chief Executive Officer
and Director
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<ARTICLE> 5
<LEGEND>
This arcticle contains summary information extracted from the three months
ended March 31, 1998 Form 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000804217
<NAME> Neal Ludeke
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 1,200,018
<SECURITIES> 0
<RECEIVABLES> 85,674
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,206,112
<DEPRECIATION> (14,874,987)
<TOTAL-ASSETS> 37,855,903
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,423,472)
<TOTAL-LIABILITY-AND-EQUITY> 37,855,903
<SALES> 0
<TOTAL-REVENUES> 1,704,410
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,139,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 571,217
<INCOME-PRETAX> (6,072)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,072)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>