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, 1999
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 06830
Greenwich, Connecticut Zip Code
(Address of principal executive offices)
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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<CAPTION>
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, 1999
(Unaudited) and December 31, 1998 3
Consolidated Statements of Operations for the
three months ended March 31, 1999 and 1998
(Unaudited) 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998
(Unaudited) 5
Notes to Consolidated Financial Statements as
of March 31, 1999 (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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<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 December 31,
(Unaudited) 1998
<S> <C> <C>
ASSETS
Property and equipment (net of accumulated
depreciation of $16,394,134 and
$16,014,726) $ 27,906,580 $ 28,285,988
Cash and cash equivalents 1,930,797 1,885,257
Restricted assets and funded reserves 4,645,496 3,944,319
Tenant security deposits 497,189 490,656
Interest and accounts receivable 63,272 71,081
Prepaid expenses 278,670 563,130
Intangible assets, net of accumulated
amortization 1,662,179 1,718,523
--------------- -----------
$ 36,984,183 $ 36,958,954
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 33,854,490 $ 33,973,813
Accounts payable and accrued expenses 196,162 182,942
Tenant security deposits payable 498,412 490,116
Due to general partners and affiliates 3,869,138 3,805,527
Deferred revenue 140,460 140,460
38,558,662 38,592,858
Partners' deficit
Limited partners' equity - -
General partners' deficit (1,574,479) (1,633,904)
------------- -------------
(1,574,479) (1,633,904)
$ 36,984,183 $ 36,958,954
============ ============
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
------------------------ --------------
<S> <C> <C>
REVENUE
Rental $ 1,779,454 $ 1,672,742
Interest 16,715 31,668
-------------- --------------
TOTAL REVENUE 1,796,169 1,704,410
------------ ------------
EXPENSES
Administrative and management 200,873 168,750
Operating and maintenance 247,269 279,382
Taxes and insurance 317,241 242,827
Financial 535,609 584,342
Depreciation and amortization 435,752 435,181
----------- -------------
TOTAL EXPENSES 1,736,744 1,710,482
----------- ------------
NET INCOME (LOSS) $ 59,425 $ (6,072)
============ ==============
NET INCOME (LOSS) ATTRIBUTABLE TO
Limited partners $ - $ -
General partners 59,425 (6,072)
-------------- ---------------
$ 59,425 $ (6,072)
============ ==============
NET INCOME (LOSS) ALLOCATED PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ - $ -
=============== ================
</TABLE>
See notes to consolidated financial statements.
4
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<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
1999 1998
--------------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 59,425 $ (6,072)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Depreciation and amortization 435,752 435,181
Increase in restricted assets and
funded reserves (701,177) (501,276)
Decrease (increase) in tenant security deposits (6,533) 5,240
Decrease in interest and accounts receivable 7,809 5,623
Decrease in prepaid expenses 284,460 211,585
Increase (decrease) in accounts payable and
accrued expenses 13,220 (217,459)
Increase in tenant security deposits payable 8,296 2,409
Increase in due to general partners and
affiliates 63,611 44,810
Increase in deferred revenue 505
Net cash provided by (used in) operating activities 164,863 (19,454)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed investment contract 19,499
Net cash provided by investing activities 19,499
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on permanent financing (119,323) (117,484)
----------- -----------
Net cash used in financing activities (119,323) (117,484)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 45,540 (117,439)
Cash and cash equivalents at beginning
of period 1,885,257 1,317,457
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,930,797 $ 1,200,018
=========== ===========
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 491,447 $ 526,574
============ ============
</TABLE>
See notes to consolidated financial statements.
5
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SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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, 1998 and no material contingencies exist which
would require additional disclosure in the report under Regulation S-X, Rule
10-01 paragraph A-5.
Certain amounts have been reclassified to conform to the current period
presentation.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the entire year.
2. Additional information, including the audited December 31, 1998 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, 1998 on file with the Securities and Exchange Commission.
6
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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. The Partnership's investments are highly illiquid.
The Partnership is not expected to have access to additional sources of
financing. Accordingly, if unforeseen circumstances arise that cause an
Operating Partnership to require capital in addition to that contributed by the
Partnership and any equity of the Operating General Partners, potential sources
from which such capital needs will be able to be satisfied (other than reserves)
would be additional equity contributions of the Operating General Partners or
other equity reserves, if any, which could adversely affect the distribution
from the Operating Partnerships to the Partnership of operating cash flow and
sale or refinancing proceeds. 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
additional funds to the extent they may be needed. 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 refinancing in 1993.
During the three months ended March 31, 1999, as a result of the cash flows
generated by the operations of the Complexes, cash and cash equivalents
increased by approximately $46,000 and restricted assets and funded
reserves increased by approximately $701,000. Mortgages payable decreased due to
principal amortization of approximately $119,000. Due to general partners and
affiliates increased primarily as a result of the accrual of interest on
advances provided by the Columbia Operating General Partners and the accrual of
investor services fees. Property and equipment decreased by approximately
$379,000 due to depreciation, while intangible assets decreased by approximately
$56,000 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. 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.
As of March 31, 1999, the balance in the Columbia Partnership's Pledged Cap
Account (see discussion below) is approximately $2,945,000. Although, the
original outside date for the Pledged Cap Account to be utilized for its
intended purpose was October 31, 1996, the lender agreed to restructure the
original terms concerning the Pledged Cap Account whereby the account may be
utilized for potential debt service shortfalls (in the event the low floater
rate is higher than the stated note rate of 4.66%), but not cause the Pledged
Cap Account to decline below a balance of $1,000,000. An interest rate cap may
be purchased upon the Pledged Cap Account reaching such minimum threshold or in
the event the low floater rate rises above 7% for 90 consecutive days or 7.5%
for 30 consecutive days. 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.
7
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Results of Operations
Three Months Ended March 31, 1999
During the three months ended March 31, 1999, the Columbia Partnership and
the Carrollton Partnership generated income from operating activities of
approximately $797,000 and approximately $271,000, respectively. Mortgage
principal payments during the period for the Columbia Partnership and the
Carrollton Partnership were approximately $88,000 and approximately $31,000,
respectively. No amounts were utilized from the Operating Deficit Reserve during
the three months ended March 31, 1999. Deposits to the Pledged Cap Account and
the Bond Retirement Escrow during the period were approximately $180,000 and
approximately $14,000, 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. During the three months
ended March 31, 1999, the Columbia Partnership incurred approximately $154,000
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 $235,000 during the three months ended March 31,
1999. 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 2.47% weighted average rate during the period) 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, will be
deposited to the Bond Retirement Escrow to make additional mortgage principal
payments. However, there can be no assurance that the level of cash flow
generated by the Complexes during the three months ended March 31, 1999 will
continue in future years.
Results of operations improved for the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998. Financial expenses
decreased primarily as a result of a decrease in the weighted average interest
rate on the Columbia Partnership's mortgages from approximately 3.11% during the
three months ended March 31, 1998 to approximately 2.47% during the three months
ended March 31, 1999. Taxes and insurance expenses increased for the three
months ended March 31, 1999 as compared to the three months ended March 31, 1998
due primarily to an increase in the Columbia Partnership's real estate taxes.
As of March 31, 1999, the occupancy of Fieldpointe Apartments was approximately
97% and the occupancy of The Westmont was approximately 99% 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.
Three Months Ended March 31, 1998
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 period for the Columbia Partnership and the
Carrollton Partnership were approximately $88,000 and approximately $29,000,
respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow
during the period were approximately $125,000 and approximately $29,000,
respectively. During the three months ended March 31, 1998, the Columbia
Partnership incurred approximately $158,000 in connection with the credit
enhancement 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.
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 (on
February 1, 1997). Operating and maintenance expenses decreased for 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.
Year 2000 Compliance
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a two
digit year is commonly referred to as the year 2000 compliance ("Y2K") issue. As
the year 2000 approaches, such systems may be unable to accurately process
certain data-based information. Many businesses may need to upgrade existing
systems or purchase new ones to correct the Y2K issue. The total cost associated
with Y2K implementation is not expected to materially impact the Partnership's
financial position or results of operations in any given year. However, there
can be no assurance that the systems of other entities on which the Partnership
relies, including Carrollton and Columbia which report to the Partnership on a
periodic basis for the purpose of the Partnership's reporting to its investors,
will be timely converted. There can be no assurance that a failure to convert by
another entity would not have a material adverse impact on the Partnership.
8
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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
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: May 17, 1999 /s/ Richard Paul Richman
----------------------------
Richard Paul Richman
President, Chief Executive Officer
and Director
10
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<ARTICLE> 5
<LEGEND>
This article contains summary information extracted for the three months
ended March 31, 1999 10-Q consoldiated Balance Sheet and Consolidated
Statement of operations 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 1,930,797
<SECURITIES> 0
<RECEIVABLES> 63,272
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,300,714
<DEPRECIATION> (16,394,134)
<TOTAL-ASSETS> 36,984,183
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,574,479)
<TOTAL-LIABILITY-AND-EQUITY> 36,984,183
<SALES> 1,779,454
<TOTAL-REVENUES> 1,796,169
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,201,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 535,609
<INCOME-PRETAX> 59,425
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,425
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
