<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For fiscal
year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the
transition period from ________ to ________.
0-17412
(Commission File Number)
Secured Income L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 06-1185846
(State or other jurisdiction (I.R.S. Employer Identification No.)
of organization)
Wilder Richman Resources Corporation
599 W. Putnam Avenue
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Title of Class)
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 such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate sales price of the units of limited partnership interest held by
non-affiliates of the Registrant is $19,687,380. There is currently no public
market for the units of limited partnership interest and, accordingly, such
figure does not represent the market value for the units.
Documents incorporated by reference:
The Prospectus of the Registrant, dated March 5, 1987 as supplemented and filed
pursuant to Rule 424(b) and (c) under the Securities Act of 1933, is
incorporated by reference into Parts I, II and III of this Annual Report on Form
10-K.
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PART I
Item 1 Business
General Development of Business
Registrant (also referred to as the "Partnership") is a limited partnership
which was formed under the Delaware Revised Uniform Limited Partnership Act on
October 10, 1986. The general partners of the Partnership (the "General
Partners") are Wilder Richman Resources Corporation, a Delaware corporation,
Real Estate Equity Partners L.P., a Delaware limited partnership and WRC-87A
Corporation, a Delaware corporation.
The Partnership was organized to invest in luxury multi-family residential
housing complexes (the "Complexes") by acquiring approximately 99% of the
limited partnership interest (the "Operating Partnership Interest") in limited
partnerships that own and operate such Complexes (the "Operating Partnerships").
WRC-87A Corporation is a special limited partner of each Operating Partnership
and has certain rights in connection therewith. Pursuant to Rule 12b-23 of the
Securities and Exchange Commission's General Rules and Regulations promulgated
under the Securities Exchange Act of 1934, as amended, the description of
Registrant's business set forth under the heading "Investment Objectives and
Policies" at pages 20 through 30 of the prospectus, dated March 5, 1987, (the
"Prospectus") is incorporated herein by reference.
Pursuant to the Partnership's Prospectus, as supplemented on October 2, 1987,
December 15, 1987 and March 29, 1988, the Partnership offered up to $50 million
of units of limited partnership interest in the Partnership (the "Units") at an
offering price of $20 per Unit. The Units were registered under the Securities
Act of 1933 pursuant to a Registration Statement on Form S-11 (Registration No.
33-9602).
Registrant terminated the offering of Units (the "Offering") on February 29,
1988 upon raising sufficient capital from the sale of Units to fund the
acquisition of the two properties specified for investment by Registrant. The
Offering raised $19,687,380 from the sale of 984,369 Units. After payment of
$1,378,117 of selling commissions and $1,378,116 of organization and offering
expenses and acquisition fees, the net proceeds available for investment were
$16,931,147. Of such net proceeds, $16,734,273 was allocated to the acquisition
of investments in the Operating Partnerships (the "Operating Partnership
Interests") which included investments in guaranteed investment contracts. The
remaining net proceeds of $196,874 was designated as working capital to be used
for operating expenses of the Partnership.
Competition
Information regarding competition, general risks, tax risks and partnership
risks is set forth under the heading "Risk Factors" at pages 37 through 48 of
the Prospectus, which is incorporated herein by reference.
Compliance with Environmental Protection Provisions
Registrant is not aware of any non-compliance by the Operating Partnerships with
respect to federal, state and local provisions regulating the discharge of
material into the environment or otherwise relating to the protection of the
environment, and is not aware of any condition that would have a material effect
on the capital expenditures or competitive position of Registrant.
Employees of Registrant
Registrant employs no personnel and incurs no payroll costs. An affiliate of
Wilder Richman Resources Corporation employs individuals who perform accounting,
secretarial, transfer and other services on behalf of Registrant as are
necessary in the ordinary course of business. Such individuals also perform
similar services for other affiliates of Wilder Richman Resources Corporation.
2
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<TABLE>
<CAPTION>
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue
Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget
Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget
Reconciliation Act of 1993, Uruguay Round Agreements Act and Taxpayer Relief Act
of 1997 (collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax
entity which does not, itself, pay Federal income tax. However, the partners of
Registrant who are subject to Federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investments. Registrant does
not anticipate that the Tax Acts will currently have a material adverse impact
on Registrant's business operations, capital resources and plans or liquidity.
Item 2 Properties
The following table sets forth information regarding the Complexes owned by the
Operating Partnerships as of December 31, 1998.
Number of
Property Location Dwelling Units
<S> <C> <C>
Fieldpointe Apartments Frederick, MD 252
The Westmont New York, NY 163
</TABLE>
Fieldpointe Apartments, which is owned by Carrollton X Associates Limited
Partnership (the "Carrollton Partnership"), is comprised of 252 apartment units
totalling approximately 235,000 square feet with approximately 500 parking
spaces. On-site amenities include a clubhouse building with locker room and
on-site management office, a swimming pool and two tennis courts. The apartments
feature numerous amenities, including dishwashers, disposals and fireplaces.
The Partnership acquired its interest as a limited partner in the Carrollton
Partnership by making a capital contribution of $3,121,995. Of this amount,
$1,373,039 was invested in guaranteed investment contracts and $1,748,956 was
contributed upon the Partnership's acquisition of the Operating Partnership
Interest, including the amount due upon the achievement of sustaining rental
revenue.
The mortgage financing of the Carrollton Partnership was modified on August 30,
1993 from the sale of tax-exempt bonds pursuant to the terms of Section
103(b)(4)(a) of the Internal Revenue Code. The modified mortgage in the amount
of $10,494,100, bearing fixed 6.09% interest (with an exception for the first
ten months through August 1994) and with a term of 35 years, is insured by the
United States Department of Housing and Urban Development ("HUD") under Section
221(d)(4) of the National Housing Act, as amended. Under the terms of the
financing, 80% of the units are permitted market rate rents and 20% of the units
are to be rented to people earning no more than the low or moderate income
levels within the meaning of Section 103(b)(4)(a) of the Internal Revenue Code.
The Fieldpointe Apartments occupancy rate was approximately 95% as of December
31, 1998.
The Westmont, which is owned by Columbia Associates (the "Columbia
Partnership"), contains 163 apartment units, 9,415 square feet of commercial
space, 46 garage parking spaces, and a penthouse with an exercise center and
health club which offers exercise equipment, steam room, sauna, jacuzzi and a
large terrace. The apartments feature numerous luxury amenities, including
security systems, microwave ovens, dishwashers and hardwood floors.
The Partnership acquired its interest as a limited partner in the Columbia
Partnership by making a capital contribution of $12,571,634. Of this amount,
$6,651,323 was invested in guaranteed investment contracts (which had a value of
$5,610,679, including net accrued interest of $18,918, at the time of the
acquisition as a result of principal amortization from the dates of purchase of
such guaranteed investment contracts to the closing of the Columbia Partnership
acquisition), $5,921,104 was contributed upon the Partnership's acquisition of
the Operating Partnership Interest in the Columbia Partnership and $1,039,851
was contributed to the Columbia Partnership upon the achievement of sustaining
rental revenue.
The mortgage financing of the Columbia Partnership was modified on May 27, 1993
pursuant to a bond refunding by the New York City Housing Development
Corporation ("HDC") in the amount of $27,600,000. Under the terms of the
modified financing, the Columbia Partnership agreed that 20% of the residential
units in The Westmont will be maintained for occupancy by low or moderate income
tenants through July 2004. The Westmont's occupancy rate as of December 31, 1998
was approximately 100% as to both residential dwelling units and commercial
space.
3
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<TABLE>
<CAPTION>
As of December 31, 1998, the market rental rates of the Complexes were
approximately as follows:
Fieldpointe The
Apartments Westmont
<S> <C> <C>
Monthly Rental Rates:
Studio $1,610-$2,100
One-Bedroom $600-$660 $1,606-$2,758
Two-Bedroom $625-$760 $1,951-$3,850
Three-Bedroom $775-$885 $3,419-$4,200
</TABLE>
The low and moderate income rental rates as of December 31, 1998 for Fieldpointe
Apartments fall within the ranges noted above. Such rates for The Westmont range
from $705 to $948.
Further information regarding the Complexes and Registrant's interest therein is
set forth under the heading Specified Investments at pages 30 through 36 of the
Prospectus, and in the supplements to the Prospectus dated October 2, 1987 and
March 29, 1988.
Item 3 Legal Proceedings
None
Item 4 Submission of Matters to a Vote of Security Holders
None
4
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<TABLE>
<CAPTION>
PART II
Item 5 Market for Registrant's Common Equity and Related Unit Matters
Market
There is no developed public market for the purchase and sale of Units and
Registrant does not anticipate that such a market will develop.
Holders
As of December 31, 1998, there were approximately 1,206 record holders of Units
(the "Limited Partners") holding an aggregate of 984,369 Units in the
Partnership.
Distributions
The Agreement of Limited Partnership of Registrant (the "Partnership Agreement")
provides that all Cash Available for Distribution (as defined therein) be
distributed quarterly to the partners in specified proportions. As part of the
restructuring of the Columbia Partnership's financing, the Columbia Partnership
is prohibited from distributing cash flow from operations. See Item 7 herein,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, for further discussion. There were no distributions to the Limited
Partners declared during the years ended December 31, 1998 and 1997.
Item 6 Selected Financial Data
The following table summarizes certain selected consolidated financial
information concerning Registrant and should be read in conjunction with the
consolidated financial statements and the related notes thereto:
Year Ended December 31,
1998 1997 1996 1995 1994
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total
revenue $7,078,399 $6,787,161 $6,434,698 $6,092,551 $5,880,772
Net loss (216,504) (596,273) (69,521) (397,620) (465,413)
Net loss
allocated
per unit
of limited
partnership
interest - - - - (.39)
At year
end:
Total
assets 38,958,954 38,149,194 39,322,376 40,458,675 41,709,487
Mortgages
payable 33,973,81 34,449,756 35,320,565 36,589,220 37,441,770
Long-term
debt - - - - -
</TABLE>
5
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Item 7 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
financing. Accordingly, if unforeseen contingencies 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.
Investment in guaranteed investment contract decreased by approximately $19,000
as a result of the amortization of principal from the 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 to cover a portion of the investor services expenses
incurred by the Partnership. 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 refinancing in 1993.
During 1998, as a result of the cash flows generated by the operations of the
Complexes, cash and cash equivalents increased by approximately $568,000.
Mortgages payable decreased due to principal amortization of approximately
$476,000. Due to general partners and affiliates decreased primarily as a result
of the repayment of $300,000 of advances previously provided by the Columbia
Operating General Partners (see discussion below concerning the modification of
the Columbia Partnership's Pledged Cap Account and the modification of certain
partner guarantees) and the payment of $265,000 by the Partnership for investor
services fees incurred in prior years, partially offset by the accrued interest
on advances provided by the Columbia Operating General Partners and the accrual
of investor services fees incurred in the current year. As of December 31, 1998,
the Partnership owes approximately $565,000 to an affiliate of certain General
Partners for accrued investor services fees.
Property and equipment decreased by approximately $1,423,000 primarily due to
depreciation, while intangible assets decreased by approximately $108,000
primarily 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.
As of December 31, 1998, the balance in the Columbia Partnership's Pledged Cap
Account (see discussion below) is approximately $2,766,000. The original outside
date for the Pledged Cap Account to be utilized for its intended purpose was
October 31, 1996. The Columbia Operating General Partners had been conducting
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. During April 1998, 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. In addition, the lender agreed
to eliminate and reduce certain partner guarantees, thereby releasing certain
previously restricted assets of approximately $1,000,000, of which $300,000 was
provided by and repaid to the Columbia Operating General Partners. 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.
6
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Results of Operations
Year Ended December 31, 1998
During 1998, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $2,884,000 and approximately
$1,063,000, respectively. Mortgage principal payments during 1998 for the
Columbia Partnership and the Carrollton Partnership were approximately $356,000
and approximately $120,000, 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 1998. Deposits to the Pledged Cap Account and
the Bond Retirement Escrow during 1998 were approximately $572,000 and
approximately $213,000, 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 1998, the Columbia
Partnership incurred $627,694 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 $304,000 during 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 3.23% weighted average rate during 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, 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 in 1998 will continue in future years.
Results of operations improved in 1998 as compared to 1997. Financial expenses
decreased as a result of costs being incurred in 1997 by the Columbia
Partnership in connection with attempts to refinance its mortgages and savings
realized from the decrease in the weighted average interest rate on the Columbia
Partnership's mortgages from approximately 3.56% in 1997 to approximately 3.23%
in 1998. Operating and maintenance expenses were higher during the year ended
December 31, 1997 primarily due to scheduled maintenance in 1997. Taxes and
insurance expenses increased in 1998 due primarily to an increase in the
Columbia Partnership's real estate taxes, which includes charges for 1997 taxes
not billed until 1998, net of a refund of certain prior years' taxes. Based on
the current assessment of the Columbia Property, annual real estate taxes of the
Columbia Partnership have increased by approximately $300,000. Interest revenue
for the year ended December 31, 1998 is comparable to the year ended December
31, 1997 and was generated primarily from Partnership deposits and escrows
established in connection with the Columbia Partnership's mortgages.
As of December 31, 1998, the occupancy of Fieldpointe Apartments was
approximately 95% and the occupancy of The Westmont was approximately 100% as to
both residential units and 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.
Year Ended December 31, 1997
During 1997, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $3,003,000 and approximately
$949,000, respectively. Mortgage principal payments during 1997 for the Columbia
Partnership and the Carrollton Partnership were approximately $758,000 and
approximately $113,000, respectively. Deposits to the Pledged Cap Account and
the Bond Retirement Escrow during 1997 were approximately $439,000 and
approximately $252,000, respectively. During 1997, the Columbia Partnership
incurred $582,229 in connection with the lender credit enhancement fee. After
considering the respective mandatory mortgage principal payments, required
deposits to mortgage escrows, accelerated principal payments on the Columbia
Mortgages and payments for the credit enhancement fee, among other things, the
Complexes generated combined cash flow of approximately $161,000 during 1997.
Although the Complexes generated cash flow during 1997, results of operations
declined as compared to 1996 primarily as a result of (i) the commencement of
the credit enhancement fee in connection with the Columbia Partnership's
mortgages (on February 1, 1997), (ii) costs incurred by the Columbia Partnership
in connection with attempts to refinance its mortgages and (iii) an increase in
the weighted average interest rate on the Columbia Partnership's mortgages from
approximately 3.29% to approximately 3.56%. Operating and maintenance expenses
increased for the year ended December 31, 1997 primarily due to scheduled
maintenance. Interest revenue for the year ended December 31, 1997 is comparable
to the year ended December 31, 1996 and was generated primarily from Partnership
deposits and escrows established in connection with the Columbia Partnership's
mortgages. As of December 31, 1997, the occupancy of Fieldpointe Apartments was
approximately 98% and the occupancy of The Westmont was approximately 99% as to
residential units and 100% as to commercial space.
7
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Year Ended December 31, 1996
During 1996, the Columbia Partnership and the Carrollton Partnership generated
income from operating activities of approximately $2,838,000 and approximately
$961,000, respectively. Deposits to the Pledged Cap Account and the Bond
Retirement Escrow during 1996 were approximately $439,000 and approximately
$712,000, respectively. Mortgage principal payments during 1996 for the Columbia
Partnership and the Carrollton Partnership were approximately $1,162,000 and
approximately $106,000, respectively, which amount for the Columbia Partnership
includes $800,000 of additional payments from the Bond Retirement Escrow. After
considering the respective mandatory mortgage principal payments, required
deposits to mortgage escrows and accelerated principal payments on the Columbia
Mortgages, among other things, the Complexes generated combined cash flow of
approximately $259,000 during 1996.
The Partnership's results from operations improved during the year ended
December 31, 1996 as compared to the year ended December 31, 1995 due to a
decrease in the weighted average interest rate on the Columbia Partnership's
mortgages and an increase in rental revenue. Operating and maintenance expenses
increased for the year ended December 31, 1996 primarily due to increased
maintenance salaries. Interest revenue for the year ended December 31, 1996 is
comparable to the year ended December 31, 1995 and was generated primarily from
Partnership deposits and escrows established in connection with the Columbia
Partnership's mortgages. As of December 31, 1996, the occupancy of Fieldpointe
Apartments was approximately 99% and the occupancy of The Westmont was
approximately 99% as to residential units and 100% as to commercial space. The
commercial space was fully occupied throughout 1996, resulting in an increase in
commercial rent revenue of approximately $133,000 as compared to 1995.
Adoption of Accounting Standards
The Partnership has adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components (revenue,
expenses, gains and losses) in the financial statements and requires that all
such items required to be recognized as components of comprehensive income be
reported and displayed with the same prominence as items in other financial
statements. The adoption of SFAS No. 130 has had no impact on the Partnership's
consolidated financial statements.
The Partnership has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers. The Partnership is in one
business segment and follows the requirements of SFAS No.131.
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.
Item 7A Quantitative and Qualitative Disclosures About Market Risk
The Partnership has market risk sensitivity with regard to financial instruments
concerning potential interest rate fluctuations in connection with the low
floater rates associated with the COlumbia Partnership's mortgages.
Accordingly, an increase in the low-floater interest rates could have a
material adverse impact on the Partnership's results of operations.
Item 8 Financial Statements and Supplementary Data
Set forth in the financial statements listed on page F-2 is the financial
information required in response to Item 8. Such financial statements and
schedules appear on pages F-1 to F-16 and are incorporated herein by reference.
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
8
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<TABLE>
<CAPTION>
PART III
Item 10 Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers.
The General Partners are Wilder Richman Resources Corporation, a Delaware
corporation (the "WRC General Partner"), Real Estate Equity Partners L.P., a
Delaware limited partnership and an affiliate of Lehman Brothers Inc. (the
"Lehman General Partner") and WRC-87A Corporation, a Delaware corporation (the
"L/WRC General Partner"). The L/WRC General Partner is currently one-half owned
by Real Estate Equity Partners Inc., the corporate general partner of the Lehman
General Partner, and one-half owned by the shareholders of the WRC General
Partner.
The WRC General Partner
The directors and officers of the WRC General Partner set forth below:
Certain officers and directors of Real Estate Equity Partners Inc. are now
serving (or in the past have served) as officers or directors of entities which
act as general partners of a number of real estate limited partnerships which
have sought protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the markets in which the
real estate is located and, consequently, the partnerships sought the protection
of the bankruptcy laws to protect the partnerships' assets from loss through
foreclosure.
Name Age Office
<S> <C> <C>
Richard Paul Richman 51 President and Director
Robert H. Wilder, Jr. 53 Executive Vice President, Secretary,
Treasurer and Director
</TABLE>
Each of such directors and officers have served in such capacity since the
company's formation.
Richard Paul Richman is President and Director of the WRC General Partner. Mr.
Richman graduated from the Columbia University Law School with a Juris Doctor
degree, the Columbia University Graduate School of Business Administration with
a Master of Business Administration degree and Syracuse University with a
Bachelor of Arts degree in Political Science. Mr. Richman has over ten years of
extensive experience in both the development and management of residential
properties. From 1973 until 1979, Mr. Richman practiced corporate law in New
York City with the law firm of Greenbaum, Wolff & Ernst and then as a partner of
Shipley, Richman & Nierenberg. For over six years, Mr. Richman acted as a lawyer
in connection with the development, syndication and tax issues relating to real
estate. Since 1988, Mr. Richman has been the President and sole stockholder of
The Richman Group, Inc. In recent years, Mr. Richman has devoted full time to
the syndication and development of real estate. Mr. Richman was a vice president
and shareholder of Related Housing Companies Incorporated, New York, New York
from 1978 until mid-1979 with responsibility for that company's project
acquisition and syndication activities. Mr. Richman has been a member of the
National Advisory Board of the Housing and Development Reporter, a bi-weekly
publication of the Bureau of National Affairs, Inc., a frequent speaker on real
estate syndication, has been a member of the New York State Historic Credit Task
Force, the National Leased Housing Association, the Coalition to Preserve the
Low-Income Tax Credit and the Minority Developer Assistance Corporation (which
was established by the New York State Battery Park Commission).
Robert H. Wilder, Jr. is Executive Vice President, Secretary, Treasurer and
Director of the WRC General Partner. Mr. Wilder graduated from the University of
Michigan with a Bachelor of Arts degree in Economics and from the Columbia
University Graduate School of Business with a Master of Business Administration
degree. After graduation in 1968, Mr. Wilder joined James D. Landauer
Associates, Inc., a national real estate consulting firm, where his
responsibilities included feasibility studies, market analyses, land use
studies, portfolio valuations and appraisals of industrial, office, commercial
and multi-family properties. From 1973 until mid-1979, Mr. Wilder was executive
vice president and shareholder of Related Housing Companies Incorporated, New
York, New York, and was responsible for mortgage financing and construction loan
placement and the supervision of the development of the company's projects.
Since 1988, Mr. Wilder has been the President and sole shareholder of Wilder
Property Companies Inc. Mr. Wilder is also a licensed real estate broker in New
York and Connecticut.
9
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<CAPTION>
The Lehman General Partner
The directors and officers of Real Estate Equity Partners Inc. are set forth
below.
Certain officers and directors of Real Estate Equity Partners Inc. are now
serving (or in the past have served) as officers or directors of entities which
act as general partners of a number of real estate limited partnerships which
have sought protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the markets in which the
real estate is located and, consequently, the partnerships sought the protection
of the bankruptcy laws to protect the partnerships' assets from loss through
foreclosure.
Name Age Office
<S> <C> <C>
Doreen D. Odell 39 President & Chief Financial Officer
Joan B. Berkowitz 39 Vice President
Doreen D. Odell is Senior Vice President of Lehman Brothers Inc. and has
worked with its Diversified Asset Group since June 1988. Ms. Odell graduated Phi
Beta Kappa and received a B.A. in Economics summa cum laude from Wellesley
College in 1981. She received a M.S. in Real Estate Development from the
Massachusetts Institute of Technology in 1986. Prior to joining Lehman Brothers
Inc., Ms. Odell was involved in real estate development in both the public and
private sectors. As a development manager with N.Y.C. Public Development
Corporation, she structured joint ventures with private developers. She also
worked with a private development company, The Harborside Corporation,
evaluating real estate investments and development projects. From 1981 through
1984, Ms. Odell was a construction loan officer with Manufacturer's Hanover
Trust Company.
Joan B. Berkowitz is a Vice President of Lehman Brothers Inc. and
is responsible for investment management of retail, commercial and residential
real estate within its Diversified Asset Group. Ms. Berkowitz joined Lehman
Brothers Inc. in May 1986 as an accountant in its Realty Investment Group. From
October 1984 to May 1986, she was an Assistant Controller to the Patrician
Group. From November 1983 to October 1984, she was employed by Diversified
Holdings Corporation. From September 1981 to November 1983, she was employed by
Deloitte Haskins & Sells. Ms. Berkowitz, a Certified Public Accountant, received
a B.S. degree from Syracuse Univerity in 1981.
The L/WRC General Partner
The directors and officers of the L/WRC General Partner are as follows:
Name Office
<S> <C>
Doreen D. Odell President and Director
Richard Paul Richman Executive Vice President, Secretary,
Treasurer and Director
</TABLE>
Ms.Odell's biography is included above under the Lehman General Partner.
Mr. Richman's biography is included above under the WRC General Partner.
Item 11 Executive Compensation
The Partnership is not required to pay the officers, directors or partners of
the General Partners any direct compensation and no such compensation was paid
during the fiscal year ended December 31, 1998.
10
<PAGE>
<TABLE>
<CAPTION>
Item 12 Security Ownership of Certain Beneficial Owners and Management
a) No person or group is known by the Partnership to be the owner of record
of more than 5% of the outstanding units as of December 31, 1998.
b) Security ownership by the General Partners is as follows:
Percentage of
Amount and Outstanding
Nature of General
Beneficial Partners'
Title of Class Name of Beneficial Owner Ownership Interest*
<S> <C> <C> <C>
General Real Estate Equity $3.33 33.3%
Partners' Partners L.P.
Interest in
Secured Income
L.P. Wilder Richman $3.33 33.3%
Resources Corporation
WRC-87A Corporation $3.34 33.4%
* General Partners as a class have a 1% interest in all profits,
losses and distributions of the Partnership.
</TABLE>
An affiliate of Wilder Richman Resources Corporation filed a tender offer
dated July 24, 1998, offering to acquire up to 394,000 Units of limited
partnership interest at $6.50 per Unit. The offering price was increased to $7
per Unit on August 7, 1998 and the offer expired, as extended, on August 31,
1998. 40,961 Units were tendered in connection with the offer, representing
approximately 4.2% of the outstanding Units of limited partnership interest.
c) Registrant knows of no arrangements which may, at a subsequent date,
result in a change of control of Registrant. Article VI of the Partnership
Agreement describes the circumstances under which changes in General Partners
can occur.
d) There is no family relationship between any of the foregoing directors
and executive officers.
e) Involvement in certain legal proceedings with respect to the foregoing
directors and executive officers: None.
Item 13 Certain Relationships and Related Transactions with Management
The General Partners and their affiliates are entitled to receive certain
compensation, fees and reimbursements of expenses. The Partnership incurred
investor services fees in the amount of $98,437, of which $84,349 is payable to
an affiliate of the General Partners for the year ended December 31, 1998.
Information regarding such compensation is set forth under the heading
"Compensation And Fees To General Partners And Affiliates" at pages 13 through
19 of the Prospectus, which is incorporated herein by reference.
The financial interests in Registrant of the General Partners and Special
Limited Partner are set forth under the heading "Profits, Losses and
Distributions" at pages 64 through 67 of the Prospectus, which is incorporated
herein by reference.
The taxable loss generated by Registrant during the year ended December 31, 1998
allocated to each of the General Partners was approximately $200.
Transactions with Affiliates of Management
Wilder Richman Management Corp. ("WRMC"), an affiliate of certain General
Partners, is the managing agent of Fieldpointe Apartments. In connection with
these services, WRMC earned management and reporting fees of $89,958 in 1998.
Indebtedness of Management
No officer or director of the General Partners or any affiliate of the foregoing
was indebted to Registrant at any time during the fiscal year ended December 31,
1998.
11
<PAGE>
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1 Financial Statements - The list of Financial Statements appears
on page F-2.
2 Schedules - All schedules are omitted because the required
information is inapplicable or it is presented in the consolidated
financial statements or the notes thereto.
3 Exhibits:
3(A) Form of Amended and Restated Agreement of Limited Partnership of
Secured Income L.P., incorporated by reference to Exhibit A to the
Prospectus contained in the Partnership's Registration Statement on
Form S-11 (No.
33-9602) (the "Form S-11").
3(B) Certificate of Limited Partnership of Secured Income L.P.,
incorporated by reference to Exhibit 3(B) of Form S-11.
10(A) Escrow Agreement between Registrant and FirsTier Bank N.A.,
incorporated by reference to Exhibit 10(A) of Form S-11.
10(B) Carrollton Partnership Interest Acquisition Agreement, incorporated
by reference to Exhibit 10(B) of Form S-11.
10(C) Carrollton Partnership Agreement, as amended, and guarantees to
certain obligations by Carrollton Developer General Partner,
incorporated by reference to Exhibit 10(C) of Form S-11.
10(D) Carrollton Property Management Agreement, as amended, incorporated by
reference to Exhibit 10(D) of Form S-11.
10(E) Fieldpointe Complex Financing Documents, incorporated by reference to
Exhibit 10(B) of Form S-11.
10(F) Form of Guaranteed Investment Contract Escrow Agreement, incorporated
by reference to Exhibit 10(F) of Form S-11.
10(G) Columbia Partnership Interest Acquisition Agreement, incorporated by
reference to Exhibit 10(G) of Form S-11.
10(H) Columbia Partnership Agreement and guarantee of certain obligations
of Columbia Developer General Partner, incorporated by reference to
Exhibit 10(H) of Form S-11.
10(I) Columbia Property Management Agreement, incorporated by reference to
Exhibit 10(I) of Form S-11.
10(J) Columbia Construction and Development Agreement, incorporated by
reference to Exhibit 10(J) of Form S-11.
10(K) Westmont Complex Financing Documents, incorporated by reference to
Exhibit 10(K) of Form S-11.
10(L) Westmont Complex Financing Restructuring Agreement, incorporated by
reference to Form 10-K for fiscal year ended December 31, 1992.
10(M) Columbia Partnership Cost-Sharing and Indemnity Agreement in
connection with the mortgage modification dated May 27, 1993,
incorporated by reference to Form 10-K for fiscal year ended December
31, 1993.
10(N) Amendment of Partnership Agreement of Columbia Partnership dated May
27, 1993, incorporated by reference to Form 10-K for fiscal year
ended December 31, 1993.
10(O) Amendment of Guaranty Agreement of Columbia Partnership dated May 27,
1993, incorporated by reference to Form 10-K for fiscal year ended
December 31, 1993.
12
<PAGE>
10(P) Columbia Partnership Financing Agreement dated May 27, 1993,
incorporated by reference to Form 10-K for fiscal year ended December
31, 1993.
10(Q) Carrollton Partnership Assignment and Modification of Deed of Trust
dated August 30, 1993, incorporated by reference to Form 10-K for
fiscal year ended December 31, 1993.
(25) Power of Attorney, incorporated by reference to Exhibit 25 of
Form S-11.
(28) Market Analysis dated February 1, 1985 of REDE Associates,
incorporated by reference to Exhibit 28 of Form S-11.
Other Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the fiscal year
ended December 31, 1998.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized on the 31st day of March,
1999.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation, General Partner
By: /s/Richard Paul Richman
Richard Paul Richman - President
By: Real Estate Equity Partners L.P., General Partner
Real Estate Equity Partners Inc.
By: /s/Doreen D. Odell
Doreen D. Odell - President
By: WRC-87A Corporation, General Partner
By: /s/Doreen D. Odell
Doreen D. Odell - President
14
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
SECURED INCOME L.P. AND SUBSIDIARIES
DECEMBER 31, 1998, 1997 AND 1996
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Table of Contents Page
Independent Auditors' Report F-3
Consolidated Financial Statements
Consolidated Balance Sheets F-4
Consolidated Statements Of Operations F-5
Consolidated Statements Of Partners' Deficit F-6
Consolidated Statements Of Cash Flows F-7
Notes To Consolidated Financial Statements F-8
</TABLE>
F - 2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Secured Income L.P. and Subsidiaries
We have audited the consolidated balance sheets of Secured Income
L.P. and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, partners' deficit and cash flows
for each of the three years ended December 31, 1998. These
Consolidated financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Secured Income L.P. and Subsidiaries as of December 31, 1998 and 1997, and
the results of their operations, changes in their partners' deficit and
their cash flows for each of the three years ended December
31, 1998, in conformity with generally accepted accounting principles.
By: /s/ Reznick Fedder & Silverman
Bethesda, Maryland
March 16, 1999
F-3
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
Notes 1998 1997
------------ ---------------- ------------
<S> <C> <C> <C>
ASSETS
Property and equipment,
net of accumulated
depreciation 3,6 $ 28,285,988 $ 29,708,923
Cash and cash equivalents 9,11 1,885,257 1,317,457
Restricted assets and
funded reserves 5,6,11 3,944,319 4,280,585
Tenant security deposits 490,656 466,609
Investment in guaranteed
investment contract 2,11 19,499
Interest and accounts receivable 11 71,081 91,297
Prepaid expenses 563,130 437,833
Intangible assets, net of
accumulated amortization 4 1,718,523 1,826,991
$ 36,958,954 $ 38,149,194
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable 6,9 $ 33,973,813 $ 34,449,756
Accounts payable and
accrued expenses 122,888 395,028
Tenant security deposits
payable 490,116 460,182
Due to general partners
and affiliates 7 3,865,581 4,109,214
Deferred revenue 140,460 152,414
---------------- ---------------
38,592,858 39,566,594
Commitments and contingencies 6,7,9
Partners' deficit 8
Limited partners
(984,369 units issued
and outstanding) - -
General partners (1,633,904) (1,417,400)
-------------- ---------------
(1,633,904) (1,417,400)
$ 36,958,954 $ 38,149,194
============= =============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Notes 1998 1997 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 6,830,701 $ 6,584,435 $6,227,870
Interest 204,262 174,393 169,896
Other 43,436 28,333 36,932
TOTAL REVENUE 7,078,399 6,787,161 6,434,698
------------ ------------ ---------
EXPENSES
Administration and
management 7 747,937 702,416 774,264
Operating and maintenance 1,144,623 1,232,640 1,060,253
Taxes and insurance 1,335,198 971,805 891,180
Financial 6,7 2,305,697 2,692,516 1,764,812
Depreciation and
amortization 3,4 1,761,448 1,784,057 2,013,710
------------- ------------ ----------
TOTAL EXPENSES 7,294,903 7,383,434 6,504,219
------------- ------------ -----------
NET LOSS $ (216,504) $ (596,273) $ (69,521)
============ ============ ==========
NET LOSS ATTRIBUTABLE TO
General partners 8 $ (216,504) $ (596,273) $ (69,521)
Limited partners 8 - - -
------------- ----------- -----------
$ (216,504) $ (596,273) $ (69,521)
============ ============ ==========
NET LOSS ALLOCATED PER UNIT
OF LIMITED PARTNERSHIP
INTEREST 8 $ - $ - $ -
======= ============ ========
Weighted number of
units outstanding 984,369 984,369 984,369
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Limited General
Total partners partners
<S> <C> <C> <C>
Partners' deficit,
December 31, 1995 $ (751,606) $ - $ (751,606)
Net loss (69,521) - (69,521)
--------------- ----------- ----------
Partners' deficit, December 31, 1996 (821,127) - (821,127)
Net loss (596,273) - (596,273)
-------------- ------------- -------------
Partners' deficit, December 31, 1997 (1,417,400) - (1,417,400)
Net loss (216,504) - (216,504)
-------------- ------------- --------------
Partners' deficit, December 31, 1998 $ (1,633,904)$ - $ (1,633,904)
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (216,504) $ (596,273) $ (69,521)
Adjustments to reconcile net loss
to net cash provided
by operating activities
Depreciation and amortization 1,761,448 1,784,057 2,013,710
Decrease (increase) in restricted
assets and funded reserves 336,266 41,539 (834,186)
Increase in tenant security
deposits (24,047) (15,208) (26,931)
Decrease (increase) in interest
and accounts receivable 20,216 (24,203) (9,235)
Decrease (increase) in prepaid
expenses (125,297) (302,099) 289,779
Decrease (increase) in intangible
assets (35,197) 20,000 (20,000)
Decrease (increase) in other assets 34,708 (34,708)
Increase (decrease) in accounts payable
and accrued expenses (293,927) 158,137 (11,418)
Increase in tenant security
deposits payable 29,934 8,781 29,455
Increase in due to general
partners and affiliates 56,367 138,936 195,794
Decrease in deferred revenue (11,954) (11,954) (11,954)
-------------- ----------- ----------
Net cash provided by operating activities 1,497,305 1,236,421 1,510,785
------------ --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds from guaranteed
investment contract 19,499 73,086 65,809
Capital expenditures (72,815) (17,674) (187,733)
------------- ---------- ----------
Net cash provided by (used in)
investing activities (53,316) 55,412 (121,924)
------------- ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of principal on
permanent financing (475,943) (870,809) (1,268,655)
Payment of mortgage costs (100,246)
Repayment of general partner advances (300,000)
Net cash used in financing activities (876,189) (870,809) (1,268,655)
------------- -------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 567,800 421,024 120,206
Cash and cash equivalents at
beginning of year 1,317,457 896,433 776,227
-------------- ------------ -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 1,885,257 $1,317,457 $ 896,433
=========== =========== ==========
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 2,365,523 $ 2,259,546 $ 1,471,566
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
Note 1 - Organization and Summary of Significant Accounting Policies
Secured Income L.P. (the "Partnership"), was formed on October 10, 1986 under
the Revised Uniform Limited Partnership Act of the State of Delaware for the
purpose of acquiring real estate limited partnership interests. The Partnership
filed a Form S-11 registration statement with the Securities and Exchange
Commission effective March 5, 1987 covering an offering of up to 2,500,000
limited partnership units at $20 per unit. The admission of limited partners
occurred on October 9, 1987 (at which time operations commenced), December 18,
1987 and April 12, 1988.
Carrollton X Associates Limited Partnership ("Carrollton") was organized under
the laws of the District of Columbia on December 18, 1985 for the purpose of
constructing and operating a residential rental apartment complex and related
facilities under Section 221(d)4 of the National Housing Act. The Partnership
acquired a 98.9% limited partner interest in Carrollton in October 1987. The
complex consists of 252 units located in Frederick, Maryland and operates under
the name of Fieldpointe Apartments.
Columbia Associates ("Columbia") was formed as a limited partnership on February
6, 1985 to acquire an interest in real property located in New York, New York
and to construct and operate thereon a 163 unit apartment complex which also
includes a parking garage and approximately 9,400 square feet of commercial
space. The Partnership acquired a 98.9% limited partner interest in Columbia in
December 1988. The complex operates under the name of The Westmont.
Columbia and Carrollton have underlying mortgages which qualify for tax-exempt
financing as a result of restricting at least 20% of their apartment units for
low to moderate income tenants as defined in applicable guidelines.
Principles of Consolidation
The consolidated financial statements include the assets, liabilities and
results of operations which relate to the business of the Partnership,
Carrollton and Columbia. All significant inter-partnership balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Property, Equipment and Depreciation
Land, buildings and improvements are carried at the lower of cost or net
realizable value. Net realizable value represents the net cash flow necessary to
recover costs exclusive of debt service. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives by use of the straight-line method over a 25-year life.
Personal property is carried at cost and is depreciated over its estimated
service life of 5-7 years using the straight-line method. Improvements are
capitalized, while expenditures for maintenance and repairs are charged to
expense as incurred. Upon disposal of depreciable property, the appropriate
property accounts are reduced by the related costs and accumulated depreciation
and the resulting gains or losses are reflected in the consolidated statements
of operations.
Other Assets and Amortization
Mortgage costs are amortized over the terms of the respective loans using the
effective interest method. Acquisition fees are amortized over the useful lives
of the respective property and equipment using the straight-line method. Leasing
costs are amortized over the period of the applicable leases which range from 5
to 12 years using the straight-line method.
F-8
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Deferred Revenue
Deferred revenue consists of a fee received by Columbia for the extension of a
parking garage lease which expires September 30, 2011. Such fee is being
accreted to revenue over the lease term.
Leases
Tenant leases are treated as operating leases. Rental revenue is reported when
earned and expenses are charged to operations as incurred.
Interest Revenue
Interest earned on the guaranteed investment contract has been recognized
utilizing the effective interest method.
Income Taxes
No provision or benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable by,
the partners individually.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be cash
equivalents.
Net Loss per Unit of Limited Partnership Interest
Net loss per unit of limited partnership interest is calculated based upon the
weighted average number of units outstanding, 984,369 for each of the years
1998, 1997 and 1996. Losses are allocated to limited partners until such time as
the limited partners' equity reaches zero.
Adoption of Accounting Standards
The Partnership has adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components (revenue,
expenses, gains and losses) in the financial statements and requires that all
such items required to be recognized as components of comprehensive income be
reported and displayed with the same prominence as items in other financial
statements. The adoption of SFAS No. 130 has had no impact on the Partnership's
consolidated financial statements.
The Partnership has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers. The Partnership is in one
business segment and follows the requirements of SFAS No.131.
Note 2 - Guaranteed Investment Contract
In order to provide investor limited partners with a 7% guaranteed cash
distribution through December 31, 1993 and to pay investor services fees for a
prescribed period, the Partnership purchased guaranteed investment contracts
upon each admission of limited partners. Proceeds from the guaranteed investment
contracts were comprised of principal and interest such that the balances of the
guaranteed investment contracts were fully amortized upon the expiration of
their respective terms.
F-9
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 2 - Guaranteed Investment Contract (continued)
In connection with the Partnership's investment in Carrollton, the Partnership
purchased guaranteed investment contracts to provide Carrollton's pro rata
portion of the 7% cash distributions through December 31, 1993. Such guaranteed
investment contracts expired on January 15, 1994 and were then fully amortized.
In connection with the Partnership's investment in Columbia, the Partnership
purchased guaranteed investment contracts sufficient to provide Columbia's pro
rata portion of the 7% cash distributions through December 31, 1993 with an
additional guaranteed investment contract being utilized to provide a cash
distribution for the year ended December 31, 1994 and to pay Columbia's investor
services fee (see Note 7) through December 31, 1997. The remaining guaranteed
investment contract provided for annual distributions of $80,072 for the payment
of Columbia's investor services fee and expired on January 15, 1998.
Note 3 - Property and Equipment
Property and equipment as of December 31, 1998 and 1997 are summarized as
follows:
1998 1997
------------------------------
<S> <C> <C>
Land $ 6,057,940 $ 6,057,940
Buildings and improvements 36,623,572 36,573,381
Furniture and equipment 1,619,202 1,574,791
-------------- --------------
44,300,714 44,206,112
Less accumulated depreciation 16,014,726 14,497,189
------------- -------------
$ 28,285,988 $ 29,708,923
============ ============
Depreciation for the years 1998, 1997 and 1996 was $1,517,537,
$1,537,334 and $1,527,885 respectively.
Note 4 - Intangible Assets
Intangible assets as of December 31, 1998 and 1997 are summarized as follows:
1998 1997
-----------------------------
Acquisition fees $ 787,495 $ 787,495
Mortgage costs 4,861,818 4,761,572
Leasing costs 255,656 220,459
------------- -------------
5,904,969 5,769,526
Less accumulated amortization 4,186,446 3,942,535
------------ ------------
$ 1,718,523 $ 1,826,991
=========== ===========
</TABLE>
Amortization for the years 1998, 1997 and 1996 was $243,911,
$246,723 and $485,825, respectively.
F-10
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 5 - Restricted Assets and Funded Reserves
Restricted assets and funded reserves (see Note 6) as of December 31,
1998 and 1997 are summarized as follows:
1998 1997
----------------------------
<S> <C> <C>
Escrows held by mortgage lenders $ 430,025 $ 553,767
Pledged cap account 2,765,571 2,193,213
Operating deficit reserve 502,474 500,000
Bond retirement escrow 246,249 33,605
Call premium collateral 1,000,000
------------------- ------------
$ 3,944,319 $ 4,280,585
=========== ===========
Note 6 - Mortgages Payable
Carrollton
On December 18, 1985, Carrollton executed a note (the "Original Carrollton
Mortgage") with Concord Mortgage Company, an affiliate of certain general
partners of Carrollton. The Original Carrollton Mortgage in the amount of
$10,494,100 was financed through tax-exempt revenue bonds issued by the City of
Frederick, Maryland and was insured by the United States Department of Housing
and Urban Development ("HUD"). The Original Carrollton Mortgage was refinanced
during 1993 (see discussion below). Under the terms of the Original Carrollton
Mortgage, principal and interest payments were payable in successive monthly
installments of $85,009 through February 1, 2028, bearing interest at 9.5%.
On August 30, 1993, the Original Carrollton Mortgage was modified and refinanced
through a 1993 series mortgage revenue bond issued by the City of Frederick,
Maryland. The note was modified by reducing the interest rate from 9.5% to 8%
for the period August 31, 1993 through June 30, 1994, then 6.09% per year
through maturity in February 2028. The modified terms include the monthly
payment of principal and interest of $74,734 from October 1, 1993 through July
1, 1994 and $60,900 from August 1, 1994 through maturity. The note is
collateralized by the underlying value of the real estate plus other amounts on
deposit with the lender. Pursuant to agreements, Carrollton is required to make
monthly escrow deposits for taxes, insurance and replacement of project assets,
and is subject to restrictions as to operating policies, rental charges,
operating expenditures and distributions to partners. The balance of the
mortgage payable at December 31, 1998 and 1997 is $9,959,661 and $10,079,919,
respectively.
Columbia
The original financing of Columbia was provided by the New York City Housing
Development Corporation ("HDC") which issued $32,497,691 of bonds in February
1985. The funds provided by the bond issue were loaned to Columbia in the form
of two mortgage loans (the "Original Columbia Mortgages"). In connection with
the issuance of such bonds, Citibank, N.A. ("Citibank") issued a letter of
credit in the amount of $33,018,629 to guarantee payment of principal and
interest on the bonds. The Original Columbia Mortgages were modified during 1993
(see discussion below). Under the terms of the Original Columbia Mortgages,
interest was payable at the rate of 9.58% per annum. Principal and interest were
payable in monthly installments of $260,256 over a period of 23 years.
On May 27, 1993, the Original Columbia Mortgages were modified (the "Modified
Columbia Mortgages"). Under the terms of the Modified Columbia Mortgages, based
on the issuance of new tax-exempt bonds (which bear a floating interest rate,
adjusted weekly), with an initial note rate of 4.66%, with required monthly
principal amortization of $29,367. Pursuant to agreements, any savings realized
on the difference between the 4.66% initial note rate and the actual low floater
rate (approximately 3.23% and 3.56% weighted average rate during 1998 and 1997,
respectively) were to be deposited in an account to be used to purchase an
interest rate cap (the "Pledged Cap Account") by October 1996. The Columbia
general partners had been conducting 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. During April 1998, 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
</TABLE>
F-11
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 6 - Mortgages Payable (continued)
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. In addition, the lender agreed to eliminate and reduce certain partner
guarantees, thereby releasing certain restricted assets of approximately
$1,000,000 (see discussion below), of which $300,000 was repaid to the Columbia
general partners (see Note 7). The balance in the Pledged Cap Account is
$2,765,571 and $2,193,213 as of December 31, 1998 and 1997, respectively (see
Note 5). Pursuant to agreements, Columbia is subject to restrictions as to
operating policies, rental charges, operating expenditures and distributions to
partners. The balance of the mortgages payable as of December 31, 1998 and 1997
is $24,014,152 and $24,369,837, respectively. The weighted average low floater
rate for the period January 1, 1999 through February 28, 1999 was approximately
2.34%.
The Modified Columbia Mortgages further provide that any cash flow generated by
Columbia above the note rate, servicing fees and principal amortization will be
applied first to fund and maintain an interest-bearing operating deficit reserve
account (the "Operating Deficit Reserve") until it accumulates to $500,000.
Thereafter, such cash flow will be deposited into the Operating Deficit Reserve
to the extent necessary to maintain a balance of $500,000 and then into a
segregated account to be used to retire the underlying bonds (the "Bond
Retirement Escrow") at the earliest possible dates in minimum denominations of
$100,000 in excess of the scheduled principal amortization of approximately
$352,000 per annum. Amounts deposited in the Operating Deficit Reserve will
generally be utilized to fund operating deficits, pay for maintenance, repairs
and replacements and to pay debt service and other amounts due under the loan
documents. As of December 31, 1998 and 1997, the balance in the Operating
Deficit Reserve is $502,474 and $500,000, respectively (see Note 5). During the
years ended December 31, 1998 and 1997, deposits of approximately $213,000 and
$252,000, respectively, were made to the Bond Retirement Escrow, with $400,000
utilized to accelerate the retirement of the debt in 1997. As of December 31,
1998 and 1997, the balance in the Bond Retirement Escrow is $246,249 and
$33,605, respectively (see Note 5).
Because the bonds issued in connection with the Original Columbia Mortgages were
redeemed voluntarily, Columbia was required to pay a prepayment premium in the
amount of $1,590,658 (the "Call Premium"). Columbia paid for the costs of
issuance of the new bonds, including the Call Premium, from the premium realized
upon liquidation of a debt service reserve held by Citibank in connection with
the Original Columbia Mortgages and, to the extent necessary, amounts were
provided by the Columbia general partners under their operating deficit
guarantee to Columbia. As a result of utilizing such debt service reserve,
Citibank required the partners of Columbia (including the Partnership) to
provide Citibank with letters of credit in the full amount of the Call Premium
(the "Call Premium Letters of Credit"). In order to establish the Call Premium
Letters of Credit, the Columbia general partners provided $900,000 (of which
$600,000 was in the form of letters of credit and $300,000 was advanced to the
Partnership) and the Partnership provided a letter credit in the amount of
$1,000,000 (inclusive of the $300,000 advance) (collectively, the "Call Premium
Collateral"). The Call Premium Letters of Credit were to be available to
Citibank upon sale or refinancing (or an event of default) in the event
available proceeds were not sufficient to pay in full all amounts due under the
bonds or accrued and unpaid Citibank letter of credit fees (see below). In
connection with the modification of the terms of the Pledged Cap Account (see
discussion above) the Call Premium Letters of Credit were released by Citibank.
However, Citibank will be entitled to draw first upon the Columbia general
partners' guaranty of payment (in the amount of approximately $1,690,000) to pay
any unpaid letter of credit fee (see discussion below). As of December 31, 1997,
$1,000,000 was invested in interest bearing deposits which served as collateral
for the Partnership's Call Premium Letter of Credit (see Note 5). The letters of
credit in the amount of $600,000 which were provided directly by the Columbia
general partners as described above are not reflected in the accompanying
consolidated balance sheet as of December 31, 1997.
As part of the mortgage modification, Citibank agreed to extend its letter of
credit from February 1997 to February 2003. Beginning February 1, 1997, Citibank
is entitled to a letter of credit fee for providing credit support for the new
bonds in the amount of 2.5% per annum of the outstanding principal balance of
the new bonds, payable on a current or deferred basis at Columbia's option.
Except as described above, the obligation to pay the letter of credit fee will
be with full recourse as to the assets of Columbia, but without recourse to any
of the partners, including the Partnership. If the letter of credit fee is not
fully paid from available proceeds from the sale or refinancing of Columbia or
the Columbia general partners' guaranty of payment, any such unpaid balance
shall be deemed fully discharged and neither Columbia nor its partners shall
have any further obligation with respect thereto. For the years ended December
31, 1998 and 1997, Columbia incurred a fee in connection with the Citibank
letter of credit in the amount of $627,694 and $583,229, respectively, which fee
is being paid currently on a monthly basis.
F-12
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 6 - Mortgages Payable (continued)
Aggregate annual mandatory maturities on the Carrollton and Columbia Mortgages
as of December 31, 1998 are as follows:
<S> <C>
1999 $ 480,188
2000 488,192
2001 496,696
2002 505,733
2003 1,388,336
Thereafter 30,614,668
$ 33,973,813
The carrying amount of the mortgages approximates fair value.
Note 7 - Related Party Transactions
Due to general partners and affiliates as of December 31, 1998 and 1997 consists
of cash advances and other payables as follows:
<S> <C> <C>
1998 1997
---------------------------
Carrollton general partners and their affiliates$ 65,154 $ 65,154
Columbia general partners and their affiliates
(including accrued interest of $1,302,712
and $1,126,066) 3,033,392 3,156,746
Wilder Richman Management Corp. 201,597 201,600
WRC-87A Corporation 565,438 685,714
------------- -------------
$ 3,865,581 $ 4,109,214
=========== ===========
The management agent for Fieldpointe Apartments is Wilder Richman Management
Corp. ("WRMC"), an affiliate of one of the Carrollton general partners. During
each of the three years ended December 31, 1998, WRMC was entitled to property
management fees equal to 4% of residential income collected. In addition, WRMC
was entitled to a reporting fee of $5 per unit per month for bookkeeping and
reporting services. The maximum annual management and reporting fees may not
exceed 5% of gross collections. Such fees of $89,958, $86,040 and $83,958 were
charged to operations during 1998, 1997 and 1996, respectively. Accrued
management and reporting fees as of December 31, 1998 and 1997 are $35,597 and
$35,600, respectively.
The management agent for The Westmont is an affiliate of one of the Columbia
general partners and receives property management fees calculated at 3.01% of
rental income for 1998 and at the greater of 2% of rental income or $70,000 for
1997 and 1996. The charges to operations amounted to $146,837, $89,332 and
$84,240 during 1998, 1997 and 1996, respectively.
WRC-87A Corporation, a general partner of the Partnership, is entitled to an
annual investor services fee which is incurred by Columbia and Carrollton in the
amounts of $80,072 and $18,365, respectively, and which is based on .5% of the
gross proceeds from the offering of Partnership units allocable to each such
investment. The fee is payable quarterly from cash flow and shall be adjusted
annually by increases in the Consumer Price Index. To the extent that there is
insufficient cash flow available to pay the investor services fee, the fee is
payable only from distributions from the guaranteed investment contracts, which
expired on January 15, 1994 and January 15, 1998 in the case of Carrolton and
Columbia, respectively. The consolidated statements of operations include
charges to operations for the investor services fee of $98,437, $80,072 and
$98,437 in 1998, 1997 and 1996, respectively. These amounts are paid or payable
to WRC-87A Corporation to the extent that such services are not provided by an
independent third party. Amounts payable to WRC-87A Corporation as of December
31, 1998 and 1997, representing the unpaid investor services fee for the year,
were $84,349 and $65,873, respectively. The Partnership paid WRC-87A Corporation
$265,000 during 1998 for investor services fees incurred in prior years.
</TABLE>
F-13
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 7 - Related Party Transactions (continued)
The sole shareholder of an affiliate of one of the Carrollton general partners
provided debt financing for the capitalization of LaMere Associates, Inc.
("LaMere"). In connection with such debt financing, the shareholder received 20%
of the stock of LaMere. LaMere was paid premiums in connection with property,
workers compensation, liability and umbrella insurance coverage provided to
Carrollton. In connection with such insurance coverage, Carrollton incurred
$41,359, $45,864 and $47,303 in premiums for the years ended December 31, 1998,
1997 and 1996, respectively.
During 1998 and 1997, Columbia paid an affiliate a fee of $60,750 and $183,750,
respectively, for services rendered in connection with the modification of the
terms of the Pledged Cap Account (see Note 6) and an attempted mortgage
refinancing, respectively. During 1998 and 1996, Columbia incurred and paid
$43,121 and $20,779, respectively, in connection with repair services provided
by an affiliate of one of its general partners.
Pursuant to an operating deficit guarantee agreement dated December 21, 1988,
the Columbia general partners guaranteed to loan to Columbia any funds required
to satisfy its operating deficits, if any, up to $2,000,000. As of December 31,
1998 and 1997, loans of $1,700,680 and $2,000,680, respectively, remain payable
by Columbia. The loans, with the exception of $300,000 as of December 31, 1997,
bear interest at Chase Manhattan Bank's prime rate plus 2% (10.25% at December
31, 1998) in accordance with the terms of the Columbia partnership agreement. In
connection with the modification of the terms of the Pledged Cap Account (see
Note 6), $300,000 was repaid to the Columbia general partners during 1998. The
amount of interest charged to operations during 1998, 1997 and 1996 was
$176,646, $177,634 and $174,731, respectively. Accrued interest as of December
31, 1998 and 1997 is $1,302,712 and $1,126,066, respectively. Such loans are
repayable from Columbia cash flow, subject to the terms of the Modified Columbia
Mortgages.
Columbia is obligated in the amount of $30,000 as of December 31, 1998 and 1997
to certain of its partners for development advances. The advances are
non-interest bearing, unsecured and due on demand.
Carrollton owes WRMC $166,000 as of December 31, 1998 and 1997 for prior years'
operating advances. Carrollton also owes its general partners and affiliates
$65,154 as of December 31, 1998 and 1997 for various advances. All such advances
are unsecured, non-interest bearing and payable from Carrollton cash flow.
Management believes it is not practicable to estimate the fair value of the
loans and advances from related parties because loans and advances with similar
characteristics are not currently available to the Partnership, Columbia and
Carrollton.
Note 8 - Partners' Deficit
Partnership Allocation
Profits and losses of the Partnership are allocated 1% and 99% to the general
partners and limited partners, respectively, until such time as the limited
partners' capital reaches zero, after which all losses are allocated to the
general partners.
Partnership Distributions
In accordance with the respective partnership agreements, to the extent that
Carrollton and Columbia generate net operating cash flow in any year at a level
sufficient, when distributed to the Partnership, to enable the Partnership to
satisfy the allocable portion of the limited partners' 8% preferred return for
such year without utilizing amounts generated from the guaranteed investment
contracts, the excess amounts generated from the guaranteed investment contracts
would be paid or distributed to the general partners of Carrollton and/or
Columbia, whichever generate(s) such level(s) of operating cash flow. No such
excess distributions were generated during the term of the guaranteed investment
contract periods (see Note 2). Due to restrictions concerning distributions from
operating cash flow of Columbia (see Note 6), there were no cash distributions
from Columbia in 1998 and 1997.
F-14
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 9 - Commitments and Contingencies
Long-term Leases
The commercial space and parking garage at Columbia are leased to tenants under
the terms of noncancellable operating leases expiring on various dates through
September 30, 2011. Future minimum rental payments as of December 31, 1998 are
as follows:
<S> <C>
1999 $ 695,000
2000 680,000
2001 526,000
2002 544,000
2003 475,000
Thereafter 3,262,000
$ 6,182,000
Income recognized under the garage and commercial space for the years 1998, 1997
and 1996 was $692,983, $758,473 and $716,277, respectively.
Lender Restrictions and Requirements
Carrollton and Columbia are subject to various lender requirements and
restrictions, including (i) the rental of not less than 20% of the dwelling
units to individuals or families who qualify as low or moderate income tenants;
(ii) restrictions on the sale of the apartment complexes; and (iii) restrictions
on the amount of cash flow which may be distributed to the partners.
Concentration of Credit Risk
As of December 31, 1998, the Partnership has $1,303,556 in cash and cash
equivalents which are deposited in interest-bearing accounts with an institution
which is not insured by the Federal Deposit Insurance Corporation ("FDIC"). As
of December 31, 1998, Carrollton has $161,996 in excess of FDIC insurance limits
at one bank.
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 10 - Reconciliation of Taxable Income (Loss) and Bases of Assets
A reconciliation of the financial statement net loss to the income tax income
(loss) of the Partnership for each of the years ended December 31, 1998, 1997
and 1996 is as follows:
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Financial statement net loss $ (216,504) $ (596,273) $ (69,521)
Excess depreciation for income tax purposes
based on estimated useful life (266,599) (267,751) (241,484)
Excess depreciation for financial reporting
purposes due to purchase accounting
treatment 436,460 438,491 405,607
Deferred revenue (11,954) (11,954) (14,627)
Amortization of start-up costs and
construction period interest and taxes 192 224 256
Accrual of related party expense items
not deductible until paid for tax purposes
under Internal Revenue Code Section 267 10,083 137,970 240,702
Amounts allocated to other partners of
Carrollton and Columbia (15,366) 4,321 (11,622)
-------------- ---------------------------
Income (loss) as shown on tax return $ (63,688) $ (294,972) $ 309,311
============== ============ ==========
A reconciliation of the financial statement carrying amount of total assets to
the tax basis as of December 31, 1998 and 1997 is as follows:
1998 1997
---------------------- ------------
<S> <C> <C>
Financial statement carrying amount of assets $ 36,958,954 $ 38,149,194
Difference which consists principally of the
utilization of purchase accounting for financial
statement purposes (14,348,641) (14,394,766)
------------- --------------
Tax basis of assets $ 22,610,313 $ 23,754,428
============= =============
</TABLE>
F-16
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998, 1997 AND 1996
Note 11 - Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value of amounts have
been determined using available market information, assumptions, estimates and
valuation methodologies.
Cash and Cash Equivalents and Restricted Assets and Funded Reserves
The carrying amount approximates fair value.
Guaranteed Investment Contract
The carrying amount approximates fair value.
Interest and Accounts Receivable
The carrying amount approximates fair value due to the shore-term nature of the
receivable.
The estimated fair values of the Partnership's financial instruments as of
December 31, 1998 and 1997 are disclosed elsewhere in the financial statements.
F-17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This article contains summary information extracted for the year ended
December 31, 1998 10-K consolidated 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> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 1,885,257
<SECURITIES> 0
<RECEIVABLES> 71,081
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,300,714
<DEPRECIATION> (16,014,726)
<TOTAL-ASSETS> 36,958,954
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,633,904)
<TOTAL-LIABILITY-AND-EQUITY> 36,958,954
<SALES> 6,830,701
<TOTAL-REVENUES> 7,078,399
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,989,206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,305,697
<INCOME-PRETAX> (216,504)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (216,504)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
