SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
Greenwich, Connecticut 06830
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
--- ---
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
Part I - Financial Information
Table of Contents
Item 1 Financial Statements Page
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3 Quantitative and Qualitative Disclosure about Market Risk 9
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999
(Unaudited) December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Property and equipment (net of accumulated depreciation
of $17,141,202 and $16,014,726) $ 27,159,512 $ 28,285,988
Cash and cash equivalents 1,888,618 1,885,257
Restricted assets and funded reserves 5,427,176 3,944,319
Tenant security deposits 506,953 490,656
Accounts receivable 61,824 71,081
Prepaid expenses 275,398 563,130
Intangible assets, net of accumulated amortization 1,549,491 1,718,523
-------------- --------------
$ 36,868,972 $ 36,958,954
============== ==============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 33,614,403 $ 33,973,813
Accounts payable and accrued expenses 220,626 182,942
Tenant security deposits payable 506,953 490,116
Due to general partners and affiliates 3,988,653 3,805,527
Deferred revenue 140,460 140,460
-------------- --------------
38,471,095 38,592,858
-------------- --------------
Partners' deficit
Limited partners' equity - -
General partners' deficit (1,602,123) (1,633,904)
-------------- --------------
(1,602,123) (1,633,904)
-------------- --------------
$ 36,868,972 $ 36,958,954
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1999 1998 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 1,813,699 $ 5,376,269 $ 1,767,686 $ 5,131,031
Interest 37,187 71,368 48,241 105,747
------------ ------------ ------------ ------------
TOTAL REVENUE 1,850,886 5,447,637 1,815,927 5,236,778
------------ ------------- ------------ ------------
EXPENSES
Administrative and management 190,413 587,098 217,890 589,564
Operating and maintenance 326,695 917,140 308,943 873,344
Taxes and insurance 308,406 930,834 516,424 988,195
Financial 579,663 1,685,276 693,264 1,889,511
Depreciation and amortization 424,004 1,295,508 435,181 1,305,543
------------ ------------ ------------ ------------
TOTAL EXPENSES 1,829,181 5,415,856 2,171,702 5,646,157
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ 21,705 $ 31,781 $ (355,775) $ (409,379)
============ ============ ============ ============
NET EARNINGS (LOSS) ATTRIBUTABLE TO
Limited partners $ - $ - $ - $ -
General partners 21,705 31,781 (355,775) (409,379)
------------ ------------ ------------ ------------
$ 21,705 $ 31,781 $ (355,775) $ (409,379)
============ ============ ============ ============
NET EARNINGS (LOSS) ALLOCATED
PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ - $ - $ - $ -
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 31,781 $ (409,379)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities
Depreciation and amortization 1,295,508 1,305,543
Decrease (increase) in restricted assets and funded reserves (1,482,857) 52,033
Increase in tenant security deposits (16,297) (12,907)
Decrease in accounts receivable 9,257 24,426
Decrease in prepaid expenses 287,732 257,821
Increase in accounts payable and accrued expenses 37,684 72,342
Increase in tenant security deposits payable 16,837 20,557
Increase in due to general partners and affiliates 183,126 168,753
Increase in deferred revenue 13,940
------------ ------------
Net cash provided by operating activities 362,771 1,493,129
------------ ------------
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 (359,410) (353,805)
Repayment of general partner advances (300,000)
------------ ------------
Net cash used in financing activities (359,410) (653,805)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,361 858,823
Cash and cash equivalents at beginning of period 1,885,257 1,317,457
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,888,618 $ 2,176,280
============ ============
SUPPLEMENTAL INFORMATION
Financial expenses paid $ 1,552,790 $ 1,755,582
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 nine months ended September 30, 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.
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rents generated by the Operating
Partnerships and interest derived from investments and deposits which are
restricted in accordance with the terms of the mortgages of the Operating
Partnerships. 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 impact 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 financing in 1993.
During the nine months ended September 30, 1999, as a result of the cash flows
generated by the operations of the Complexes, cash and cash equivalents
increased by approximately $3,000 and restricted assets and funded reserves
increased by approximately $1,483,000. Mortgages payable decreased due to
principal amortization of approximately $359,000. 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
$1,126,000 due to depreciation, while intangible assets decreased by
approximately $169,000 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 September 30, 1999, the balance in the Columbia Partnership's Pledged Cap
Account (see discussion below) is approximately $3,218,000. 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 above
7.5% for 30 consecutive days. The Columbia Operating General Partners are
currently conducting discussions with a major financial institution in an effort
to replace Citibank as the credit enhancer, refinance the Columbia Partnership's
mortgages, modify the structure and utilization of the mortgage escrows and
modify or eliminate the current cash distribution restrictions. There can be no
assurance that the Columbia Operating General Partners will procure suitable
alternative financing.
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
Results of Operations
Nine Months Ended September 30, 1999
During the nine months ended September 30, 1999, the Columbia Partnership and
the Carrollton Partnership generated income from operating activities of
approximately $2,355,000 and approximately $731,000, respectively. Mortgage
principal payments during the period for the Columbia Partnership and the
Carrollton Partnership were approximately $264,000 and approximately $95,000,
respectively. No amounts were utilized from the Operating Deficit Reserve during
the nine months ended September 30, 1999. Deposits to the Pledged Cap Account
and the Bond Retirement Escrow during the period were approximately $452,000 and
approximately $15,000, 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 nine months
ended September 30, 1999, the Columbia Partnership incurred approximately
$467,000 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 $621,000 during the nine months ended
September 30, 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 2.85% 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 nine months ended September
30, 1999 will continue in future years.
Results of operations improved for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998. Financial expenses
decreased primarily as a result of (i) a decrease in the weighted average
interest rate on the Columbia Partnership's mortgages from approximately 3.21%
during the nine months ended September 30, 1998 to approximately 2.85% during
the nine months ended September 30, 1999 and (ii) approximately $100,000 being
incurred in 1998 in connection with attempts to refinance the Columbia
Partnership's mortgages. Operating and maintenance expenses increased for the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998 as a result of scheduled repairs and improvements. Taxes and
insurance expenses decreased for the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998 because, although the
annual real estate taxes of the Columbia Partnership increased, the expense for
the nine months ended September 30, 1998 includes charges for 1997 taxes not
billed until 1998.
As of September 30, 1999, the occupancy of Fieldpointe Apartments was
approximately 96% and the occupancy of The Westmont was approximately 97% 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.
Nine Months Ended September 30, 1998
During the nine months ended September 30, 1998, the Columbia Partnership and
the Carrollton Partnership generated income from operating activities of
approximately $2,026,000 and approximately $771,000, respectively. Mortgage
principal payments during the period for the Columbia Partnership and the
Carrollton Partnership were approximately $264,000 and approximately $90,000,
respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow
during the period were approximately $394,000 and approximately $175,000,
respectively. During the nine months ended September 30, 1998, the Columbia
Partnership incurred approximately $472,000 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 $111,000 during the nine months ended September 30, 1998. As of
September 30, 1998, the occupancy of Fieldpointe Apartments was approximately
99% and the occupancy of The Westmont was approximately 100% as to both
residential units and commercial space.
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
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 databased information. Many businesses may need to upgrade existing
systems or purchase new ones to correct the Y2K issue. The Partnership has
performed an assessment of its computer software and hardware and believes it
has made the necessary upgrades in an effort to ensure compliance. 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. The Partnership has corresponded
with Carrollton and Columbia to ensure their awareness of the Y2K issue and has
requested details regarding their efforts to ensure compliance. 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 a failure to convert by the Partnership
or another entity would not have a material adverse impact on the Partnership.
Item 3 Quantitative and Qualitative Disclosure 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.
<PAGE>
SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: November 22, 1999 /s/ Richard Paul Richman
--------------------------------------
Richard Paul Richman
President, Chief Executive Officer
and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This article contains summary financial information extracted for the
nine months ended September 30, 1999 10Q Consolidated Balance Sheets and
Consolidated Statements of Operations by reference to such financial
statements.
</LEGEND>
<CIK> 0000804217
<NAME> Secured Income L.P.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.00
<CASH> 1,888,618
<SECURITIES> 0
<RECEIVABLES> 61,824
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,300,714
<DEPRECIATION> (17,141,202)
<TOTAL-ASSETS> 36,868,972
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,602,123)
<TOTAL-LIABILITY-AND-EQUITY> 36,868,972
<SALES> 5,376,269
<TOTAL-REVENUES> 5,447,637
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,730,580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,685,276
<INCOME-PRETAX> 31,781
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,781
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
