UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 March 31, 1997
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 0-16856
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3368726
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue Greenwich, CT 06830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(203) 862-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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 [ ]
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - MARCH 31, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1997 and December 31, 1996
STATEMENTS OF INCOME - For the three months ended
March 31, 1997 and 1996
STATEMENT OF PARTNERS' EQUITY - For the three months ended
March 31, 1997
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1997 and 1996
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
BALANCE SHEETS
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of allowance for
loan losses of $12,133,380) ...................... $16,616,033 $16,616,033
Cash and cash equivalents ........................... 2,870,658 2,873,084
Other receivable .................................... 12,144 11,899
----------- -----------
$19,498,835 $19,501,016
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses ............... $ 92,900 $ 130,798
----------- -----------
Commitments and contingencies
Partners' equity
Limited partners' equity (as restated) (187,919 units
issued and outstanding) .......................... 18,920,812 18,885,988
General partners' equity (as restated) .............. 485,123 484,230
----------- -----------
Total partners' equity ....................... 19,405,935 19,370,218
----------- -----------
$19,498,835 $19,501,016
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF INCOME
For the three months ended
March 31,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
Revenues
Short term investment interest ................ $ 34,481 $ 28,978
Other income .................................. 6,090 8,858
Mortgage loans interest income ................ -- 389,013
-------- --------
40,571 426,849
-------- --------
Costs and expenses
General and administrative expenses ........... 4,854 41,426
-------- --------
Net income ......................................... $ 35,717 $385,423
======== ========
Net income attributable to
Limited partners .............................. $ 34,824 $375,787
General partners .............................. 893 9,636
-------- --------
$ 35,717 $385,423
======== ========
Net income per unit of limited partnership
interest (187,919 units outstanding) .......... $ 0.19 $ 2.00
======== ========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENT OF PARTNERS' EQUITY
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1997 ............. $ (249,527) $ 19,619,745 $ 19,370,218
Reallocation of partners' equity ..... 733,757 (733,757) --
------------ ------------ ------------
Balance, January 1, 1997 (as restated) 484,230 18,885,988 19,370,218
Net income for the three months ended
March 31, 1997 .................. 893 34,824 35,717
------------ ------------ ------------
Balance, March 31, 1997 .............. $ 485,123 $ 18,920,812 $ 19,405,935
============ ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income ...................................... $ 35,717 $ 385,423
Adjustments to reconcile net income to
net cash used in operating activities
Non-cash interest earned on mortgage loans -- (389,013)
Changes in assets and liabilities
Other receivable ............................. (245) --
Accounts payable and accrued expenses ........ (37,898) (6,427)
----------- -----------
Net cash used in operating activities .... (2,426) (10,017)
----------- -----------
Net decrease in cash and cash equivalents ............ (2,426) (10,017)
Cash and cash equivalents, beginning of period ....... 2,873,084 2,835,755
----------- -----------
Cash and cash equivalents, end of period ............. $ 2,870,658 $ 2,825,738
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussions should be read in conjunction
with the financial statements, related footnotes and discussions
contained in the Resources Accrued Mortgage Investors 2 L.P. (the
"Partnership") annual report on Form 10-K for the year ended December
31, 1996. The results of operations for the three months ended March
31, 1997 are not necessarily indicative of the results to be expected
for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in mortgage loans
The Partnership principally invested in "zero coupon" senior and junior
mortgage loans on properties owned or acquired by limited partnerships
originally sponsored by affiliates of the General Partners. These loans
generally contain provisions whereby the Partnership may be entitled to
additional interest represented by participation in the appreciation of
the underlying property.
The Partnership accounts for its investments in mortgage loans under
the following methods:
Investment method
Mortgage loans representing transactions in which the
Partnership is considered to have substantially the same risks
and potential rewards as the borrower are accounted for as
investments in real estate rather than as loans. Although the
transactions are structured as loans, due to the terms of the
zero coupon mortgage, it is not readily determinable at
inception that the borrower will continue to maintain a minimum
investment in the property. Under this method of accounting, the
Partnership will recognize as revenue the lesser of the amount
of interest as contractually provided for in the mortgage loan,
or its pro rata share of the actual cash flow from operations of
the underlying property inclusive of depreciation and interest
expense on any senior indebtedness. None of the Partnership's
mortgage loans are currently recognizing revenue under the
investment method.
Interest method
Under this method of accounting, the Partnership recognizes
revenue as interest income over the term of the mortgage loan so
as to produce a constant periodic rate of return. Interest
income will not be recognized as revenue during periods where
there are concerns about the ultimate realization of the
interest or loan principal.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each of the mortgage loans in the Partnership's portfolio. In
performing this review, management considers the estimated net
realizable value of the mortgage loan or collateral as well as other
factors, such as the current occupancy, the amount and status of any
senior debt, the prospects for the property and the economic situation
in the region where the property is located. Because this determination
of net realizable value is based upon projections of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying value as of
March 31, 1997.
The allowance is inherently subjective and is based upon management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide for additional losses in
subsequent periods and such provisions could be material. No allowance
was required for the quarters ended March 31, 1997 and 1996.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, RAM Funding, Inc., is
a wholly-owned subsidiary of Presidio Capital Corp. ("Presidio"). As of
February 28, 1995, the Associate General Partner of the Partnership is
Presidio AGP Corp., a Delaware Corporation ("Presidio AGP"), which is
also a wholly-owned subsidiary of Presidio. The general partners and
certain affiliates of the general partners, are general partners in
several other limited partnerships which are also affiliated with
Presidio, and which are engaged in businesses that are, or may be in
the future, in direct competition with the Partnership. Wexford
Management LLC, a company controlled by certain officers and directors
of Presidio, performs management and administrative services for
Presidio and its direct and indirect subsidiaries as well as the
Partnership. For the three months ended March 31, 1997 and 1996,
reimbursable expenses paid to Wexford amounted to $6,654 and $13,326,
respectively. Wexford Management LLC is engaged to perform similar
services for other similar entities that may be in competition with the
Partnership.
The Partnership has invested principally in mortgage loans on
properties owned or acquired by privately syndicated limited
partnerships which are controlled by Presidio. Transactions entered
into between the Partnership and such entities are subject to inherent
conflicts of interest.
The General Partners are allocated 2.5% of the net income or loss of
the Partnership and are entitled to 2.5% of distributions. The 2.5%
shall be apportioned 98% to the Managing General Partner and 2% to the
Associate General Partner. For the quarters ended March 31, 1997 and
1996, the Managing General Partner and Associate General Partner were
allocated net income of $875 and $18, and $9,443 and $193,
respectively.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
The Partnership invests in zero-coupon, nonrecourse senior and junior
mortgage loans. Collection of the amounts due on the Partnership's
junior mortgage loans is solely dependent upon the sale or refinancing
of the underlying properties at amounts sufficient to satisfy the
Partnership's mortgage notes after payment of the senior mortgage notes
owned by unaffiliated third parties.
All of the Partnership's mortgage notes, with the exception of the
Harborista Loan, contain a provision which requires the borrowers to
provide current appraisals based upon certain conditions or in some
cases upon request.
The Partnership has prepared internal appraisals for the properties
owned by Twin Oak Plaza Associates, L.P. ("Twin Oak") and High Cash
Partners, L.P. ("High Cash"), each of whose general partners are
affiliated with the Managing General Partner of the Partnership.
Additionally, all of the loans, with the exception of the Harborista
Loan, contain a provision that requires that if the appraisal indicates
that the value of all indebtedness senior to and including the
Partnership's loan, taking into account principal plus accrued interest
in excess of 5% per annum, exceeds 85% of the then current appraisal,
the borrower must repay the indebtedness to a point where the 85% loan
to value ratio is restored. The Twin Oak and High Cash borrowers may
not have sufficient assets available to restore the 85% loan to value
ratio.
While there are risks inherent in a zero-coupon nonrecourse senior or
junior mortgage loan portfolio, the above described provisions were
intended to provide some mitigation of these risks. However, in the
event a borrower is required to make a payment under such loan
provisions, there can be no assurance that the borrower will be able to
make such payments.
The Twin Oak borrower is currently failing this test and it is
anticipated that the High Cash borrower will fail this test by December
1997. The Partnership will not take action against the borrowers at
this time, as there is not an adequate remedy. By the Partnership
calling its loans, the borrowers could possibly seek protection under
Chapter 11 of the United States Bankruptcy Code, necessitating the
Partnership to expend legal and administrative funds. Since the
estimated market value of the Twin Oak property is currently
approximately equal to the first mortgage plus the carrying value of
the Partnership's mortgage and the estimated market value of the High
Cash property is currently approximately equal to the Partnership's
mortgage, by calling its loans, the Partnership would jeopardize its
potential for realizing the full contractual value of its mortgage
loans.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Twin Oak loan
The first mortgage on this property, which is held by an unaffiliated
third party, was due to mature on July 1, 1993, however, during 1993,
this loan was extended for three years until July 1, 1996. The terms
and conditions of the extension were essentially the same as the
original loan. During March 1997, the Twin Oak borrower and its first
mortgage lender agreed in principal to extend the maturity date of the
first mortgage until July 1, 1998. In addition, the first mortgage
holder agreed to increase the first mortgage by $175,000 in order to
allow Twin Oak to become current on its first mortgage payments.
The Partnership agreed to the loan extension on the condition that Twin
Oak provide to the Partnership a deed-in-lieu of foreclosure of the
Twin Oak property on or before the extended due date of the first
mortgage, which would occur on July 1, 1998, unless Twin Oak is able to
refinance the first mortgage and the Partnership's mortgage before such
date. Twin Oak agreed to this condition. Should the Partnership receive
the deed to the Twin Oak property, the Partnership would own the
property subject to the terms and conditions of the first mortgage.
Consummation of the loan extension is subject to final documentation
and is expected to close during the second or third quarter of 1997.
Sierra loan
During the first quarter of 1997, High Cash, the owner of the Sierra
property and the borrower of the Sierra loan, wrote the property down
to its estimated fair market value of $15,875,000. The balance of the
Sierra loan at December 31, 1996 was approximately $15,979,000 and it
is unlikely that any additional interest accrued on the Sierra loan
will ultimately be recovered from the value of the underlying property.
Consequently, as of January 1, 1997 the Partnership ceased accruing
interest on the Sierra loan.
Interest recognized for the Partnership's mortgage loans are as
follows:
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------
Description 1997 1996
----------- ---- ----
<S> <C> <C>
Shopping Center
Sierra Marketplace (a), (b)
Reno, Nevada $ - $ 389,013
========= ===========
</TABLE>
(a) This loan is accounted for under the interest method.
(b) The Partnership may be entitled to additional interest in the
appreciation of this property which is subordinated to a specified
return to the Borrower. It is unlikely that the Partnership will
realize any additional interest from this loan.
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, 1997 December 31, 1996
------------------------------------- -------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Opening balance $ - $16,616,033 $16,616,033 $ - $16,511,153 $16,511,153
Income recognized - - - - 1,619,880 1,619,880
Allowance for loan losses - - - - (1,515,000) (1,515,000)
----------- ----------- ----------- ----------- ----------- ------------
Ending balance $ - $16,616,033 $16,616,033 $ - $16,616,033 $16,616,033
=========== =========== =========== =========== =========== ===========
</TABLE>
Information with respect to the Partnership's mortgage loans is as follows:
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased Placement
Description Rate % Period Type Date Date Advanced Interest Fees
- ----------- ------ ------ ---- ---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza 13.307 Monthly 2nd 13-Feb-89(e) 1-Dec-98 $10,000,000 $ 23,513 $ 594,867
Boston, MA (a)
Sierra Marketplace (b)(c) 11.220 Monthly 1st 10-Feb-89 28-Feb-01 6,500,000 - 385,757
Reno, NV
Twin Oak (b) 12.280 Annually 2nd 3-Apr-90 1-May-02 1,200,000 - 71,218
Ft. Lauderdale, FL
----------- ----------- ------------
$17,700,000 $ 23,513 $ 1,051,842
=========== =========== ============
</TABLE>
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
<TABLE>
<CAPTION>
(d)
Interest recognized Carrying value Contractual Balance
------------------- -------------- -------------------
March 31, 1996 and Reserves/ March 31, Dec. 31, March 31, Dec. 31,
Description 1997 Prior Write-offs 1997 1996 1997 1996
- ----------- ---- ----- ---------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza $ - $ - $(10,618,380) $ - $ - $ 29,339,810 $28,385,000
Boston, MA (a)
Sierra Marketplace (b)(c) - 9,093,598 - 15,979,355 15,979,355 16,132,766 15,688,576
Reno, NV
Twin Oak (b) - 880,460 (1,515,000) 636,678 636,678 2,694,889 2,614,938
Ft. Lauderdale, FL
----------- ----------- ------------ ------------ ------------ ------------ -----------
$ - $ 9,974,058 $(12,133,380) $ 16,616,033 $ 16,616,033 $ 48,167,465 $46,688,514
=========== =========== ============ ============ ============ ============ ===========
(a) This loan is accounted for under the investment method.
(b) These loans are accounted for under the interest method.
(c) The Partnership may be entitled to additional interest in the
appreciation of the property which is subordinated to a specified
return to the borrower. It is unlikely that the Partnership will
realize any additional interest from this loan.
(d) Contractual balance represents the amount that would be paid by the
borrower if the loan was liquidated (principal plus accrued interest
earned to date). These amounts are provided for informational purposes
only.
(e) The mortgage was extended until December 1, 1999.
</TABLE>
5 PARTNERS' EQUITY
The General Partners hold a 2.5% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners'
equity account was credited with only the actual capital contributed in
cash, $1,000. The Partnership's management determined that this
accounting does not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it does not reflect the General Partners' 2.5% equity
interest in the Partnership. Thus, the Partnership has restated its
financial statements to reallocate $733,757 (2.5% of the gross proceeds
raised at the Partnership's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the
inception of the Partnership and all periods presented in the financial
statements have been restated to reflect the reallocation. The
reallocation has no impact on the Partnership's financial position,
results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The General Partners hold a 2.5% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners'
equity account was credited with only the actual capital contributed in
cash, $1,000. The Partnership's management determined that this
accounting does not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it does not reflect the General Partners' 2.5% equity
interest in the Partnership. Thus, the Partnership has restated its
financial statements to reallocate $733,757 (2.5% of the gross proceeds
raised at the Partnership's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the
inception of the Partnership and all periods presented in the financial
statements have been restated to reflect the reallocation. The
reallocation has no impact on the Partnership's financial position,
results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
The Partnership invested the net proceeds of its public offering in
"zero coupon" first and junior mortgage loans secured by properties
owned principally by privately and publicly syndicated limited
partnerships originally sponsored by affiliates of the general
partners. The initial admission of limited partners occurred on June 1,
1988 and as of the termination of its offering on September 20, 1989
the Partnership had raised gross proceeds of $46,979,750. Since all
gross proceeds that were raised had not been invested or committed for
investment, the Partnership was obligated under the terms of the
Prospectus to return such uninvested funds. The Managing General
Partner distributed these proceeds in the amount of $19,263,445 in
August, 1990. This represented a return of capital of $90.06 per unit
and an allocation of interest earned on uninvested gross proceeds,
ranging from $6.42 per unit to $17.90 per unit depending on the date of
admission. Additionally, the Partnership made a second related
distribution of $606,978, or $3.23 per unit, on October 30, 1990.
The Partnership originally invested in four Mortgage Loans aggregating
$23,300,000 in principal. In June, 1992 the Partnership lost its
investment in the Promenade Loan with original loan proceeds of
$5,600,000 leaving an aggregate of original investments of
approximately $17,700,000 at March 31, 1997.
The Partnership uses working capital reserves provided from the
proceeds of its public offering and subsequent settlement amounts, and
interest earned thereon as its primary measure of liquidity. The
Partnership does not anticipate making any distributions from cash flow
during its first 8 to 12 years of operations, or until such time as the
mortgage loans mature or are prepaid. Working capital reserves are
invested in short-term instruments and are expected to be sufficient to
pay administrative expenses during the term of the Partnership. As of
March 31, 1997, the Partnership had working capital reserves of
approximately $2,900,000.
<PAGE>
A portion of the Partnership's Proof of Claim was allowed by the
Bankruptcy Court in the amount of $691,791. A cash distribution of 35.8
percent or $247,613 was made to the Partnership in full settlement of
this claim. The Managing General Partner has added this amount to the
Partnership's working capital reserves.
In December 1995, the Partnership consummated an agreement resulting in
a payment to the Partnership of $341,038 from the master lessee of
Harbor Plaza. The Managing General Partner has added this amount to
working capital reserves.
Except as discussed above, management is not aware of any other known
trends, events, commitments, or uncertainties that will have a
significant impact on liquidity.
Real Estate Market
The real estate market continues to suffer from the effects of the
recession which included a substantial decline in the market value of
existing properties. Market values have been slow to recover, and while
the pace of new construction has slowed, high vacancy rates continue to
exist in many areas. These factors may continue to reduce rental rates.
As a result, the Partnership's potential for realizing the full value
of its investments in mortgages is considered unlikely.
Allowance for loan losses
An allowance for loan losses is established based upon a quarterly
review of each of the mortgage loans in the Partnership's portfolio. In
performing the review, management considered the estimated net
realizable value of the property or collateral as well as other
factors, such as the current occupancy, the amount and status of senior
debt, if any, the prospects for the property and the economic situation
in the region where the property is located. Because this determination
of net realizable value is based upon projection of future economic
events which are inherently subjective, the amounts ultimately realized
at disposition may differ materially from the carrying values as of
March 31, 1997. No allowance was required for the quarters ended March
31, 1997 and 1996.
For the quarter ended June 30, 1996, a $1,515,000 allowance for loan
losses was recorded on the Twin Oak Loan. As a result of the vacancy of
the former McCrory space and uncertainties regarding its lease up, a
decline in the standard of living in the surrounding area of the Twin
Oak Shopping Center and negotiations with the first mortgage lender
regarding an extension of its loan which was due July 1, 1996, cash
flow projections were performed which indicated the estimated fair
value of the Twin Oak property to be approximately $4,530,000 at June
30, 1996. The contractual balance of the first mortgage on June 30,
1996 was approximately $3,890,000, necessitating a write-down of
$1,515,000 to reduce the carrying value of the loan to approximately
$640,000.
The allowance is inherently subjective and is based on management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide additional losses in
subsequent years and such provisions could be material.
<PAGE>
Results of operations
Net income decreased for the quarter ended March 31, 1997 compared to
1996. The decrease was due to a greater decrease in revenues than the
decrease in expenses.
Revenues decreased compared to the same period in 1996. The decrease
was primarily a result of a decrease in interest income due to the
cessation of the accrual of interest on the Sierra loan.
During the first quarter of 1997, High Cash Partners, L.P., the owner
of the Sierra property and the borrower of the Sierra loan, wrote the
property down to its estimated fair market value of $15,875,000. The
balance of the Sierra loan at December 31, 1996 was approximately
$15,979,000 and it is unlikely that any additional interest accrued on
the Sierra loan will ultimately be recovered from the value of the
underlying property. Consequently, as of January 1, 1997 the
Partnership ceased accruing interest on the Sierra loan.
Costs and expenses decreased for the quarter ended March 31, 1997
compared to the same period in 1996. The decrease was primarily due to
a decrease in general and administrative costs. General and
administrative costs decreased as a result of a decrease in payroll
costs in 1997.
Inflation has not had a material effect on the Partnership's operations
or financial condition during the last three years and is not expected
to have a material effect in the future.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) 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.
RESOURCES ACCRUED MORTGAGE
INVESTORS 2 L.P.
By: RAM Funding, Inc.
Managing General Partner
Dated: May 15, 1997 By: /s/ Frederick Simon
-------------------
Frederick Simon
President
(Duly Authorized Officer)
Dated: May 15, 1997 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the March 31, 1997 Form 10-Q of Resources Accrued Mortgage
Investors 2 L.P. and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,870,658
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,882,802
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,498,835
<CURRENT-LIABILITIES> 92,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,405,935
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<INCOME-PRETAX> 35,717
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 35,717
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</TABLE>
