U.S. 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 June 30, 2000
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.)
Five Cambridge Center, Cambridge MA 02142-1493
--------------------------------------- -----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
--------------
Indicate by check mark whether 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
--- ---
1 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Investments in mortgage loan, net $ 15,979,355 $ 15,979,355
Cash and cash equivalents 4,282,478 4,276,843
Other receivable -- 32,525
------------ ------------
Total Assets $ 20,261,833 $ 20,288,723
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 26,910 $ 99,954
------------ ------------
Total Liabilities 26,910 99,954
------------ ------------
Commitments and Contingencies
PARTNERS' EQUITY:
Limited partners' equity (187,919 units
issued and outstanding) 19,729,075 19,684,075
General partners' equity 505,848 504,694
------------ ------------
Total Partners' Equity 20,234,923 20,188,769
------------ ------------
Total Liabilities and Partners' Equity $ 20,261,833 $ 20,288,723
============ ============
</TABLE>
See notes to financial statements.
2 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999
--------- ---------
REVENUES:
Short-term investment interest $ 118,841 $ 74,891
Other income -- 69,840
--------- ---------
Total revenues 118,841 144,731
--------- ---------
COSTS AND EXPENSES:
General and administrative 72,687 41,001
--------- ---------
Total costs and expenses 72,687 41,001
--------- ---------
Net income $ 46,154 $ 103,730
========= =========
Net income attributable to:
Limited partners $ 45,000 $ 101,137
General partners 1,154 2,593
--------- ---------
$ 46,154 $ 103,730
========= =========
Net income per unit of limited partnership
interest (187,919 units outstanding) $ .24 $ 0.54
========= =========
See notes to financial statements.
3 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
2000 1999
-------- ---------
REVENUES:
Short-term investment interest $ 62,147 $ 42,796
Other income - 23,770
-------- --------
Total revenues 62,147 66,566
-------- --------
COSTS AND EXPENSES:
General and administrative 49,790 22,186
-------- --------
Total costs and expenses 49,790 22,186
-------- --------
Net income $ 12,357 $ 44,380
======== ========
Net income attributable to:
Limited partners $ 12,048 $ 43,271
General partners 309 1,109
-------- --------
$ 12,357 $ 44,380
======== ========
Net income per unit of limited partnership
interest (187,919 units outstanding) $ .06 $ 0.23
======== ========
See notes to financial statements.
4 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
LIMITED GENERAL TOTAL
PARTNERS' PARTNERS' PARTNERS'
EQUITY EQUITY EQUITY
------------ --------- -----------
Balance - January 1, 2000 $ 19,684,075 $ 504,694 $ 20,188,769
Net income 45,000 1,154 46,154
------------ --------- ------------
Balance - June 30, 2000 $ 19,729,075 $ 505,848 $ 20,234,923
============ ========= ============
See notes to financial statements.
5 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 1999
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 46,154 $ 103,730
Changes in operating assets and liabilities:
Other receivables 32,525 10,240
Accounts payable and accrued expenses (73,044) 13,208
----------- -----------
Net cash provided by operating activities 5,635 127,178
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received from sale of mortgage loan, net - 800,000
Mortgage loan payments received - 236,678
----------- -----------
Cash provided by investing activities - 1,036,678
----------- -----------
Net increase in cash and cash equivalents 5,635 1,163,856
Cash and cash equivalents, beginning of period 4,276,843 2,992,413
----------- -----------
Cash and cash equivalents, end of period $ 4,282,478 $ 4,156,269
=========== ===========
</TABLE>
See notes to financial statements.
6 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The summarized financial information of Resources Accrued Mortgage
Investors 2, L.P. (the "Partnership") 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, footnotes and discussions contained in the
Partnership's annual report on Form 10-K for the year ended December 31,
1999. The accounting policies used in preparing these financial statements
are consistent with those described in the December 31, 1999 financial
statements. The results of operations for the six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the
year ending December 31, 2000.
2. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, RAM Funding, Inc. and the
Associate General Partner, Presidio AGP Corp. are wholly-owned subsidiaries
of Presidio Capital Corp. ("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.
Subject to the rights of the Limited Partners under the Limited Partnership
Agreement, Presidio controls the Partnership through its indirect ownership
of the General Partners. Presidio is indirectly controlled by NorthStar
Capital Investment Corp. ("NorthStar"), a Maryland Corporation.
For the six months ended June 30, 2000 and 1999 reimbursable expenses due
to an affiliate of Presidio from the Partnership amounted to $0 and $3,581,
respectively.
On October 21, 1999, Presidio entered into a Services Agreement with AP-PCC
III, L.P. (the "Agent") pursuant to which the Agent was retained to provide
asset management and investor relation services to the Partnership and
other entities affiliated with the Partnership.
As a result of this agreement, the Agent has the duty to direct the
day-to-day affairs of the Partnership, including, without limitation,
reviewing and analyzing potential sale, financing or restructuring
proposals regarding the Partnership's assets, preparation of all
Partnership reports, maintaining Partnership records and maintaining bank
accounts of the Partnership. The Agent is not permitted, however, without
the consent of Presidio, or as otherwise required under the terms of the
Partnership's Agreement of Limited Partnership (the "Partnership
Agreement") to, among other things, cause the Partnership to sell or
acquire an asset or file for bankruptcy.
7 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
In order to facilitate the provision by the Agent of the asset management
services and the investor relation services, effective October 25, 1999,
the officers and directors of the General Partner resigned and nominees of
the Agent were elected as the officers and directors of the General
Partner. The Agent is an affiliate of Winthrop Financial Associates, a
Boston based company that provides asset management services, investor
relation services and property management services to over 150 limited
partnerships which own commercial property and other assets. The General
Partner does not believe that this transaction will have a material effect
on the operations of the Partnership.
As of June 30, 2000, affiliates of Presidio had acquired 31,845 units of
limited partnership interest of the Partnership. These units represent
16.95% of the issued and outstanding limited partnership units.
3. INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCE FOR LOAN LOSSES
The Partnership, which originally invested in zero-coupon, nonrecourse
senior and junior mortgage loans, currently holds an interest in one
outstanding mortgage loan. During the first quarter of 1997, the obligor
under the Partnership's remaining mortgage loan wrote the property down to
what its management believed to be its estimated fair market value of
$15,875,000. Management of the Partnership performed its own evaluation at
that time and determined that this amount was a fair estimate of the
property value. The outstanding balance of the loan at December 31, 1996
was approximately $15,979,000 and it was unlikely that any additional
interest accrued on the loan would ultimately be recovered from the value
of the underlying property. Consequently, as of January 1, 1997 the
Partnership ceased accruing interest on the loan.
The Partnership's remaining mortgage note contains a provision, which
requires the borrower to provide a current appraisal based upon certain
conditions or in some cases upon request. If an appraisal indicates 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.
See "Item 2. Management's Discussion and Analysis of Financial Condition
and Result of Operations."
9 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENTS IN MORTGAGE LOAN AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
A summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
----------------------------------------- -----------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
------------ ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Opening balance $ -- $ 15,979,355 $ 15,979,355 $ 800,000 $ 16,216,033 $ 17,016,033
Recovery of loan losses -- -- -- -- 99,156 99,156
Payments received, net -- -- -- (800,000) (335,834) (1,135,834)
------------ ------------ ------------ ---------- ------------ ------------
Ending balance $ -- $ 15,979,355 $ 15,979,355 $ -- $ 15,979,355 $ 15,979,355
============ ============= ============ ========== ============ ============
</TABLE>
Information with respect to the Partnership's mortgage loans is as follows:
<TABLE>
<CAPTION>
Original Mortgage Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased Placement
Rate % Period Type Date Date Advanced Interest Fees
--------- ---------- -------- -------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Description
Shopping Center
Sierra Marketplace
Reno, Nevada 11.220 Monthly 1st 2/10/89 2/28/01 $ 6,500,000 $ -- $ 385,757
============ ========== =========
</TABLE>
<TABLE>
<CAPTION>
Interest Recognized Carrying Value Contractual Balance
----------------------- ---------------------------- --------------------------
June 30, 1999 and Reserves/ June 30, December 31, June 30, December 31,
2000 Prior Write-offs Proceeds 2000 1999 2000 1999
-------- ----------- ---------- -------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
Sierra Marketplace
Reno, Nevada $ -- $ 9,093,598 $ -- $ -- $ 15,979,355 $ 15,979,355 $ 23,196,808 $ 21,916,707
======== =========== ======= ======== ============= ============ ============ ============
</TABLE>
On March 30, 1999, the Partnership sold its interest in the Harborista Loan
to 470 Atlantic Avenue Management Corp. ("470 Atlantic") for gross proceeds
of $1,000,000, exclusive of legal and other costs related to the
transaction of $200,000. Accordingly, the Partnership recorded $800,000 of
recovery of loan losses with respect to the sale of this loan as of
December 31, 1999.
Following its acquisition of the Harborista Loan, 470 Atlantic foreclosed
on its interests in the two mortgages and acquired Harbor Plaza. On March
29, 1999, 470 Atlantic entered into an agreement with Charbird Enterprises
LLC ("Charbird"), an affiliate of Northstar and the General Partners, for
the performance of services in connection with the marketing of Harbor
Plaza. Charbird assigned to Northstar its right to receive a substantial
portion of amounts paid under the agreement and Northstar agreed to
indemnify Charbird for any liabilities under the agreement.
Harbor Plaza was sold in December 1999 for approximately $50,500,000.
Charbird received a fee of $14,050,884 under the agreement, $12,645,796 of
which was paid to Northstar.
10 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosure contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Partnership from time to
time. The discussion of the Partnership's liquidity, capital resources and
results of operations, including forward-looking statements pertaining to
such matters, does not take into account the effects of any changes to the
Partnership's operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as a
result of a number of factors, including those identified herein.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.
Liquidity and Capital Resources
The Partnership initially invested the net proceeds of its public offering
in four zero coupon first and junior mortgage loans aggregating
$23,300,000. These loans were secured by properties owned principally by
privately and publicly syndicated limited partnerships originally sponsored
by affiliates of the general partners. The Partnership currently retains an
investment in one of the original four mortgage loans, which had an initial
principal balance of approximately $6,500,000. During the first quarter of
1997, the obligor under the Partnership's remaining mortgage loan wrote the
property down to what its management believed to be its estimated fair
market value of $15,875,000. Management of the Partnership performed its
own evaluation at that time and determined that this amount was a fair
estimate of the property value. The outstanding balance of the loan at
December 31, 1996 was approximately $15,979,000 and it was unlikely that
any additional interest accrued on the loan would ultimately be recovered
from the value of the underlying property. Consequently, as of January 1,
1997 the Partnership ceased accruing interest on the loan. At June 30,
2000, the contractual balance of principal and accrued interest on this
loan was $23,196,808 and the Partnership had a carrying value in this loan
of $15,979,355.
The Partnership's remaining mortgage note contains a provision, which
requires the borrower to provide a current appraisal based upon certain
conditions or in some cases upon request. If an appraisal indicates 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 Partnership was recently contacted by the borrower under its remaining
mortgage loan in an effort to restructure the loan prior to its maturity
(February 1, 2001). In this regard, the Partnership and the borrower are
currently negotiating to modify the loan. It is expected that if the loan
is modified, any such modification will contain the following terms:
1. The Partnership will agree to delay its exercise of remedies under
the mortgage loan until February 28, 2003.
2. The borrower will place in escrow a deed in lieu of foreclosure as
well as documents necessary to convey the property to a third party which
will be released to the Partnership (A) on March 1, 2003, (B) at such time
as a third-party purchaser is identified to acquire the property or (C) at
any time after March 1, 2002 if the Partnership deems it necessary to
protect its economic interest.
3. The borrower will agree to pay to the Partnership to be applied
towards the loan all cash flow generated from the property in excess of
$100,000 per year
4. The borrower will have an appraisal prepared on the property to
determine if an excess payment is due and, if such a payment is due, to
make such payment.
5. The borrower will have the right to prepay the loan after the
initial maturity date, February 28, 2001, by paying to the Partnership the
sum of the then unpaid principal balance of the loan together with accrued
interest and other charges due under the loan and 66% of the value of the
property in excess of such amount.
The borrower indicated to the Partnership that it believes that the value
of the property has increased since 1997. If the appraisal indicates that
the value of the property has increased since 1997, the ultimate amount
received by the Partnership on account of its mortgage loan may exceed the
value at which the mortgage loan is currently carried on your partnership's
financial statements.
There can be no assurance that the foregoing transaction will be
consummated or that, if consummated, will be on the foregoing terms.
The Partnership's level of liquidity based on cash and cash equivalents
increased by $5,635 to $4,282,478 during the six months ended June 30, 2000
as compared to December 31, 1999. The increase is due to cash provided by
operating activities. Cash and cash equivalents are invested in short-term
instruments and are expected to be sufficient to pay administrative
expenses during the term of the Partnership.
On March 1, 1999, the Twin Oak Property was sold for a gross purchase price
of approximately $4,150,000 (subject to customary adjustments at closing).
The Twin Oak Borrower used the proceeds from the sale to repay the first
mortgage to Southern Life Mortgage and on May 5, 1999, the Partnership
received approximately $237,000 representing the carrying value of the Twin
Oak loan. During December 31, 1999, the Partnership received an additional
$99,156 representing residual proceeds from The Twin Oak sale and recorded
such amount as loan loss recovery in 1999.
During the latter part of 1998 and continuing into 1999, the Partnership
attempted to arrange for financing in order to satisfy the underlying First
Mortgage encumbering Harbor Plaza, the property underlying the Harborista
Loan, and protect the Partnership's interest in the Harborista Loan. The
Partnership was unable to obtain financing and, on March 29, 1999, the
Partnership sold its interest in the Harborista Loan to the holder of the
First Mortgage for gross proceeds of $1,000,000, exclusive of legal and
other costs related to the transaction of approximately $200,000.
Following its acquisition of the Harborista Loan, 470 Atlantic Avenue
Management Corp. ("470 Atlantic") foreclosed on its interests in the two
mortgages and acquired Harbor Plaza. On March 29, 1999, 470 Atlantic
entered into an agreement with Charbird Enterprises LLC ("Charbird"), an
affiliate of Northstar Capital Investment Corp. ("Northstar") and the
General Partners, for the performance of services in connection with the
marketing of Harbor Plaza. Charbird assigned to Northstar its right to
receive a substantial portion of amounts paid under the agreement and
Northstar agreed to indemnify Charbird for any liabilities under the
agreement. Harbor Plaza was sold in December 1999 for approximately
$50,500,000. Charbird received a fee of $14,050,884 under the agreement,
$12,645,796 of which was paid to Northstar.
11 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS (CONTINUED)
Results of Operations
Net income decreased for the three and six month periods ended June 30,
2000 as compared to the same periods in 1999, due to a decrease in revenue
and an increase in costs and expenses.
Revenues decreased for the three and six month periods ended June 30, 2000
as compared to the same periods in 1999, principally due to a decrease in
other income items partially offset by an increase in short term investment
interest resulting from larger cash balances available for short term
investment.
Costs and expenses increased for the three and six month periods ended June
30, 2000, as compared to the same periods in 1999 principally due to higher
professional fees.
Inflation has not had a material effect on the Partnership's recent
operations or financial condition and is not expected to have a material
effect in the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual funds. The
Partnership has no loans outstanding.
12 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits: 27. Financial Data Schedule
B. Reports on Form 8-K: None.
13 of 14
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
FORM 10-Q JUNE 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities and 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
BY: /S/ MICHAEL L. ASHNER
--------------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
BY: /S/ CAROLYN B. TIFFANY
--------------------------------
Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Dated: August 14, 2000
14 of 14
