FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________________ to ______________________
Commission File Number T3-24235
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SECURED INVESTMENT RESOURCES FUND, L.P. III
(Exact name of registrant as specified in its charter)
Missouri 48-6291172
- -------------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Main, Suite 2100 Kansas City, Missouri 64105
- ------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (816) 421-4670
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
----
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests ("Units")
---------------------------------------
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 such shorter periods 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 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]
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PART I
Item 1. Business
Secured Investment Resources Fund, L.P. III (the "Partnership" or "Registrant")
is a Missouri limited partnership formed pursuant to the Missouri Revised
Uniform Limited Partnership Act on April 20, 1988. Nichols Resources Ltd., a
Missouri corporation ("Nichols") is the General Partner. The Partnership has no
predecessors or subsidiaries.
The Partnership was formed to engage in the business of acquiring, improving,
developing, operating and holding for investment income producing real
properties with the objectives of (i) preserving and protecting the
Partnership's capital; (ii) providing cash distributions from operations; (iii)
providing capital growth through property appreciation of Partnership
properties; and (iv) increasing equity in property ownership by the reduction of
mortgage loans on Partnership properties. The term of the Partnership is 60
years from the date of the Partnership Agreement (December 6, 1988), or the date
on which all of the assets acquired by the Partnership are sold and converted to
cash.
On December 7, 1990, the Partnership closed its offering having received gross
proceeds of $4,842,500 from the sale of 9,685 units of limited partnership
interests.
The Partnership acquired two apartment communities in 1989. The General Partners
feel that these properties met the Partnership's investment criteria and
objectives. Because of many factors, the Partnership did not raise the level of
capital anticipated. Accordingly, the General Partners were unable to obtain the
targeted leveraged ratio and a residential/commercial property mix.
Due to the Partnership's inability to restructure the debt on one of the
Partnership's properties, the KC Club Apartments (after negotiations to obtain
more favorable terms failed), on January 7, 1998 the property was lost to
foreclosure (as described in Note 6 to the accompanying Consolidated Financial
Statements).
On July 21, 1999, in connection with its consent solicitation statement filed
with the Securities and Exchange Commission (the "SEC") on April 21, 1999 (the
"Consent Solicitation Statement"), Nichols Resources, Ltd., a general partner of
the Partnership ("Nichols"), obtained the written consent of limited partners of
the Partnership holding a majority of the issued and outstanding units of
limited partnership issued by the Partnership ("Units") to (i) the assignment of
James R. Hoyt's and SIR Partners III, L.P.'s general partner interests to
Nichols and (ii) the appointment of Nichols as successor Managing General
Partner of the Partnership. Pursuant to the consent solicitation, Nichols
received the consent of limited partners of the Partnership holding 4,877 units
of the 9,685 issued and outstanding units of limited partnership issued by the
Partnership ("Units"). As a result, effective as of July 21, 1999, Nichols
acquired Hoyt's and SIR Partners' general partnership interest and is the
Partnership's sole General Partner.
On January 1, 1999, the Partnership entered into a property management agreement
with Maxus Properties, Inc. ("Maxus"), a Missouri corporation that is an
affiliate of Nichols Resources, Ltd., the Partnership's general partner. The
sole shareholder of Nichols is MJS Associates, Inc. ("MJS"), a Missouri
corporation. David L. Johnson is the principal shareholder and an executive
officer and director of MJS. David L. Johnson is also the majority shareholder
and an executive officer and director of Maxus.
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Item 1. Business--Cont'd.
As of December 31, 1999, the Partnership has made cash distributions to Limited
Partners of $364,000 for the period April 1, 1989 through December 31, 1999. No
distributions have been made since July 1990. Future distributions will only be
made from excess cash flow not needed for capital expenditures or working
capital reserves.
As of December 31, 1999, the Partnership had no employees. Employees of Maxus
provided property management services to the Partnership (as described in Note 5
to the accompanying Consolidated Financial Statements).
Competition
The real estate business is highly competitive, and the Partnership competes
with numerous entities engaged in real estate activities, some of which may have
greater financial resources than those of the Partnership. The Partnership's
management believes that success against such competition is dependent upon the
geographic location of the property, the performance of property managers, the
amount of new construction in the area and the maintenance and appearance of the
property. With respect to residential property, competition is also based upon
the design and mix of the units and the ability to provide a community
atmosphere for the tenants. The Partnership's direct competitors, located within
five miles of the Partnership's only property ( the Greenhills Bicycle Club
Apartments), are Quail Run Apartments, 690 units built in 1985; Falcon Point,
192 units built in 1988; The Ethans, 606 units built in 1988; Camden Passage,
598 units built in 1989-1998; The Lakes, 400 units built in 1987 and Kelly
Crossing, 624 units built in 1998. The Greenhills Bicycle Club Apartments is
competitive in terms of square footage per unit and rents for unit types. The
Partnership's management believes that general economic circumstances and trends
and new properties in the vicinity of the Partnership's property will also be
competitive factors.
Inflation
The effects of inflation on the Partnership's operations or investments are not
quantifiable. Revenues from property operations fluctuate proportionately with
increases and decreases in housing costs. Fluctuations in the rate of inflation
also affect the sales values of properties and, correspondingly, the ultimate
gains to be realized by the Partnership from property sales.
Item 2. Properties
The following table sets forth the investment portfolio of the Partnership at
December 31, 1999:
Properties at Occupancy(*)
Property Description Initial Cost Date Acquired Percentage
-------- ----------- ------------ ------------- ----------
1999 1998
Greenhills Bicycle
Club Apartments
Kansas City, MO 312 units $11,251,613 Oct. 27, 1989 90% 91%
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Item 2. Properties-Cont'd.
(*) Based upon vacancy amount (in dollars) as a percent of gross possible rents.
(Gross possible rents is calculated by multiplying established market rents for
each unit type by the total unit mix. Established market rents are budgeted
rents, established by conducting market surveys to determine the typical rents
charged for similar properties in the area and through knowledge of the rates
the market will bear for similar unit types.)
The encumbrance against the property is described in Note 3 to the accompanying
Consolidated Financial Statements.
Description of Real Estate:
The Partnership's sole property, the Greenhills Bicycle Club Apartments,
consists of 312 units of multi-family rental real estate. On July 8, 1996 the
Partnership refinanced the matured first mortgage on Greenhills Bicycle Club
Apartments. The terms of the mortgage are $8,100,000 at 9.0% interest with
monthly principal and interest payments in the amount of $65,000 through the
loan maturity date of August 1, 2001. The outstanding principal balance of the
note at December 31, 1999 is $7,895,000. The balance to be due at maturity
assuming no payment has been made on principal in advance of its due date is
$7,766,000. The note can be prepaid with penalty. A second mortgage note was
paid in full at a discount in July, 1998 for $200,000, creating an extraordinary
gain on early extinguishment of debt of $197,000.
Competition:
The real estate business is highly competitive and the Partnership competes with
numerous entities engaged in real estate activities, some of which may have
greater financial resources than those of the Partnership. The Partnership's
management believes that success against such competition is dependent upon the
geographic location of the property, the performance of property managers, the
amount of new construction in the area and the maintenance and appearance of the
property. With respect to residential property, competition is also based upon
the design and mix of the units and the ability to provide a community
atmosphere for the tenants. The Partnership's direct competitors, located within
five miles of the Greenhills Bicycle Club Apartments, are Quail Run Apartments,
690 units built in 1985; Falcon Point, 192 units built in 1988; The Ethans, 606
units built in 1988; Camden Passage, 598 units built in 1989-1998; The Lake, 400
units built in 1987 and Kelly Crossing, 624 units built in 1998. The Bicycle
Club Apartments is competitive in terms of square footage per unit and rents for
unit types. The Partnership's management believes that general economic
circumstances and trends and new properties in the vicinity of the Partnership's
property will also be competitive factors. The partnership's management believes
that the property is adequately covered by insurance.
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Item 2. Properties-Cont'd.
Operating Data:
The occupancy rate for the Greenhills Bicycle Club Apartments for each of the
last five years was:
1995: 93% 1996: 91% 1997: 91% 1998: 91% 1999: 90%
The average effective annual rental per unit for each of the last five years was
1995: $5,360 1996: $5,750 1997: $6,000 1998: $6,100 1999: $6,300
Depreciation:
Investment property is depreciated on a straight-line basis over the estimated
useful life of the property (30 years for buildings and 5 years for furniture,
fixtures and equipment). Improvements are capitalized and depreciated over their
estimated useful lives. Maintenance and repair expenses are charged to
operations as incurred. Cost (including capital improvements subsequent to
acquisition) of the Greenhills Bicycle Club Apartments at December 31, 1999 is
$11,246,000.
Item 3. Legal Proceedings,
None.
Item 4. Submission of Matters to a Vote for Security Holders.
None
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PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
(A) There is no established public trading market for the Units of the
Partnership.
(B) There have been no distributions the last three years.
(C) As of December 31, 1999, the Partnership had admitted 463 Limited Partners
who purchased 9,685 units.
Item 6. Selected Financial Data,
<TABLE>
<CAPTION>OPERATING DATA
(In Thousands)
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Revenues $ 1,982 $ 1,945 $ 2,739 $ 2,768 $ 2,697
Interest and earnings on
investments 11 13 196 90 128
Property operating
expense 1,414 1,400 2,027 2,110 2,072
Interest expense 713 741 1,112 1,126 925
-------- -------- -------- -------- --------
Partnership income (loss)
before extraordinary item (134) (182) (204) (378) (172)
-------- -------- -------- -------- --------
Extraordinary item:
Gain on extinguishment
of debt -- 976 -- -- --
-------- -------- -------- -------- --------
Partnership income (loss) $ (134) $ 794 $ (204) $ (378) $ (172)
======== ======== ======== ======== ========
PER LIMITED PARTNERSHIP UNIT
Partnership income(loss)
before extraordinary item (1) (13.69) $ (18.61) $ (20.87) $ (38.64) $ (17.54)
-------- -------- -------- -------- --------
Partnership income(loss) (1) (13.69) $ 81.18 $ (20.87) $ (38.64) $ (17.54)
======== ======== ======== ======== ========
Cash distribution $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
BALANCE SHEET DATA 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(In Thousands)
Total Assets $ 7,487 $ 7,690 $ 11,617 $ 12,749 $ 13,223
Mortgage Debt $ 7,895 $ 7,963 $ 12,344 $ 12,931 $ 12,851
</TABLE>
(1) Partnership loss per limited partnership unit is computed
by dividing loss allocated to the Limited Partners by the
weighted average number of limited partnership units
outstanding (9,685 units for each period).
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
1999 Comparisons
Revenues for the year ended December 31, 1999 increased $37,000 (1.9%) when
compared to the same period in 1998. This increase is primarily due to an
increase in damage reimbursement income of $39,000.
Total operating and administrative expenses for the year ended December 31, 1999
increased $14,000 (1.0%) compared to 1998. The $14,000 increase is primarily due
to increases in property operating expenses of $74,000, management fees of
$3,000, and depreciation and amortization of $14,000, offset by decreases in
general and administrative expense of $22,000 and professional fees of $55,000.
The $74,000 increase in property operating expense was due to an increase in
general operating expenses including an increase in marketing and property tax
and an increase in periodic repairs and maintenance, partially related to
increased turn cost. The $14,000 increase in depreciation and amortization was
due primarily to depreciation of capital items added to the property in the
year ended December 31, 1999.
Interest expense for the year ended December 31, 1999 decreased by $28,000. The
decrease is due to the Bicycle Club Apartments paying down the mortgage balance
on the property through normal principal and interest payments.
1998 Comparisons
Revenues for the year ended December 31, 1998 decreased $794,000 (29.0%) when
compared to 1997. The majority of the decrease is due to the loss of revenue
caused by the foreclosure of the KC Club Apartments. Revenue for 1998 at the
Greenhills Bicycle Club Apartments increased $30,000 (1.6%) when compared to the
same period in 1997. This increase is primarily due to increased rental rates
for new leases and upon lease renewals. These higher market rates are being
achieved with fewer rent concessions.
Total operating and administrative expenses for the year ended December 31, 1998
decreased $627,000 (30.9%) compared to 1997. Of the total decrease, $820,000
relates to the foreclosure of the KC Club Apartments. In addition, total
operating and administrative expenses at the Greenhills Bicycle Club Apartments
increased by $193,000. The $820,000 decrease related to the foreclosure of the
KC Club Apartments is primarily due to a decrease in expenses as follows:
property operating expense $536,000, general and administrative expense $28,000,
professional services $30,000, management fee $41,000 and depreciation and
amortization $168,000. The $193,000 increase in total operating and
administrative expenses relating to the Greenhills Bicycle Club Apartments is
primarily due to an increase in expenses as follows: property operating expense
$178,000, professional services $71,000, management fee $17,000 and depreciation
and amortization $15,000, while general and administrative expense decreased by
$90,000. The $178,000 increase in property operating expense was due to an
increase in general operating expenses including an increase in periodic repairs
and maintenance, marketing and property tax. The $71,000 increase in
professional services expenses was primarily due to legal fees incurred in
connection with the foreclosure of the KC Club Apartments and other partnership
related matters. The General Partners were entitled to receive a Partnership
management fee equal to 5% of total operating cash flows (as defined) for
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations--Cont'd.
managing the normal operations of the Partnership. The $17,000 increase in
management fee expense was due primarily to the management fees due to the
General Partners for the year ended December 31, 1998. There was no management
fee due to the General Partners for the years ended December 31, 1997 and 1996.
The $15,000 increase in depreciation and amortization was due primarily to
depreciation of capital items added to the balance sheet in the year ended
December 31, 1998.
Interest expense for the year ended December 31, 1998 decreased $371,000
(33.4%). $340,000 of the decrease is due to the foreclosure of the KC Club
Apartments. The remainder of the decrease is due to the Bicycle Club Apartments
paying down the mortgage balance on the property through normal principal and
interest payments.
Interest income for the year ended December 31, 1998 decreased $182,000 (92.8%)
from 1997. The decrease in interest income was caused primarily by the absence
of interest income from, and the August 1997 gain realized on the sale of, the
Treasury certificate of accrual held by the Partnership as collateral for the KC
Club Apartments.
Liquidity and Sources of Capital
Cash on hand as of December 31, 1999 is $358,000, an increase of $228,000 from
the year ended December 31, 1998. The increase in cash is due primarily to a
decrease in net loss before extraordinary item of $48,000, including non-cash
expenses (depreciation and amortization) of $451,000.
During 1999, cash was provided by operating activities in the amount of $311,000
compared to $244,000 for 1998. The increase is primarily due to a decrease in
net loss (excluding extraordinary item) from 1998 ($182,000) to 1999 ($134,000).
Investing activities used $15,000 primarily due to an increase in property and
equipment purchases of $53,000 offset by a decrease in restricted deposits of
$38,000. Financing activities (primarily principal payments, as described in the
Consolidated Statement of Cash Flows) used $68,000.
As a result of the foreclosure of the KC Club Apartments in 1998, the liquidity
and financial condition of the Partnership has improved. The cash generated from
operations for the KC Club Apartments was insufficient to service the mortgage
on the property.
During 1998, cash was provided by operating activities in the amount of
$244,000. Investing activities used $112,000, and financing activities
(primarily principal payments, as described in the Consolidated Statement of
Cash Flows) used $319,000.
Year 2000
Information Technology Systems
Subsequent to December 31, 1999, the Registrant has not experienced any material
information technology ("IT") or embedded ("non-IT") systems disruptions or
failures and anticipates no material systems problems at Bicycle Club
Apartments.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Year 2000 - Cont'd.
Material Third Parties' Systems Failures
Evaluation of material third parties' Year 2000 readiness status was essentially
complete as of December 31, 1999. The Registrant continues to monitor for any
additional information pertaining to these parties' Year 2000 readiness. The
Registrant has not experienced and does not anticipate any Year 2000 performance
issues related to its material third parties.
Inflation
The effects of inflation on the Partnership's operations or investments are not
quantifiable. Revenues from property operations fluctuate proportionately with
increases and decreases in housing costs. Fluctuations in the rate of inflation
also affect the sales values of properties and, correspondingly, the ultimate
gains to be realized by the Partnership from property sales.
Future Changes in Accounting Principle
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). This statement, as amended by SFAS No. 137,
requires all derivatives to be recorded on the balance sheet at fair value and
establishes standard accounting methodologies for hedging activities. The
standard will result in the recognition of offsetting changes in value or cash
flows of both the hedge and the hedged item in earnings or comprehensive income
in the same period. The statement is effective for Secured Investment Resources
Fund, L.P. III's fiscal year ending December 31, 2001. Because Secured
Investment Resources Fund, L.P. III does not hold derivative instruments, the
adoption of this statement is not expected to have a material impact on the
financial statements.
Item 7A. Qualitative and Quantitative Disclosure About Market Risk.
The Registrant has considered the provision of Financial Reporting Release No.
48 "Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments". The Trust had
no holdings of derivative financial or commodity instruments at December 31,
1999.
The Registrant does not believe that it has any material exposure to interest
rate risk. The debt on the Trust's property matures in the year 2001. Management
believes that the Trust will be able to refinance the debt on similar terms at
that time.
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Item 8. Financial Statements and Supplementary Data
See Item 14(a).
Item 9. Changes in and Disagreements with Registrant's Certifying Accountants
and Accounting and Financial Disclosure.
None
Part III
Item 10. Directors and Executive Officers of the Registrant.
The General Partner of the Partnership is Nichols Resources, Ltd., a Missouri
corporation formed on August 22, 1988 for the purpose of acting as a general
partner of public real estate programs and otherwise investing in and dealing
with limited partnerships, property management and the real estate syndication
business. Nichols Resources, Ltd. was a wholly-owned subsidiary of the J.C.
Nichols Company until January, 1998. It is now a wholly-owned subsidiary of MJS
Associates, Inc., a Missouri corporation with executive offices located at 1100
Main Street, Ste 2100 Kansas City, Missouri 64105. MJS Associates, Inc. acquired
all of the outstanding stock of Nichols Resources, Ltd. in January 1998 from
J.C. Nichols company. Nichols Resources, Ltd. issued 15,000 shares of common
stock for $1,500,000 on August 22, 1988.
Currently, Nichols' sole business is acting as general partner of the
Registrant. Besides its ownership of stock of Nichols and other real estate
companies, MJS oversees construction relating to the rehabilitation of
properties, but has no employees. David L. Johnson is the principal shareholder
and an officer and director of MJS.
Nichols has three directors: David L. Johnson, John W. Alvey and Daniel W.
Pishny. Christine A. Robinson is Nichols' President, and Mr. Pishny and Mr.
Alvey are Nichols' Vice President and Secretary/Treasurer, respectively.
Mr. Johnson, age 43, is a member of the Board of Trustees and Chairman of Nooney
Realty Trust, Inc., a publicly-traded real estate investment trust ("NRTI"). Mr.
Johnson also is Chairman, Chief Executive Officer, and majority shareholder of
Maxus Properties, Inc. ("Maxus"), a Missouri corporation located at 1100 Main,
Suite 2100, Kansas City, Missouri 64105, that specializes in commercial property
management for affiliated owners. Maxus
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Item 10. Directors and Executive Officers of the Registrant-Cont'd.
employs more than 250 people to manage 49 commercial properties, including more
than 8,000 apartment units and 700,000 square feet of retail and office space.
Mr. Johnson is also a member of the Board of Directors and Chairman of Maxus
Capital Corp. ("MCC") the managing general partner of Maxus Real Property
Investors - Four, L.P., a publicly traded limited partnership.
Mr. Pishny, age 37, is a member of the Board of Trustees and President of NRTI,
and is President and Chief Operating Officer of Maxus. Mr. Pishny is responsible
for the day-to-day operations of Maxus and its managed properties. Mr. Pishny is
also a member of the Board of Directors and President of MCC.
Mr. Alvey, age 41, is Vice President of NRTI, Executive Vice President and Chief
Financial Officer of Maxus. Mr. Alvey is also a member of the Board of Directors
of MCC.
Ms. Robinson, age 33, is Secretary of NRTI, Vice President of Administration and
Director of Investor Relations of Maxus.
Item 11. Management Compensation
During 1999, The Partnership paid $100,000 in fees to related parties for
property management services. The Partnership also paid $17,000 to Nichols
Resources, Ltd, for professional services as described in Note 5 to the
accompanying Consolidated Financial Statements.
See Item 14(a)(i)(vii), Notes to Financial Statements, Note 5 to the
accompanying Consolidated Financial Statements for a discussion of transactions
between the Registrant and certain affiliates of the General Partner.
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Item 12. Security ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
The table below sets forth each person or entity that has reported to the
Registrant beneficial ownership of more than 5% of the Registrant's
limited partner units as of January 31, 2000. The percentage of ownership
is based on 9,685 limited partner units outstanding as of February 1,
2000.
Amount and Nature of
Name Beneficial Ownership Percentage
Bond Purchase, L.L.C. 511 5.3%
1100 Main, Suite 2100
Kansas City, Missouri 64105
(b) Security Ownership of Management.
The table shown below sets forth the number of the Registrant's limited
partner units beneficially owned as of February 1, 2000, directly or
indirectly, by each general partner and executive officer and all general
partners and executive officers as a group.
Amount and Nature of
Name Beneficial Ownership (1) Percentage(2)
---- ------------------------- -------------
Nichols Resources, Ltd.............. -0- -
David L. Johnson (3)................ 511 5.3%
Daniel W. Pishny .................. -0- -
John W. Alvey ...................... -0- -
Nichols Resources, Ltd.............. -0- -
Christine A. Robinson............... -0- -
All general partners, directors
and officers........................ 511 5.3%
- ----------------
(1) A beneficial owner of a security includes a person who, directly
or indirectly, has or shares voting or investment power with
respect to such security. Voting power is the power to vote or
direct the voting of the security and investment power is
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Item 12. Security ownership of Certain Beneficial owners and Management-Cont'd.
the power to dispose or direct the disposition of the security.
Each person listed has stated that he, either alone or with his
spouse, has sole voting power and sole investment power with
respect to the units shown as beneficially owned, except as
otherwise indicated.
(2) The percentages represent the total number of limited partner
units in the adjacent column divided by 9,685, the number of
issued and outstanding units of the Registrant on February 1,
2000.
(3) Represents units held by Bond Purchase, L.L.C. of which Mr.
Johnson is approximately an 86% owner.
(c ) Change in Control.
On July 21, 1999, in connection with its consent solicitation statement filed
with the Securities and Exchange Commission (the "SEC") on April 21, 1999 (the
"Consent Solicitation Statement"), Nichols Resources, Ltd., a general partner of
the Registrant ("Nichols"), obtained the written consent of limited partners of
the Registrant holding a majority of the issued and outstanding units of limited
partnership issued by the Registrant ("Units") to (i) the assignment of James R.
Hoyt's and SIR Partners III, L.P.'s general partner interests to Nichols and
(ii) the appointment of Nichols as successor Managing General Partner of the
Registrant. Pursuant to the consent solicitation, Nichols received the consent
of limited partners of the Registrant holding 4,877 units of the 9,685 issued
and outstanding units of limited partnership issued by the Registrant ("Units").
As a result, effective as of July 21, 1999, Nichols acquired Hoyt's and SIR
Partners' general partnership interest and is the Registrant's sole General
Partner.
Nichols is a Missouri corporation, the owner of which is MJS Associates, Inc., a
Missouri corporation ("MJS"). Nichols has three directors: David L. Johnson,
John W. Alvey and Daniel W. Pishny. Christine A. Robinson is Nichols' President,
and Mr. Pishny and Mr. Alvey are Nichols' Vice President and
Secretary/Treasurer, respectively. Nichols was formed on August 22, 1988 for the
purpose of acting as a general partner of public real estate programs and
otherwise investing in and dealing with limited partnerships, property
management and real estate syndications. Currently, Nichols' sole business is
acting a general partner of the Registrant. Prior to January, 1998, Nichols was
a wholly-owned subsidiary of the J.C. Nichols Company. In January, 1998, MJS
acquired all the issued and outstanding shares of common stock of Nichols from
the J.C. Nichols Company. Besides its ownership of stock of Nichols and other
real estate companies, MJS oversees construction relating to the rehabilitation
of properties, but has no employees. David L. Johnson is the principal
shareholder and an officer and director of MJS.
Item 13. Certain Relationships and Related Transactions.
See Item 14(a)(1)(vii), Notes to Financial Statements, Note 5 to the
accompanying Consolidated Financial Statements.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) The following Financial Statements of Secured Investment Resources Fund,
L.P. III, accompany this report:
SECURED INVESTMENT RESOURCES FUND, L.P. III
(i) Independent Accountants' Report
(ii) Independent Auditor's Report
(iii) Consolidated Balance Sheets - December 31, 1999
and 1998
(iv) Consolidated Statements of Income -
Years Ended December 31, 1999,
1998, and 1997
(v) Consolidated Statements of Changes in Partners' Deficit
Years Ended December 31,
1999, 1998, and 1997
(vi) Consolidated Statements of Cash Flows -
Years Ended December 31, 1999,
1998, and 1997
(vii) Notes to Consolidated Financial Statements
(a)(2) The following Financial Statement Schedules are part of this report:
(i) Report of Independent Accountants on Financial Statement Schedules
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(ii) Schedule II - Allowance For Doubtful Accounts Information
(iii) Schedule III - Real Estate and Accumulated Depreciation
All schedules other than those indicated in the index have been omitted as the
required information is presented in the financial statements, related notes or
is inapplicable.
(a)(3) The following Exhibits are Incorporated by Reference and are an integral
part of this Form 10-K.
Exhibit Number Description
(3) (a) Amended and Restated Agreement
of Limited Partnership. (iii)
(b) Certificate of Limited
Partnership. (i)
(4) (a) Form of Subscription Agreement. (iii)
(b) Form of Certificate evidencing units. (i)
(10) (a) Property Management Agreement as Amended (ii)
(b) Management Agreement between the Partnership and Maxus
Properties, Inc.
(c) Escrow Agreement between the Partnership and The Mission
Bank. (i)
(d) Real Estate Contract of Sale for the Brywood Hills
Apartments. (iv)
(e) Real Estate Contract of Sale for The Greenhills Bicycle
Club (formerly Candlewyck Apartments). (v)
15
<PAGE>
(f) Deed of Trust and Promissory Notes for Greenhills
Bicycle Club (formerly Candlewyck Apartments). (vi)
(g) Deed of Trust and Promissory Notes for Brywood Hills
Apartments. (vi)
(16) (a) Letter regarding change in certifying accountant. (vi)
(25) (a) Power of Attorney. (i)
(27) (a) Secured Investment Resources Fund, L.P. III Financial
Data Schedule at December 31, 1999 and for the year then
ended.
(28) (b) Guarantee of General Partners. (i)
(i) Previously filed on September 13, 1988 as an Exhibit to the Registration
Statement on Form S-11 (file no. 3324235) such Exhibit and Registration
Statement incorporated herein by reference.
(ii) Previously filed on December 7, 1988 as an Exhibit to Amendment #1 to
registration Statement of Form S-11 such Exhibit and Registration
Statement incorporated herein by reference.
(iii) Previously filed on December 7, 1988 as part of Amendment #1 to
Registration Statement and incorporated herein by reference.
(iv) Previously filed as an exhibit to a current report on Form 8-K dated June
12, 1989 which exhibit and Form is incorporated herein by reference.
(v) Previously filed as an exhibit to a current report on Form 8-K dated
October 30, 1989 which exhibit and Form is incorporated herein by
reference.
(vi) Previously filed as an exhibit to an annual report on Form 10-K dated
December 31, 1998 which exhibit and Form is incorporated herein by
reference.
(vii) Previously filed as an exhibit to a current report on Form 8-K (Amendment
No.1) dated December 1, 1998 which exhibit and Form is incorporated
herein by reference.
(b) Report of Form 8-K filed during the fourth quarter.
None
16
<PAGE>
(c) See Exhibit Index contained herein.
(d) See (a)(2) above.
(the remainder of this page left blank intentionally)
17
<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 hereunto duly authorized.
Secured Investment Resources
Fund, L.P., III, a Missouri limited
partnership (Registrant)
Date: March 30, 2000 By: Nichols Resources, Ltd., its
general partner
By: /s/ Christine A. Robinson
Christine A. Robinson
President
Pursuant to the requirements of the Securities Exchanged Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
/s/ David L. Johnson Director of Nichols March 30, 2000
David L. Johnson Resources, Ltd., a
corporate general partner
of the Registrant
/s/ John W. Alvey Director of Nichols March 30, 2000
John W. Alvey Resources, Ltd., a
corporate general partner
of the Registrant
/s/ Daniel W. Pisny Director of Nichols March 30, 2000
Daniel W. Pishny Resources, Ltd., a
corporate general partner
of the Registrant
18
<PAGE>
Secured Investment Resources Fund, L.P. III
(A Partnership)
Accountants' Report and Consolidated Financial Statements
December 31, 1999 and 1998
[BKD LOGO]
BKD
Baird, Kurtz & Dobson
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
DECEMBER 31, 1999 AND 1998
CONTENTS
Page
INDEPENDENT ACCOUNTANTS' REPORT
Baird, Kurtz and Dobson................................................F-3
BDO Seidman, LLP.......................................................F-4
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets.........................................................F-5
Statements of Operations...............................................F-6
Statements of Changes in Partners' Deficit.............................F-7
Statements of Cash Flows...............................................F-8
Notes to Financial Statements..........................................F-9
F-2
<PAGE>
Independent Accountants' Report
The Partners
Secured Investment Resources Fund, L.P. III
Kansas City, Missouri
We have audited the consolidated balance sheets of SECURED INVESTMENT
RESOURCES FUND, L.P. III (A Partnership) as of December 31, 1999 and 1998, and
the related consolidated statements of operations, changes in partners' deficit
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of SECURED INVESTMENT RESOURCES
FUND, L.P. III (A Partnership) as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Baird, Kurtz and Dobson
Kansas City, Missouri
January 19, 2000
F-3
<PAGE>
Report of Independent Certified Public Accountants
The Partners
Secured Investment Resources Fund, L.P. III
Mission, Missouri
We have audited the consolidated statements of operations, partnership
deficit and cash flows for the year ended December 31, 1997, of Secured
Investment Resources Fund, L.P. III. We have also audited the financial
statement schedules for the year ended December 31, 1997. These financial
statements and schedules are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedules 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and their cash flows
of Secured Investment Resources Fund, L.P. III for the year then ended, in
conformity with generally accepted accounting principles.
Also, in our opinion, the schedules present fairly, in all material
respects, the information set forth therein.
/s/ BDO Seidman, LLP
St. Louis, Missouri
February 6, 1998
F-4
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(in thousands, except unit information)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------- -------
INVESTMENT PROPERTIES $ 6,885 $ 7,220
------- -------
RESTRICTED DEPOSITS 117 155
------- -------
CASH 358 130
------- -------
OTHER ASSETS
Rent receivables -- 2
Prepaid expenses and deposits 27 20
Debt issuance costs, less accumulated
amortization of $316 in 1999 and
$253 in 1998 100 163
------- -------
127 185
------- -------
$ 7,487 $ 7,690
======= =======
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
1999 1998
------- -------
Mortgage payable $ 7,895 $ 7,963
Accounts payable and accrued expenses 69 48
Accrued management fees - General Partner 16 18
Accrued interest 59 60
Unearned revenue 4 25
Tenant security deposits 73 71
------- -------
8,116 8,185
------- -------
PARTNERS' DEFICIT
General Partner (4 units authorized
and outstanding)
Capital contributions 2 2
Partnership deficit (45) (44)
------- -------
(43) (42)
------- -------
Limited Partners (60,000 units authorized;
9,685 units outstanding)
Capital contributions 3,915 3,915
Partnership deficit (4,501) (4,368)
------- -------
(586) (453)
------- -------
(629) (495)
------- -------
$ 7,487 $ 7,690
======= =======
F-5
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
------- ------- -------
REVENUES
Rents $ 1,865 $ 1,869 $ 2,692
Other income 117 76 47
------- ------- -------
1,982 1,945 2,739
------- ------- -------
OPERATING AND ADMINISTRATIVE
EXPENSES
Property operating expenses 611 537 895
General and administrative expenses 158 180 298
Professional fees 78 133 92
Management fees 116 113 137
Depreciation and amortization 451 437 605
------- ------- -------
1,414 1,400 2,027
------- ------- -------
OPERATING INCOME 568 545 712
------- ------- -------
OTHER INCOME (EXPENSE)
Interest expense (713) (741) (1,112)
Interest income 11 14 196
------- ------- -------
(702) (727) (916)
------- ------- -------
NET LOSS BEFORE EXTRAORDINARY ITEM (134) (182) (204)
EXTRAORDINARY ITEM
Gain on extinguishment of debt -- 976 --
NET INCOME (LOSS) $ (134) $ 794 $ (204)
======= ======= =======
ALLOCATION OF INCOME (LOSS)
General Partner $ (1) $ 8 $ (2)
Limited Partners (133) 786 (202)
------- ------- -------
$ (134) $ 794 $ (204)
======= ======= =======
PARTNERSHIP INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT
BEFORE EXTRAORDINARY ITEM $(13.69) $(18.61) $(20.87)
======= ======= =======
PARTNERSHIP INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $(13.69) $ 81.18 $(20.87)
======= ======= =======
</TABLE>
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
General Limited
Partners Partners Total
-------- -------- -----
PARTNERS' DEFICIT, JANUARY 1, 1997 $ (48) $ (1,037) $ (1,085)
Partnership loss (2) (202) (204)
--------- ---------- ----------
PARTNERS' DEFICIT, DECEMBER 31, 1997 (50) (1,239) (1,289)
Partnership income 8 786 794
-------- --------- ---------
PARTNERS' DEFICIT, DECEMBER 31, 1998 (42) (453) (495)
Partnership loss (1) (133) (134)
--------- ---------- ----------
PARTNERS' DEFICIT, DECEMBER 31, 1999 $ (43) $ (586) $ (629)
========= ========== ==========
F-7
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (134) $ 794 $ (204)
Items not requiring (providing) cash:
Depreciation and amortization 451 437 605
Extraordinary item -- (976) --
Gain on sale of assets -- -- (115)
Changes in:
Rent and other receivables 2 -- (2)
Prepaid expenses and deposits (7) -- (1)
Accounts payable and accrued expenses 19 (1) 56
Unearned revenue (21) 13 (16)
Accrued interest (1) (11) (386)
Tenant security deposits 2 (12) 4
------- ------- -------
Net cash provided by (used in) operating activities 311 244 (59)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments from related parties -- 107 --
Net change in restricted deposits 38 (72) (59)
Proceeds from sale of assets -- -- 1,083
Income on investments -- -- (71)
Purchase of property and equipment (53) (147) (66)
------- ------- -------
Net cash provided by (used in) investing activities (15) (112) 887
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (68) (262) (587)
Cash payments on foreclosure -- (57) --
Note receivable from related parties -- -- (7)
------- ------- -------
Net cash used in financing activities (68) (319) (594)
------- ------- -------
INCREASE (DECREASE) IN CASH 228 (187) 234
CASH, BEGINNING OF YEAR 130 317 83
------- ------- -------
CASH, END OF YEAR $ 358 $ 130 $ 317
======= ======= =======
</TABLE>
F-8
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Secured Investment Resources Fund, L.P. III (Partnership) is a Missouri
limited partnership formed pursuant to the Missouri Revised Uniform Limited
Partnership Act on April 20, 1988. The Partnership invested in two apartment
complexes in the Metropolitan Kansas City, Missouri area. It extends unsecured
credit, subject to security deposits, to its tenants. Tenant leases are
generally subject to annual renewals. The General Partner's and Limited
Partners' interest in Partnership earnings or loss initially amounts to 1% and
99%, respectively. At such point in time cash distributions to the Limited
Partners equal their original invested capital plus interest at a rate of the
greater of 12% (14% for those investors who subscribed for units on or before 90
days after December 7, 1988) or the increase in the Consumer Price Index per
annum, cumulative non-compounded on their adjusted invested capital, net income
or loss will be allocated 15% to the General Partner and 85% to the Limited
Partners. Upon dissolution of the Partnership, the General Partner must have a
capital account greater than or equal to 1.01% of the original invested capital.
If a deficiency exists, the General Partner will be required to fund the
necessary amounts. Effective January 7, 1998, one of the two apartment complexes
was foreclosed by the mortgage holder (see Note 6).
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Partnership Loss Per Limited Partnership Unit
Partnership loss per limited partnership unit is computed by dividing the
loss allocated to the Limited Partners by the weighted average number of limited
partnership units sold. The per unit information has been computed based on
9,685 weighted average limited partnership units outstanding.
Principles of Consolidation
The Partnership is the sole Limited Partner of a single asset partnership,
Bicycle Club Joint Venture, L.P. The consolidated financial statements include
the accounts of the Partnership and Bicycle Club Joint Venture, L.P. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
F-9
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Depreciation and Amortization
Depreciation and amortization methods and lives are as follows:
Estimated
Useful Life Method
----------- ------
Building and land improvements 30 years Straight-line
Equipment 5 years Straight-line
Debt issue costs are being amortized over the lives of the related mortgage
note using a method that approximates the interest method. Amortization expense
was $63, $63 and $76 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Impairment
The Partnership evaluates long-lived assets to be held and used for
impairment when events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. Impairment is recognized if
expected undiscounted future cash flows are less than the carrying amount of
those assets.
Income Taxes
Income taxes on the income of the Partnership are assumed by the individual
partners. Therefore, no provision for income taxes is reflected in the
accompanying consolidated financial statements.
Restricted Deposits
Restricted deposits consist of cash accounts held for debt service payments
and repair and replacement costs.
Future Changes in Accounting Principle
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). This statement, as amended by SFAS No. 137,
requires all derivatives to be recorded on the balance sheet at fair value and
establishes standard accounting methodologies for hedging activities. The
standard will result in the recognition of offsetting changes in value or cash
flows of both the hedge and the hedged item in earnings or comprehensive income
in the same period. The statement is effective for Secured Investment Resources
Fund, L.P. III's fiscal year ending December 31, 2001. Because Secured
Investment Resources Fund, L.P. III does not hold derivative instruments, the
adoption of this statement is not expected to have a material impact on the
financial statements.
F-10
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reclassifications
Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform with the 1999 presentation. These reclassifications had
no effect on the previously reported net income (loss) or partners' deficit.
NOTE 2: INVESTMENT PROPERTIES
Major classifications of investment properties, stated at cost, are as
follows:
1999 1998
------------------
Greenhills Bicycle Club Apartments $11,246 $11,193
Office Equipment 12 12
------- -------
11,258 11,205
Less accumulated depreciation 4,373 3,985
------- -------
$ 6,885 $ 7,220
======= =======
Depreciation expense was $388, $374 and $542 for the years ended December 31,
1999, 1998 and 1997, respectively.
NOTE 3: MORTGAGE PAYABLE
1999 1998
--------- ------
Real Estate Mortgage:
Greenhills Bicycle Club Apartments (A) $ 7,895 $7,963
========= ======
(A) Mortgage payable, bank, original balance of $8,100, payable in monthly
installments of $65 including principal and interest. Due August 2001
with interest at 9%; collateralized by investment property.
The carrying value for the above mortgage payable approximates fair value.
Aggregate annual maturities of long-term debt at December 31, 1999 are as
follows:
2000 $ 75
2001 7,820
---------
$ 7,895
=========
F-11
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
NOTE 4: LAND LEASE
The Partnership entered into a land lease agreement for the land underlying
the KC Club Apartments for a term of 20 years. The lease payments for years 1 to
15 were calculated at 50% of that year's net operating income from the leased
premises in excess of an ascending scale from $650 to $800. During years 16 to
20, the annual lease payments were 10% of the land's then appraised value. For
the year ended December 31, 1997, the net operating income did not exceed the
land lease requirements, which resulted in no lease payments. The property was
lost to foreclosure on January 7, 1998 and the lease was effectively terminated.
The Partnership invested $500 (held as a Certificate of Accrual with a market
value of $1,037 as of December 31, 1996) which was pledged as collateral until
the property's net operating income achieved the level of 120% of the debt
service on the first mortgages for a consecutive 24-month period or May 31,
2004, whichever was earlier. The Certificate of Accrual was sold on August 1,
1997 for $1,083. The proceeds were used to pay $553 of accrued interest and $530
of principal on the KC Club Apartments.
NOTE 5: RELATED PARTY TRANSACTIONS
Through December 31, 1998, SPECS, Inc., a corporation in which a former
General Partner had a 100% interest, received property management fees for
providing property management services. SPECS, Inc. also performed various
professional services for the Partnership, primarily tax accounting, audit
preparation, SEC 10Q and 10K preparation, and investor services. Amounts paid by
the Partnership to SPECS, Inc. are as follows:
1998 1997
---------------------
Property management fee $ 95 $ 137
Professional services 17 43
--------- ------
$ 112 $ 180
========= ======
On January 1, 1999, the Partnership entered into a new property management
agreement with Maxus Properties, Inc. (Maxus), an affiliate of the current
general partner, Nichols Resources, Ltd ("Nichols"). The sole shareholder of
Nichols is MJS Associates, Inc. ("MJS"), a Missouri corporation. David L.
Johnson is the principal shareholder and an executive officer and director of
MJS. David L. Johnson is also the majority shareholder and an executive officer
and director of Maxus. Under this agreement, Maxus provides management and other
services for the Partnership similar to those services described above. Maxus
receives a management fee of 5% of the monthly gross receipts, as defined in the
agreement. Management fees totaled $100 for the year ended December 31, 1999.
F-12
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
(A Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except unit and per unit information)
NOTE 5: RELATED PARTY TRANSACTIONS (Continued)
The General Partner is also entitled to receive a Partnership Management Fee
equal to 5% of total operating cash flows (as defined) for managing the normal
operations of the Partnership. Partnership management fees amounted to $16 and
$18 for the years ended December 31, 1999 and 1998, respectively. There was no
partnership management fee due for the year ended December 31, 1997.
NOTE 6: EXTRAORDINARY ITEM
During the year ended December 31, 1998, the Partnership realized a gain of
$976 as the result of the foreclosure by the mortgage holder on KC Club
Apartments and the related debt forgiveness (see Note 1), and the exercise of an
option to pay off the second mortgage related to the Greenhills Bicycle Club
Apartments.
Under the terms of the foreclosure, net assets with a net book value of
$3,143 were surrendered to the KC Club mortgage holder and the Partnership was
relieved of the mortgage obligation amounting to $3,922. The resulting gain
amounted to $779.
Under the exercise of the option, the Partnership settled the obligation
(remaining principal balance of $397) for $200, resulting in a $197 gain.
NOTE 7: CASH DISTRIBUTIONS
No distributions have been made to the general or limited partners since July
1990. Future distributions, if any, will be made from excess cash flow not
needed for capital improvement or working capital purposes.
NOTE 8: ADDITIONAL CASH FLOWS INFORMATION
1999 1998 1997
---- ---- ----
Non-Cash Investing and Financing Activities
Net assets surrendered in exchange for debt
forgiveness in foreclosure transaction -- $ 3,143 --
Additional Cash Payment Information
Interest paid $ 714 741 $ 1,498
F-13
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
The Partners
Secured Investment Resources Fund, L.P. III
Kansas City, Missouri
In connection with our audits of the consolidated financial statements of
Secured Investment Resources Fund, L.P. III for the years ended December 31,
1999 and 1998, we have also audited the information in the following financial
statement schedules for the years ended December 31, 1999 and 1998. These
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits of the basic consolidated financial
statements. The schedules are presented for purposes of complying with the
Securities and Exchange Commission's rules and regulations and are not a
required part of the basic consolidated financial statements.
In our opinion, the 1999 and 1998 consolidated financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
/s/ Baird, Kurtz and Dobson
Kansas City, Missouri
January 19, 2000
<PAGE>
SECURED INVESTMENT RESOURCES FUND, L.P. III
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS
DECEMBER 31, 1999
(in thousands, except unit information)
Balance at Bad Debt Write Balance at
Beginning of Charged to Offs Deducted End
Period Operations From Allowance of Period
For Years Ended
December 31,
1997 $ 12 $ 62 $ 58 $ 16
1998 16 30 46 --
1999 -- 46 46 --
<PAGE>
Secured Investment Resource Fund , LP III
Schedule III - Real Estate & Accumulated Depreciation
December 31, 1999
(in thousands, except unit information)
<TABLE>
<CAPTION>
Initial Cost to Partnership (a)
--------------------------------------
<S> <C> <C> <C> <C>
Building & Furniture
Encumbrances Land Improvement Equipment
------------ ---- ----------- ---------
Garden Apartments:
KC Club Apartments 3,922 0 4,776 295
Kansas City, MO
Green Hills Bicycle Club 8,422 431 9,988 833
Kansas City, MO
Other Equipment 0 0 0 0
------- ------- ------- ------
TOTAL 12,344 431 14,764 1,128
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at Close of Period
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Building & Furniture Accumulated Date Depreciation
Land Improvements Equipment Total Depreciation Acquired Life
---- ------------ --------- ----- ------------ -------- ----
Garden Apartments:
KC Club Apartments 0 0 0 0 0 06/30/89 30 Yrs (1)
Kansas City, MO 5 Yrs (2)
Green Hills Bicycle Club 407 9,655 1,184 11,246 4,361 10/27/89 30 Yrs (1)
Kansas City, MO 5 Yrs (2)
Other Equipment 0 0 12 12 12 5 Yrs (2)
--- ----- ----- ------ -----
TOTAL 407 9,655 1,196 11,258 4,373
=== ===== ===== ====== =====
</TABLE>
(1) Estimated useful life of buildings
(2) Estimated useful life of furniture and fixtures
NOTES:
(a) The initial cost to the Partnership represents the original purchase price
of the properties, including $206 and $146 of improvements incurred in 1988
and 1987, respectively, which were contemplated at the time the property was
acquired.
(b) Receipts received under the terms of certain guarantee agreement are
recorded by the Partnership as a reduction of the basis of the property to
which the guaranteed income relates.
<PAGE>
Secured Investment Resource Fund , LP III
Schedule III - Real Estate & Accumulated Depreciation - Cont'd
December 31, 1997
(c) reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Buildings & Furniture &
Total Land Improvement Equipment
------ ---- ----------- -----------
Balance at January 1, 1997 16,042 407 14,163 1,472
Additions during year:
Improvements 66 0 21 45
------ --- ------ -----
Balance at December 31, 1997 16,108 407 14,184 1,517
Additions during year:
Improvements 147 0 62 85
Disposition (5,050) 0 (4,641) (409)
------ --- ------ -----
Balance at December 31, 1998 11,205 407 9,605 1,193
Additions during year:
Improvements 53 0 50 3
------ --- ------ -----
Balance at December 31, 1999 11,258 407 9,655 1,196
====== === ====== =====
</TABLE>
(d) Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance at January 1, 1997 4,732 0 3,448 1,284
Additions during year:
Depreciation Expenses 542 --- 463 79
------ ---- ------ ------
Balance at December 31, 1997 5,274 0 3,911 1,363
Additions during year:
Depreciation Expenses 373 --- 328 45
Disposition (1,662) --- (1,315) (347)
------ ---- ------ ------
Balance at December 31, 1998 3,985 0 2,924 1,061
Additions during year:
Depreciation Expenses 388 0 341 47
------ ---- ------ ------
Balance at December 31, 1999 4,373 0 3,265 1,108
====== ==== ====== ======
</TABLE>
(e) The total gross amount of real estate at January 1, 1997 includes $567 of
acquisition fees paid to affiliates.
<PAGE>
M A N A G E M E N T A G R E E M E N T
---------------------------------------
OWNER: Secured Investment Resources Fund, L.P., III
AGENT: Maxus Properties, Inc.
PREMISES: Bicycle Club Apartments
7909 N. Granby
Kansas City, Missouri 64151
BEGINNING: January 1, 1999
ENDING: January 1, 2004
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IN CONSIDERATION of the covenants herein contained, Secured Investment
Resources Fund L.P., III, (hereinafter called "OWNER"), and Maxus Properties,
Inc. (hereinafter called "AGENT"), agree as follows:
1. The OWNER hereby employs the AGENT exclusively to rent and manage the
property known as Bicycle Club Apartments (hereinafter the "Premises") upon the
terms and conditions hereinafter set forth, for a term of 3 years beginning on
January 1, 1999 and ending on January 1, 2004, and thereafter for yearly periods
from time to time, unless on or before 30 days prior to the date last above
mentioned or on or before 30 days prior to the expiration of any such renewal
period, either party hereto shall notify the other in writing that it elects to
terminate this Agreement, in which case this Agreement shall be thereby
terminated on said last mentioned date. (See also Paragraph 6.3 below.)
2. THE AGENT AGREES:
2.1 To accept the management of the Premises, to the extent, for the period,
and upon the terms herein provided and agrees to furnish the services of its
organization for the rental operation and management of the Premises.
2.2 To prepare a monthly statement of receipts and disbursements and to
remit, on a monthly basis, the net cash flow generated by the Premises after
payment of all operating expenses, debt service and escrow payments if
applicable, to the following party:
Secured Investment Resources Fund L.P., III
c/o David L. Johnson
P.O. Box 26730
Kansas City, MO 64196
In the event total monthly disbursements are in excess of total monthly
receipts, the OWNER shall promptly provide funds to cover such shortfalls.
Nothing contained herein shall obligate the AGENT to advance its own funds on
behalf of the OWNER to cover any shortfalls.
2.3 To cause all employees of the AGENT who handle or are responsible for the
safekeeping of any monies of the OWNER to be covered by a fidelity bond in an
amount and with a company determined by the AGENT.
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3. THE OWNER AGREES:
To give the AGENT the following authority and powers (all or any of which may
be exercised in the name of the OWNER) and agrees to assume all expenses in
connection therewith:
3.1 To advertise the Premises or any part thereof; to display signs thereon
and to rent the same; to cause references of prospective tenants to be
investigated; to sign leases for terms not in excess of one year and to renew
and/or cancel the existing leases and prepare and execute the new leases without
additional charge to the OWNER; provided; however, that the AGENT may collect
from tenant all or any of the following: a late rent administrative charge, a
non-negotiable check charge, credit report fee, a subleasing administrative
charge and/or broker's commission and need not account for such charges and/or
commission to the OWNER; to terminate tenancies and to sign and serve such
notices as are deemed needful by the AGENT; to institute and prosecute actions
to oust tenants and to recover possession of the Premises; to sue for and
recover rent; and, when expedient, to settle, compromise, and release such
actions or suits, or reinstate such tenancies. OWNER shall reimburse AGENT for
all expenses of litigation including attorneys' fees, filing fees, and court
costs which AGENT does not recover from tenants. AGENT may select the attorney
of its choice to handle such litigation.
3.2 To hire, discharge, and pay all managers, engineers, janitors and other
employees; to make or cause to be made all ordinary repairs and replacements
necessary to preserve the Premises in its present condition and for the
operating efficiency thereof and all alterations required to comply with lease
requirements, and to do decorating on the Premises; to negotiate contracts for
nonrecurring items not exceeding $5,000 and to enter into agreements for all
necessary repairs, maintenance, minor alterations and utility services; and to
purchase supplies and pay bills. AGENT shall secure the approval of the OWNER
for items, except monthly or recurring operating charges and emergency repairs
in excess of the maximum, if, in the opinion of the AGENT, such repairs are
necessary to protect the property from damage or to maintain services to the
tenants as called for by their tenancy.
3.3 To collect rents and/or assessments and other items due or to become due
and give receipts therefor and to deposit all funds collected hereunder in the
AGENT's custodial account.
3.4 AGENT agrees to collect all tenant security deposits. OWNER instructs
AGENT to deposit all security deposits in the general operating accounts of the
property. AGENT is not to segregate the security deposits into a separate
account or into an escrow account.
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3.5 To execute and file all returns and other instruments and do and perform
all acts required of the OWNER as an employer with respect to the Premises under
the Federal Insurance Contributions Acts, the Federal Unemployment Tax Act and
Subtitle C of the Internal Revenue Code of 1954 with respect to wages paid by
the AGENT on behalf of the OWNER and under any similar federal and state law now
or hereafter in force (and in connection therewith the OWNER agrees upon request
to promptly execute and deliver to the AGENT all necessary powers of attorney,
notices of appointment, and the like).
3.6 The AGENT shall not be required to advance any monies for the care or
management of said property, and the OWNER agrees to advance all monies
necessary therefor. If the AGENT shall elect to advance any money in connection
with the property, the OWNER agrees to reimburse the AGENT forthwith and hereby
authorizes the AGENT to deduct such advances from any monies due the OWNER. The
AGENT, shall, upon instruction from the OWNER, impound reserves each month for
the payment of real estate taxes, insurance, or any other special expenditure.
In addition, the OWNER agrees to establish a permanent Operating Reserve Account
with the AGENT in the amount of $ Not Applicable .
4. THE OWNER FURTHER AGREES:
4.1 To indemnify, defend and save the AGENT harmless from all suits in
connection with the Premises and from liability for damage to property and
injuries to or death of any employee or other person whomsoever, and to carry at
his (its) own expense public liability, elevator liability (if elevators are
part of the equipment of the Premises), and workmen's compensation insurance
naming the OWNER and AGENT, adequate to protect their interests in form,
substance, and amounts reasonably satisfactory to the AGENT, and to furnish to
the AGENT certificates evidencing the existence of such insurance. Unless the
OWNER shall provide such insurance and furnish such certificate within 30 days
from the date of this Agreement, the AGENT may, but shall not be obligated to,
place said insurance and charge the cost thereof to the account of the OWNER.
All such insurance policies shall provide that the AGENT shall receive thirty
(30) days' written notice prior to cancellation of the policy.
4.2 To pay all expenses incurred by the AGENT, including, but not limited to,
reasonable attorneys' fees and AGENT's costs and time in connection with any
claim, proceeding, or suit involving an alleged violation by the AGENT or the
OWNER, or both, of any law pertaining to fair employment, fair credit reporting,
environmental protection, rent control, taxes, or fair housing, including, but
not limited to, any law prohibiting, or making illegal,
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discrimination on the basis of race, sex, creed, color, religion, national
origin, or mental or physical handicap, provided, however, that the OWNER shall
not be responsible to the AGENT for any such expenses in the event the AGENT is
finally adjudicated to have personally, and not in a representative capacity,
violated any such law. Nothing contained herein shall obligate the AGENT to
employ counsel to represent the OWNER in any such proceeding or suit, and the
OWNER may elect to employ counsel to represent the OWNER in any such proceeding
or suit. The OWNER also agrees to pay reasonable expenses (or an apportioned
amount of such expenses where other employers of AGENT also benefit from the
expenditure) incurred by the AGENT in obtaining legal advice regarding
compliance with any law affecting the premises or activities related thereto.
4.3 To indemnify, defend, and save the AGENT harmless from all claims,
investigations, and suits, or from actions or failures to act of the OWNER, with
respect to any alleged or actual violation of state or federal labor laws, it
being expressly agreed and understood that as between the OWNER and the AGENT,
all persons employed in connection with the Premises are employees of the OWNER,
not the AGENT. However, it shall be the responsibility of the AGENT to comply
with all applicable state or federal labor laws. The OWNER's obligation under
this paragraph 4.3 shall include the payment of all settlements, judgements,
damages, liquidated damages, penalties, forfeitures, back pay awards, court
costs, litigation expense, and attorneys' fees.
4.4 To give adequate advance written notice to the AGENT if the OWNER desires
that the AGENT make payment, out of the proceeds from the premises, or mortgage
indebtedness, general taxes, special assessments, or fire, steam boiler, or any
other insurance premiums. In no event shall the AGENT be required to advance its
own money in payment of any such indebtedness, taxes, assessments, or premiums.
5. THE OWNER AGREES TO PAY THE AGENT EACH MONTH:
5.1 MANAGEMENT: OWNER agrees to pay AGENT for the ordinary management of the
Premises Five percent (5.0%) of the monthly gross receipts from the operation of
the Premises during the period this Agreement remains in full force and effect.
Gross receipts are all amounts received from the operation of the Premises
including, but not limited to, rents, parking fees, deposits, laundry income and
fees.
5.2 OTHER ITEMS OF MUTUAL AGREEMENT: In the event OWNER requests and AGENT
agrees to perform services outside the scope of ordinary management of the
Premises, the parties will agree to a fee and payment structure for these
services prior to commencement of the work.
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6. IT IS MUTUALLY AGREED THAT:
6.1 The OWNER expressly withholds from the AGENT any power or authority to
make any structural changes in any building or to make any other major
alterations or additions in or to any such building or equipment therein, or to
incur any expense chargeable to OWNER other than expenses related to exercising
the express powers above vested in AGENT without the prior written direction of
an authorized representative of OWNER. AGENT is granted the authority to make
structural changes or major alterations if such actions are required because of
danger to life or which are immediately necessary for the preservation and
safety of the Premises or the safety of the occupants thereof or are required to
avoid the suspension of any necessary service to the Premises.
6.2 The AGENT does not assume and is given no responsibility for compliance
of any building on the Premises or any equipment therein with the requirements
of any statute, ordinance, law or regulation of any governmental body or of any
public authority or
official thereof having jurisdiction, except to notify the OWNER promptly or
forward to the OWNER promptly any complaints, warnings, notices, or summonses
received by it relating to such matters. The OWNER represents that to the best
of his (its) knowledge the Premises and such equipment comply with all such
requirements and authorizes the AGENT, its representatives, servants, and
employees, of and from all loss, cost, expense, and liability whatsoever which
may be imposed on them or any of them by reason of any present or future
violation or alleged violation of such laws, ordinances, statutes, or
regulations.
6.3 In the event it is alleged or charged that any building on the Premises
or any equipment therein or any act or failure to act by the OWNER with respect
to the Premises or the sale, rental or other disposition thereof fails to comply
with, or is in violation of, any of the requirements of a constitutional
provision, statute, ordinance, law or regulation of any governmental body or any
order or ruling of any public authority or official thereof having or claiming
to have jurisdiction thereover, and the AGENT, in its sole and absolute
discretion, considers that the action or position of the OWNER or registered
managing AGENT with respect thereto may result in damage or liability to the
AGENT, the AGENT shall have the right to cancel this Agreement at any time by
written notice to the OWNER of its election so to do, which cancellation shall
be effective upon the service of such notice. Such notice may be served
personally or by registered mail, on or to the person named to receive the
AGENT's monthly statement at the address designated for such person as provided
in Paragraph 2.2 above, and if service by mail shall be deemed to have
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been served when deposited in the U.S. Mail. Such cancellation shall not release
the indemnities of the OWNER set forth in Paragraph 4 and 6.2 above and shall
not terminate any liability or obligation of the OWNER to the AGENT for any
payment, reimbursement, or other sum of money then due and payable to the AGENT
hereunder.
7. This Agreement may be cancelled by OWNER before the termination date
specified in Paragraph 1 on not less than 30 days' prior written notice to the
AGENT.
8. The OWNER shall pay or reimburse the AGENT for any sums of money due it
under this Agreement for service for actions prior to termination,
notwithstanding any termination of this Agreement. All provisions of this
Agreement that require the OWNER to have insured or to defend, reimburse, or
indemnify the AGENT (including, but not limited to, Paragraphs 4.1, 4.2, and
4.3) shall survive any termination and, if AGENT is or becomes involved in any
proceeding or litigation by reason of having been the OWNER's agent, such
provisions shall apply as if this Agreement were still in effect. The parties
understand and agree that the AGENT may withhold funds for thirty (30) days
after the end of the month in which the Agreement is terminated to pay bills
previously incurred but not yet invoiced and to close accounts.
This Agreement shall be binding upon the successors and assigns of the AGENT
and their heirs, administrators, executors, successors, and assigns of the
OWNER.
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IN WITNESS THEREOF, the parties hereto have affixed or caused to be affixed
their respective signatures effective this 1st day of January, 1999.
OWNER: Secured Investment Resources Fund, L.P. III
By: /s/ Christine Robinson
Christine Robinson, President
Nichols Resources, Ltd.
General Partner of
Secured Investment Resources
Fund, L.P. III
AGENT: Firm: Maxus Properties, Inc.
By: /s/ Daniel W. Pishny
Daniel W. Pishny
President
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<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for Secured Investment Resources Fund, L.P. III and is
qualified in its entirety by reference to such financial statements.</LEGEND>
<CIK> 0000839638
<NAME> Secured Investment Resources Fund, L.P. III
<MULTIPLIER>1
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 358,000
<SECURITIES> 0
<RECEIVABLES> 42,000
<ALLOWANCES> (42,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,258,000
<DEPRECIATION> 4,373,000
<TOTAL-ASSETS> 7,487,000
<CURRENT-LIABILITIES> 0
<BONDS> 7,895,000
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 7,487,000
<SALES> 0
<TOTAL-REVENUES> 1,982,000
<CGS> 0
<TOTAL-COSTS> 1,403,000
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 713,000
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<NET-INCOME> (134,000)
<EPS-BASIC> (13.69)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
