Attached files
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EX-31.1 - SECURED INCOME L P | v166151_ex31-1.htm |
EX-32.2 - SECURED INCOME L P | v166151_ex32-2.htm |
EX-31.2 - SECURED INCOME L P | v166151_ex31-2.htm |
EX-32.1 - SECURED INCOME L P | v166151_ex32-1.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC
_________________________
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Quarterly Period Ended September 30, 2009
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Transition Period from
to
Commission
File Number 0-17412
Secured Income
L.P.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
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06-1185846
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State
or Other Jurisdiction of
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(IRS Employer
|
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Incorporation
or Organization
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Identification No.)
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340 Pemberwick Road
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Greenwich,
Connecticut
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06831
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(Address
of Principal Executive Offices)
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Zip Code
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Registrant's
Telephone Number, Including Area Code: (203) 869-0900
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer ¨ Accelerated Filer
¨
Non-Accelerated Filer ¨ Smaller Reporting
Company x
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No x
As of
November 13, 2009, there are 984,369 units of limited partnership interest
outstanding.
SECURED
INCOME L.P. AND SUBSIDIARY
Part I - Financial
Information.
Table of
Contents
Page
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||
Item
1.
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Financial Statements
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Consolidated
Balance Sheets
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3
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Consolidated
Statements of Operations
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4
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Consolidated
Statements of Cash Flows
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5
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Notes
to Consolidated Financial Statements
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6
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and
Results of Operations
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9
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Item
3.
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Quantitative and Qualitative Disclosure about
Market Risk
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12
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Item
4.
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Controls and Procedures
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12
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Item
4T.
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Internal Control Over Financial
Reporting
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13
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2
SECURED
INCOME L.P. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
September 30,
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December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Property
and equipment, net of accumulated depreciation
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$ | 2,677,848 | $ | 2,974,071 | ||||
Cash
and cash equivalents
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799,074 | 1,495,589 | ||||||
Mortgage
escrows
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619,704 | 705,956 | ||||||
Tenant
security deposits
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83,884 | 194,610 | ||||||
Accounts
receivable
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2,461 | 3,662 | ||||||
Prepaid
expenses
|
331,820 | 190,031 | ||||||
Intangible
assets, net of accumulated amortization
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287,306 | 303,592 | ||||||
$ | 4,802,097 | $ | 5,867,511 | |||||
LIABILITIES
AND PARTNERS' EQUITY (DEFICIT)
|
||||||||
Liabilities
|
||||||||
Mortgage
payable
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$ | 8,079,770 | $ | 8,254,369 | ||||
Accounts
payable and accrued expenses
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110,522 | 91,560 | ||||||
Tenant
security deposits payable
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64,665 | 119,222 | ||||||
Due
to general partners and affiliates
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13,774 | 18,365 | ||||||
8,268,731 | 8,483,516 | |||||||
Partners'
equity (deficit)
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||||||||
Limited
partners
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617,792 | 1,173,099 | ||||||
General
partners
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(4,084,426 | ) | (3,789,104 | ) | ||||
(3,466,634 | ) | (2,616,005 | ) | |||||
$ | 4,802,097 | $ | 5,867,511 |
See notes
to consolidated financial statements.
3
SECURED
INCOME L.P. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE
AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
Three Months
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Nine Months
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Three Months
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Nine Months
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|||||||||||||
Ended
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Ended
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Ended
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Ended
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|||||||||||||
September 30,
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September 30,
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September 30,
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September 30,
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|||||||||||||
2009
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2009
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2008
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2008
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|||||||||||||
REVENUE
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||||||||||||||||
Rental
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$ | 607,095 | $ | 1,893,077 | $ | 681,362 | $ | 2,032,443 | ||||||||
Interest
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78 | 1,446 | 2,363 | 13,938 | ||||||||||||
TOTAL
REVENUE
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607,173 | 1,894,523 | 683,725 | 2,046,381 | ||||||||||||
EXPENSES
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||||||||||||||||
Administrative
and management
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126,504 | 376,354 | 111,319 | 375,089 | ||||||||||||
Operating
and maintenance
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174,828 | 475,330 | 137,268 | 474,604 | ||||||||||||
Taxes
and insurance
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112,273 | 343,941 | 118,241 | 306,548 | ||||||||||||
Financial
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134,696 | 406,959 | 138,489 | 422,254 | ||||||||||||
Depreciation
and amortization
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104,170 | 312,509 | 5,428 | 16,286 | ||||||||||||
TOTAL
EXPENSES
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652,471 | 1,915,093 | 510,745 | 1,594,781 | ||||||||||||
NET
INCOME (LOSS)
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$ | (45,298 | ) | $ | (20,570 | ) | $ | 172,980 | $ | 451,600 | ||||||
NET
INCOME (LOSS) ATTRIBUTABLE TO
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||||||||||||||||
Limited
partners
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$ | (44,845 | ) | $ | (20,364 | ) | $ | 171,250 | $ | 447,084 | ||||||
General
partners
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(453 | ) | (206 | ) | 1,730 | 4,516 | ||||||||||
$ | (45,298 | ) | $ | (20,570 | ) | $ | 172,980 | $ | 451,600 | |||||||
NET
INCOME (LOSS) ALLOCATED PER UNIT OF LIMITED PARTNERSHIP
INTEREST
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$ | (.04 | ) | $ | (.02 | ) | $ | .17 | $ | .45 |
See notes
to consolidated financial statements.
4
SECURED
INCOME L.P. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
NINE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Unaudited)
2009
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2008
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|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
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||||||||
Net
income (loss)
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$ | (20,570 | ) | $ | 451,600 | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities
|
||||||||
Depreciation
and amortization
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312,509 | 16,286 | ||||||
Decrease
in mortgage escrows
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86,252 | 76,765 | ||||||
Decrease
(increase) in tenant security deposits
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110,726 | (27,103 | ) | |||||
Decrease
in accounts receivable
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1,201 | 3,625 | ||||||
Increase
in prepaid expenses
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(141,789 | ) | (120,300 | ) | ||||
Increase
in accounts payable and accrued expenses
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18,962 | 18,540 | ||||||
Increase
(decrease) in tenant security deposits payable
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(54,557 | ) | 13,367 | |||||
Decrease
in due to general partners and affiliates
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(4,591 | ) | (4,591 | ) | ||||
Net
cash provided by operating activities
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308,143 | 428,189 | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
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||||||||
Distributions
to partners
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(830,059 | ) | (495,546 | ) | ||||
Principal
payments on mortgage
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(174,599 | ) | (164,402 | ) | ||||
Net
cash used in financing activities
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(1,004,658 | ) | (659,948 | ) | ||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
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(696,515 | ) | (231,759 | ) | ||||
Cash
and cash equivalents at beginning of period
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1,495,589 | 1,748,610 | ||||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
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$ | 799,074 | $ | 1,516,851 | ||||
SUPPLEMENTAL
INFORMATION
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||||||||
Financial
expenses paid
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$ | 417,828 | $ | 425,420 |
See notes
to consolidated financial statements.
5
SECURED
INCOME L.P. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(Unaudited)
1.
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The
accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America (“GAAP”) for interim financial information.
They do not include all information and footnotes required by GAAP for
complete financial statements. The results of operations are impacted
significantly by the results of operations of the Carrollton Partnership
(“Carrollton”), which are provided on an unaudited basis during interim
periods. Accordingly, the accompanying consolidated financial statements
are dependent on such unaudited information. In the opinion of the general
partners of the Partnership (the “General Partners”), the accompanying
consolidated financial statements include all adjustments necessary to
reflect fairly the results of the interim periods presented. All
adjustments are of a normal recurring nature. No significant events have
occurred subsequent to December 31, 2008 that have not been reflected
herein and no material contingencies exist which would require additional
disclosure in the report under Regulation S-X, Rule 10-01 paragraph
A-5.
|
|
Between
mid 2006 and mid 2007, on three separate occasions with three different
potential buyers, Carrollton reached agreements to sell its operating
complex (“Fieldpointe”) at gross prices (before brokerage commissions and
other selling costs) ranging from $25,500,000 to $27,100,000; however, on
each occasion, the purchaser did not consummate the transaction. More
recently, in order to facilitate a sale of Fieldpointe, Carrollton’s
general partners obtained a Phase I environmental report, an updated
survey, title commitment and an independent appraisal of Fieldpointe in
contemplation of providing a due diligence package to prospective
purchasers. Carrollton also retained a national third party brokerage
firm. As of September 30, 2009, approximately eight non-binding written
offers to purchase Fieldpointe have been received; a number of such offers
are in the range of, or exceeding, $20,000,000. Management considered the
offers to be inadequate and, in one case, rejected the offer because it
came from one of the prior potential purchasers that previously did not
consummate the transaction after an agreement was reached. Fieldpointe
remains on the market for sale; however, given the current real estate
markets, the Carrollton general partners believe the likelihood that an
acceptable offer might be received in the near term is not probable. At
this time, it remains management’s intention to sell Fieldpointe; however,
the Carrollton general partners cannot accurately predict the near term
direction of the real estate markets, and there can be no assurance that
an acceptable offer will be received or that a sale will be consummated.
As a result, and in accordance with Statement of Financial Accounting
Standard (“SFAS”) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," as codified by the Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360;
Subtopic 10, the property and equipment of Carrollton is classified as
held and used in the accompanying consolidated balance sheets and
Carrollton’s results of operations are classified as continuing operations
in the accompanying consolidated statements of operations. In the
unaudited consolidated financial statements as of September 30, 2008 and
for the three and nine month periods then ended as previously issued, a
significant portion of Carrollton’s assets were classified as held for
sale, a significant portion of Carrollton’s liabilities were classified as
liabilities related to assets held for sale and virtually all of
Carrollton’s results of operations were classified as discontinued
operations; such amounts have been reclassified to conform to the current
period presentation. There was no depreciation expense recorded for the
three and nine month periods ended September 30, 2008 due to the property
and equipment of Carrollton being classified as held for
sale.
|
|
Certain
prior period balances have been reclassified to conform to the current
period presentation (see discussion above herein Note
1).
|
|
The
results of operations for the nine months ended September 30, 2009 are not
necessarily indicative of the results to be expected for the entire
year.
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6
SECURED
INCOME L.P. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER
30, 2009
(Unaudited)
|
Recent Accounting
Pronouncements
|
|
The
FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in
Income Taxes,” as codified by ASC Topic 740; Subtopic 10, which interprets
SFAS No. 109, “Accounting for Income Taxes,” as codified by ASC Topic 740;
Subtopic 10. ASC Topic 740; Subtopic 10 requires all taxpayers to analyze
all material positions they have taken or plan to take in all tax returns
that have been filed or should have been filed with all taxing authorities
for all years still subject to challenge by those taxing authorities. If
the position taken is “more-likely-than-not” to be sustained by the taxing
authority on its technical merits and if there is more than a 50%
likelihood that the position would be sustained if challenged and
considered by the highest court in the relevant jurisdiction, the tax
consequences of that position should be reflected in the taxpayer’s GAAP
financial statements. Earlier proposed interpretations of ASC Topic 740;
Subtopic 10 had recommended a “probable” standard for recognition of tax
consequences rather than the “more-likely-than-not” standard finally
adopted. Because the Partnership is a pass-through entity and is not
required to pay income taxes, ASC Topic 740; Subtopic 10 does not
currently have any impact on its consolidated financial
statements.
|
|
The
FASB issued SFAS No. 157, “Fair Value Measurements,” as codified by ASC
Topic 820, which defines fair value, establishes a framework for measuring
fair value in accordance with GAAP and expands disclosures about fair
value measurements. ASC Topic 820 applies to other accounting
pronouncements that require or permit fair value measurements.
Accordingly, ASC Topic 820 does not require any new fair value
measurements. ASC Topic 820 is effective for fiscal years beginning after
November 15, 2007. The Partnership adopted ASC Topic 820 effective
January 1, 2008. On February 6, 2008 the FASB approved the Financial Staff
Position (“FSP”) that deferred the effective date of ASC Topic 820 by one
year for nonfinancial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a nonrecurring
basis. The partial adoption of ASC Topic 820 for financial
assets and liabilities did not have a material impact on the Partnership’s
consolidated financial position, results of operations or cash
flows.
|
|
The
Partnership adopted ASC Topic 820 as of January 1, 2008, with the
exception of the application of the statement to nonrecurring nonfinancial
assets and nonfinancial liabilities. Nonrecurring nonfinancial assets and
liabilities for which the Partnership has not applied the provisions of
ASC Topic 820 include property and equipment and intangible assets
measured at fair value for impairment testing. The Partnership’s full
adoption of ASC Topic 820 as of January 1, 2009 did not have an impact on
its consolidated financial
statements.
|
|
ASC
Topic 820 establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active
markets for identical assets or liabilities; Level 2, defined as inputs
other than quoted prices for similar assets or liabilities in active
markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own
assumptions.
|
|
Financial
assets accounted for at historical cost which approximates fair value on a
recurring basis as of September 30, 2009 include cash and cash equivalents
of $799,074, mortgage deposits of $619,704 and tenant security deposits of
$83,884 as reflected in the accompanying consolidated balance sheet. These
assets are carried at historical cost which approximates fair value based
on quoted market prices for identical securities (Level 1
inputs).
|
The FASB
issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51,” as codified by ASC Topic 810, which
replaces the concept of minority interest with noncontrolling interests in
subsidiaries. Noncontrolling interests will now be reported as a component of
equity in the consolidated statement of financial position. Earnings
attributable to noncontrolling interests will continue to be reported as a part
of consolidated earnings; however, ASC Topic 810 requires that income
attributable to both controlling and noncontrolling interests be presented
separately on the face of the consolidated income statement. In addition, ASC
Topic 810 provides that when losses attributable to noncontrolling interests
exceed the noncontrolling interest’s basis, losses continue to be attributed to
the noncontrolling interest as opposed to being absorbed by the consolidating
entity. ASC Topic 810 requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
of ASC Topic 810 shall be applied prospectively. ASC Topic 810 is effective for
the first annual reporting period beginning on or after December 15, 2008. The
Partnership is currently determining the impact of the adoption of ASC Topic 810
on its consolidated financial position and results of
operations.
7
SECURED
INCOME L.P. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SEPTEMBER
30, 2009
(Unaudited)
In April
2009, the FASB issued FSP 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments,” as codified by ASC Topic 825; Subtopic 10,
which requires disclosure about the method and significant assumptions used
to establish the fair value of financial instruments for interim reporting
periods as well as annual statements. ASC Topic 825; Subtopic 10 is
effective for the Partnership as of June 30, 2009 and its adoption did not
impact the Partnership’s consolidated financial condition or results of
operations.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” as codified by ASC
Topic 855, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. ASC Topic 855 is
effective for the Partnership as of June 30, 2009 and its adoption did not have
an impact on the Partnership’s consolidated financial condition or results of
operations.
2.
|
Additional
information, including the audited December 31, 2008 Consolidated
Financial Statements and the Summary of Significant Accounting Policies,
is included in the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 2008 on file with the Securities and Exchange
Commission.
|
8
SECURED
INCOME L.P. AND SUBSIDIARY
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Liquidity
and Capital Resources
Between
mid 2006 and mid 2007, on three separate occasions with three different
potential buyers, the Carrollton Partnership (“Carrollton”) reached agreements
to sell its operating complex (“Fieldpointe”) at gross prices (before brokerage
commissions and other selling costs) ranging from $25,500,000 to $27,100,000;
however, on each occasion, the purchaser did not consummate the transaction.
More recently, in order to facilitate a sale of Fieldpointe, Carrollton’s
general partners obtained a Phase I environmental report, an updated survey,
title commitment and an independent appraisal of Fieldpointe in contemplation of
providing a due diligence package to prospective purchasers. Carrollton also
retained a national third party brokerage firm. As of November 2009,
approximately eight non-binding written offers to purchase Fieldpointe have been
received; a number of such offers are in the range of, or exceeding,
$20,000,000. Management considered the offers to be inadequate and, in one case,
rejected the offer because it came from one of the prior potential purchasers
that previously did not consummate the transaction after an agreement was
reached. Fieldpointe remains on the market for sale; however, given the current
real estate markets, the Carrollton general partners believe the likelihood that
an acceptable offer might be received in the near term is not probable. At this
time, it remains management’s intention to sell Fieldpointe; however, the
Carrollton general partners cannot accurately predict the near term direction of
the real estate markets, and there can be no assurance that an acceptable offer
will be received or that a sale will be consummated. As a result, and in
accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," as codified by
the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 360; Subtopic 10, the property and equipment of
Carrollton is classified as held and used in the accompanying consolidated
balance sheets and Carrollton’s results of operations are classified as
continuing operations in the accompanying consolidated statements of operations.
In the unaudited consolidated financial statements as of September 30, 2008 and
for the three and nine month periods then ended as previously issued, a
significant portion of Carrollton’s assets were classified as held for sale, a
significant portion of Carrollton’s liabilities were classified as liabilities
related to assets held for sale and virtually all of Carrollton’s results of
operations were classified as discontinued operations; such amounts have been
reclassified to conform to the current period presentation. Following a sale of
Fieldpointe, if consummated, Registrant intends to distribute the net proceeds
to which it is entitled under Carrollton’s partnership agreement to its
partners, less a reasonable reserve, in accordance with the terms and conditions
of Registrant’s Partnership Agreement. At such time, Registrant intends to
dissolve.
Registrant's
primary sources of funds are currently rents generated by Fieldpointe and
interest derived from deposits, certain of which are restricted in accordance
with the terms of Fieldpointe’s mortgage. Registrant's investment is considered
highly illiquid.
Registrant
made a distribution on July 21, 2009 in the amount of approximately $0.50 per
Unit to Unit holders of record as of June 30, 2009. If a sale of Fieldpointe is
not completed, or near completion, in 2009 or early in 2010, Registrant expects
to make an additional distribution of approximately $0.25 per Unit in the first
quarter of 2010 to Unit holders of record as of December 31, 2009.
Registrant’s ability to make such distributions assumes that the cash flow
generated by Fieldpointe remains relatively stable and that there are no
unanticipated major expenditures or reserve requirements to be funded.
Accordingly, there can be no certainty as to the payment of future distributions
or the amount and timing of such distributions. The distributions reflected in
the accompanying financial statements as of and for the nine months ended
September 30, 2009 include withholding taxes paid by Registrant to the State of
Maryland on behalf of the partners (including approximately $.04 attributable to
the Unit holders), distributions to the General Partners and amounts distributed
by Carrollton to its general partners.
In the
event a sale of Fieldpointe does not take place, Registrant is not expected to
have access to additional sources of financing. Accordingly, if unforeseen
contingencies arise that cause Fieldpointe to require capital in addition to
that contributed by Registrant and any equity of Carrollton’s general partners,
potential sources from which such capital needs will be able to be satisfied
(other than reserves) would be additional equity contributions or voluntary
loans from Carrollton’s general partners (which general partners are not
required to fund such amounts) or other reserves, if any, which could adversely
impact distributions from Carrollton to Registrant of operating cash flow and
any sale or refinancing proceeds.
Registrant
formerly held an interest in Columbia Westmont Associates, L.P. (“Columbia”),
which sold its underlying property in 2006. After an appeal, Columbia has
received a real estate tax refund for a prior year in the amount of
approximately $998,000, which amount is net of professional fees incurred in
connection with the appeal. Registrant and the general partners of Columbia are
currently discussing and seeking guidance in an effort to determine how the
funds received should be characterized and applied under the terms of Columbia’s
partnership agreement, and the amount, if any, that should be paid to Registrant
and the other partners of Columbia.
9
SECURED
INCOME L.P. AND SUBSIDIARY
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(continued).
Results
of Operations
Although
Registrant generated cash from operations during the nine months ended September
30, 2009, cash and cash equivalents decreased by approximately $697,000 during
the period, primarily as a result of distributions to partners. Property and
equipment decreased as a result of depreciation expense. Under accounting
principles generally accepted in the United States of America (“GAAP”), there
was no depreciation expense recorded for the nine months ended September 30,
2008 due to the property and equipment of Carrollton being classified as held
for sale. Prepaid expenses increased and mortgage escrows decreased in the
ordinary course of operations. Excess tenant security deposits funded were
transferred to cash and cash equivalents during the period and the related
liability decreased as a result of the turnover of units and a decline in
average occupancy. In addition, Carrollton implemented a new policy in 2009
whereby a bond is accepted from a tenant in lieu of a cash deposit. Mortgage
payable decreased as a result of principal payments on Carrollton’s
mortgage.
The
discussion below refers primarily to the operations of Carrollton and not that
of Registrant as a whole.
Nine Months Ended September
30, 2009
During
the nine months ended September 30, 2009, Carrollton's operations resulted in
net income of approximately $95,000, which includes financial expenses and
depreciation and amortization of approximately $407,000 and approximately
$308,000, respectively. As noted above, there was no depreciation expense
recorded for the nine months ended September 30, 2008 as a result of the
property and equipment of Fieldpointe being classified as held for sale.
Accordingly, Carrollton generated income from operating activities prior to
financial expenses and depreciation and amortization of approximately $810,000.
Mortgage principal payments during the period were approximately $175,000. After
considering the mandatory mortgage principal payments and required deposits to
mortgage escrows, among other things, Fieldpointe generated cash flow of
approximately $199,000 during the nine months ended September 30, 2009. There
can be no assurance that the level of cash flow generated by Fieldpointe during
the nine months ended September 30, 2009 will continue in future
periods.
Registrant’s
results of operations for the nine months ended September 30, 2009 reflect a
decline as compared to the nine months ended September 30, 2008. Such decline is
due primarily to a decrease in the average occupancy of Fieldpointe for the
first nine months of 2009 as compared to the first nine months of 2008 and
Carrollton’s recording of depreciation expense in 2009.
As of
September 30, 2009, the occupancy of Fieldpointe was approximately 90%. In the
event a sale of Fieldpointe does not take place, the future operating results of
Fieldpointe will be extremely dependent on market conditions and therefore may
be subject to significant volatility.
Nine Months Ended September
30, 2008
During
the nine months ended September 30, 2008, Carrollton's operations resulted in
net income of approximately $566,000, which includes financial expenses and
amortization of approximately $422,000 and approximately $12,000, respectively.
As noted above, there was no depreciation expense recorded for the nine months
ended September 30, 2008 as a result of the property and equipment of
Fieldpointe being classified as held for sale. Accordingly, Carrollton generated
income from operating activities prior to financial expenses and amortization of
approximately $1,000,000. Mortgage principal payments during the period were
approximately $164,000. After considering the mandatory mortgage principal
payments and required deposits to mortgage escrows, among other things,
Fieldpointe generated cash flow of approximately $382,000 during the nine months
ended September 30, 2008. As of September 30, 2008, the occupancy of Fieldpointe
was approximately 98%.
Critical Accounting Policies
and Estimates
The
accompanying unaudited consolidated financial statements are prepared in
accordance with GAAP, which requires Registrant to make certain estimates and
assumptions. The following section is a summary of certain aspects of those
accounting policies that may require subjective or complex judgments and are
most important to the portrayal of Registrant’s consolidated financial condition
and results of operations. Registrant believes that there is a low probability
that the use of different estimates or assumptions in making these judgments
would result in materially different amounts being reported in the accompanying
consolidated financial statements.
10
SECURED
INCOME L.P. AND SUBSIDIARY
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(continued).
Registrant
records its real estate assets at cost less accumulated depreciation and, if
there are indications that impairment exists, adjusts the carrying value of
those assets in accordance with ASC Topic 360; Subtopic 10. In accordance with
ASC Topic 360; Subtopic 10, long-lived assets, primarily property and equipment,
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets might not be recoverable. Conditions that
would necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets, Registrant recognizes an impairment loss
only if its carrying amount is not recoverable through its undiscounted cash
flows and measures the impairment loss based on the difference between the
carrying amount and estimated fair value. No such adjustment for impairment
losses is required as of September 30, 2009.
Recent Accounting
Pronouncements
The FASB
issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income
Taxes,” as codified by ASC Topic 740; Subtopic 10, which interprets SFAS No.
109, “Accounting for Income Taxes,” as codified by ASC Topic 740; Subtopic 10.
ASC Topic 740; Subtopic 10 requires all taxpayers to analyze all material
positions they have taken or plan to take in all tax returns that have been
filed or should have been filed with all taxing authorities for all years still
subject to challenge by those taxing authorities. If the position taken is
“more-likely-than-not” to be sustained by the taxing authority on its technical
merits and if there is more than a 50% likelihood that the position would be
sustained if challenged and considered by the highest court in the relevant
jurisdiction, the tax consequences of that position should be reflected in the
taxpayer’s GAAP financial statements. Earlier proposed interpretations of ASC
Topic 740; Subtopic 10 had recommended a “probable” standard for recognition of
tax consequences rather than the “more-likely-than-not” standard finally
adopted. Because Registrant is a pass-through entity and is not required to pay
income taxes, ASC Topic 740; Subtopic 10 does not currently have any impact on
its consolidated financial statements.
The FASB
issued SFAS No. 157, “Fair Value Measurements,” as codified by ASC Topic 820,
which defines fair value, establishes a framework for measuring fair value in
accordance with GAAP and expands disclosures about fair value
measurements. ASC Topic 820 applies to other accounting
pronouncements that require or permit fair value measurements. Accordingly, ASC
Topic 820 does not require any new fair value measurements. ASC Topic 820 is
effective for fiscal years beginning after November 15, 2007. Registrant
adopted ASC Topic 820 effective January 1, 2008. On February 6, 2008 the FASB
approved the Financial Staff Position (“FSP”) that deferred the effective date
of ASC Topic 820 by one year for nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis. The partial adoption of ASC Topic 820 for
financial assets and liabilities did not have a material impact on Registrant’s
consolidated financial position, results of operations or cash
flows.
Registrant
adopted ASC Topic 820 as of January 1, 2008, with the exception of the
application of the statement to nonrecurring nonfinancial assets and
nonfinancial liabilities. Nonrecurring nonfinancial assets and liabilities for
which Registrant has not applied the provisions of ASC Topic 820 include
property and equipment and intangible assets measured at fair value for
impairment testing. Registrant’s full adoption of ASC Topic 820 as of January 1,
2009 did not have an impact on its consolidated financial
statements.
ASC Topic
820 establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. These tiers include: Level 1, defined
as observable inputs such as quoted prices in active markets for identical
assets or liabilities; Level 2, defined as inputs other than quoted prices for
similar assets or liabilities in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable inputs in which
little or no market data exists, therefore requiring an entity to develop its
own assumptions.
Financial
assets accounted for at historical cost which approximates fair value on a
recurring basis as of September 30, 2009 include cash and cash equivalents of
$799,074, mortgage escrows of $619,704 and tenant security deposits of $83,884
as reflected in the accompanying consolidated balance sheet. These assets are
carried at historical cost which approximates fair value based on quoted market
prices for identical securities (Level 1 inputs).
11
SECURED
INCOME L.P. AND SUBSIDIARY
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(continued).
The FASB
issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51,” as codified by ASC Topic 810, which
replaces the concept of minority interest with noncontrolling interests in
subsidiaries. Noncontrolling interests will now be reported as a component of
equity in the consolidated statement of financial position. Earnings
attributable to noncontrolling interests will continue to be reported as a part
of consolidated earnings; however, ASC Topic 810 requires that income
attributable to both controlling and noncontrolling interests be presented
separately on the face of the consolidated income statement. In addition, ASC
Topic 810 provides that when losses attributable to noncontrolling interests
exceed the noncontrolling interest’s basis, losses continue to be attributed to
the noncontrolling interest as opposed to being absorbed by the consolidating
entity. ASC Topic 810 requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
of ASC Topic 810 shall be applied prospectively. ASC Topic 810 is effective for
the first annual reporting period beginning on or after December 15, 2008.
Registrant is currently determining the impact of the adoption of ASC Topic 810
on its consolidated financial position and results of operations.
In April
2009, the FASB issued FSP 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments,” as codified by ASC Topic 825; Subtopic 10,
which requires disclosure about the method and significant assumptions used to
establish the fair value of financial instruments for interim reporting periods
as well as annual statements. ASC Topic 825; Subtopic 10 is effective
for Registrant as of June 30, 2009 and its adoption did not impact Registrant’s
consolidated financial condition or results of operations.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” as codified by ASC
Topic 855, which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. ASC Topic 855 is
effective for Registrant as of June 30, 2009 and its adoption did not have an
impact on Registrant’s consolidated financial condition or results of
operations.
Forward-Looking
Information
As a
cautionary note, with the exception of historical facts, the matters discussed
in this quarterly report on Form 10-Q are “forward-looking” statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform
Act”). Forward-looking statements may relate to, among other things, current
expectations, forecasts of future events, future actions, future performance
generally, business development activities, capital expenditures, strategies,
the outcome of contingencies, future financial results, financing sources and
availability and the effects of regulation and competition. Words such as
“anticipate,” “expect,” “intend,” “plan,” “seek,” “estimate” and other words and
terms of similar meaning in connection with discussions of future operating or
financial performance signify forward-looking statements. Registrant may also
provide written forward-looking statements in other materials released to the
public. Such statements are made in good faith by Registrant pursuant to the
“Safe Harbor” provisions of the Reform Act. Registrant undertakes no obligation
to update publicly or revise any forward-looking statement, whether as a result
of new information, future events or otherwise. Such forward-looking statements
involve known risks, uncertainties and other factors that may cause Registrant’s
actual results of operations or actions to be materially different from future
results of operations or actions expressed or implied by the forward-looking
statements.
Item
3. Quantitative and Qualitative
Disclosure About Market Risk.
None.
Item
4. Controls and
Procedures.
Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed by Registrant in reports that
Registrant files or submits under the Exchange Act is recorded, processed,
summarized and timely reported as provided in SEC rules and forms.
Registrant periodically reviews the design and effectiveness of its disclosure
controls and procedures, including compliance with various laws and regulations
that apply to its operations. Registrant makes modifications to improve the
design and effectiveness of its disclosure controls and procedures, and may take
other corrective action, if its reviews identify a need for such modifications
or actions. In designing and evaluating the disclosure controls and procedures,
Registrant recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives.
12
SECURED
INCOME L.P. AND SUBSIDIARY
Item
4. Controls and
Procedures (continued).
Registrant
has carried out an evaluation, under the supervision and the participation of
its management, including the Chief Executive Officer and Chief Financial
Officer of Wilder Richman Resources Corporation (“WRRC”), one of Registrant’s
general partners, of the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act), as of the three months ended September
30, 2009. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer of WRRC concluded that Registrant’s disclosure controls and
procedures were effective as of September 30, 2009.
Item
4T. Internal
Control Over Financial Reporting.
There
were no changes in Registrant’s internal control over financial reporting during
the three months ended September 30, 2009 that have materially affected, or
are reasonably likely to materially affect, Registrant’s internal control over
financial reporting.
13
SECURED
INCOME L.P. AND SUBSIDIARY
Part II - Other
Information.
Item
1.
|
Legal
Proceedings.
|
None.
Item
1A.
|
Risk
Factors.
|
Registrant
is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
is not required to provide the information required under this
Item.
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds.
|
None.
Item
3.
|
Defaults Upon Senior
Securities.
|
None.
Item
4.
|
Submission of Matters
to a Vote of Security
Holders.
|
None.
Item
5.
|
Other
Information.
|
None.
Item
6.
|
Exhibits.
|
Exhibit
31.1 - Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
Exhibit
31.2 - Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
Exhibit
32.1 - Section 1350 Certification of Chief Executive Officer.
Exhibit
32.2 - Section 1350 Certification of Chief Financial Officer.
14
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized on the 13th day of
November 2009.
SECURED
INCOME L.P.
|
||||
By:
|
Wilder
Richman Resources Corporation, General Partner
|
|||
By:
|
/s/Richard Paul Richman
|
|||
Richard
Paul Richman
|
||||
Chief
Executive Officer
|
||||
By:
|
/s/James Hussey
|
|||
James
Hussey
|
||||
Chief
Financial Officer
|
||||
By:
|
WRC-87A
Corporation, General Partner
|
|||
By:
|
/s/Richard Paul Richman
|
|||
Richard
Paul Richman
|
||||
Executive
Vice President and Treasurer
|
15