FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE
REQUIRED)
Commission file number 2-65391
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Delaware 16-1173249
-------- -----------------
(State of Formation) (IRS Employer Identification No.)
2350 North Forest Road - Suite 12-A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-9090
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
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 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 the 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)
DOCUMENTS INCORPORATED BY REFERENCE
See Page 12 for a list of all documents incorporated by reference.
1
<PAGE>
PART I
ITEM 1: BUSINESS
The Registrant, Realmark Property Investors Limited Partnership (the
"Partnership"), is a Delaware Limited Partnership organized in 1979 pursuant to
an Agreement and Certificate of Limited Partnership (the "Partnership
Agreement"), under the Delaware Uniform Limited Partnership Act. The
Partnership's Corporate General Partner is Realmark Properties, Inc. (the
"Corporate General Partner"), a Delaware corporation, and it's Individual
General Partner is Joseph M. Jayson (the "Individual General Partner").
The Registrant commenced the public offering of its limited partnership units,
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, on March 26, 1981, and concluded the offering on December
31, 1981, having raised a total of $3.1 million before sales commissions and
expenses of the offering.
The Partnership's investment objectives are to (1) provide a return of capital
plus capital gains from the sale of appreciated properties; (2) provide partners
with cash distributions until properties are sold; (3) preserve and protect
partners capital; and (4) achieve a build-up of equity through the reduction of
mortgage loans.
The Partnership's one remaining apartment complex, acquired in 1981, is located
in Englewood, Ohio. The surrounding community continues to be marked by
relatively stable occupancy rates and minimal construction. Physical occupancy
at Carriage House of Englewood (formerly Gold Key Village Apartments) for 1997
was 79%, for 1996 was 83% and for 1995 was 92%. As the only property in the
Partnership, Carriage House of Englewood accounts for all of the revenue
generated by the Partnership.
The business of the Partnership is not seasonal. As of December 31, 1997, the
Partnership did not directly employ any persons in a full-time position. All
persons who regularly rendered services on behalf of the Partnership through
December 31, 1997 were employees of the Corporate General Partner or its
affiliates.
Carriage House of Englewood is currently managed by Realmark Corporation, an
affiliate of the Corporate General Partner.
ITEM 2: PROPERTIES
As of December 31, 1997, the Partnership continued to own and operate Carriage
House of Englewood (formerly the Gold Key Village Apartments). Purchased in
November 1981, Carriage House of Englewood, located in Englewood, Ohio, is a 144
unit rental complex consisting of 24 buildings and recreational facilities on
9.6 acres of land. Realmark Corporation, an affiliate of the General Partners,
has managed the complex since March 1, 1984.
On May 5, 1992, the Partnership refinanced its two mortgages with a 9% U.S.
Department of Housing and Urban Development (HUD) insured mortgage in the amount
of $2,997,800 due June 1, 2027. The outstanding mortgage balance at December 31,
1997 was $2,914,486.
2
<PAGE>
ITEM 2: PROPERTIES (Continued)
Also, on May 5, 1992, the Partnership entered into a joint venture agreement
with Realmark Property Investors Limited Partnership VI A (RPILP VI A) for the
purpose of operating Carriage House of Englewood. Under the terms of the joint
venture agreement, the Partnership contributed the property net of the mortgage
and RPILP VI A contributed $497,911. The agreement provided for the income,
loss, gain, cash flow, or sale proceeds to be allocated 68% to the Partnership
and 32% to RPILP VI A. On March 1, 1993, RPILP VI A contributed an additional
$125,239, changing the allocation percentages to 60% to the Partnership and 40%
to RPILP VI A.
ITEM 3: LEGAL PROCEEDINGS
The Partnership is not a party to, nor is any of the Partnership's property the
subject of, any material pending legal proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST.
There is currently no established trading market for the units of Limited
Partnership Interest of the Partnership and it is not anticipated that any will
develop in the future.
The Partnership did not make any distributions during 1997, 1996 or 1995 and
management does not anticipate making any distributions until Carriage House of
Englewood is sold and all Partnership obligations are satisfied. Unless there is
significant improvement in the overall property performance, it remains unlikely
that the investors will receive any of the proceeds from sale.
As of December 31, 1997, there were 421 record holders of units of Limited
Partnership Interest.
3
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
Realmark Properties Investors Limited Partnership
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total assets $ 1,621,652 $ 1,653,163 $ 1,757,445 $ 1,864,870 $ 2,007,503
============ ============ ============ ============ ============
Notes payable and
Long-term obligations $ 2,914,486 $ 2,930,266 $ 2,947,711 $ 2,963,659 $ 2,978,240
============ ============ ============ ============ ============
Revenue $ 996,136 $ 685,142 $ 765,363 $ 744,192 $ 723,783
Expenses 952,949 1,068,126 1,084,592 993,203 884,131
------------ ------------ ------------ ------------ ------------
Income (loss) before allocation
to minority interest and
extraordinary item 43,187 (382,984) (319,229) (249,011) (160,348)
Joint Venture losses allocated to
Minority Interest 101,583 119,637 91,833 70,183 33,636
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 144,770 $ (263,347) $ (227,396) $ (178,828) $ (126,712)
============ ============ ============ ============ ============
Net cash (used in)
provided by operating
activities $ (256,752) $ (271,721) $ (134,649) $ (71,690) $ (122,857)
Principal payments on
long-term debt (15,780) (17,445) (15,948) (14,581) (13,330)
------------ ------------ ------------ ------------ ------------
Net cash used in
operating activities
less principal payments
on long-term debt $ (272,532) $ (289,166) $ (150,597) $ (86,271) $ (136,187)
============ ============ ============ ============ ============
Income (loss) per limited
partnership unit $ 46.23 $ (84.10) $ (72.62) $ (57.11) $ (40.47)
============ ============ ============ ============ ============
Weighted average
number of limited
units outstanding 3,100 3,100 3,100 3,100 3,100
============ ============ ============ ============ ============
</TABLE>
4
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources:
The Partnership continues to incur cash flow deficits and large losses from
operations as has been noted in prior years. The Corporate General Partner and
its affiliates have regularly advanced funds and/or not taken payment of fees
otherwise entitled to whenever it was necessary to cover its shortfalls. The
Corporate General Partner is under no obligation to make advances, and there is
no assurance that such advances will continue. As of December 31, 1997, the
Corporate General Partner (and affiliate) advances totaled $780,708, all of
which is payable on demand and accruing interest at 11% per annum. Due to the
operating shortfalls, the Partnership did not make any distributions in the
years ended December 31, 1997 and 1996. Until such time as the Partnership can
satisfy its obligations and repay the Corporate General Partner advances, which
is not expected to happen prior to the sale of the remaining property in the
Partnership, no distributions are anticipated.
The Partnership's one remaining property, Carriage House of Englewood (formerly
Gold Key Apartments) came under contract for sale during July 1996; the contract
was extended into 1997 and also renegotiated, but was subsequently canceled. The
pending sale did result in the forfeiture of non-refundable deposits totaling
$370,000. The General Partner continues to market this property for sale.
Although the Corporate General Partner feels the sale of this property is in the
best interest of the Limited Partners, it remains highly unlikely that the
Limited Partners will receive any proceeds from the sale due to the amount of
the Partnership's liabilities.
During 1997, management continued to work with the United States Department of
Housing and Urban Development (HUD) and the mortgagee on the property to obtain
funds from escrows to help the property with cash flow shortages it incurred.
Management successfully secured the release of all of the property's replacement
reserve funds early in 1998; additionally future reserve payments have been
suspended in an effort to assist in the funding of the property's operations.
Management is also negotiating with the lender to reduce the interest rate being
charged on the current mortgage to a lower, more "market-level" rate, which
would lower the debt service, and thus increase cash flow. The additional cash
flow is intended to be used to both fund operations and to do needed capital
improvements to the property, such as roofing repairs and interior and exterior
painting. Although HUD and the mortgagee have assisted the Partnership through
the release of the escrowed funds and suspension of future deposits into the
escrow reserve, unless the property shows significant improvement in occupancy
and collections, as well as a decrease in expenses, the property could be in a
position to default on its mortgage, thus throwing it into a foreclosure. With
this in mind, the Corporate General Partner is aggressively marketing the
property to potential buyers.
Management has once again implemented corrective action plans in response to the
going concern consideration discussed in Note 9 to the financial statements, as
well as to deal with the HUD noncompliance detailed in the notes to the
financial statements. These plans include the closer monitoring of expenses such
as payroll, advertising and maintenance, which have typically been the expenses
that have increased from year to year. The HUD noncompliance detailed in the
notes technically puts the Partnership in default of the mortgage which could
result in fines or interest charges being levied, or the take over of the
property by HUD. A concerted effort at correcting the noncompliance will
hopefully lead to the ultimate cure of such default.
5
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued):
The Partnership has conducted a review of its computer systems to identify the
systems that could be affected by the "year 2000 issue" and has substantially
developed an implementation plan to resolve such issues.
The year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. Management has confirmed with its
software providers that all software currently in use is either "2000 compliant"
or will be with little adaptation and at no significant cost.
Results of Operations:
For the year ended December 31, 1997, the Partnership had net income of $144,770
or $46.23 per limited partnership unit. This compares to a net loss of $263,347
or $84.10 per limited partnership unit for the previous year and a loss of
$227,396 or $72.62 per limited partnership unit from the year ended December 31,
1995. The net income for the current year was the result of income arising from
non-refundable deposits of $370,000 on the sale of the Carriage House of
Englewood Apartments which were forfeited by the potential buyer. Without the
income from these deposits, the Partnership would have incurred a net loss more
in line with that of the prior years; this continues to demonstrate the
Partnership's struggle with poor cash flow.
Partnership revenues for the year ended December 31, 1997 totaled $996,136; this
consisted of rental income of $583,445, income from the forfeited deposits
mentioned above of $370,000, and other income, which includes interest, laundry
income, and other miscellaneous sources of income of $42,691. Revenues for the
years ended December 31, 1996 and 1995 totaled $685,142 and $765,363
respectively. Although other income remained fairly constant as compared to the
year ended December 31, 1996 with only a five percent decrease (mostly
attributable to a decrease in laundry revenue), there does appear to be a
continual decline when comparing the last three years (i.e., a similar decrease
may be noted between 1995 and 1996). A continual decrease in rental revenue is
also evident when comparing the previous three years. Rents were increased at
Carriage House of Englewood, however the decrease in net rental income is
related to both a decrease in occupancy and no significant improvement in
delinquencies at this property. Physical occupancy averaged 79% for the year
ended December 31, 1997, 83% during the year ended December 31, 1996, and 92%
for 1995. Management continues to focus additional and continual effort on
increasing occupancy, as well as decreasing delinquencies through, for example,
planned tightening of credit policies and more aggressive marketing through the
use of promotions and rental concessions.
6
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (Continued)
Results of Operations (Continued):
Partnership expenses for the year ended December 31, 1997 totaled $952,949, a
decrease of slightly over $115,000 from those of 1996 which totaled $1,068,126
and an even greater reduction from those of 1995 which totaled $1,084,592. Much
of this decrease was related to no depreciation expense being taken for the year
ended December 31, 1997 and for part of the year ended December 31, 1996 due to
accounting pronouncements as described in Note 3 to the financial statements.
Although total property operation expenses decreased, payroll and associated
expenses increased. The increase was the result of more maintenance staff hired
on site to perform the necessary physical improvements to the property at a
lower cost than would be incurred if the work was contracted out. A more than
fifty percent decrease resulted in contracted service costs as a result of more
on-site maintenance personnel. Other property operation expenses, such as
utility costs, real estate taxes and insurance expense remained fairly
consistent with those of the previous year. Administrative expenses charged by
affiliates also changed only slightly from those of the prior year. A decrease
of over $32,000 in other administrative costs was the result of significantly
lower advertising and promotion costs. The decrease in this expenditure was the
result of the Partnership having less cash to spend. Management is being forced
to focus on the effect and end results of advertising without first incurring
the associated costs. Due to the marketing of the property, a slight increase in
brokerage fees and related expenses was also noted when comparing the years
ended December 31, 1997 and 1996.
The Partnership continues to expect higher than "normal" property operations
expenses in the coming months due to the maintenance work that needs to be done
at the Carriage House of Englewood Apartments; much work needs to be completed
in order to prepare units for new tenants and to satisfy current tenants (i.e.
cleaning, painting, appliance and carpeting costs), as well as to physically
improve the exterior of the complex. Although this work is necessary in order to
lease up the apartment complex, management is trying to control expenditures so
as not to worsen the cash flow situation of the Partnership. Management was
successful in early 1998 in both negotiating the release of escrowed reserve
funds and in the suspension of future escrows for replacements. It is hoped that
this will provide the property and the Partnership with some of the additional
cash needed to fund the necessary improvements.
For the year ended December 31, 1997, the tax basis income was $174,866 or
$55.84 per limited partnership unit compared to a tax loss of $183,920 or $58.74
per unit for the year ended December 31, 1996 and a tax loss of $194,584 or
$62.14 per limited partnership unit for the year ended December 31, 1995. The
Partnership agreement provides for the taxable income or losses to be allocated
99% to the Limited Partners and 1% to the General Partners. Through the year
ended December 31, 1986 and for the years ended December 31, 1991, 1996 and
1997, taxable income or losses were allocated in accordance with this provision.
For the years 1987 through 1990, and 1992 through 1995, the Partnership was
required to reallocate taxable losses in accordance with the provisions of
Section 704(b) of the Internal Revenue Code. In general, Section 704(b) may be
applicable when Partnership capital is negative and Limited Partners are not
required to restore negative capital accounts. In such circumstances, the IRS
code requires that the General Partner(s) bear a greater portion of the economic
loss than that which would be allocated pursuant to the Partnership agreement
and, therefore, the loss must be reallocated.
7
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed under Item 14 of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
8
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any directors or officers. The
Individual General Partner of the Partnership is Joseph M. Jayson. The directors
and executive officers of Realmark Properties, Inc., the Partnership's Corporate
General Partner, as of March 1, 1998, are listed below. Each director is subject
to election on an annual basis.
<TABLE>
<CAPTION>
Year First
Name Title of All Positions Held with Company Elected Director
- ---- ---------------------------------------- ----------------
<S> <C> <C>
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice-President and Director 1979
Michael J. Colmerauer Secretary
</TABLE>
Joseph M. Jayson, President and Director of Realmark Properties, Inc. and Judith
P. Jayson, Vice-President and Director of Realmark Properties, Inc., are married
to each other.
The Directors and Executive Officers of the Corporate General Partner and their
principal occupations and affiliations during the last five years or more are as
follows:
Joseph M. Jayson, age 59, is Chairman and Director and sole stockholder of J.M.
Jayson & Company, Inc. and certain of its affiliated companies: Westmoreland
Capital Corporation, Oilmark Corporation and U.S. Energy Development
Corporation. In addition, Mr. Jayson is Chairman of Realmark Corporation, and
President and Director of Realmark Properties, Inc., wholly owned subsidiaries
of J.M. Jayson & Company, Inc. and co-general partner of Realmark Properties
Investors Limited Partnership, Realmark Properties Investors Limited
Partnership-II, Realmark Properties Investors Limited Partnership-III, Realmark
Properties Investors Limited Partnership-IV, Realmark Properties Investors
Limited Partnership-V, Realmark Properties Investors Limited Partnership-VI A
and Realmark Properties Investors Limited Partnership-VI B. Mr. Jayson is a
member of the Investment Advisory Board of the Corporate General Partner. Mr.
Jayson has been in real estate for the last 35 years and is a Certified Property
manager as designated by the Institute of Real Estate Management ("I.R.E.M.").
Mr. Jayson received a B.S. Degree in Education in 1961 from Indiana University,
a Masters Degree from the University of Buffalo in 1963, and has served on the
Educational Faculty of the Institute of Real Estate Management. Mr. Jayson has
for the last 35 years been engaged in various aspects of real estate brokerage
and investment. He brokered residential properties from 1962 to 1964, commercial
and investment properties from 1964 to 1967, and in 1967, left commercial real
estate to form his own investment firm. Since that time, Mr. Jayson and J.M.
Jayson & Company, Inc. have formed, or participated in various ways in forming
over 30 real estate related limited partnerships. For the past sixteen years,
Mr. Jayson and J.M. Jayson & Company, Inc. and an affiliate have also engaged in
developmental drilling for gas and oil.
9
<PAGE>
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Judith P. Jayson, age 58, is currently Vice-President and a Director of Realmark
Properties, Inc. She is also a Director of the property management affiliate,
Realmark Corporation. Mrs. Jayson has been involved in property management for
the last 36 years and has extensive experience in the hiring and training of
property management personnel and in directing, developing and implementing
property management systems and programs. Mrs. Jayson, prior to joining the firm
in 1973, taught business in the Buffalo, New York high school system. Mrs.
Jayson graduated from St. Mary of the Woods College in Terre Haute, Indiana,
with a degree in Business Administration. Mrs. Jayson is the wife of Joseph M.
Jayson, the Individual General Partner.
Michael J. Colmerauer, age 39, is Secretary and in-house legal counsel for J.M.
Jayson and Company, Inc., Realmark Corporation, Realmark Properties, Inc. and
other companies affiliated with the General Partners. He received a Bachelor's
Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar Association and has been employed by the Jayson group of companies
for the last 14 years.
ITEM 11: EXECUTIVE COMPENSATION
No direct remuneration was paid or payable by the Partnerships to directors and
officers (since it has no directors or officers) for its fiscal years ended
December 31, 1997, 1996 or 1995, nor was any direct remuneration paid or payable
by the Partnership to directors or officers of Realmark Properties, Inc., the
Corporate General Partner and sponsor, for the fiscal years ended December 31,
1997, 1996 or 1995.
The following table sets forth for the years ended December 31, 1997, 1996 and
1995, the compensation paid or accrued as payable by the Partnership, directly
or indirectly, to affiliates of the General Partners:
<TABLE>
<CAPTION>
Entity Compensation 1997 1996 1995
------ ------------ ---- ---- ----
<S> <C> <C> <C> <C>
Realmark Properties, Inc. Interest charged on
(The Corporate General accounts payable -
Partner) affiliates $ 85,335 $ 84,692 $ 83,159
--------- --------- ----------
Reimbursement for allocated
partnership administration
expenses:
Investor Services Fees 2,589 1,958 1,881
Brokerage Fees 4,653 2,677 3,175
Portfolio Management
& Accounting Fees 16,989 14,677 8,118
Realmark Corporation Property Management Fees 31,362 33,678 37,930
Computer Service Fees 3,030 3,030 3,030
--------- --------- ----------
58,623 56,020 54,134
--------- --------- ----------
$ 143,958 $ 140,712 $ 137,293
========= ========= =========
</TABLE>
10
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION (CONTINUED)
The Corporate General Partner is entitled to a continuing Partnership Management
Fee equal to 9% of adjusted cash flow (as defined in the Partnership Agreement).
This fee is subordinated to the receipt by the limited partners of a
non-cumulative annual cash return equal to 7% on the average of their adjusted
capital contributions (as defined in the Partnership Agreement). Since the
limited partners have not received a 7% return on their average capital
balances, this fee has not been paid to the General Partner or accrued by the
Partnership. The General Partners are entitled to 1% of Distributable Cash (as
defined in the Partnership Agreement) and to certain expense reimbursements with
respect to Partnership operations.
Additionally, the Partnership's share of net proceeds arising from a sale or
refinancing shall be distributed first to the Limited Partners in amounts
equivalent to a 7% return on their average adjusted capital balances, plus an
amount equal to their capital contributions, then to all partners in amounts
equal to their respective positive capital account balances. The partnership's
share of additional proceeds, after property disposition fees, shall then be
allocated to the Limited Partners in an amount equivalent to 5% of their average
adjusted capital balances and the remainder, if any, in the ratio of 90% to the
Limited Partners and 10% to the General Partners. The Partnership's share of
income arising from the sale or refinancing shall be allocated in the same
manner as the proceeds are to be distributed, except that the General Partners
are to be allocated at least 1% of the income.
The Corporate General Partner is also allowed to collect property disposition
fees upon the sale of acquired properties. This fee is not to exceed the lesser
of 9% of the gross proceeds of the offering applicable to the property or 50% of
normal rates, subordinated to: (i) the payment to the Limited Partners of a
cumulative annual return (not compounded) equal to 7% on their average adjusted
capital balances; (ii) the repayment to the Limited Partners of a cumulative
amount equal to their capital contributions; and (iii) the payment to all
partners of an amount equal to their respective positive capital account
balances to the extent such balances exceed the amounts provided for in the
preceding clauses (i) and (ii). Inasmuch as these conditions have not been met,
no amounts have been recorded with regard to the sale of Clarewood and Gallery.
See also Notes 1 and 4 to the financial statements.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No person is known to the Partnership to own of record or beneficially more than
five percent (5%) of the units of Limited Partnership Interest of the
Partnership. Excluding the General Partner's Interest in the Partnership ($1,000
initial capital contribution), the General Partners, as of December 31, 1997,
owned no units of Limited Partnership interest.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others
All transactions between the Partnership and Realmark Properties, Inc. (the
Corporate General Partner) and any other affiliated organization are described
in Item 11 of this report and in Notes 4 and 7 to the financial statements.
11
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements and Schedules
Financial Statements Page
(i) Independent Auditors' Report 14
(ii) Balance Sheets as of December 31, 1997
and 1996 15
(iii) Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 16
(iv) Statements of Partners' Deficit for the years
ended December 31, 1997, 1996 and 1995 17
(v) Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 18
(vi) Notes to Financial Statements 19 - 26
Financial Statement Schedule
(i) Schedule III - Real Estate and Accumulated
Depreciation 27 - 28
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
(b) Reports on Form 8-K
None
(c) Exhibits
4. Instruments defining the rights of security holder, including indentures.
(a) Certificate of Limited Partners filed with the
Registration Statement of the Registrant Form S-11,
filed March 26, 1981 and subsequently amended
incorporated herein by reference.
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
10. Material contracts.
(a) Property Management Agreement with Realmark Corporation included
with the Registration Statement of the Registrant as filed and
amended to date incorporated herein by reference.
(b) Property sales agreement with unrelated third-party included with
the 1996 third quarter Form 10Q incorporated herein by reference.
13
<PAGE>
INDEPENDENT AUDTIORS' REPORT
The Partners
Realmark Property Investors Limited Partnership
We have audited the accompanying balance sheets of Realmark Property Investors
Limited Partnership (the Partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' deficit, and cash flows for
each of the three years in the period ended December 31, 1997. Our audits
also included the financial statement schedule listed in the index at Item 14.
These financial statements and financial statement schedule are the
responsibility of the General Partners. Our responsibility is to express an
opinion on the financial statements and the financial statement based on our
audits.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statetments 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 the General Partners, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
The accompanying financial statements and financial statement schedule have been
prepared assuming that the Partnership will continue as a going concern. As
discussed in Note 9 to the financial statements, the Partnership's failure to
meet its Department of Housing and Urban Development regulatory agreement
requirements, its recurring losses from operations and its partners' deficit
raise substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
March 6, 1998
14
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Property, at cost (assets held for sale, see Note 3):
Land $ 182,500 $ 182,500
Land improvements 185,000 185,000
Buildings 2,475,133 2,413,805
Furniture, fixtures and equipment 164,141 164,141
----------- -----------
3,006,774 2,945,446
Less accumulated depreciation 1,753,995 1,753,995
----------- -----------
Property, net 1,252,779 1,191,451
----------- -----------
Cash - security deposits 30,154 29,406
Escrow deposits 155,194 187,815
Note receivable -- 47,200
Prepaid expenses 15,110 23,134
Mortgage costs - net of accumulated amortization
of $32,536 in 1997 and $26,794 in 1996 168,415 174,157
----------- -----------
Total Assets $ 1,621,652 $ 1,653,163
=========== ===========
Liabilities and Partners' Deficit
Liabilities:
Cash overdraft $ 315,892 $ 208,100
Mortgage payable 2,914,486 2,930,266
Accounts payable and accrued expenses 232,267 229,897
Accounts payable - affiliates 780,708 784,461
Non-refundable deposits on sale of property -- 220,000
Accrued interest 65,539 21,977
Security deposits and prepaid rent 42,969 31,858
----------- -----------
Total Liabilities 4,351,861 4,426,559
----------- -----------
Minority interest in consolidated joint venture 172,597 274,180
----------- -----------
Partners' Deficit:
General partners (791,521) (792,969)
Limited partners (2,111,285) (2,254,607)
----------- -----------
Total Partners' Deficit (2,902,806) (3,047,576)
----------- -----------
Total Liabilities and Partners' Deficit $ 1,621,652 $ 1,653,163
=========== ===========
</TABLE>
See notes to financial statements
15
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income:
Rental $ 583,445 $ 640,124 $ 717,713
Forfeited deposits on sale of property 370,000 -- --
Interest and other 42,691 45,018 47,650
----------- ----------- -----------
Total income 996,136 685,142 765,363
----------- ----------- -----------
Expenses:
Property operations 436,623 450,675 455,991
Interest:
Paid to affiliates 85,335 84,692 83,159
Other 262,807 264,455 265,963
Depreciation and amortization 5,742 76,032 123,813
Administrative:
Paid to affiliates 58,623 56,020 54,134
Other 103,819 136,252 101,532
----------- ----------- -----------
Total expenses 952,949 1,068,126 1,084,592
----------- ----------- -----------
Income (loss) before allocation to minority interest 43,187 (382,984) (319,229)
Joint Venture losses allocated to minority interest 101,583 119,637 91,833
----------- ----------- -----------
Net income (loss) $ 144,770 $ (263,347) $ (227,396)
=========== =========== ===========
Income (loss) per limited partnership unit $ 46.23 $ (84.10) $ (72.62)
=========== =========== ===========
Weighted average number of limited partnership
units outstanding 3,100 3,100 3,100
=========== =========== ===========
</TABLE>
See notes to financial statements
16
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
General
Partners Limited Partners
Amount Units Amount
-------- ----- ------
<S> <C> <C> <C>
Balance, January 1, 1995 $ (788,062) 3,100 $(1,768,771)
Net loss (2,274) -- (225,122)
----------- ----------- -----------
Balance, December 31, 1995 (790,336) 3,100 (1,993,893)
Net loss (2,633) -- (260,714)
----------- ----------- -----------
Balance, December 31, 1996 (792,969) 3,100 (2,254,607)
Net income 1,448 -- 143,322
----------- ----------- -----------
Balance, December 31, 1997 $ (791,521) 3,100 $(2,111,285)
=========== =========== ===========
</TABLE>
See notes to financial statements
17
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 144,770 $(263,347) $(227,396)
Adjustments to reconcile net income (loss) to
net cash flow used in operating activities:
Deposits forfeited on sale of property (370,000) -- --
Depreciation and amortization 5,742 76,032 123,813
Minority interest share of Joint Venture
net losses (101,583) (119,637) (91,833)
Changes in operating assets and liabilities:
Cash - security deposits (748) (1,555) (686)
Prepaid expenses 8,024 (3,683) (3,483)
Accounts payable and accrued expenses 2,370 51,452 62,995
Accrued interest 43,562 (131) (119)
Security deposits and prepaid rent 11,111 (10,852) 2,060
--------- --------- ---------
Net cash used in operating activities (256,752) (271,721) (134,649)
--------- --------- ---------
Cash flows from investing activities:
Decrease in escrow deposits 32,621 89,708 841
Deposits received on sale of property 150,000 172,800 --
Payments received on note receivable 47,200 -- --
Property additions (61,328) (9,020) (14,134)
--------- --------- ---------
Net cash provided by (used in) investing activities 168,493 253,488 (13,293)
--------- --------- ---------
Cash flows from financing activities:
Increase in cash overdraft 107,792 125,701 82,399
Increase (decrease) in accounts
payable - affiliates (3,753) (90,023) 80,417
Mortgage principal payments (15,780) (17,445) (15,948)
--------- --------- ---------
Net cash provided by financing activities 88,259 18,233 146,868
--------- --------- ---------
Increase (decrease) in cash -- -- (1,074)
Cash - beginning of year -- -- 1,074
--------- --------- ---------
Cash - end of year $ -- $ -- $ --
========= ========= =========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 219,245 $ 264,586 $ 266,082
========= ========= =========
</TABLE>
During 1996, the Partnership received a deposit of $220,000 representing cash
totaling $172,800 and a note receivable totaling $47,200 related to the pending
sale of the Carriage House of Englewood.
18
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. FORMATION AND OPERATION OF PARTNERSHIP:
Realmark Property Investors Limited Partnership (the "Partnership"), a
Delaware Limited Partnership, was formed on August 28, 1979, to invest in a
diversified portfolio of income producing real estate.
In March 1981, the Partnership commenced the Public Offering of Units
of Limited Partnership Interest. On December 31, 1981 the offering was
concluded, at which time 3,100 units of Limited Partnership Interest were
outstanding. The General Partners are Realmark Properties, Inc., a wholly-owned
subsidiary of J.M. Jayson & Company, Inc. (JMJ) and Mr. Joseph M. Jayson, the
sole shareholder of JMJ. Under the Partnership Agreement, the General Partners
and affiliates can receive compensation for services rendered, and reimbursement
for expenses incurred on behalf of the Partnership (See Note 4).
The Partnership agreement provides for the Partnership's share of
taxable income or losses of the Partnership to be allocated 99% to the Limited
Partners and 1% to the General Partners. Through December 31, 1986 and for 1991
and 1997, taxable income or losses were allocated in accordance with this
provision. For the years 1987 through 1990, and 1992 through 1995, the
Partnership was required to reallocate losses in accordance with Internal
Revenue Section 704(b). In general, section 704(b) may be applicable when
Partnership capital is negative and Limited Partners are not required to restore
negative capital accounts. In such instances the IRS code requires that the
General Partner bears a greater portion of the economic loss than that which
would be allocated pursuant to the Partnership Agreement and, therefore, the
loss must be reallocated.
The Partnership's share of gains or losses arising from the sale or
refinancing of properties shall be allocated 99% to the Limited Partners and 1%
to the General Partners. The Partnership's share of net proceeds arising from a
sale or refinancing shall be distributed first to the Limited Partners in
amounts equivalent to a 7% return on their average adjusted capital balances,
plus an amount equal to their capital contributions, then to all partners in
amounts equal to their respective positive capital account balances. The
partnership's share of additional proceeds, after property disposition fees,
shall then be allocated to the Limited Partners in an amount equivalent to 5% of
their average adjusted capital balances and the remainder, if any, in the ratio
of 90% to the Limited Partners and 10% to the General Partners. The
Partnership's share of income arising from the sale or refinancing shall be
allocated in the same manner as the proceeds are to be distributed, except that
the General Partners are to be allocated at least 1% of the income.
On May 5, 1992, the Partnership entered into an agreement to form a
joint venture with Realmark Property Investors Limited Partnership VI A (RPILP
VI A). The joint venture was formed for the purpose of operating Carriage House
of Englewood, formerly Gold Key Village Apartments, owned by the Partnership.
The joint venture is further described in Note 7.
19
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a) 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.
b) Cash
For purposes of reporting cash flows, cash includes the following
items: cash on hand, cash in checking accounts and cash in savings accounts. Any
cash overdrafts as of December 31, 1997 have been replenished by the General
Partner in the first quarter of 1998.
c) Cash-Security Deposits
Cash-security deposits represents cash on deposit in accordance with
the HUD regulatory agreement for the property which has a HUD insured mortgage.
d) Escrow Deposits
Escrow deposits represent cash which is restricted for the payment of
property taxes and insurance or for repairs and replacements in accordance with
the mortgage agreement.
e) Mortgage Costs
Mortgage costs incurred in obtaining property mortgage financing have
been deferred and are being amortized over the term of the mortgage using the
straight-line method.
f) Property and Depreciation
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets, and totaled $70,290 and
$118,072 for the years ended December 31, 1996 and 1995, respectively. No
depreciation was recorded in the year ended December 31, 1997. The estimated
useful lives of the Partnership's assets range from 5 to 25 years. Expenditures
for maintenance and repairs are expensed as incurred; major renewals and
betterments are capitalized. The Accelerated Cost Recovery System is used to
calculate depreciation expense for tax purposes. See further discussion at
Footnote 3.
g) Minority Interest in Consolidated Joint Venture
The minority interest in consolidated joint venture is stated at the
amount of capital contributed by the minority investor adjusted for its share of
joint venture losses.
20
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
h) Rental Income
All rental income is derived from one residential rental property. The
outstanding leases with respect to this property are for terms of one year or
less. The rental income is recognized as earned according to the terms of the
leases.
i) Income Per Limited Partnership Unit
The income per limited partnership unit is based on the weighted
average number of limited partnership units outstanding for the year.
j) Accrued Rent Receivable
Due to the nature of accrued rent receivable, all such receivables are
fully reserved for at December 31, 1997 and 1996.
3. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY:
In November 1981, the Partnership acquired a 144 unit apartment complex
(Carriage House of Englewood, formerly Gold Key Village Apartments) located in
Englewood, Ohio, for a purchase price of $2,860,754, which included $191,872 in
acquisition fees.
In July, 1982, the Partnership acquired a 99 unit apartment complex
(Clarewood) located in Lafayette, Louisiana, for a purchase price of $2,428,834,
which included $134,992 in acquisition fees.
In July, 1982, the partnership acquired a 155 unit apartment complex
(Gallery) located in Lafayette, Louisiana, for a purchase price of $3,546,653,
which included $197,987 in acquisition fees.
In October, 1989, the partnership sold Clarewood and Gallery for a
combined price of $4,647,516, which generated a total net gain for financial
statement purposes of $1,209,194.
In July 1996, the Partnership entered into a plan to dispose of the
property, plant and equipment of Carriage House of Englewood with a carrying
amount of $1,252,779 and $1,191,451 at December 31, 1997 and 1996 respectively.
Carriage House of Englewood incurred losses of $253,956 and $299,092 for the
years ended December 31, 1997 and 1996. Management has determined that a sale of
the property is in the best interest of the limited partners. The plan for
disposal continued throughout 1997 when sales agreements were in place but had
expired by December 31, 1997. Management continues to actively market the
property with a sale anticipated in 1998.
In connection with the pending sale, the Partnership received
non-refundable deposits of $150,000 and $220,000 in the years ended December 31,
1997 and 1996, respectively. Of the deposits received in 1996, $47,200 was
represented by a note receivable at December 31, 1996. All such deposits were
forfeited in 1997 and recorded as income.
21
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
3. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED):
Financial Accounting Standards Statement No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of (the
"Statement") requires that assets to be disposed of be recorded at the lower of
carrying value or fair value, less costs to sell. The Statement also requires
that such assets not be depreciated during the disposal period, as the assets
will be recovered through sale rather than through operations. In accordance
with this Statement, the long-lived assets of the Partnership, classified as
held for sale on the balance sheet, are recorded at the carrying amount which is
the lower of carrying value or fair value less costs to sell, and have not been
depreciated during the disposal period. Depreciation expense, not recorded
during the disposal period, for the years ended December 31, 1997 and 1996
totaled approximately $122,000 and $44,000, respectively. Management believes
that the property's fair value has not changed significantly since being
classified as held for sale.
4. RELATED PARTY TRANSACTIONS:
Management fees for the properties are paid or accrued to an affiliate
of the General Partners. The management agreement provides for 5% of gross
monthly rental receipts of the complex to be paid as fees for administering the
operations of the property. These fees totaled $31,362, $33,678 and $37,930 for
the years ended December 31, 1997, 1996 and 1995, respectively.
Accounts payable to affiliates, which are payable on demand, amounted
to $780,708 and $784,461 at December 31, 1997 and 1996, respectively. The
payables represent fees due and advances from the General Partners or an
affiliate of the General Partners. Interest is charged on accounts
payable-affiliates at an annual rate of 11%. Such amounts totaled $85,335,
$84,692 and $83,159 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Pursuant to the Partnership Agreement, the Corporate General Partner
charges the Partnership for reimbursement of certain costs and expenses incurred
by the Corporate General Partner and its affiliates in connection with the
administration of the Partnership. These charges were for the Partnership's
allocated share of such costs and expenses as payroll, printing, mailing, travel
and communication costs related to Partnership accounting, partner
communications and property marketing and are included in property operations.
Additionally, Partnership accounting and portfolio management fees, investor
services fees and brokerage fees are allocated based on total assets, number of
partners and number of units, respectively. Such charges totaled $24,231,
$19,312 and $13,174 in 1997, 1996 and 1995, respectively.
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partners. The fee is based upon the number of apartment
units and totaled $3,030 for the years ended December 31, 1997, 1996 and 1995,
respectively.
22
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
4. RELATED PARTY TRANSACTIONS (CONTINUED):
The Corporate General Partner is allowed to collect property
disposition fees upon the sale of acquired properties. This fee is not to exceed
the lesser of 9% of the gross proceeds of the offering applicable to the
property or 50% of normal rates, subordinated to: (i) the payment to the Limited
Partners of a cumulative annual return (not compounded) equal to 7% on their
average adjusted capital balances; (ii) the repayment to the Limited Partners of
a cumulative amount equal to their capital contributions; and (iii) the payment
to all partners of an amount equal to their respective positive capital account
balances to the extent such balances exceed the amounts provided for in the
preceding clauses (i) and (ii). Inasmuch as these conditions have not been met
no amounts have been recorded with regard to the sale of Clarewood and Gallery.
5. MORTGAGE PAYABLE:
Carriage House of Englewood
On May 5, 1992, the partnership's first and second mortgages on
Carriage House of Englewood were refinanced with a 9% U.S. Department of Housing
and Urban Development (HUD) insured mortgage in the amount of $2,997,800, due
June 1, 2027. The mortgage provides for monthly principal and interest payments
of $23,503, plus monthly escrow deposits for real estate taxes, insurance and
repairs and maintenance totaling $10,165. The balance of the mortgage at
December 31, 1997 and 1996 was $2,914,486 and $2,930,266, respectively.
The mortgage is secured by all of the assets of Carriage House of
Englewood.
The mortgage is subject to a HUD regulatory agreement which places
restrictions on the operations of the Partnership. As discussed in Note 9 to the
Financial Statements, the Partnership currently is not in compliance with
certain requirements of the HUD regulatory agreement.
Maturities of the mortgage for each of the next five years and
thereafter are as follows:
1998 $ 24,171
1999 22,829
2000 24,970
2001 27,312
2002 29,875
Thereafter 2,785,329
------------
TOTAL $ 2,914,486
============
23
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair values of cash,
accounts payable, accrued expenses and deposit liabilities approximate the
carrying value due to the short-term nature of these instruments.
The fair value of the mortgage payable, which has a carrying value of
$2,914,486 at December 31, 1997, cannot be determined because it is uncertain if
a comparable mortgage could be obtained in the current market. See Note 5 for a
description of the terms of the mortgage payable.
7. MINORITY INTEREST OF RELATED PARTY IN CARRIAGE HOUSE OF ENGLEWOOD
JOINT VENTURE:
On May 5, 1992, the Partnership entered into an agreement to form a
joint venture with Realmark Property Investors Limited Partnership VI A (RPILP
VI A). The joint venture was formed for the purpose of operating Carriage House
of Englewood, formerly Gold Key Village Apartments, owned by the Partnership.
Under the original terms of the agreement, RPILP VI A contributed $497,911, with
the Partnership contributing the property net of the first mortgage. On March 1,
1993, RPILP VI A contributed an additional $125,239 to the joint venture. The
amended joint venture agreement provides that any income, loss, gain, cash flow
or sale proceeds from the joint venture be allocated 60% to the Partnership and
40% to RPILP VI A. The net loss from the date of inception has been allocated to
the minority interest as described above and has been recorded as a reduction of
the capital contribution. Carriage House of Englewood incurred net losses of
$253,956, $299,092 and $229,583 for the years ended December 31, 1997, 1996 and
1995, respectively. The forfeited deposits received on the sale of property,
discussed in Note 3, are considered revenues of the Partnership and not
allocable to the minority interest.
A reconciliation of the minority interest share in Carriage House of
Englewood Joint Venture is as follows:
1997 1996
---- ----
Balance, beginning of year $ 274,180 $ 393,817
Allocated loss (101,583) (119,637)
--------- ---------
Balance, end of year $ 172,597 $ 274,180
========= =========
24
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
8. INCOME TAXES:
No provision has been made for income taxes since the income or loss of
the Partnership is to be included in the tax returns of the individual partners.
The tax returns of the Partnership are subject to examination by
federal and state taxing authorities. Under federal and state income tax laws,
regulations and rulings, certain types of transactions, may be accorded varying
interpretations and, accordingly, reported Partnership amounts could be changed
as a result of any such examination.
The reconciliation of Partners' Deficit for the years ended December
31, 1997, 1996 and 1995, as reported in the balance sheet and as reported for
tax return purposes, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Partners' Deficit - Balance Sheet $(2,902,806) $(3,047,576) $(2,784,229)
Add to (deduct from):
Accumulated difference in depreciation (965,732) (960,555) (995,670)
Accumulated amortization of
mortgage discount 240,000 240,000 240,000
Syndication costs 248,000 248,000 248,000
Reserve for bad debts 103,826 68,553 40,032
Other 1,711 1,711 (14,080)
Tax basis adjustment - Joint Venture (17,085) (17,085) (17,085)
----------- ----------- -----------
Partners' Deficit - tax return purposes $(3,292,086) $(3,466,952) $(3,283,032)
=========== =========== ===========
</TABLE>
The reconciliation of net income (loss) for the years ended December
31, 1997, 1996 and 1995, as reported in the statement of operations, and as
would be reported for tax return purposes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (loss) -
Statement of operations $ 144,770 $(263,347) $(227,396)
Add to (deduct from):
Difference in depreciation (5,177) 35,115 39,095
Difference due to reserve for bad debts 35,273 28,521 4,993
Other -- 15,791 (5,280)
Tax basis adjustment - Joint Venture -- -- (5,996)
--------- --------- ---------
Net income (loss) - tax return purposes $ 174,866 $(183,920) $(194,584)
========= ========= =========
</TABLE>
25
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
9. GOING CONCERN CONSIDERATIONS:
On May 5, 1992, the Partnership obtained a mortgage insured by the
Department of Housing and Urban Development (HUD). The mortgage is subject to a
HUD regulatory agreement which places restrictions on the operations of the
Partnership. As of December 31, 1997 the partnership was not in compliance with
several of these regulations including:
o Security deposits or an itemized list of claims be returned to
tenants within 30 days;
o The Partnership maintain accounting records in accordance with
HUD regulations;
o There be proper segregation of duties in the cash receipts
system;
o The Partnership submit reliable financial status reports on a
timely basis;
o The Partnership make promptly all payments under the note and
mortgage and deposit monthly amounts, as required, into its
replacement reserve;
o The Partnership collect security deposits at the time of the
initial lease and in an amount required in the lease agreements;
and
o The Partnership have its Affirmative Housing Market Plan approved
by HUD.
The consequences of the noncompliance with these restrictions could
include HUD-imposed sanctions such as fines or interest charges. Additionally,
the violation of the regulatory agreement could be deemed an event of default by
the mortgagor, and HUD could possibly take over as holder of the mortgage.
Given the uncertainty surrounding the outcome of the noncompliance, the
Partnership's recurring losses from operations, cash flow difficulties, and
partners' deficit, substantial doubt exists about the Partnership's ability to
continue as a going concern. Management has responded to HUD regarding the
aforementioned noncompliance including its intentions to take corrective action.
The ultimate plans are to sell the Partnership's assets. In the interim,
management intends to increase rents and reduce expenses. In addition, during
the first quarter of 1998, management was able to negotiate the release of all
of the property's replacement reserve funds and the suspension of future reserve
deposits in an effort to improve cash flow. Negotiations are also in process to
reduce the interest rate currently charged on the mortgage.
26
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Initial Cost to Gross amounts at which
Partnership Carried at Close of Period
-------------------------- ---------------------------------------
Cost
Capitalized
Land Buildings Subsequent Land Buildings
Property and and to and and (1)(2)
Description Encumbrances Improvements Improvements Acquisition Improvements Improvements Total
----------- ------------ ------------ ------------ ------------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Carriage House of
Englewood
Dayton, OH $2,914,486 $ 367,500 $2,341,254 $ 133,879 $ 367,500 $2,475,133 $2,842,633
========== ========== ========== ========== ========== ========== ==========
<CAPTION>
Life on Which
Depreciation
In Latest
(3)(4) Statement
Property Accumulated Date of Date Of Operations
Description Depreciation Construction Acquired Is Computed
----------- ------------ ------------ -------- --------------
Carriage House of
Englewood
Dayton, OH $1,596,577 1971 11/81 15 - 25 Years
========== ==== ===== =============
</TABLE>
27
<PAGE>
SCHEDULE III
(Continued)
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(1) The aggregate cost for Federal income tax purposes is $2,842,633.
(2) A reconciliation of the carrying amount of land and buildings as of December
31, 1997, 1996 and 1995 follows:
1997 1996 1995
---- ---- ----
Balance at beginning of period $2,781,305 $2,772,285 $2,766,285
Additions 61,328 9,020 6,000
---------- ---------- ----------
Balance at end of period $2,842,633 $2,781,305 $2,772,285
========== ========== ==========
(3) A reconciliation of accumulated depreciation for the years ended December
31, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $1,596,577 $1,527,236 $1,409,627
Additions charged to cost and expenses
during the year -- 69,341 117,609
---------- ---------- ----------
Balance at end of year (4) $1,596,577 $1,596,577 $1,527,236
========== ========== ==========
</TABLE>
(4) Balance applies entirely to buildings and improvements.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP
By: /s/ JOSEPH M. JAYSON 4/15/98
--------------------------- -------------------
JOSEPH M. JAYSON, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: REALMARK PROPERTIES, INC.
Corporate General Partner
/s/ JOSEPH M. JAYSON 4/15/98
------------------------------- --------------------
JOSEPH M. JAYSON Date
President and Director
/s/ MICHAEL J. COLMERAUER 4/15/98
------------------------------- --------------------
MICHAEL J. COLMERAUER Date
Secretary
29
<PAGE>
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
The form 10-K is sent to security holders. No other annual report is
distributed. No proxy statement, form of proxy or other proxy soliciting
material was sent to any of the registrant's security holders with respect to
any annual or other meeting of security holders.
30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Realmark Property Investors Limited Partnership for
the year ended December 31, 1997, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 30,154
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 200,458
<PP&E> 3,006,774
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,621,652
<CURRENT-LIABILITIES> 1,437,375
<BONDS> 2,914,486
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,621,652
<SALES> 0
<TOTAL-REVENUES> 996,136
<CGS> 0
<TOTAL-COSTS> 952,949
<OTHER-EXPENSES> 101,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 348,142
<INCOME-PRETAX> 144,770
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,770
<EPS-PRIMARY> 46.23
<EPS-DILUTED> 0
</TABLE>
