FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1998 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) 636-0280
Indicate by a 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 a 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-Q or any
amendment to this Form 10-Q. (X)
As of September 30, 1998, the issuer had 3,100 units of limited partnership
interest outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
September 30, 1998 and December 31, 1997 3
Statements of Operations -
Three Months Ended September 30, 1998 and 1997 4
Statements of Operations -
Nine Months Ended September 30, 1998 and 1997 5
Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 6
Statements of Partners' (Deficit) -
Nine Months Ended September 30, 1998 and 1997 7
Notes to Financial Statements 8 - 16
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 - 18
---------------------------------------------
</TABLE>
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
BALANCE SHEETS
--------------
September 30, 1998 and December 31, 1997
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
- ------
Property, at cost:
Land $ 182,500 $ 182,500
Land improvements 185,000 185,000
Buildings 2,475,133 2,475,133
Furniture and fixtures 164,141 164,141
---------------- -----------------
3,006,774 3,006,774
Less accumulated depreciation 1,819,658 1,753,995
---------------- -----------------
Property, net 1,187,116 1,252,779
Cash - security deposits 14,532 30,154
Escrow deposits 99,988 155,194
Prepaid expenses - 15,110
Mortgage costs, net of accumulated
amortization of $36,843 and $32,536 164,108 168,415
---------------- -----------------
Total Assets $ 1,465,744 $ 1,621,652
================ =================
LIABILITIES AND PARTNERS' (DEFICIT)
- ----------------------------------
Liabilities:
Cash overdraft $ 617 $ 315,892
Mortgages payable 2,895,748 2,914,486
Accounts payable and accrued expenses 374,177 232,267
Accounts payable - affiliates 1,298,866 780,708
Accrued interest 22,029 65,539
Security deposits and prepaid rent 53,944 42,969
---------------- -----------------
Total Liabilities 4,645,381 4,351,861
---------------- -----------------
Minority interest in consolidated
joint venture 29,281 172,597
---------------- -----------------
Partners' (Deficit):
General partners (794,582) (791,521)
Limited partners (2,414,335) (2,111,285)
---------------- -----------------
Total Partners' (Deficit) (3,208,918) (2,902,806)
---------------- -----------------
Total Liabilities and Partners' (Deficit) $ 1,465,744 $ 1,621,652
================ =================
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended September 30, 1998 and 1997
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 149,123 $ 152,310
Interest and other income 3,492 1,010
-------------- --------------
Total income 152,615 153,320
-------------- --------------
Expenses:
Property operations 123,630 155,583
Interest:
Paid to affiliates 37,437 24,330
Other 65,255 65,649
Depreciation and amortization 67,099 31,605
Administrative:
Paid to affiliates 8,939 11,371
Other 2,932 9,421
-------------- --------------
Total expenses 305,292 297,959
-------------- --------------
Income (loss) before allocation
to minority interest (152,677) (144,639)
Loss allocated to minority interest 65,882 57,706
Extraordinary income:
Deposit on terminated sales contract - -
-------------- --------------
Net income (loss) $ (86,795) $ (86,933)
============== ==============
Income (loss) per limited partnership unit $ (27.72) $ (27.76)
============== ==============
Distributions per limited partnership unit $ - $ -
============== ==============
Weighted average number of
limited partnership units
outstanding 3,100 3,100
============== ==============
</TABLE>
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 450,877 $ 461,763
Interest and other income 17,403 16,678
---------------- -----------------
Total income 468,280 478,441
---------------- -----------------
Expenses:
Property operations 452,825 348,750
Interest:
Paid to affiliates 91,137 65,102
Other 196,281 197,268
Depreciation and amortization 69,970 94,815
Administrative:
Paid to affiliates 41,953 46,330
Other 65,542 45,248
---------------- -----------------
Total expenses 917,708 797,513
---------------- -----------------
Loss before allocation
to minority interest and extraordinary income (449,428) (319,072)
Loss allocated to minority interest 143,316 117,523
Extraordinary income:
Deposit on terminated sales contract - 220,000
---------------- -----------------
Net (loss) income $ (306,112) $ 18,451
================ =================
(Loss) income per limited partnership unit $ (97.76) $ 5.89
================ =================
Distributions per limited partnership unit $ - $ -
================ =================
Weighted average number of
limited partnership units
outstanding 3,100 3,100
================ =================
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $ (306,112) $ 18,451
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 69,970 94,815
Minority interest share of net loss (143,316) (117,523)
Changes in operating assets and liabilities:
Cash - security deposits 15,622 (561)
Escrow deposits 55,206 45,329
Prepaid expenses 15,110 (24,778)
Other assets - 39,852
Accounts payable and accrued expenses 141,911 22,475
Accrued interest (43,510) (106)
Security deposits and prepaid rent 10,975 (1,119)
---------------- -----------------
Net cash (used in) provided by operating activities (184,144) 76,835
---------------- -----------------
Cash flow from investing activities:
Property additions and net cash
(used in) investing activities - (31,933)
---------------- -----------------
Cash flows from financing activities:
Cash overdraft (315,276) 119,589
Accounts payable - affiliates 518,158 22,458
Principal payments on mortgage(s) (18,738) (14,149)
Mortgage costs - -
Deposits received on sale of property - (172,800)
---------------- -----------------
Net cash provided by (used in) financing activities 184,144 (44,902)
---------------- -----------------
Increase (decrease) in cash - -
Cash - beginning of period - -
---------------- -----------------
Cash - end of period $ - $ -
================ =================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 330,928 $ 197,162
================ =================
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1997 $ (792,969) 3,100 $ (2,254,607)
Net income 185 - 18,267
------------------ --------------- -----------------
Balance, September 30, 1997 $ (792,784) 3,100 $ (2,236,340)
================== =============== =================
Balance, January 1, 1998 $ (791,521) 3,100 $ (2,111,285)
Net loss (3,061) - (303,050)
------------------ --------------- -----------------
Balance, September 30, 1998 $ (794,582) 3,100 $ (2,414,335)
================== =============== =================
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
1. GENERAL PARTNER'S DISCLOSURE
----------------------------
In the opinion of the General Partners of Realmark Property Investors
Limited Partnership, all adjustments necessary for the fair
presentation of the Partnership's financial position, results of
operations, and changes in cash flows for the nine months ended
September 30, 1998 and 1997 have been made in the financial statements.
The financial statements are unaudited and subject to any year-end
adjustments which may be necessary.
2. FORMATION AND OPERATION OF PARTNERSHIP
--------------------------------------
Realmark Property Investors Limited Partnership (the "Partnership"), a
Delaware Limited Partnership, was formed 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
Delaware corporation, the corporate General Partner, and Mr. Joseph M.
Jayson, the individual General Partner. Joseph M. Jayson is the sole
shareholder of J.M. Jayson & Company, Inc. Realmark Properties, Inc. is
a wholly-owned subsidiary of J.M. Jayson & Company, Inc.
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. The Partnership
agreement provides for taxable income or loss of the Partnership to be
allocated 99% to the limited partners and 1% to the general partners.
Through December 31, 1986, and for 1991, 1996 and 1997, taxable income
or loss was allocated in accordance with this provision. For the years
1987 through 1990, 1992, 1993, 1994 and 1995, the Partnership was
required to allocate 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 partners 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.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
-------------------------------------------------
Losses arising from the sale of properties shall be allocated 99% to
the Limited Partners and 1% to the General Partners subject to the
revisions made in the Internal Revenue Code, pursuant to the Tax Reform
Act of 1986. Net proceeds arising from a sale or refinancing shall be
distributed first to the Limited Partners in an amount equivalent to a
7% return on their average adjusted capital balances, plus an amount
equal to their respective positive capital account balances.
Additional proceeds after property disposition fees shall 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. 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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
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.
Cash
----
For purposes of reporting cash flows, cash includes the following
items: cash on hand; cash in checking; and money market savings.
Cash - security deposits
------------------------
Cash - security deposits represents cash on deposit in accordance with
the HUD regulatory agreement for the one property with a HUD mortgage.
Escrow deposits
---------------
Escrow deposits represent cash which is restricted for the payment of
property taxes or for repairs and replacements in accordance with the
mortgage agreement.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Property and depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are expensed as incurred, and major renewals
and betterments are capitalized. The Accelerated Cost Recovery System
is used to calculate depreciation expense for tax purposes.
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.
Minority interest in consolidated joint venture
-----------------------------------------------
The minority interest in a consolidated joint venture is stated at the
amount of capital contributed by the minority investor adjusted for its
share of joint venture losses.
Rental income
-------------
Rental income is recognized as earned according to the terms of the
leases. The outstanding leases with respect to rental properties owned
are for terms of no more than one year.
Income (loss) per limited partnership unit
------------------------------------------
The income or loss per limited partnership unit is based on the
weighted average number of limited partnership units outstanding during
the period then ended.
Accrued rent receivable
-----------------------
Due to the nature of accrued rent receivable, all such receivables for
this apartment complex are fully reserved for at September 30, 1998 and
1997.
-10-
<PAGE>
4. 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. Management believes that
the property's fair value has not changed significantly since being
classified as held for sale.
5. 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 the Clarewood and Gallery
apartments for a combined price of $4,647,516, which generated a total
net gain for financial statement purposes of $1,209,164.
-11-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
----------------------------------------------------------
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 $1,191,451. Management has determined that a sale of
the property is in the best interest of the investors. As of September
30, 1997, the contract for the sale of Carriage House of Englewood had
been terminated. The equity provider for the purchaser was unwilling to
provide the equity necessary to close the deal due to the extent of
rehab work needed at the property. Non-refundable deposits on the sale
of $220,000 and $150,000 were received and maintained by the registrant;
such deposits were recognized as income upon the termination of the
sales contract. Management continues to actively market the property.
5. MORTGAGE PAYABLE
----------------
Carriage House of Englewood (formerly Gold Key Village Apartments)
-----------------------------------------------------------------
On May 5, 1992, the Partnership's first and second mortgages on the
Gold Key apartment complex were refinanced with a 9% U.S. Department of
Housing and Urban Development (HUD) guaranteed 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 and insurance totaling $8,135 (note:
repairs and maintenance reserve was suspended by HUD during 1997). The
balance of the mortgage at September 30, 1998 and 1997 was $2,895,748
and $2,916,117, respectively. The mortgage is secured by all of the
assets of the Carriage House of Englewood apartment complex.
The mortgage is subject to a HUD regulatory agreement which, among
other things, places restrictions on the uses and handling of cash and
restricts distributions to the property owner to amounts that are
considered to be surplus cash as defined in the agreement.
-12-
<PAGE>
MORTGAGE PAYABLE (CONTINUED)
---------------------------
The maturity of the mortgage payable for each of the next five years
and thereafter is as follows:
Year Amount
---- ------
1998 $ 24,171
1999 22,829
2000 24,970
2001 27,312
2002 29,875
Thereafter 2,785,329
------------
TOTAL $ 2,914,486
============
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of
cash, accounts receivable, accounts payable, accrued expenses, accounts
payable - affiliates 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
$2,895,748 at September 30, 1998, cannot be determined because it is
uncertain if a comparable mortgage could be obtained in the current
market.
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 owned by the Partnership. Under the terms
of the original 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, amending
the original joint venture agreement in the process.
The amended agreement now provides that any income, loss, gain, cash
flow, or sale proceeds be allocated 60.0% to the Partnership and 40.0%
to RPILP VI-A. The net loss from the date of inception has been
allocated to the minority interest in accordance with the terms of the
agreement and has been recorded as a reduction of the capital
contribution.
-13-
<PAGE>
MINORITY INTEREST OF RELATED PARTY IN CARRIAGE HOUSE OF ENGLEWOOD JOINT
-----------------------------------------------------------------------
VENTURE (CONTINUED)
------------------
A reconciliation of the minority interest share in the Carriage House
of Englewood Joint Venture is as follows:
Balance, January 1 $ 172,597
Capital contribution -
Allocated loss (143,316)
----------
Balance, September 30, $ 29,281
==========
8. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for Carriage House of Englewood 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 $26,100 and $23,800 for the nine months ended September 30,
1998 and 1997, respectively.
The general partner is also entitled to receive a Partnership
management fee equal to 9% of net cash flow (as defined in the
partnership agreement), 2% of which is subordinated to the limited
partners having received an annual cash return equal to 7% of their
adjusted capital contributions. No such fee has been paid or accrued by
the Partnership for the nine months ended September 30, 1998 and 1997.
Accounts payable - affiliates amounted to $1,298,748 and $806,919 at
September 30, 1998 and 1997, respectively. The payable represents fees
due and advances from the General Partner. Interest charged on accounts
payable - affiliates totaled $91,137 and $65,102 for the nine month
period ended September 30, 1998 and 1997, respectively.
Pursuant to the terms of the Partnership agreement, the corporate
general partner charged the Partnership for reimbursement of certain
costs and expenses incurred by the corporate general partner and its
affiliates. These charges were for the Partnership's allocated share of
costs and expenses such as payroll, travel and communication, costs
related to partnership accounting, and partner's communication and
relations.
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 $2,370 for the nine month periods ended
September 30, 1998 and 1997.
-14-
<PAGE>
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: (1)
the payment to the limited partners of a cumulative annual return (not
compounded) equal to 7% of their average adjusted capital balances; (2)
the repayment to the limited partners of a cumulative amount equal to
their capital contributions; and (3) 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 (1) and (2).
9. 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 net (loss) income for the nine month periods
ended September 30, 1998 and 1997 as reported in the statements of
operations, and as would be reported for tax purposes respectively, is
as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Net (loss) income
Statement of operations $ (306,112) $ 18,451
(Add to) deduct from:
Difference in depreciation ( 3,884) 26,337
Difference in amortization - -
Difference in bad debt reserve 26,455 21,390
Tax adjustment - Joint Venture - -
------------ ------------
Net (loss) income for tax purposes $ (283,541) $ 66,178
============ ============
</TABLE>
-15-
<PAGE>
INCOME TAXES (CONTINUED)
-----------------------
The reconciliation of partners' (deficit) at September 30, 1998 and
December 31, 1997 as reported in the balance sheets, and as reported
for tax purposes, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Partners' (Deficit) - balance sheet $ (3,208,918) $ (2,902,806)
Add to (deduct from):
Accumulated difference in
depreciation (969,616) (965,732)
Accumulated amortization 240,000 240,000
Syndication fees 248,000 248,000
Reserve for bad debts 130,281 103,826
Tax Basis Adjustment
- Joint Venture (17,085) (17,085)
Other 1,711 1,711
------------ -------------
Partners' (Deficit) - tax return $ (3,575,627) $ (3,292,086)
============ =============
</TABLE>
-16-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership continues operating with cash flow shortages due to a decrease
in the total revenue generated. The General Partner meanwhile, continues to
advance funds to the Partnership to cover cash flow shortages, although under no
obligation to do so. There is no assurance that the General Partner will
continue to do so. The General Partner has advanced $1,298,866, as of September
30, 1998, and these funds are payable on demand.
The Partnership did not make any distributions during the nine month periods
ending September 30, 1998 and 1997, nor does it anticipate making any
distributions until the remaining property is sold and all Partnership
obligations are satisfied. The General Partner believes that unless there is a
significant increase in income and a major reduction in expenses, the property
could be in default concerning the mortgage. The General Partner has been
corresponding with the United States Department of Housing and Urban Development
(HUD) in search of means of obtaining more usable cash to operate the property
with. As of this date, neither HUD nor the mortgagor has been willing to
refinance the mortgage or change its terms.
The General Partner continues to try to stabilize the property's cash flow by
increasing occupancy (i.e., bring it to full occupancy even if it means lowering
target rents). It is believed that with full occupancy will come improved cash
flow. The additional cash that comes in can then be used to physically improve
the property (e.g., fresh paint, new carpets and appliances, etc.) to make the
property more attractive to potential renters. Once cash flow improves, rents
can then be increased again.
The General Partner continues to aggressively seek a buyer for the sole
remaining property in this Partnership as it is felt that the sale of the
property is in the best interests of the limited partners. At this time it is
highly unlikely that the Limited Partners will receive any proceeds from the
sale.
Results of Operations:
- ---------------------
For the quarter ended September 30, 1998, the Partnership had a net loss of
$86,795 or $27.72 per limited partnership unit. For the quarter ended September
30, 1997, a net loss of $86,933 or $27.76 per limited partnership unit was
recorded. For the nine month period ended September 30, 1998, the net loss was
$306,112 or $97.76 per limited partnership unit as compared to income of $18,451
or $5.89 per limited partnership unit for the nine month period ended September
30, 1997. The net income for the nine months ended September 30, 1997 was the
result of the Partnership recognizing $220,000 in income from a non-refundable
deposit received on the sale of Carriage House of Englewood; this sale fell
through and as a result, the deposit was forfeited and therefore recognized as
income.
-17-
<PAGE>
Results of Operations (continued):
- ---------------------------------
Partnership revenue for the quarter ended September 30, 1998 totaled $152,615,
which is a slight decrease of $700 from the quarter ended September 30, 1997.
Partnership revenues for the quarter ended September 30, 1997 were $153,320.
Rental income decreased just under $3,200 between the two quarters. For the nine
month period ended September 30, 1998, Partnership revenue totaled $468,280 a
decrease when compared to $478,441 for the same period in the previous year. The
decrease in revenue is attributable to continual problems with both occupancy
and collections.
For the three month period ended September 30, 1998, Partnership expenses
totaled $917,708, an increase of just over $7,000 from the quarter ended June
30, 1997. For the nine month period ended September 30, 1998, total expenses
increased approximately 15% over those of the same period in 1997. Increases in
repairs and maintenance expenses due to increased focus by management on the
property's appearance accounted for much of the change in operating expenses.
Also, an increase in payroll and associated benefits as compared to the previous
year continued the trends noted in the first two quarters of 1998. Utility costs
increased significantly between the nine months ended September 30, 1998 and
September 30, 1997, while insurance expense and real estate taxes decreased
slightly from the same nine month period in the previous year. The increase seen
in administrative expenses was due to increases in legal expenses related to
evictions and vendor disputes, increased advertising costs due to declining
occupancy and increased accounting and auditing charges.
The Partnership is making every effort to control/maintain property operation
and administrative expenses, however additional expenses, such as cleaning,
painting, and carpeting costs related to preparing units for new tenants, are
expected to keep property operations expenses increasing. Such expenses are
deemed necessary in order to improve occupancy.
For the nine month period ended September 30, 1998, the tax basis loss amounted
to $283,541 or $90.55 per limited partnership unit compared to taxable income of
$66,178 or $21.13 per unit for the nine month period ended September 30, 1997.
The tax basis income is once again due to the recognition of $220,000 in
extraordinary income resulting from the cancellation of a sales contract on
Carriage House of Englewood (i.e., the funds were received as a non-refundable
deposit on such sale).
-18-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership is not a party to, nor are any of the Partnership's properties
subject to any material pending legal proceedings other than ordinary, routine
litigation incidental to the Partnership's business.
Items 2, 3, 4 and 5
- -------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
- -----------------------------------------
None.
-19-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP
By: /s/ Joseph M. Jayson November 11, 1998
---------------------- -----------------
Joseph M. Jayson, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed 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 November 11, 1998
---------------------- -----------------
Joseph M. Jayson, Date
President and Director
/s/ Michael J. Colmerauer November 11, 1998
--------------------------- -----------------
Michael J. Colmerauer Date
Secretary
<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
nine months ended September 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 114,520
<PP&E> 3,006,774
<DEPRECIATION> 1,819,658
<TOTAL-ASSETS> 1,465,744
<CURRENT-LIABILITIES> 1,749,633
<BONDS> 2,895,748
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,465,744
<SALES> 0
<TOTAL-REVENUES> 468,280
<CGS> 0
<TOTAL-COSTS> 774,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 287,418
<INCOME-PRETAX> (306,112)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (306,112)
<EPS-PRIMARY> (97.76)
<EPS-DILUTED> 0
</TABLE>
