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
June 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 June 30, 1998, the issuer had 3,100 units of limited partnership interest
outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------ ---------------------
<S> <C> <C>
Balance Sheets -
June 30, 1998 and December 31, 1997 3
Statements of Operations -
Three Months Ended June 30, 1998 and 1997 4
Statements of Operations -
Six Months Ended June 30, 1998 and 1997 5
Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 6
Statements of Partners' (Deficit) -
Six Months Ended June 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
--------------
June 30, 1998 and December 31, 1997
-----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
June 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 1,753,995 1,753,995
---------------- -----------------
Property, net 1,252,779 1,252,779
Cash - security deposits 19,560 30,154
Escrow deposits 75,583 155,194
Prepaid expenses 1,858 15,110
Mortgage costs, net of accumulated
amortization of $35,407 and $32,536 165,544 168,415
---------------- -----------------
Total Assets $ 1,515,324 $ 1,621,652
================ =================
LIABILITIES AND PARTNERS' (DEFICIT)
- ----------------------------------
Liabilities:
Cash overdraft $ 3,833 $ 315,892
Mortgages payable 2,900,984 2,914,486
Accounts payable and accrued expenses 336,207 232,267
Accounts payable - affiliates 1,225,729 780,708
Accrued interest 22,046 65,539
Security deposits and prepaid rent 53,485 42,969
---------------- -----------------
Total Liabilities 4,542,284 4,351,861
---------------- -----------------
Minority interest in consolidated
joint venture 95,163 172,597
---------------- -----------------
Partners' (Deficit):
General partners (793,714) (791,521)
Limited partners (2,328,409) (2,111,285)
---------------- -----------------
Total Partners' (Deficit) (3,122,123) (2,902,806)
---------------- -----------------
Total Liabilities and Partners' (Deficit) $ 1,515,324 $ 1,621,652
================ =================
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended June 30, 1998 and 1997
-----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 157,192 $ 152,794
Interest and other income 6,398 5,207
-------------- --------------
Total income 163,590 158,001
-------------- --------------
Expenses:
Property operations 178,135 107,076
Interest:
Paid to affiliates 27,125 20,582
Other 65,600 65,757
Depreciation and amortization 1,435 31,605
Administrative:
Paid to affiliates 3,363 19,041
Other 45,717 24,040
-------------- --------------
Total expenses 321,375 268,101
-------------- --------------
Income (loss) before allocation
to minority interest (157,785) (110,100)
Loss allocated to minority interest 21,848 37,269
Extraordinary income:
Deposit on terminated sales contract - 220,000
-------------- --------------
Net income (loss) $ (135,937) $ 147,169
============== ==============
Income (loss) per limited partnership unit $ (43.41) $ 47.00
============== ==============
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
------------------------
Six Months Ended June 30, 1998 and 1997
---------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 301,754 $ 309,453
Interest and other income 13,911 15,668
---------------- -----------------
Total income 315,665 325,121
---------------- -----------------
Expenses:
Property operations 329,195 193,167
Interest:
Paid to affiliates 53,700 40,772
Other 131,026 131,619
Depreciation and amortization 2,871 63,210
Administrative:
Paid to affiliates 33,014 34,959
Other 62,610 35,827
---------------- -----------------
Total expenses 612,416 499,554
---------------- -----------------
Income (loss) before allocation
to minority interest (296,751) (174,433)
Loss allocated to minority interest 77,434 59,817
Extraordinary income:
Deposit on terminated sales contract - 220,000
---------------- -----------------
Net income (loss) $ (219,317) $ 105,384
================ =================
Income (loss) per limited partnership unit $ (70.04) $ 33.65
================ =================
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
------------------------
Six Months Ended June 30, 1998 and 1997
---------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $ (219,317) $ 105,384
Adjustments to reconcile net (loss) income to net cash
(used in) provided by
operating activities:
Depreciation and amortization 2,871 63,210
Minority interest share of net loss (77,434) (59,817)
Changes in operating assets and liabilities:
Cash - security deposits 10,594 (373)
Escrow deposits 79,611 38,999
Prepaid expenses 13,252 2,150
Accounts payable and accrued expenses 103,941 (10,621)
Accrued interest (43,493) (70)
Security deposits and prepaid rent 10,516 543
---------------- -----------------
Net cash (used in) provided by operating activities (119,459) 139,405
---------------- -----------------
Cash flow from investing activities:
Property additions and net cash
(used in) investing activities - (31,933)
---------------- -----------------
Cash flows from financing activities:
Cash overdraft (312,060) 94,184
Accounts payable - affiliates 445,021 (19,530)
Principal payments on mortgage(s) (13,502) (9,326)
Mortgage costs - -
Deposits received on sale of property - (172,800)
---------------- -----------------
Net cash provided by (used in) financing activities 119,459 (107,472)
---------------- -----------------
Increase (decrease) in cash - -
Cash - beginning of period - -
---------------- -----------------
Cash - end of period $ - $ -
================ =================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 228,219 $ 131,549
================ =================
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Six Months Ended June 30, 1998 and 1997
---------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General
Partners Limited Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1997 $ (792,969) 3,100 $ (2,254,607)
Net income 1,054 - 104,330
------------------ --------------- -----------------
Balance, June 30, 1997 $ (791,915) 3,100 $ (2,150,277)
================== =============== =================
Balance, January 1, 1998 $ (791,521) 3,100 $ (2,111,285)
Net loss (2,193) - (217,124)
------------------ --------------- -----------------
Balance, June 30, 1998 $ (793,714) 3,100 $ (2,328,409)
================== =============== =================
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Six Months Ended June 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 six months ended June 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
--------------------------------------
RealmarkProperty 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
--------------
Mortgagecosts 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
apartment complexes are fully reserved for at June 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. Depreciation expense, not
recorded during the disposal period, for the period ended June 30, 1998
totaled approximately $60,000. 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 June 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 June 30, 1998 and 1997 was $2,900,984 and
$2,920,940, 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
$2,900,984 at June 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 (77,434)
----------
Balance, June 30, $ 95,163
==========
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 $17,400 and $16,081 for the six months ended June 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 six months ended June 30, 1998 and 1997.
Accounts payable - affiliates amounted to $1,172,029 and $764,931 at
June 30, 1998 and 1997, respectively. The payable represents fees due
and advances from the General Partner. Interest charged on accounts
payable affiliates totaled $53,700 and $40,772 for the six month period
ended June 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 $1,580 for the six month periods ended June
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 six month periods ended
June 30, 1998 and 1997 as reported in the statements of operations, and
as would be reported for tax purposes respectively, is as follows:
June 30, June 30,
1998 1997
---- ----
Net (loss) income
Statement of operations $(219,317) $ 105,384
(Add to) deduct from:
Difference in depreciation ( 2,589) 17,558
Difference in amortization - -
Difference in bad debt reserve 17,637 14,260
Tax adjustment - Joint Venture - -
----------- ------------
Net (loss) income for tax purposes $ (204,269) $ 137,202
=========== ============
-15-
<PAGE>
INCOME TAXES (CONTINUED)
-----------------------
The reconciliation of partners' (deficit) at June 30, 1998 and December
31, 1997 as reported in the balance sheets, and as reported for tax
purposes, is as follows:
June 30, December 31,
1998 1997
---- ----
Partners' (Deficit) - balance sheet $ (3,122,123) $ (2,902,806)
Add to (deduct from):
Accumulated difference in
depreciation ( 968,321) ( 965,732)
Accumulated amortization 240,000 240,000
Syndication fees 248,000 248,000
Reserve for bad debts 121,463 103,826
Tax Basis Adjustment
- Joint Venture (17,085) (17,085)
Other 1,711 1,711
------------ ------------
Partners' (Deficit) - tax return $ (3,496,355) $ (3,292,086)
============ ============
-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 $1,172,029, as of June 30,
1998, and these funds are payable on demand.
The Partnership did not make any distributions during the six month periods
ending June 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) and the
mortgagor on the Gold Key property 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 is attempting to stabilize the property's cash flow by
increasing occupancy (i.e., bring it to full occupancy even if it means lowering
target rents). With full occupancy will come improved cash flow. The additional
cash that comes in can then be used to physically improve the property, to
better the landscaping, and to do everything else necessary to make the property
more attractive to potential renters. Once cash flow improves, rents can be
increased.
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 June 30, 1998, the Partnership's net loss was $135,937 or
$43.41 per limited partnership unit. Net income for the quarter ended June 30,
1997, amounted to $147,169 or $47.00 per unit. For the six month period ended
June 30, 1998, the net loss was $219,317 or $70.04 per limited partnership unit
as compared to income of $105,384 or $33.65 per limited partnership unit for the
six month period ended June 30, 1997. The net income for both the quarter ended
June 30, 1997 and the six months then ended 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 June 30, 1998 totaled $163,590, which
is an increase of $5,589 from the quarter ended June 30, 1997. The change
between the two years is mostly attributable to an increase in rents being
charged at Carriage House of Englewood. Partnership revenues for the quarter
ended June 30, 1997 were $158,001. Rental income increased just under $4,400
between the two quarters. For the six month period ended June 30, 1998,
Partnership revenue totaled $315,665 a decrease when compared to $325,121 for
the same period in the previous year.
For the three month period ended June 30, 1998, Partnership expenses totaled
$321,375, an increase of just over $53,000 from the quarter ended June 30, 1997.
For the six month period ended June 30, 1998, total expenses increased
approximately 23% over those of the same period in 1996. 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 of almost $7,900 in payroll and associated benefits as compared to the
previous year continued the trend noted in the first quarter of 1998. Utility
costs increased significantly between the six months ended June 30, 1998 and
June 30, 1997, while insurance expense decreased over $5,200 and real estate
taxes decreased by over $6,600 from the same six 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.
The property did, during the second quarter of 1997, secure the release of
escrowed funds from the U.S. Department of Housing and Urban Development for use
in repairing/replacing several roofs. The roof work was completed shortly
thereafter.
For the six month period ended June 30, 1998, the tax basis loss amounted to
$204,269 or $65.23 per limited partnership unit compared to taxable income of
$178,987 or $57.16 per unit for the six month period ended June 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 August 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 August 11, 1998
------------------------------ ------------------------
Joseph M. Jayson, Date
President and Director
/s/ Michael J. Colmerauer August 11, 1998
------------------------------ ------------------------
Michael J. Colmerauer Date
Secretary
-20-
<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 six months ended June 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 19,560
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 97,001
<PP&E> 3,006,774
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,515,324
<CURRENT-LIABILITIES> 1,641,300
<BONDS> 2,900,984
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,637,447
<SALES> 0
<TOTAL-REVENUES> 315,665
<CGS> 0
<TOTAL-COSTS> 534,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,726
<INCOME-PRETAX> (219,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (219,317)
<EPS-PRIMARY> (70.04)
<EPS-DILUTED> 0
</TABLE>
