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
March 31, 1999 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 March 31, 1999, 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 -
March 31, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Statements of Partners' (Deficit) -
Three Months Ended March 31, 1999 and 1998 6
Notes to Financial Statements 7 - 15
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 16 - 18
---------------------------------------------
PART III: FINANCIAL DATA SCHEDULE
- -------- -----------------------
</TABLE>
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
BALANCE SHEETS
--------------
March 31, 1999 and December 31, 1998
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
- ------
Property, at cost:
Land $ 182,500 $ 182,500
Land improvements 185,000 185,000
Buildings 2,487,824 2,487,824
Furniture and fixtures 164,141 164,141
----------------- -----------------
3,019,465 3,019,465
Less accumulated depreciation 1,753,995 1,753,995
----------------- -----------------
Property, net 1,265,470 1,265,470
Cash - 8,618
Cash - security deposits 29,523 14,604
Escrow deposits 76,787 65,464
Prepaid expenses 10,115 16,738
Mortgage costs, net of accumulated
amortization of $39,714 and $38,278 161,237 162,673
----------------- -----------------
Total Assets $ 1,543,132 $ 1,533,567
================= =================
LIABILITIES AND PARTNERS' (DEFICIT)
- ----------------------------------
Liabilities:
Cash overdraft $ 8,220 $ -
Mortgages payable 2,884,798 2,890,315
Accounts payable and accrued expenses 267,594 237,083
Accounts payable - affiliates 1,553,244 1,471,883
Accrued interest 21,636 21,677
Security deposits and prepaid rent 37,557 42,470
----------------- -----------------
Total Liabilities 4,773,049 4,663,428
----------------- -----------------
Minority interest in consolidated
joint venture 44,510 66,200
----------------- -----------------
Partners' (Deficit):
General partners (795,238) (794,454)
Limited partners (2,479,190) (2,401,607)
----------------- -----------------
Total Partners' (Deficit) (3,274,427) (3,196,061)
----------------- -----------------
Total Liabilities and Partners' (Deficit) $ 1,543,132 $ 1,533,567
================= =================
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 159,601 $ 144,562
Interest and other income 14,716 7,513
----------------- -----------------
Total income 174,317 152,075
----------------- -----------------
Expenses:
Property operations 106,157 151,060
Interest:
To affiliates 41,031 26,575
Other 64,950 65,426
Depreciation and amortization 1,436 1,436
Administrative:
To affiliates 22,078 29,651
Other 38,721 16,893
----------------- -----------------
Total expenses 274,373 291,041
----------------- -----------------
Loss before allocation
to minority interest (100,056) (138,966)
Loss allocated to minority interest 21,690 55,586
----------------- -----------------
Net loss $ (78,366) $ (83,380)
================= =================
Loss per limited partnership unit $ (25.03) $ (26.63)
================= =================
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 CASH FLOWS
------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (78,366) $ (83,380)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,436 1,436
Minority interest share of net loss (21,690) (55,586)
Changes in operating assets and liabilities:
Cash - security deposits (14,919) 9,837
Escrow deposits (11,323) 104,016
Prepaid expenses 6,623 6,626
Accounts payable and accrued expenses 30,511 (22,477)
Accrued interest (41) (43,743)
Security deposits and prepaid rent (4,913) 24,056
----------------- -----------------
Net cash used in operating activities (92,682) (59,215)
----------------- -----------------
Cash flow from investing activities:
Property additions and net cash
(used in) investing activities - -
----------------- -----------------
Cash flows from financing activities:
Cash overdraft 8,220 -
Accounts payable - affiliates 81,361 397,894
Principal payments on mortgage(s) (5,517) (8,344)
Mortgage costs - -
----------------- -----------------
Net cash provided by financing activities 84,064 389,550
----------------- -----------------
(Decrease) increase in cash (8,618) 330,335
Cash - beginning of period 8,618 (320,993)
----------------- -----------------
Cash - end of period $ - $ 9,342
================= =================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 64,991 $ 65,426
================= =================
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (968,393) 3,100 $ (1,939,409)
Net loss (834) - (82,546)
----------------- -------------- ------------------
Balance, March 31, 1998 $ (969,227) 3,100 $ (2,021,955)
================= ============== ==================
Balance, January 1, 1999 $ (794,454) 3,100 $ (2,401,607)
Net loss (784) - (77,583)
----------------- -------------- ------------------
Balance, March 31, 1999 $ (795,238) 3,100 $ (2,479,190)
================= ============== ==================
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(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 three months ended March 31, 1999 and 1998
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, and 1996 through 1998, taxable
income or loss was allocated in accordance with this provision. For the
years 1987 through 1990, and 1992 through 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.
-7-
<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.
-8-
<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. The Carriage House Joint Venture is
consolidated in the Partnership's financial statements because the
Partnership is majority owner and exerts significant control over its
operations.
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 are
fully reserved for at March 31, 1999 and 1998.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------ -----------
Comprehensive Income
--------------------
The Partnership has adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. SFAS 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Comprehensive income is defined as "the change in equity of a business
during a period from transactions and other events and circumstances
from non-owner sources". Other than net income (loss), the Partnership
has no other sources of comprehensive income.
Segment Information
-------------------
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the way public business
enterprises report information about operating segments in annual
financial statements. The Partnership's only operating segment is the
ownership and operation of income-producing real property for the
benefit of its limited partners.
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 three month periods ended
March 31, 1999 and 1998 totaled approximately $30,000 each. 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.
-10-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
----------------------------------------------------------
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.
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 $1,265,470 at March 31, 1999 and 1998. Management has
determined that a sale of the property is in the best interest of the
investors. Carriage House of Englewood incurred losses of $54,225 and
$138,966 for the three months ended March 31, 1999 and 1998,
respectively. Management continues to actively market the property.
6. 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 March 31, 1999 and 1998 was $2,884,798 and $2,906,142,
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.
-11-
<PAGE>
MORTGAGE PAYABLE (CONTINUED)
---------------------------
The maturity of the mortgage payable for each of the next five years and
thereafter is as follows:
Year Amount
---- ------
1999 $ 22,829
2000 24,970
2001 27,312
2002 29,875
2003 32,677
Thereafter 2,752,652
-----------
TOTAL $ 2,890,315
===========
7. 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
$2,884,798 at March 31, 1999, 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.
8. 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.
-12-
<PAGE>
MINORITY INTEREST OF RELATED PARTY IN CARRIAGE HOUSE OF ENGLEWOOD JOINT
-----------------------------------------------------------------------
VENTURE (CONTINUED)
------------------
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.
A reconciliation of the minority interest share in the Carriage House of
Englewood Joint Venture is as follows:
Balance, January 1, 1999 $ 66,200
Allocated loss (21,690)
----------
Balance, March 31, 1999 $ 44,510
==========
9. 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 $8,700 for each of the three months ended March 31, 1999 and
1998.
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 three months ended March 31, 1999 and 1998.
Accounts payable - affiliates amounted to $1,553,244 and $1,178,601 at
March 31, 1999 and 1998, respectively. The payable represents fees due
and advances from the General Partner. Interest charged on accounts
payable - affiliates totaled $41,031 and $26,575 for the three month
period ended March 31, 1999 and 1998, 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.
-13-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
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 approximately $760 for the three month
periods ended March 31, 1999 and 1998.
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).
10. 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 for the three month periods ended March
31, 1999 and 1998 as reported in the statements of operations, and as
would be reported for tax purposes respectively, is as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Net loss -
Statement of operations $( 78,366) $ (86,672)
(Add to) deduct from:
Difference in depreciation ( 915) -
Difference in amortization - 1,436
Difference in bad debt reserve 5,800 -
Tax adjustment - Joint Venture - -
--------- ------------
Net loss for tax purposes $( 73,481) $ (85,236)
========= ============
</TABLE>
-14-
<PAGE>
INCOME TAXES (CONTINUED)
------------------------
The reconciliation of partners' (deficit) at March 31, 1999 and December
31, 1998 as reported in the balance sheets, and as reported for tax
purposes, is as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Partners' (Deficit) - balance sheet $ (3,274,427) $ (3,196,061)
Add to (deduct from):
Accumulated difference in
depreciation ( 970,304) ( 969,389)
Accumulated amortization 240,000 240,000
Syndication fees 248,000 248,000
Reserve for bad debts 133,159 127,359
Tax Basis Adjustment
- Joint Venture (17,085) (17,085)
Other 1,711 1,711
--------------- --------------
Partners' (Deficit) - tax return $ (3,638,946) $ (3,565,465)
=============== ===============
</TABLE>
-15-
<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 and large
losses from operations. Although total revenue increased and expenses
decreased when comparing the three months ended March 31, 1999 and 1998,
the Partnership still relies on funds advanced from the Corporate
General Partner and/or its affiliates. Additionally, the Corporate
General Partner and/or its affiliates have not taken fees or
reimbursements they are entitled to so that the Partnership may
otherwise cover its other obligations. The General Partner is under no
obligation to make advances and there is no assurance that the General
Partner will continue to do so. The General Partner has advanced
$1,553,244, as of March 31, 1999; these funds are payable on demand.
Interest is being accrued quarterly on the average outstanding balance
at the rate of 11% per annum.
The Partnership did not make any distributions during the three month
periods ending March 31, 1999 and 1998, 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 Carriage House property in search of means of obtaining more usable
cash to operate the property with. During 1998, management worked with
the United States Department of Housing and Urban Development (HUD) and
the mortgagee on the property to obtain consent for a "partial payment
of claim". This would take a qualifying portion of the existing mortgage
and make it a second mortgage with terms that allow the Partnership to
pay the second mortgage as cash flow improves. Management has requested
that not only does the lender accept the partial payment of claim, but
also that they 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. Conditions which must be met for
acceptance of this plan include a willing lender (i.e., a mortgagee who
voluntarily accepts partial payments under the loan agreement and is
willing to recast the remaining mortgage under new terms and conditions)
and the ability to prove to HUD that the poor performance of the
property is due to market conditions which are beyond the control of the
owner. The Partnership's first and second applications for a partial
payment of claim were rejected by HUD, but meetings and discussions
between HUD, the mortgagee and the General Partner continue.
-16-
<PAGE>
Liquidity and Capital Resources (Cont'd.)
----------------------------------------
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. At
March 31, 1999, occupancy reached the mid-80's; management believes the
complex will continue to see a steady increase in occupancy over the
next several months.
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.
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 discussed with outside
independent computer consultants its readiness for the Year 2000. The
majority of the software in use is either "2000 compliant" or will be
with little adaptation and at no significant cost per information
provided by their software providers. Management has also engaged a
computer firm to re-write its tax software making it Year 2000
compliant. This work began May 1, 1999 and is expected to take three
months. Management has a complete inventory of its computers and feels
that the cost of replacing those which will not be "2000 compliant" will
be relatively minor (i.e., most likely under $10,000). Non-informational
systems have also been evaluated and management feels that there will be
little, if any, cost to preparing these for the Year 2000 (i.e., most
likely under $10,000). Management expects to be fully Year 2000
compliant with all testing done by September 30, 1999. The Partnership
is working on a contingency plan in the unlikely event that its systems
do not operate as planned. It is management's belief that in the
unlikely event that its informational systems do not operate as planned
in the year 2000, all records could be maintained manually until the
problems with its systems are resolved. Management feels that its
external vendors, suppliers and customers, for the most part, will be
unaffected by the Year 2000 as most do not rely on information systems
in their businesses; management believes that the utility companies it
contracts for service with, due to the nature of their service, have
evaluated the Year 2000 issue and its impact on their services, and
expect that it will not negatively affect its users.
-17-
<PAGE>
Results of Operations:
----------------------
For the three months ended March 31, 1999, the Partnership's net loss
was $78,366 or $25.03 per limited partnership unit. Net loss for the
quarter ended March 31, 1998, amounted to $83,380 or $26.63 per unit.
Partnership revenue for the three months ended March 31, 1999 totaled
$174,317, which is an increase of approximately $22,000 from the quarter
ended March 31, 1998. Rental income increased by approximately $15,000
between the three months ended March 31, 1999 and 1998; rental income
for the three months ended March 31, 1999 and 1998 totaled $159,601 and
$144,562, respectively. The change between the two periods is
attributable to increased occupancy and improved collections. For the
three month period ended March 31, 1999, interest and other income
totaled $14,716, an increase of approximately $7,200 or 100% from that
reported at March 31, 1998.
For the three month period ended March 31, 1999, Partnership expenses
totaled $274,373, a decrease of approximately $16,700 from the same
three month period in 1998. Property operations expenses decreased
approximately $45,000 between the three months ended March 31, 1999 and
1998. Approximately $11,000 of the decrease in operations expenses was
due to lower payroll and associated costs; $9,200 was due to decreased
repairs and maintenance expenses; $5,200 was the result of lower utility
costs; and $2,900 was due to decreased costs associated with contracted
services. Due to cash flow constraints, the property has had to "cut
back" on the number of on-site maintenance staff, while also having to
perform more of the property's maintenance with its on-site employees as
opposed to hiring outside contractors at what would typically result in
higher costs. For the three months ended March 31, 1999, insurance
expense and real estate taxes remained virtually unchanged from those
expenses incurred during the same three month period in 1998. The
increase seen in other administrative expenses of approximately $22,000
was primarily due to increases in costs associated with updating and
maintaining furnished models at the complex and increased advertising
costs incurred in order to increase traffic of potential renters. A
decrease in administrative expenses paid/accrued to affiliates was the
result of a decrease in accounting and portfolio management fees.
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 result in higher property operations
expenses in the next quarter of 1999. Such expenses are deemed necessary
in order to improve occupancy.
For the three month period ended March 31, 1999, the tax basis loss
amounted to $73,481 or $23.47 per limited partnership unit compared to a
taxable loss of $85,236 or $27.22 per unit for the three month period
ended March 31, 1998.
-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.
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP
<S> <C>
By: /s/ Joseph M. Jayson June 1, 1999
-------------------------------------------- -------------------------
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 June 2, 1999
-------------------------------------------- -------------------------
Joseph M. Jayson, Date
President and Director
/s/ Judith P. Jayson June 2, 1999
-------------------------------------------- -------------------------
Judith P. Jayson, Date
Director
/s/ Michael J. Colmerauer June 2, 1999
-------------------------------------------- -------------------------
Michael J. Colmerauer Date
Secretary
</TABLE>
-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 three months ended March 31, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,425
<PP&E> 3,019,465
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,543,132
<CURRENT-LIABILITIES> 1,888,251
<BONDS> 2,884,798
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,543,132
<SALES> 0
<TOTAL-REVENUES> 174,317
<CGS> 0
<TOTAL-COSTS> 252,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,981
<INCOME-PRETAX> (78,366)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,366)
<EPS-BASIC> (25.03)
<EPS-DILUTED> 0
</TABLE>
