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, 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 June 30, 1999, the issuer had 3,100 units of limited partnership interest
outstanding.
1
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
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INDEX
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PAGE NO.
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PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
June 30, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended June 30, 1999 and 1998 4
Statements of Operations -
Six Months Ended June 30, 1999 and 1998 5
Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 6
Statements of Partners' (Deficit) -
Six Months Ended June 30, 1999 and 1998 7
Notes to Financial Statements 8 - 16
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 17 - 19
----------
PART III: FINANCIAL DATA SCHEDULE
- -------- -----------------------
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
BALANCE SHEETS
--------------
June 30, 1999 and December 31, 1998
-----------------------------------
(Unaudited)
June 30, 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 39,056 14,604
Escrow deposits 98,338 65,464
Prepaid expenses 2,210 16,738
Mortgage costs, net of accumulated
amortization of $41,149 and $38,278 159,802 162,673
----------------- -----------------
Total Assets $ 1,564,876 $ 1,533,567
================= =================
LIABILITIES AND PARTNERS' (DEFICIT)
- -----------------------------------
Liabilities:
Cash overdraft $ 6,198 $ -
Mortgages payable 2,879,156 2,890,315
Accounts payable and accrued expenses 262,662 237,083
Accounts payable - affiliates 1,653,357 1,471,883
Accrued interest 21,636 21,677
Security deposits and prepaid rent 49,123 42,470
----------------- -----------------
Total Liabilities 4,872,132 4,663,428
----------------- -----------------
Minority interest in consolidated
joint venture 31,678 66,200
----------------- -----------------
Partners' (Deficit):
General partners (795,883) (794,454)
Limited partners (2,543,052) (2,401,607)
----------------- -----------------
Total Partners' (Deficit) (3,338,934) (3,196,061)
----------------- -----------------
Total Liabilities and Partners' (Deficit) $ 1,564,876 $ 1,533,567
================= =================
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See notes to financial statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended June 30, 1999 and 1998
-----------------------------------------
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 177,766 $ 157,192
Interest and other income 21,088 6,398
-------------- --------------
Total income 198,854 163,590
-------------- --------------
Expenses:
Property operations 119,815 178,135
Interest:
To affiliates 42,613 27,125
Other 64,865 65,600
Depreciation and amortization 1,435 1,435
Administrative:
To affiliates 24,033 3,363
Other 23,432 45,717
-------------- --------------
Total expenses 276,193 321,375
-------------- --------------
Loss before allocation
to minority interest (77,339) (157,785)
Loss allocated to minority interest 12,832 21,848
-------------- --------------
Net loss $ (64,507) $ (135,937)
============== ==============
Loss per limited partnership unit $ (20.60) $ (43.41)
============== ==============
Distributions per limited partnership unit $ - $ -
============== ==============
Weighted average number of
limited partnership units
outstanding 3,100 3,100
============== ==============
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See notes to financial statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1999 and 1998
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 337,367 $ 301,754
Interest and other income 35,804 13,911
----------------- -----------------
Total income 373,171 315,665
----------------- -----------------
Expenses:
Property operations 225,972 329,195
Interest:
To affiliates 83,644 53,700
Other 129,815 131,026
Depreciation and amortization 2,871 2,871
Administrative:
To affiliates 46,111 33,014
Other 62,153 62,610
----------------- -----------------
Total expenses 550,566 612,416
----------------- -----------------
Loss before allocation
to minority interest (177,395) (296,751)
Loss allocated to minority interest 34,522 77,434
----------------- -----------------
Net loss $ (142,873) $ (219,317)
================= =================
Loss per limited partnership unit $ (45.63) $ (70.04)
================= =================
Distributions per limited partnership unit $ - $ -
================= =================
Weighted average number of
limited partnership units
outstanding 3,100 3,100
================= =================
</TABLE>
See notes to financial statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
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STATEMENTS OF CASH FLOWS
------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (142,873) $ (219,317)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,871 2,871
Minority interest share of net loss (34,522) (77,434)
Changes in operating assets and liabilities:
Cash - security deposits (24,452) 10,594
Escrow deposits (32,874) 79,611
Prepaid expenses 14,528 13,252
Accounts payable and accrued expenses 25,580 103,941
Accrued interest (41) (43,493)
Security deposits and prepaid rent 6,653 10,516
----------------- -----------------
Net cash used in operating activities (185,130) (119,459)
----------------- -----------------
Cash flow from investing activities:
Property additions and net cash
(used in) investing activities - -
----------------- -----------------
Cash flows from financing activities:
Cash overdraft 6,197 (312,060)
Accounts payable - affiliates 181,474 445,021
Principal payments on mortgage(s) (11,159) (13,502)
Mortgage costs - -
----------------- -----------------
Net cash provided by financing activities 176,512 119,459
----------------- -----------------
Decrease in cash (8,618) -
Cash - beginning of period 8,618 -
----------------- -----------------
Cash - end of period $ - $ -
================= =================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 213,500 $ 228,219
================= =================
</TABLE>
See notes to financial statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
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STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(Unaudited)
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (791,521) 3,100 $ (2,111,285)
Net income (2,193) - (217,124)
----------------- -------------- ------------------
Balance, June 30, 1998 $ (793,714) 3,100 $ (2,328,409)
================= ============== ==================
Balance, January 1, 1999 $ (794,454) 3,100 $ (2,401,607)
Net loss (1,429) - (141,445)
----------------- -------------- ------------------
Balance, June 30, 1999 $ (795,883) 3,100 $ (2,543,052)
================= ============== ==================
</TABLE>
See notes to financial statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Six Months Ended June 30, 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 six months ended June 30, 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.
-8-
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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-
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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 for
apartment complexes are fully reserved for at June 30, 1999 and 1998.
-10-
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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 periods ended June 30, 1999
and 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.
-11-
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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.
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 June 30, 1999 and 1998 was $2,879,156 and $2,900,984,
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-
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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
$2,879,156 at June 30, 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.
-13-
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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:
1999 1998
---- ----
Balance, January 1 $ 66,200 $ 172,597
Capital contribution - -
Allocated loss (34,522) ( 77,434)
---------- ------------
Balance, June 30 $ 31,678 $ 95,163
========== ============
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 approximately $17,400 for both the six months ended June 30,
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 six months ended June 30, 1999 and 1998.
Accounts payable - affiliates amounted to $1,653,357 and $1,172,029 at
June 30, 1999 and 1998, respectively. The payable represents fees due
and advances from the General Partner. Interest charged on accounts
payable - affiliates totaled $83,644 and $53,700 for the six month
periods ended June 30, 1999 and 1998, respectively.
Partnership accounting and portfolio management fees, investor services
fees and brokerage fees are allocated based on total assets, the number
of partners, and number of units, respectively. In addition to the
above, other property specific expenses, such as payroll, benefits, etc.
are charged to property operations on the Statement of Operations.
-14-
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RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partner based, in part, upon the number of
apartment units and complexes. Such amounts totaled approximately $1,580
for the six month periods ended June 30, 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) income for the six month periods ended
June 30, 1999 and 1998 as reported in the statements of operations, and
as would be reported for tax purposes respectively, is as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
---- ----
<S> <C> <C>
Net loss -
Statement of operations $(142,873) $ (219,317)
(Add to) deduct from:
Difference in depreciation ( 1,830) ( 2,589)
Difference in amortization - -
Difference in bad debt reserve 11,600 17,637
Tax adjustment - Joint Venture - -
--------- ------------
Net loss for tax purposes $(133,103) $ (204,269)
========= ============
</TABLE>
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INCOME TAXES (CONTINUED)
------------------------
The reconciliation of partners' (deficit) at June 30, 1999 and December
31, 1998 as reported in the balance sheets, and as reported for tax
purposes, is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Partners' (Deficit) - balance sheet $ (3,338,934) $ (3,196,061)
Add to (deduct from):
Accumulated difference in
depreciation ( 971,219) ( 969,389)
Accumulated amortization 240,000 240,000
Syndication fees 248,000 248,000
Reserve for bad debts 138,959 127,359
Tax Basis Adjustment
- Joint Venture (17,085) (17,085)
Other 1,711 1,711
--------------- ---------------
Partners' (Deficit) - tax return $ (3,698,568) $ (3,565,465)
=============== ===============
</TABLE>
-16-
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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 continued
losses from operations. 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 advances from the General Partners and/or affiliates are
in the form of accrued, but unpaid management fees and reimbursements for
expenses paid on behalf of the Partnership, as well as actual cash advances to
assist the Partnership in meeting its obligations. The General Partner has
advanced $1,653,357, as of June 30, 1999; these funds are payable on demand.
The Partnership did not make any distributions during the six month periods
ending June 30, 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 had requested a
modification of the terms of the mortgage according to the United States
Department of Housing and Urban Development's (HUD's) "Partial Payment of Claim"
program which would modify a portion of the existing mortgage making it a second
mortgage to be paid from cash flow. As of this date, neither HUD nor the
mortgagor has been willing to refinance the mortgage or change its terms.
The General Partner is putting all efforts into increasing occupancy. With
increased occupancy, management feels improved cash flow will follow. 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.
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.
-17-
<PAGE>
Liquidity and Capital Resources (continued)
- -------------------------------------------
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 currently expected to
be completed by September 30, 1999. 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.
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 date, no
sales contracts on the property exist. Additionally, at this time, it is highly
unlikely that the Limited Partners will receive any proceeds from a sale.
Results of Operations:
- ----------------------
For the quarter ended June 30, 1999, the Partnership's net loss was $64,507 or
$20.60 per limited partnership unit. Net loss for the quarter ended June 30,
1998, amounted to $135,937 or $43.41 per unit. For the six month period ended
June 30, 1999, the net loss was $142,873 or $45.63 per limited partnership unit
as compared to a loss of $219,317 or $70.04 per limited partnership unit for the
six month period ended June 30, 1998.
Partnership revenue for the quarter ended June 30, 1999 totaled $198,854, which
is an increase of approximately $35,000 or 22% from the quarter ended June 30,
1998 when revenue totaled $163,590. The change between the two years is
attributable to an increase in occupancy (approximately 92% at June 30, 1999),
decreased delinquencies (although still relatively high), and increased rents
charged at Carriage House of Englewood. Rental income increased just over
$20,500 between the two quarters. For the six month period ended June 30, 1999,
Partnership revenue totaled $373,171 an increase of approximately $57,500 when
compared to revenue totaling $315,665 for the same period in the previous year.
-18-
<PAGE>
Results of Operations (continued):
- ----------------------------------
For the three month period ended June 30, 1999, Partnership expenses totaled
$276,193, a decrease of just over $45,000 from the quarter ended June 30, 1998.
For the six month period ended June 30, 1999, total expenses decreased
approximately 10% over those of the same period in 1998; expenses totaled
$550,566 and $612,416 for the six months ended June 30, 1999 and 1998,
respectively. Property operations expenses decreased from $329,195 for the six
months ended June 30, 1998 to $225,972 for the six months ended June 30, 1999;
the total decrease in property operations was approximately $103,000. Payroll
and related costs, repairs and maintenance expenses, and contracted services all
decreased notably between the two six month periods. Utility costs, insurance
and real estate taxes all remained fairly constant (i.e., only slight changes
were noted) when comparing the six months ended June 30, 1999 and 1998. The
increase seen in administrative expenses to affiliates was due to increases in
accounting and portfolio management fees and other service fees resulting from
increased reporting responsibilities mandated by HUD, the insurer of the
mortgage on Carriage House of Englewood.
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 six month period ended June 30, 1999, the tax basis loss amounted to
approximately $133,103 or $42.51 per limited partnership unit compared to a
taxable loss of approximately $204,269 or $65.23 per unit for the six month
period ended June 30, 1998.
-19-
<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.
-20-
<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 26, 1999
--------------------- ---------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 39,056
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 139,604
<PP&E> 3,019,465
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,564,876
<CURRENT-LIABILITIES> 1,992,976
<BONDS> 2,879,156
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,564,876
<SALES> 0
<TOTAL-REVENUES> 373,171
<CGS> 0
<TOTAL-COSTS> 516,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,459
<INCOME-PRETAX> (142,873)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,873)
<EPS-BASIC> (45.63)
<EPS-DILUTED> 0
</TABLE>
