FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 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 September 30, 1999, the issuer had 3,100 units of limited partnership
interest outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
INDEX
-----
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
September 30, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended September 30, 1999 and 1998 4
Statements of Operations -
Nine Months Ended September 30, 1999 and 1998 5
Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 6
Statements of Partners' (Deficit) -
Nine Months Ended September 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 22
- --------- -----------------------
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
BALANCE SHEETS
--------------
September 30, 1999 and December 31, 1998
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS
- ------
<S> <C> <C>
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 40,215 14,604
Escrow deposits 30,651 65,464
Prepaid expenses 8,230 16,738
Mortgage costs, net of accumulated
amortization of $43,063 and $38,278 157,888 162,673
Other assets 205 -
----------- ----------
Total Assets $ 1,502,659 $ 1,533,567
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT)
- -----------------------------------
Liabilities:
Cash overdraft $ 3,699 $ -
Mortgages payable 2,873,387 2,890,315
Accounts payable and accrued expenses 248,274 237,083
Accounts payable - affiliates 1,714,625 1,471,883
Accrued interest 21,636 21,677
Security deposits and prepaid rent 51,936 42,470
----------- ----------
Total Liabilities 4,913,557 4,663,428
----------- ----------
Minority interest in consolidated
joint venture 8,533 66,200
----------- ----------
Partners' Deficit:
General partners (796,688) (794,454)
Limited partners (2,622,743) (2,401,607)
----------- ----------
Total Partners' Deficit (3,419,431) (3,196,061)
----------- ----------
Total Liabilities and Partners' Deficit $ 1,502,659 $ 1,533,567
=========== ===========
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended September 30, 1999 and 1998
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
----- ----
<S> <C> <C>
Income:
Rental $ 178,151 $ 149,123
Interest and other income 13,188 3,492
--------------- ---------------
Total income 191,339 152,615
--------------- ---------------
Expenses:
Property operations 131,816 123,630
Interest:
To affiliates 42,592 37,437
Other 64,742 65,255
Depreciation and amortization 1,914 67,099
Administrative:
To affiliates 32,666 8,939
Other 21,251 2,932
--------------- ---------------
Total expenses 294,981 305,292
--------------- ---------------
Loss before allocation
to minority interest (103,642) (152,677)
Loss allocated to minority interest 23,145 65,882
--------------- ---------------
Net loss $ (80,497) $ (86,795)
=============== ===============
Loss per limited partnership unit $ (25.71) $ (27.72)
=============== ===============
Distributions per limited partnership unit $ - $ -
=============== ===============
Weighted average number of
limited partnership units
outstanding 3,100 3,100
=============== ===============
</TABLE>
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 515,518 $ 450,877
Interest and other income 48,992 17,403
---------- ----------
Total income 564,510 468,280
---------- ----------
Expenses:
Property operations 357,788 452,825
Interest:
To affiliates 126,236 91,137
Other 194,557 196,281
Depreciation and amortization 4,785 69,970
Administrative:
To affiliates 78,777 41,953
Other 83,404 65,542
---------- ----------
Total expenses 845,547 917,708
---------- ----------
Loss before allocation
to minority interest (281,037) (449,428)
Loss allocated to minority interest 57,667 143,316
---------- ----------
Net loss $ (223,370) $ (306,112)
========== ==========
Loss per limited partnership unit
$ (71.33) $ (97.76)
========== ==========
Distributions per limited partnership unit
$ - $ -
========== ==========
Weighted average number of
limited partnership units
outstanding
3,100 3,100
========== ==========
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income
$ (223,370) $ (306,112)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,785 69,970
Minority interest share of net loss (57,667) (143,316)
Changes in operating assets and liabilities:
Cash - security deposits (25,611) 15,622
Escrow deposits 34,813 55,206
Prepaid expenses 8,508 15,110
Other assets (205) -
Accounts payable and accrued expenses 11,192 141,911
Accrued interest (41) (43,510)
Security deposits and prepaid rent 9,466 10,975
------------ ----------
Net cash used in operating activities (238,130) (184,144)
------------ ----------
Cash flow from investing activities:
Property additions and net cash
used in investing activities - -
------------ ----------
Cash flows from financing activities:
Cash overdraft 3,698 (315,276)
Accounts payable - affiliates 242,742 518,158
Principal payments on mortgage(s) (16,928) (18,738)
Mortgage costs - -
------------ ----------
Net cash provided by financing activities 229,512 184,144
------------ ----------
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 $ 311,327 $ 330,928
============ ==========
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT)
---------------------------------
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- -------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (791,521) 3,100 $ (2,111,285)
Net loss (3,061) - (303,050)
----------------- -------------- ------------------
Balance, September 30, 1998 $ (794,582) 3,100 $ (2,414,335)
================= ============== ==================
Balance, January 1, 1999 $ (794,454) 3,100 $ (2,401,607)
Net loss (2,234) - (221,136)
----------------- -------------- ------------------
Balance, September 30, 1999 $ (796,688) 3,100 $ (2,622,743)
================= ============== ==================
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Nine Months Ended September 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 nine months ended September 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 for 1996 through 1998,
taxable income or loss was allocated in accordance with this provision.
For the years 1987 through 1990, 1992, 1993, 1994 and 1995, the
Partnership was required to allocate losses in accordance with Internal
Revenue Section 704(b). In general, Section 704(b) may be applicable
when Partnership capital is negative and limited partners are not
required to restore negative capital accounts. In such instances, the
IRS code requires that the general partners bear a greater portion of
the economic loss than that which would be allocated pursuant to the
partnership agreement and, therefore, the loss must be reallocated.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
---------------------------------------------------
Losses arising from the sale of properties shall be allocated 99% to the
Limited Partners and 1% to the General Partners subject to the revisions
made in the Internal Revenue Code, pursuant to the Tax Reform Act of
1986. Net proceeds arising from a sale or refinancing shall be
distributed first to the Limited Partners in an amount equivalent to a
7% return on their average adjusted capital balances, plus an amount
equal to their respective positive capital account balances.
Additional proceeds after property disposition fees shall be allocated
to the Limited Partners in an amount equivalent to 5% of their average
adjusted capital balances and the remainder, if any, in the ratio of 90%
to the Limited Partners and 10% to the General Partners. Income arising
from the sale or refinancing shall be allocated in the same manner as
the proceeds are to be distributed, except that the General Partners are
to be allocated at least 1% of the income.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
Cash - security deposits
------------------------
Cash - security deposits represents cash on deposit in accordance with
the HUD regulatory agreement for the one property with a HUD mortgage.
Escrow deposits
---------------
Escrow deposits represent cash which is restricted for the payment of
property taxes or for repairs and replacements in accordance with the
mortgage agreement.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------
Property and depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are expensed as incurred, and major renewals and
betterments are capitalized. The Accelerated Cost Recovery System is
used to calculate depreciation expense for tax purposes.
Mortgage costs
--------------
Mortgage costs incurred in obtaining property mortgage financing have
been deferred and are being amortized over the term of the mortgage
using the straight-line method.
Minority interest in consolidated joint venture
-----------------------------------------------
The minority interest in a consolidated joint venture is stated at the
amount of capital contributed by the minority investor adjusted for its
share of joint venture losses.
Rental income
-------------
Rental income is recognized as earned according to the terms of the
leases. The outstanding leases with respect to rental properties owned
are for terms of no more than one year.
Income (loss) per limited partnership unit
------------------------------------------
The income or loss per limited partnership unit is based on the weighted
average number of limited partnership units outstanding during the
period then ended.
Accrued rent receivable
-----------------------
Due to the nature of accrued rent receivable, all such receivables for
this apartment complex are fully reserved for at September 30, 1999 and
1998.
-10-
<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
----------------------------------------------
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)
---------------------------------------------------------
- -
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 nine months ended September
30, 1999 totaled approximately $90,000. Management believes that the
property's fair value has not changed significantly since being
classified as held for sale.
5. MORTGAGE PAYABLE
----------------
Carriage House of Englewood (formerly Gold Key Village Apartments)
-------------------------------------------------------------------
On May 5, 1992, the Partnership's first and second mortgages on the Gold
Key apartment complex were refinanced with a 9% U.S. Department of
Housing and Urban Development (HUD) guaranteed mortgage in the amount of
$2,997,800 due June 1, 2027. The mortgage provides for monthly principal
and interest payments of $23,503, plus monthly escrow deposits for real
estate taxes and insurance totaling $8,135 (note: repairs and
maintenance reserve was suspended by HUD during 1997). The balance of
the mortgage at September 30, 1999 and 1998 was $2,873,387 and
$2,895,748, 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
---- -------
1999 $ 22,829
2000 24,970
2001 27,312
2002 29,875
2003 32,677
Thereafter 2,752,652
----------
TOTAL $ 2,890,315
===========
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
$2,873,387 at September 30, 1999, 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:
1999 1998
---- ----
Balance, January 1 $ 66,200 $ 172,597
Capital contribution - -
Allocated loss ( 57,668) (143,316)
----------- ----------
Balance, September 30, $ 8,532 $ 29,281
=========== ===========
8. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for Carriage House of Englewood are paid or accrued to
an affiliate of the General Partners. The management agreement provides
for 5% of gross monthly rental receipts of the complex to be paid as
fees for administering the operations of the property. These fees
totaled approximately $29,000 and $26,100 for the nine months ended
September 30, 1999 and 1998, respectively.
The general partner is also entitled to receive a Partnership management
fee equal to 9% of net cash flow (as defined in the partnership
agreement), 2% of which is subordinated to the limited partners having
received an annual cash return equal to 7% of their adjusted capital
contributions. No such fee has been paid or accrued by the Partnership
for the nine months ended September 30, 1999 and 1998.
Accounts payable - affiliates amounted to $1,714,625 and $1,298,748 at
September 30, 1999 and 1998, respectively. The payable represents fees
due and advances from the General Partner. Interest charged on accounts
payable - affiliates totaled $126,236 and $91,137 for the nine month
periods ended September 30, 1999 and 1998, respectively. Interest is
charged on accounts payable - affiliates at an annual rate of 11%.
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.
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 $2,370 for the nine month
periods ended September 30, 1999 and 1998.
-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 for the nine month periods ended
September 30, 1999 and 1998 as reported in the statements of operations,
and as would be reported for tax purposes respectively, is as follows:
September 30, September 30,
1999 1998
---- -----
Net loss -
Statement of operations $ (223,370) $ (306,112)
(Add to) deduct from:
Difference in depreciation (2,745) (3,884)
Difference in amortization - -
Difference in bad debt reserve 17,400 26,455
Tax adjustment - Joint Venture - -
----------- ------------
Net loss for tax purposes $ (208,715) $ (283,541)
=========== ============
-15-
<PAGE>
INCOME TAXES (CONTINUED)
-------------------------
The reconciliation of partners' deficit at September 30, 1999 and
December 31, 1998 as reported in the balance sheets, and as reported for
tax purposes, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Partners' Deficit - balance sheet $ (3,419,431) $ (3,196,061)
Add to (deduct from):
Accumulated difference in
depreciation (972,134) (969,389)
Accumulated amortization 240,000 240,000
Syndication fees 248,000 248,000
Reserve for bad debts 144,759 127,359
Tax Basis Adjustment
- Joint Venture (17,085) (17,085)
Other 1,711 1,711
------------- ------------
Partners' Deficit - tax return $ (3,774,180) $ (3,565,465)
============= =============
</TABLE>
-16-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership continues operating with cash flow shortages due to a decrease
in the total revenue generated. The General Partner meanwhile, continues to
advance funds to the Partnership to cover cash flow shortages, although under no
obligation to do so. There is no assurance that the General Partner will
continue to do so. The General Partner has advanced $1,714,625, as of September
30, 1999, in the form of either direct cash advances, unreimbursed expenses,
accrued interest or accrued but unpaid management fees. These funds are payable
on demand.
The Partnership did not make any distributions during the nine month periods
ending September 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 has been
corresponding with the United States Department of Housing and Urban Development
(HUD) in search of means of obtaining more usable cash to operate the property
with. As of this date, neither HUD nor the mortgagor has been willing to
refinance the mortgage or change its terms.
The General Partner continues to try to stabilize the property's cash flow by
increasing occupancy (i.e., bring it to full occupancy even if it means lowering
target rents). It is believed that with full occupancy will come improved cash
flow. The additional cash that comes in can then be used to physically improve
the property (e.g., fresh paint, new carpets and appliances, etc.) to make the
property more attractive to potential renters. Once cash flow improves, rents
can then be increased again.
The General Partner continues to aggressively seek a buyer for the sole
remaining property in this Partnership as it is felt that the sale of the
property is in the best interests of the limited partners. At this time it is
highly unlikely that the Limited Partners will receive any proceeds from the
sale.
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.
-17-
<PAGE>
Liquidity and Capital Resources (continued)
- ------------------------------------------
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 currently expected to be completed by December 1,
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 December 1,
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.
Results of Operations:
- ----------------------
For the quarter ended September 30, 1999, the Partnership had a net loss of
$80,497 or $25.71 per limited partnership unit. For the quarter ended September
30, 1998, a net loss of $86,795 or $27.72 per limited partnership unit was
recorded. For the nine month period ended September 30, 1999, the net loss was
$223,370 or $71.33 per limited partnership unit as compared to a loss of
$306,112 or $97.76 per limited partnership unit for the nine month period ended
September 30, 1998.
Partnership revenue for the quarter ended September 30, 1998 totaled $191,339,
which is an increase of approximately $39,000 from the quarter ended September
30, 1998. Partnership revenues for the quarter ended September 30, 1998 were
$152,615. Rental income increased approximately $29,000 between the two
quarters. For the nine month period ended September 30, 1999, Partnership
revenue totaled $564,510 an increase when compared to $468,280 for the same
period in the previous year. The increase in revenue is primarily attributable
to improved occupancy and collections during the third quarter of 1999 as well
as increased other income from rental of furniture to several tenants.
-18-
<PAGE>
Results of Operations (continued):
- ----------------------------------
For the three month period ended September 30, 1999, Partnership expenses
totaled $294,981, a decrease of approximately $10,000 from the quarter ended
September 30, 1998. For the nine month period ended September 30, 1999, total
expenses decreased approximately $72,000 or 8% compared to those of the same
period in 1998. The majority of the decrease in total expenses was due to a
decrease in property operations expenses; due to cash flow shortages, management
has been unable to complete much of the needed deferred maintenance needed at
the remaining property in the Partnership. Utility costs, real estate taxes and
insurance costs all remained virtually unchanged from the nine months ended
September 30, 1999 and 1998. Interest expense to the General Partners and/or
their affiliates increased due to the increase in advances made to the
Partnership by these parties. No depreciation was taken during the nine month
period ended September 30, 1999 since the remaining property was considered to
be "held for sale" (see Note 4 to the financial statements). The increase seen
in administrative expenses continues to be due to increased legal expenses
related to evictions and vendor disputes, increased advertising costs due to
declining occupancy, and increased 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 nine month period ended September 30, 1999, the tax basis loss amounted
to $82,478 or $26.34 per limited partnership unit compared to a taxable loss of
$283,541 or $90.55 per unit for the nine month period ended September 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 November 21, 1999
--------------------- -----------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Realmark Property Investors Limited Partnership for the
nine months ended September 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,301
<PP&E> 3,019,465
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,502,659
<CURRENT-LIABILITIES> 2,040,170
<BONDS> 2,873,387
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,502,659
<SALES> 0
<TOTAL-REVENUES> 564,510
<CGS> 0
<TOTAL-COSTS> 787,880
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320,793
<INCOME-PRETAX> (223,370)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223,370)
<EPS-BASIC> (71.33)
<EPS-DILUTED> 0
</TABLE>
