FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE
REQUIRED)
Commission file number 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) 636-9090
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
Indicate by 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 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-K or any
amendment to this Form 10-K. (X)
DOCUMENTS INCORPORATED BY REFERENCE
See Page 12 for a list of all documents incorporated by reference.
1
<PAGE>
PART I
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ITEM 1: BUSINESS
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The Registrant, Realmark Property Investors Limited Partnership (the
"Partnership"), is a Delaware Limited Partnership organized in 1979 pursuant to
an Agreement and Certificate of Limited Partnership (the "Partnership
Agreement"), under the Delaware Uniform Limited Partnership Act. The
Partnership's Corporate General Partner is Realmark Properties, Inc. (the
"Corporate General Partner"), a Delaware corporation, and it's Individual
General Partner is Joseph M. Jayson (the "Individual General Partner").
The Registrant commenced the public offering of its limited partnership units,
registered with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, on March 26, 1981, and concluded the offering on December
31, 1981, having raised a total of $3.1 million before sales commissions and
expenses of the offering.
The Partnership's investment objectives are to (1) provide a return of capital
plus capital gains from the sale of appreciated properties; (2) provide partners
with cash distributions until properties are sold; (3) preserve and protect
partners capital; and (4) achieve a build-up of equity through the reduction of
mortgage loans.
The Partnership's one remaining apartment complex, acquired in 1981, is located
in Englewood, Ohio. The surrounding community continues to be marked by minimal
residential home construction. According to market studies, the competition was
offering concessions through virtually all of 1998 to attract new renters.
Average physical occupancy at Carriage House of Englewood (formerly Gold Key
Village Apartments) for 1998 was 84%, for 1997 was 79% and for 1996 was 83%. As
the only property in the Partnership, Carriage House of Englewood accounts for
all of the revenue generated by the Partnership.
The business of the Partnership is not seasonal. As of December 31, 1998, the
Partnership did not directly employ any persons in a full-time position. All
persons who regularly rendered services on behalf of the Partnership through
December 31, 1998 were employees of the Corporate General Partner or its
affiliates.
Carriage House of Englewood is currently managed by Realmark Corporation, an
affiliate of the Corporate General Partner.
This annual report contains certain forward-looking statements concerning the
Partnership's current expectations as to future results. Such forward-looking
statements are contained in Item 7: Management's Discussion and Analysis of
Financial Conditions and Results of Operations. Words such as "believes",
"forecasts", "intends", "possible", "expects", "estimates", "anticipates" or
"plans" and similar expressions are intended to identify forward-looking
statements.
ITEM 2: PROPERTIES
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As of December 31, 1998, the Partnership continued to own and operate Carriage
House of Englewood (formerly the Gold Key Village Apartments). Purchased in
November 1981, Carriage House of Englewood, located in Englewood, Ohio, is a 145
unit rental complex consisting of 24 buildings and recreational facilities on
9.6 acres of land. Realmark Corporation, an affiliate of the General Partners,
has managed the complex since March 1, 1984.
On May 5, 1992, the Partnership refinanced its two mortgages with a 9% U.S.
Department of Housing and Urban Development (HUD) insured mortgage in the amount
of $2,997,800 due June 1, 2027. The outstanding mortgage balance at December 31,
1998 was $2,890,315.
2
<PAGE>
ITEM 2: PROPERTIES (Con't.)
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Also, on May 5, 1992, the Partnership entered into a joint venture agreement
with Realmark Property Investors Limited Partnership VI A (RPILP VI A) for the
purpose of operating Carriage House of Englewood. Under the terms of the joint
venture agreement, the Partnership contributed the property net of the mortgage
and RPILP VI A contributed $497,911. The agreement provided for the income,
loss, gain, cash flow, or sale proceeds to be allocated 68% to the Partnership
and 32% to RPILP VI A. On March 1, 1993, RPILP VI A contributed an additional
$125,239, changing the allocation percentages to 60% to the Partnership and 40%
to RPILP VI A.
ITEM 3: LEGAL PROCEEDINGS
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The Partnership is not a party to, nor is any of the Partnership's property the
subject of, any material pending legal proceedings that would impact the future
financial position and operations of the Partnership.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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None.
PART II
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ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST.
- ------- --------------------------------------------------------------
There is currently no established trading market for the units of Limited
Partnership Interest of the Partnership and it is not anticipated that any will
develop in the future.
The Partnership did not make any distributions during 1998, 1997 or 1996 and
management does not anticipate making any distributions until Carriage House of
Englewood is sold and all Partnership obligations are satisfied. Unless there is
significant improvement in the overall property performance, it remains unlikely
that the investors will receive any of the proceeds from sale.
As of December 31, 1998, there were 421 record holders of units of Limited
Partnership Interest.
3
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
Realmark Properties Investors Limited Partnership
-------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
--------------- ---------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $1,533,567 $1,621,652 $1,653,163 $1,757,445 $1,864,870
=============== ================ ================ =============== ===============
Notes payable and
Long-term obligations $2,890,315 $2,914,486 $2,930,266 $2,947,711 $2,963,659
=============== ================ ================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
Revenue $ 623,341 $ 996,136 $ 685,142 $ 765,363 $ 744,192
Expenses 1,022,993 952,949 1,068,126 1,084,592 993,203
--------------- ---------------- ---------------- --------------- ---------------
(Loss) income before allocation
to minority interest (399,652) 43,187 (382,984) (319,229) (249,011)
Joint Venture losses allocated to
Minority Interest 106,397 101,583 119,637 91,833 70,183
--------------- ---------------- ---------------- --------------- ---------------
Net (loss) income $ (293,255) $ 144,770 $ (263,347) $ (227,396) $ (178,828)
=============== ================ ================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in operating
activities $ (419,533) $ (256,752) $ (271,721) $ (134,649) $ (71,690)
Principal payments on
long-term debt (24,171) (15,780) (17,445) (15,948) (14,581)
--------------- ---------------- ---------------- --------------- ---------------
Net cash used in
operating activities
less principal payments
on long-term debt $ (443,704) $ (272,532) $ (289,166) $ (150,597) $ (86,271)
=============== ================ ================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income per limited
partnership unit $ (93.65) $ 46.23 $ (84.10) $ (72.62) $ (57.11)
=============== ================ ================ =============== ===============
Weighted average
number of limited
units outstanding 3,100 3,100 3,100 3,100 3,100
=============== ================ ================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Liquidity and Capital Resources:
- --------------------------------
The Partnership once again incurred a cash flow deficit and also, incurred a
large loss from operations; in fact, the net cash used in operations totaled
$419,533 which exceeded that of the previous two years by 63% and 54%,
respectively. The Corporate General Partner and its affiliates continued during
1998 to advance funds and/or not take payment of fees or reimbursements
otherwise entitled to whenever it was necessary to cover its shortfalls. The
Corporate General Partner is under no obligation to make advances, and there is
no assurance that such advances will continue. As of December 31, 1998, the
Corporate General Partner (and affiliate) advances totaled $1,471,883, all of
which is payable on demand and accruing interest at 11% per annum. Due to the
operating shortfalls, the Partnership did not make any distributions in the
years ended December 31, 1998, 1997 and 1996. Until such time as the Partnership
can satisfy its obligations and repay the Corporate General Partner advances,
which is not expected to happen prior to the sale of the remaining property in
the Partnership, no distributions are anticipated.
The Partnership's one remaining property, Carriage House of Englewood (formerly
Gold Key Apartments) is being marketed for sale as the Corporate General Partner
feels the sale of this property is in the best interest of the Limited Partners.
Currently no contract for sale on this property exists, although efforts
continue to find an interested buyer through means such as advertising in
national newspapers and through networking efforts. At this time, it remains
highly unlikely that the Limited Partners will receive any proceeds from the
sale due to the amount of the Partnership's liabilities.
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)
which the Partnership has, 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 application for a partial payment
of claim was rejected by HUD, but meetings and discussions between HUD, the
mortgagee and the General Partner continue. Management is optimistic that their
application will be accepted some time during 1999. Management successfully
secured the release of all of the property's replacement reserve funds early in
1998; additionally future reserve payments have been suspended by HUD in an
effort to assist in the funding of the property's operations. Although HUD and
the mortgagee have assisted the Partnership through the release of the escrowed
funds and suspension of future deposits into the escrow reserve, unless the
property shows significant improvement in occupancy and collections, as well as
a decrease in expenses, the property could be in a position to default on its
mortgage, thus throwing it into a foreclosure. With this in mind, the Corporate
General Partner is aggressively marketing the property to potential buyers.
During the year ended December 31, 1998 all exterior painting and roof repairs
were completed. Additionally, all common hallways were newly painted and
problems which put the swimming pool out of use in the previous year were
corrected. For 1999, management intends to do needed asphalt repairs to the
parking lot; although the property needs compete re-paving, cash flow is not
expected to permit this, so patching and resealing is planned.
5
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS (Con't.)
- ------------------------------
Liquidity and Capital Resources (Con't.):
- -----------------------------------------
Management has once again implemented corrective action plans in response to the
going concern consideration discussed in Note 9 to the financial statements, as
well as to deal with the HUD noncompliance detailed in the notes to the
financial statements. These plans include the closer monitoring of expenses such
as payroll, advertising and maintenance, which have typically been the expenses
that have increased from year to year. The HUD noncompliance detailed in the
notes technically puts the Partnership in default of the mortgage which could
result in fines or interest charges being levied, or the take over of the
property by HUD. A concerted effort at correcting the noncompliance will
hopefully lead to the ultimate cure of such default.
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 is scheduled to begin 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. 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. 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.
Results of Operations:
- ----------------------
For the year ended December 31, 1998, the Partnership incurred a net loss of
$293,255 or $93.65 per limited partnership unit. This compares to net income of
$144,770 or $46.23 per limited partnership unit for the previous year and a loss
of $263,347 or $84.10 per limited partnership unit from the year ended December
31, 1996. The net income for the previous year was the result of income arising
from non-refundable deposits of $370,000 on the attempted sale of the Carriage
House of Englewood Apartments which were forfeited by the potential buyer.
Without the income from these deposits, the Partnership would have incurred a
net loss more in line with that of the prior years; this continues to
demonstrate the Partnership's struggle with poor cash flow.
6
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS (Con't.)
- ------------------------------
Results of Operations (Con't.):
- -------------------------------
Partnership revenues for the year ended December 31, 1998 totaled $623,341; this
consisted of rental income of $581,864 and other income, which includes
interest, laundry income, and other miscellaneous sources of income of $41,477.
Revenues for the years ended December 31, 1997 and 1996 totaled $996,136
(includes a non-refundable deposit on the sale of the property of $370,000) and
$685,142, respectively. Although other income remained fairly constant as
compared to the year ended December 31, 1997 with under a three percent decrease
(mostly attributable to a decrease in laundry revenue), there does appear to be
a continual decline when comparing the last three years (i.e., a five percent
decrease may be noted between 1997 and 1996). A continual decrease in rental
revenue is also evident when comparing the previous three years. Toward the end
of 1998, rents were decreased at Carriage House of Englewood in an effort to
stabilize occupancy and remain competitive in the local market which was
consistently offering concessions during the year. In the prior year, management
increased rents, yet there was an overall decrease in rental income due to both
a decrease in occupancy and no significant improvement in delinquencies at the
property. Physical occupancy averaged 84% for the year ended December 31, 1998,
79% for the year ended December 31, 1997, and 83% for the year ended December
31, 1996. Management continues to focus additional and continual effort on
increasing occupancy, as well as decreasing delinquencies through, for example,
more aggressive marketing through the use of promotions and rental concessions
and closer monitoring of delinquent rental collections by more timely eviction
filings.
Partnership expenses for the year ended December 31, 1998 totaled $1,022,993, an
increase of slightly over $70,000 from those of 1997 which totaled $952,949. The
current year saw an overall decrease in expenses of just over $45,000 from those
reported for the year ended December 31, 1996 which totaled $1,068,126. Much of
this decrease (as well as the decrease between the years 1996 and 1997) was
related to no depreciation expense being taken for the years ended December 31,
1998 and 1997 as management has committed to a plan to sell and is actively
marketing the assets of the property as described in Note 3 to the financial
statements. Property operation expenses continued to decrease as has been noted
over the previous two years. Payroll and associated expenses decreased slightly
between 1998 and 1997 (i.e., approximately $4,700) and contracted services
similarly decreased slightly (i.e., approximately $3,500). Larger decreases were
noted between 1998 and 1997 property operations expenditures for insurance and
utilities; insurance expense decreased by just under $7,600 and total utility
costs decreased by over $30,000. More repair and maintenance work at the
property is being performed by on-site personnel at a lower cost than would be
incurred if the work was contracted out. Administrative expenses in total
increased by almost $38,000 between the years ended December 31, 1998 and 1997,
with virtually all of the increase being attributable to other administrative
expenses (i.e., as opposed to those charged by affiliates). The largest portion
of this increase is attributed to increased legal expenses from evictions which
increased by more than fifty percent. Other increases and/or decreases in
individual administrative expenses were slight. Interest expense charged by
affiliates during the year ended December 31, 1998 increased from that incurred
during 1997 by almost $48,000 due to the increase in the related party payable
of over $643,000 (exclusive of the interest charged for the year). Interest is
charged on accounts payable affiliates at an annual rate of 11%.
7
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS (Con't.)
- ------------------------------
Results of Operations (Con't.):
- -------------------------------
The Partnership continues to expect higher than "normal" property operations
expenses in the coming months due to the maintenance work that needs to be done
at the Carriage House of Englewood Apartments; much work needs to be completed
in order to prepare units for new tenants and to satisfy current tenants (i.e.
cleaning, appliance and carpeting costs), as well as to physically improve the
exterior of the complex (i.e., paving and landscaping). Although this work is
necessary in order to increase the occupancy of the apartment complex,
management is trying to control expenditures so as not to worsen the cash flow
situation of the Partnership.
For the year ended December 31, 1998, the tax basis loss was $273,379 or $87.30
as compared to the tax basis income reported for the year ended December 31,
1997 of $174,866 or $55.84 per limited partnership unit and a tax loss of
$183,920 or $58.74 per unit for the year ended December 31, 1996. The
Partnership agreement provides for the taxable income or losses to be allocated
99% to the Limited Partners and 1% to the General Partners. Taxable income or
losses were allocated in accordance with this provision for the years ended
December 31, 1998, 1997 and 1996. The Partnership may be required to reallocate
taxable losses in accordance with the provisions of Section 704(b) of the
Internal Revenue Code. 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 circumstances, the IRS code requires that the
General Partner(s) 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.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Partnership does not have investments in instruments which are
subject to market risk (e.g., derivatives, options or other interest sensitive
instruments).
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Listed under Item 14 of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None
8
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PART III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The Partnership, as an entity, does not have any directors or officers. The
Individual General Partner of the Partnership is Joseph M. Jayson. The directors
and executive officers of Realmark Properties, Inc., the Partnership's Corporate
General Partner, as of March 1, 1999, are listed below. Each director is subject
to election on an annual basis.
<TABLE>
<CAPTION>
Year First
Name Title of All Positions Held with Company Elected Director
- ---- ---------------------------------------- ----------------
<S> <C> <C>
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice-President and Director 1979
Michael J. Colmerauer Secretary N/A
</TABLE>
Joseph M. Jayson, President and Director of Realmark Properties, Inc. and Judith
P. Jayson, Vice-President and Director of Realmark Properties, Inc., are married
to each other.
The Directors and Executive Officers of the Corporate General Partner and their
principal occupations and affiliations during the last five years or more are as
follows:
Joseph M. Jayson, age 60, is Chairman and Director and sole stockholder of J.M.
Jayson & Company, Inc. and certain of its affiliated companies: U.S. Apartments
LLC, Westmoreland Capital Corporation, Oilmark Corporation and U.S. Energy
Development Corporation. In addition, Mr. Jayson is Chairman of Realmark
Corporation, and President and Director of Realmark Properties, Inc., wholly
owned subsidiaries of J.M. Jayson & Company, Inc. and co-general partner of
Realmark Properties Investors Limited Partnership, Realmark Properties Investors
Limited Partnership-II, Realmark Properties Investors Limited Partnership-III,
Realmark Properties Investors Limited Partnership-IV, Realmark Properties
Investors Limited Partnership-V, Realmark Properties Investors Limited
Partnership-VI A and Realmark Properties Investors Limited Partnership-VI B. Mr.
Jayson is a member of the Investment Advisory Board of the Corporate General
Partner. Mr. Jayson has been in real estate for the last 36 years and is a
Certified Property manager as designated by the Institute of Real Estate
Management ("I.R.E.M."). Mr. Jayson received a B.S. Degree in Education in 1961
from Indiana University, a Masters Degree from the University of Buffalo in
1963, and has served on the Educational Faculty of the Institute of Real Estate
Management. Mr. Jayson has for the last 36 years been engaged in various aspects
of real estate brokerage and investment. He brokered residential properties from
1962 to 1964, commercial and investment properties from 1964 to 1967, and in
1967, left commercial real estate to form his own investment firm. Since that
time, Mr. Jayson and J.M. Jayson & Company, Inc. have formed, or participated in
various ways in forming over 30 real estate related limited partnerships. For
the past seventeen years, Mr. Jayson and J.M. Jayson & Company, Inc. and an
affiliate have also engaged in developmental drilling for gas and oil.
9
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CON'T.)
- -------- -----------------------------------------------------------
Judith P. Jayson, age 60, is currently Vice-President and a Director of Realmark
Properties, Inc. She is also a Director of the property management affiliate,
Realmark Corporation. Mrs. Jayson has been involved in property management for
the last 37 years and has extensive experience in the hiring and training of
property management personnel and in directing, developing and implementing
property management systems and programs. Mrs. Jayson, prior to joining the firm
in 1973, taught business in the Buffalo, New York high school system. Mrs.
Jayson graduated from St. Mary of the Woods College in Terre Haute, Indiana,
with a degree in Business Administration. Mrs. Jayson is the wife of Joseph M.
Jayson, the Individual General Partner.
Michael J. Colmerauer, age 40, is Secretary and in-house legal counsel for J.M.
Jayson and Company, Inc., Realmark Corporation, Realmark Properties, Inc. and
other companies affiliated with the General Partners. He received a Bachelor's
Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar Association and has been employed by the Jayson group of companies
for the last 15 years.
ITEM 11: EXECUTIVE COMPENSATION
- -------- ----------------------
No direct remuneration was paid or payable by the Partnerships to directors and
officers (since it has no directors or officers) for its fiscal years ended
December 31, 1998, 1997 or 1996, nor was any direct remuneration paid or payable
by the Partnership to directors or officers of Realmark Properties, Inc., the
Corporate General Partner and sponsor, for the fiscal years ended December 31,
1998, 1997 or 1996.
The following table sets forth for the years ended December 31, 1998, 1997 and
1996, the compensation paid or accrued as payable by the Partnership, directly
or indirectly, to affiliates of the General Partners:
<TABLE>
<CAPTION>
Entity Compensation 1998 1997 1996
------ ------------ ---- ---- ----
<S> <C> <C> <C>
Realmark Properties, Inc. Interest charged on
(The Corporate General accounts payable -
Partner) affiliates $133,279 $ 85,335 $ 84,692
-------------- -------------- --------------
Reimbursement for
allocated partnership
administration expenses:
Investor Services Fees 2,496 2,589 1,958
Brokerage Fees 5,163 4,653 2,677
Portfolio Management
& Accounting Fees 18,569 16,989 14,677
Realmark Corporation Property Management Fees 30,192 31,362 33,678
Computer Service Fees 3,030 3,030 3,030
-------------- -------------- --------------
59,450 58,623 56,020
-------------- -------------- --------------
$192,729 $143,958 $140,712
============== ============== ==============
</TABLE>
10
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION (CON'T.)
- -------- -------------------------------
The Corporate General Partner is entitled to a continuing Partnership Management
Fee equal to 9% of adjusted cash flow (as defined in the Partnership Agreement).
This fee is subordinated to the receipt by the limited partners of a
non-cumulative annual cash return equal to 7% on the average of their adjusted
capital contributions (as defined in the Partnership Agreement). Since the
limited partners have not received a 7% return on their average capital
balances, this fee has not been paid to the General Partner or accrued by the
Partnership. The General Partners are entitled to 1% of Distributable Cash (as
defined in the Partnership Agreement) and to certain expense reimbursements with
respect to Partnership operations.
Additionally, the Partnership's share of net proceeds arising from a sale or
refinancing shall be distributed first to the Limited Partners in amounts
equivalent to a 7% return on their average adjusted capital balances, plus an
amount equal to their capital contributions, then to all partners in amounts
equal to their respective positive capital account balances. The partnership's
share of additional proceeds, after property disposition fees, shall then 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. The Partnership's share of
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.
The Corporate General Partner is also 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: (i) the payment to the Limited Partners of a
cumulative annual return (not compounded) equal to 7% on their average adjusted
capital balances; (ii) the repayment to the Limited Partners of a cumulative
amount equal to their capital contributions; and (iii) 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 (i) and (ii). Inasmuch as these conditions have not been met,
no amounts have been recorded with regard to the sale of Clarewood and Gallery.
See also Notes 1 and 4 to the financial statements.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
No person is known to the Partnership to own of record or beneficially more than
five percent (5%) of the units of Limited Partnership Interest of the
Partnership. Excluding the General Partner's Interest in the Partnership ($1,000
initial capital contribution), the General Partners, as of December 31, 1998,
owned no units of Limited Partnership interest.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
(a) Transactions with Management and Others
- --- ---------------------------------------
All transactions between the Partnership and Realmark Properties, Inc. (the
Corporate General Partner) and any other affiliated organization are described
in Item 11 of this report and in Notes 4 and 7 to the financial statements.
11
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
- -------- ------------------------------------------------------------------
(a) Financial Statements and Schedules
----------------------------------
<TABLE>
<CAPTION>
Financial Statements Page
----
<S> <C>
(i) Independent Auditors' Report 14
(ii) Balance Sheets as of December 31, 1998
and 1997 15
(iii) Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 16
(iv) Statements of Partners' Deficit for the years
ended December 31, 1998, 1997 and 1996 17
(v) Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 18
(vi) Notes to Financial Statements 19 - 27
Financial Statement Schedule
----------------------------
(i) Schedule III - Real Estate and Accumulated
Depreciation 28 - 29
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
(b) Reports on Form 8-K
-------------------
None
c) Exhibits
--------
4. Instruments defining the rights of security holder, including
indentures.
(a) Certificate of Limited Partners filed with the
Registration Statement of the Registrant Form S-11,
filed March 26, 1981 and subsequently amended
incorporated herein by reference.
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
- -------- -----------------------------------------------------------------
(Con't.)
- --------
10. Material contracts.
(a) Property Management Agreement with Realmark Corporation
included with the Registration Statement of the Registrant
as filed and amended to date incorporated herein by
reference.
(b) Property sales agreement with unrelated third-party
included with the 1996 third quarter Form 10Q incorporated
herein by reference.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Realmark Property Investors Limited Partnership
We have audited the accompanying balance sheets of Realmark Property Investors
Limited Partnership (the Partnership) as of December 31, 1998 and 1997, and the
related statements of operations, partners' deficit, and cash flows for each of
the three years in the period ended December 31, 1998. Our audits also included
the financial statement schedule listed in the index at Item 14. These financial
statements and the financial statement schedule are the responsibility of the
General Partners. Our responsibility is to express an opinion on the financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
The accompanying financial statements and financial statement schedule have been
prepared assuming that the Partnership will continue as a going concern. As
discussed in Note 9 to the financial statements, the Partnership's failure to
meet its Department of Housing and Urban Development regulatory agreement
requirements, its recurring losses from operations and its partners' deficit
raise substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Buffalo, New York
April 14, 1999
14
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1998 AND 1997
--------------------------
Assets 1998 1997
- ------ ---- ----
<S> <C> <C>
Property, at cost (assets held for sale, see Note 3):
Land $ 182,500 $ 182,500
Land improvements 185,000 185,000
Buildings 2,487,824 2,475,133
Furniture, fixtures and equipment 164,141 164,141
-------------------- --------------------
3,019,465 3,006,774
Less accumulated depreciation 1,753,995 1,753,995
-------------------- --------------------
Property, net 1,265,470 1,252,779
-------------------- --------------------
Cash 8,618 -
Cash - security deposits 14,604 30,154
Escrow deposits 65,464 155,194
Prepaid expenses 16,738 15,110
Mortgage costs - net of accumulated amortization
of $38,278 in 1998 and $32,536 in 1997 162,673 168,415
-------------------- --------------------
Total Assets $ 1,533,567 $ 1,621,652
==================== ====================
Liabilities and Partners' Deficit
- ---------------------------------
Liabilities:
Cash overdraft $ - $ 315,892
Mortgage payable 2,890,315 2,914,486
Accounts payable and accrued expenses 237,083 232,267
Accounts payable - affiliates 1,471,883 780,708
Accrued interest 21,677 65,539
Security deposits and prepaid rent 42,470 42,969
-------------------- --------------------
Total Liabilities 4,663,428 4,351,861
-------------------- --------------------
Minority interest in consolidated joint venture 66,200 172,597
-------------------- --------------------
Partners' Deficit:
General partners (794,454) (791,521)
Limited partners (2,401,607) (2,111,285)
-------------------- --------------------
Total Partners' Deficit (3,196,061) (2,902,806)
-------------------- --------------------
Total Liabilities and Partners' Deficit $ 1,533,567 $ 1,621,652
==================== ====================
</TABLE>
See notes to financial statements
15
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1998 1997 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Income:
Rental $581,864 $ 583,445 $640,124
Forfeited deposits on sale of property - 370,000 -
Interest and other 41,477 42,691 45,018
--------------- --------------- ----------------
Total income 623,341 996,136 685,142
--------------- --------------- ----------------
Expenses:
Property operations 422,895 436,623 450,675
Interest:
Due to affiliates 133,279 85,335 84,692
Other 261,029 262,807 264,455
Depreciation and amortization 5,742 5,742 76,032
Administrative:
Due to affiliates 59,450 58,623 56,020
Other 140,598 103,819 136,252
--------------- --------------- ----------------
Total expenses 1,022,993 952,949 1,068,126
--------------- --------------- ----------------
(Loss) income before allocation to minority interest (399,652) 43,187 (382,984)
Joint Venture losses allocated to minority interest 106,397 101,583 119,637
--------------- --------------- ----------------
Net (loss) income $(293,255) $ 144,770 $(263,347)
=============== =============== ================
(Loss) income per limited partnership unit $ (93.65) $ 46.23 $ (84.10)
=============== =============== ================
Weighted average number of limited partnership
units outstanding 3,100 3,100 3,100
=============== =============== ================
</TABLE>
See notes to financial statements
16
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF PARTNERS' DEFICIT
-------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
General
Partners Limited Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1996 $(790,336) 3,100 $(1,993,893)
Net loss (2,633) - (260,714)
------------------- -------------- ----------------------
Balance, December 31, 1996 (792,969) 3,100 (2,254,607)
Net income 1,448 - 143,322
------------------- -------------- ----------------------
Balance, December 31, 1997 (791,521) 3,100 (2,111,285)
Net loss (2,933) - (290,322)
------------------- -------------- ----------------------
Balance, December 31, 1998 $(794,454) 3,100 $(2,401,607)
=================== ============== ======================
</TABLE>
See notes to financial statements
17
<PAGE>
<TABLE>
<CAPTION>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(293,255) $ 144,770 $(263,347)
Adjustments to reconcile net (loss) income to
net cash flow used in operating activities:
Deposits forfeited on sale of property - (370,000) -
Depreciation and amortization 5,742 5,742 76,032
Minority interest share of Joint Venture
net losses (106,397) (101,583) (119,637)
Changes in operating assets and liabilities:
Cash - security deposits 15,550 (748) (1,555)
Prepaid expenses (1,628) 8,024 (3,683)
Accounts payable and accrued expenses 4,816 2,370 51,452
Accrued interest (43,862) 43,562 (131)
Security deposits and prepaid rent (499) 11,111 (10,852)
------------------- ------------------- -------------------
Net cash used in operating activities (419,533) (256,752) (271,721)
------------------- ------------------- -------------------
Cash flows from investing activities:
Decrease in escrow deposits 89,730 32,621 89,708
Deposits received on sale of property - 150,000 172,800
Payments received on note receivable - 47,200 -
Property additions (12,691) (61,328) (9,020)
------------------- ------------------- -------------------
Net cash provided by investing activities 77,039 168,493 253,488
------------------- ------------------- -------------------
Cash flows from financing activities:
(Decrease) increase in cash overdraft (315,892) 107,792 125,701
Increase (decrease) in accounts
payable - affiliates 691,175 (3,753) (90,023)
Mortgage principal payments (24,171) (15,780) (17,445)
------------------- ------------------- -------------------
Net cash provided by financing activities 351,112 88,259 18,233
------------------- ------------------- -------------------
Increase in cash 8,618 - -
Cash - beginning of year - - -
------------------- ------------------- -------------------
Cash - end of year $ 8,618 $ - $ -
=================== =================== ===================
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 304,891 $ 219,245 $ 264,586
=================== =================== ===================
</TABLE>
During 1996, the Partnership received a deposit of $220,000 representing cash
totaling $172,800 and a note receivable totaling $47,200 related to the pending
sale of the Carriage House of Englewood. An additional $150,000 in deposits was
received in 1997. All deposits were forfeited in 1997 and recorded as income.
See notes to financial statements
18
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
1. FORMATION AND OPERATION OF PARTNERSHIP:
--------------------------------------
Realmark Property Investors Limited Partnership (the "Partnership"), a
Delaware Limited Partnership, was formed on August 28, 1979, to invest in a
diversified portfolio of income producing real estate. It operates in one
business segment.
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. ("the Corporate
General Partner"), a wholly-owned subsidiary of J.M. Jayson & Company, Inc.
(JMJ) and Mr. Joseph M. Jayson ("the Individual General Partner"), the sole
shareholder of JMJ. 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 (See Note 4).
The Partnership agreement provides for the Partnership's share of
taxable income or losses of the Partnership to be allocated 99% to the Limited
Partners and 1% to the General Partners. Taxable income or losses were allocated
in accordance with this provision for the years ended December 31, 1998, 1997
and 1996. The Partnership may be required to reallocate 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 Partner bears 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.
The Partnership's share of gains or losses arising from the sale or
refinancing of properties shall be allocated 99% to the Limited Partners and 1%
to the General Partners. The Partnership's share of net proceeds arising from a
sale or refinancing shall be distributed first to the Limited Partners in
amounts equivalent to a 7% return on their average adjusted capital balances,
plus an amount equal to their capital contributions, then to all partners in
amounts equal to their respective positive capital account balances. The
partnership's share of additional proceeds, after property disposition fees,
shall then 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. The
Partnership's share of 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.
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, formerly Gold Key Village Apartments, owned by the Partnership.
The joint venture is further described in Note 7.
19
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
a) 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.
b) Cash
----
For purposes of reporting cash flows, cash includes the following
items: cash on hand, cash in checking accounts and cash in savings accounts.
c) Cash-Security Deposits
----------------------
Cash-security deposits represents cash on deposit in accordance with
the HUD regulatory agreement for the property which has a HUD insured mortgage.
The cash shortage in the security deposit account as of December 31, 1998 was
replenished by the General Partners in the first quarter of 1999 so that the
security deposit liability was fully funded.
d) Escrow Deposits
---------------
Escrow deposits represent cash which is restricted for the payment of
property taxes and insurance in accordance with the mortgage agreement.
e) 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.
f) Property and Depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets, and totaled $70,290 for the
year ended December 31, 1996. As discussed in Note 3, no depreciation was
recorded in the years ended December 31, 1998 and 1997 as the assets were held
for sale. The estimated useful lives of the Partnership's assets range from 5 to
25 years. Expenditures for maintenance and repairs are expensed as incurred;
major renewals and betterments are capitalized. The Accelerated Cost Recovery
System is used to calculate depreciation expense for tax purposes. See further
discussion at Footnote 3.
20
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
-----------------------------------------------------
g) Minority Interest in Consolidated Joint Venture
-----------------------------------------------
The minority interest in Carriage House 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.
h) Rental Income
-------------
All rental income is derived from one residential rental property. The
outstanding leases with respect to this property are for terms of one year or
less. The rental income is recognized as earned according to the terms of the
leases.
i) Income Per Limited Partnership Unit
-----------------------------------
The income per limited partnership unit is based on the weighted
average number of limited partnership units outstanding for the year.
j) Accrued Rent Receivable
-----------------------
Due to the nature of accrued rent receivable, all such receivables are
fully reserved for at December 31, 1998 and 1997.
k) 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 enterprise 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.
l) 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 partners.
21
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
3. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY:
----------------------------------------------
In November 1981, the Partnership acquired a 145 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 Clarewood and Gallery for a
combined price of $4,647,516, which generated a total net gain for financial
statement purposes of $1,209,194.
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 and $1,252,779 at December 31, 1998 and 1997 respectively.
Carriage House of Englewood incurred losses of $265,994, $253,956 and $299,092
for the years ended December 31, 1998, 1997 and 1996, respectively. Management
has determined that a sale of the property is in the best interest of the
limited partners. Management continues to actively market the property with a
sale anticipated in 1999.
In connection with the pending sale, the Partnership received
non-refundable deposits totaling $370,000 in 1996 and 1997. All such deposits
were forfeited in 1997 and recorded as income.
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. Fair value is determined based on
estimated future cash flows. Depreciation expense, not recorded during the
disposal period, for the years ended December 31, 1998, 1997 and 1996 totaled
approximately $120,000, $122,000 and $44,000, respectively. Management believes
that the property's fair value has not changed significantly since being
classified as held for sale.
4. RELATED PARTY TRANSACTIONS:
--------------------------
Management fees for the properties 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 $30,192, $31,362 and $33,678 for
the years ended December 31, 1998, 1997 and 1996, respectively.
22
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
4. RELATED PARTY TRANSACTIONS (Con't.):
-----------------------------------
Accounts payable to affiliates, which are payable on demand, amounted
to $1,471,883 and $780,708 at December 31, 1998 and 1997, respectively. The
payables represent fees due and advances from the General Partners or an
affiliate of the General Partners. Interest is charged on accounts
payable-affiliates at an annual rate of 11%. Such amounts totaled $133,279,
$85,335 and $84,692 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Pursuant to the Partnership Agreement, the Corporate General Partner
charges the Partnership for reimbursement of certain costs and expenses incurred
by the Corporate General Partner and its affiliates in connection with the
administration of the Partnership. These charges were for the Partnership's
allocated share of such costs and expenses as payroll, printing, mailing, travel
and communication costs related to Partnership accounting, partner
communications and property marketing and are included in property operations.
Additionally, Partnership accounting and portfolio management fees, investor
services fees and brokerage fees are allocated based on total assets, number of
partners and number of units, respectively. Such charges totaled $26,228,
$24,231 and $19,312 in 1998, 1997 and 1996, respectively.
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 $3,030 for the years ended December 31, 1998, 1997 and 1996,
respectively.
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: (i) the payment to the Limited
Partners of a cumulative annual return (not compounded) equal to 7% on their
average adjusted capital balances; (ii) the repayment to the Limited Partners of
a cumulative amount equal to their capital contributions; and (iii) 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 (i) and (ii). Inasmuch as these conditions have not been met
no amounts have been recorded with regard to the sale of Clarewood and Gallery.
5. MORTGAGE PAYABLE:
----------------
Carriage House of Englewood
---------------------------
On May 5, 1992, the Partnership's first and second mortgages on
Carriage House of Englewood were refinanced with a 9% U.S. Department of Housing
and Urban Development (HUD) insured 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 $7,208. The balance of the mortgage at December 31, 1998 and 1997 was
$2,890,315 and $2,914,486, respectively.
23
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
5. MORTGAGE PAYABLE (Con't.):
-------------------------
The mortgage is secured by all of the assets of Carriage House of
Englewood.
The mortgage is subject to a HUD regulatory agreement which places
restrictions on the operations of the Partnership. As discussed in Note 9 to the
Financial Statements, the Partnership currently is not in compliance with
certain requirements of the HUD regulatory agreement.
Maturities of the mortgage for each of the next five years and
thereafter are as follows:
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 values of cash,
accounts payable, accrued expenses and deposit liabilities approximate the
carrying value due to the short-term nature of these instruments.
Management believes it is impracticable to estimate the fair value of
the mortgage payable, which has a carrying value of $2,890,315 at December 31,
1998, 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.
24
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
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, formerly Gold Key Village Apartments, owned by the Partnership.
Under the original terms of the 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 to the joint venture. The
amended joint venture agreement provides that any income, loss, gain, cash flow
or sale proceeds from the joint venture be allocated 60% to the Partnership and
40% to RPILP VI A. The net loss from the date of inception has been allocated to
the minority interest as described above and has been recorded as a reduction of
the capital contribution. Carriage House of Englewood incurred net losses of
$265,994, $253,956 and $299,092 for the years ended December 31, 1998, 1997 and
1996, respectively. The forfeited deposits received on the sale of property,
discussed in Note 3, are considered revenues of the Partnership and not
allocable to the minority interest.
A reconciliation of the minority interest share in Carriage House of
Englewood Joint Venture is as follows:
1998 1997
---------------- ------------------
Balance, beginning of year $ 172,597 $ 274,180
Allocated loss (106,397) (101,583)
---------------- ------------------
Balance, end of year $ 66,200 $ 172,597
================ ==================
8. 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.
25
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
8. INCOME TAXES (Con't.):
--------------------
The reconciliation of Partners' Deficit for the years ended December
31, 1998, 1997 and 1996, as reported in the balance sheet and as reported for
tax return purposes, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Partners' Deficit - Balance Sheet $ (3,196,061) $ (2,902,806) $ (3,047,576)
Add to (deduct from):
Accumulated difference in depreciation (969,389) (965,732) (960,555)
Accumulated amortization of
mortgage discount 240,000 240,000 240,000
Syndication costs 248,000 248,000 248,000
Reserve for bad debts 127,359 103,826 68,553
Other 1,711 1,711 1,711
Tax basis adjustment - Joint Venture (17,085) (17,085) (17,085)
------------------ ------------------ ------------------
Partners' Deficit - tax return purposes $ (3,565,465) $ (3,292,086) $ (3,466,952)
================== ================== ==================
</TABLE>
The reconciliation of net (loss) income for the years ended December
31, 1998, 1997 and 1996, as reported in the statement of operations, and as
would be reported for tax return purposes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net (loss) income -
Statement of operations $ (293,255) $ 144,770 $ (263,347)
Add to (deduct from):
Difference in depreciation (3,657) (5,177) 35,115
Difference due to reserve for bad debts 23,533 35,273 28,521
Other - - 15,791
Tax basis adjustment - Joint Venture - - -
------------------ ------------------ ------------------
Net (loss) income - tax return purposes $ (273,379) $ 174,866 $ (183,920)
================== ================== ==================
</TABLE>
26
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
9. GOING CONCERN CONSIDERATIONS:
----------------------------
On May 5, 1992, the Partnership obtained a mortgage insured by the
Department of Housing and Urban Development (HUD). The mortgage is subject to a
HUD regulatory agreement which places restrictions on the operations of the
Partnership. As of December 31, 1998 the partnership was not in compliance with
several of these regulations including:
o Security deposits or an itemized list of claims be returned to tenants
within 30 days;
o The Partnership maintain accounting records in accordance with HUD
regulations;
o There be proper segregation of duties in the cash receipts system;
o The Partnership submit financial status reports on a timely basis;
o The Partnership make promptly all payments under the note and mortgage;
o The Partnership collect security deposits at the time of the
initial lease and in an amount required in the lease agreements;
o The Partnership have its Affirmative Housing Market Plan approved by
HUD; and
o The Partnership maintain the required level of funded reserves to cover
its security deposit liability.
The consequences of the noncompliance with these restrictions could
include HUD-imposed sanctions such as fines or interest charges. Additionally,
the violation of the regulatory agreement could be deemed an event of default by
the mortgagor, and HUD could possibly take over as holder of the mortgage.
Given the uncertainty surrounding the outcome of the noncompliance, the
Partnership's recurring losses from operations, cash flow difficulties, and
partners' deficit, substantial doubt exists about the Partnership's ability to
continue as a going concern. Management is in the process of responding to HUD
regarding the aforementioned noncompliance including its intentions to take
corrective action. Management has developed a plan and is in the process of
trying to sell the Partnership's assets. In the interim, management plans to
continue negotiating to obtain a partial payment of claim with HUD and its
lender. A partial payment of claim 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. Management anticipates that this will allow the Partnership
to both fund operations and to do needed capital improvements to the property.
Other interim plans include management's intent to focus on increasing rental
occupancy to near 95% and reducing operating expenses at the Carriage House of
Englewood. A new rental incentive program will be put into place to encourage
property managers to lease. Operating expense reductions are planned in the form
of less deferred maintenance and replacements at the property than has been done
over the past several years.
27
<PAGE>
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
<TABLE>
<CAPTION>
Initial Cost to Gross amounts at which
Partnership Carried at Close of Period
-------------------------------- -----------------------------------------------
Cost
Capitalized
Land Buildings Subsequent Land Buildings
Property and and to and and (1)(2)
Description Encumbrances Improvements Improvements Acquisition Improvements Improvements Total
----------- ------------ ------------ ------------ ----------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Carriage House of
Englewood
Dayton, OH $2,890,315 $367,500 $2,341,254 $146,570 $367,500 $2,487,824 $2,855,324
=============== ============== ============== ============ ============== ============== =============
(RESTUBBED TABLE)
Life on Which
Depreciation
In Latest
(3)(4) Statement
Accumulated Date of Date Of Operations
Depreciation Construction Acquired Is Computed
------------ ------------ -------- -----------
Carriage House of
Englewood
Dayton, OH $1,596,577 1971 11/81 15 - 25 Years
==============
</TABLE>
28
<PAGE>
SCHEDULE III
- ------------
(Continued)
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
-----------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
(1) The aggregate cost for Federal income tax purposes is $2,855,324.
(2) A reconciliation of the carrying amount of land and buildings as of
December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 2,842,633 $ 2,781,305 $ 2,772,285
Additions 12,691 61,328 9,020
-------------------------------------------------------------
Balance at end of period $ 2,855,324 $ 2,842,633 $ 2,781,305
=============================================================
</TABLE>
(3) A reconciliation of accumulated depreciation for the years ended
December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of period $ 1,596,577 $ 1,596,577 $ 1,527,236
Additions charged to cost and expenses
during the year - - 69,341
-------------------------------------------------------------
Balance at end of year (4) $ 1,596,577 $ 1,596,577 $ 1,596,577
=============================================================
</TABLE>
(4) Balance applies entirely to buildings and improvements.
29
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 04/14/99
--------------------- --------
JOSEPH M. JAYSON, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below 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 04/14/99
--- ---------------- --------
JOSEPH M. JAYSON Date
President and Director
/S/ MICHAEL J. COLMERAUER 04/14/99
--- --------------------- --------
MICHAEL J. COLMERAUER Date
Secretary
30
<PAGE>
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
The form 10-K is sent to security holders. No other annual report is
distributed. No proxy statement, form of proxy or other proxy soliciting
material was sent to any of the registrant's security holders with respect to
any annual or other meeting of security holders.
31
<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 year ended December 31, 1998, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 23,222
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 268,097
<PP&E> 3,019,465
<DEPRECIATION> 1,753,995
<TOTAL-ASSETS> 1,533,567
<CURRENT-LIABILITIES> 1,773,113
<BONDS> 2,890,315
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,533,567
<SALES> 0
<TOTAL-REVENUES> 623,341
<CGS> 0
<TOTAL-COSTS> 916,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,308
<INCOME-PRETAX> (293,255)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,255)
<EPS-BASIC> (93.65)
<EPS-DILUTED> 0
</TABLE>
