FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
March 31, 2000 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 Number)
2350 North Forest Road
Suite 12A
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 [ ]
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Form 10-Q
INDEX
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PART I - FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
Balance Sheets - March 31, 2000 and December 31, 1999 3
Statements of Operations - Three months ended March 31, 2000 and 1999 4
Statement of Partners' Deficiency - Three months ended March 31, 2000 5
Statements of Cash Flows - Three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2 - 5. Not applicable 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
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PART I - Item 1. Financial Statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Balance Sheets
March 31, 2000 and December 31, 1999
<TABLE>
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(Unaudited)
March 31, December 31,
Assets 2000 1999
------ ---- ----
<S> <C> <C>
Property and equipment:
Land $ 182,500 182,500
Land improvements 185,000 185,000
Buildings 2,487,824 2,487,824
Furniture, fixtures and equipment 169,992 169,992
----------- -----------
3,025,316 3,025,316
Less accumulated depreciation 1,753,995 1,753,995
----------- -----------
Net property and equipment 1,271,321 1,271,321
Cash -- 6,883
Due from minority interest in consolidated joint venture -- 8,644
Security deposits 40,518 40,365
Escrow deposits 43,714 52,598
Prepaid expenses 8,166 15,555
Mortgage costs, less accumulated amortization of
$45,456 in 2000 and $44,020 in 1999 155,495 156,931
----------- -----------
Total assets $ 1,519,214 1,552,297
=========== ===========
Liabilities and Partners' Deficiency
------------------------------------
Liabilities:
Mortgage loan payable 2,861,452 2,867,486
Accounts payable and accrued expenses 190,609 207,133
Payables to affiliated parties 1,809,132 1,821,768
Accrued interest payable 46,458 21,506
Security deposits and prepaid rents 50,328 66,026
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Total liabilities 4,957,979 4,983,919
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Minority interest in consolidated joint venture 108,962 --
----------- -----------
Partners' deficiency:
General partners (797,971) (796,810)
Limited partners (2,749,756) (2,634,812)
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Total partners' deficiency (3,547,727) (3,431,622)
----------- -----------
Contingency
----------- -----------
Total liabilities and partners' deficiency $ 1,519,214 1,552,297
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Statements of Operations
Three months ended March 31, 2000 and 1999
(Unaudited)
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<CAPTION>
Three months ended
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March 31, March 31,
2000 1999
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Income:
Rental $ 197,939 159,601
Interest and other income 10,187 14,716
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Total income 208,126 174,317
--------- ---------
Expenses:
Property operations 120,524 106,157
Interest:
Affiliated parties 40,836 41,031
Other 65,854 66,386
Administrative:
Affiliated parties 13,185 22,078
Other 36,712 38,721
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Total expenses 277,111 274,373
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Loss before minority interest in joint venture operations (68,985) (100,056)
Minority interest in joint venture operations (47,120) 21,690
--------- ---------
Net loss $(116,105) (78,366)
========= =========
Net loss per limited partnership unit $ (37.08) (25.03)
========= =========
Weighted average number of limited partnership
units outstanding 3,100 3,100
========= =========
</TABLE>
See accompanying notes to financial statements.
4
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Statement of Partners' Deficiency
Three months ended March 31, 2000
(Unaudited)
<TABLE>
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General Limited Partners
Partners Units Amount
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<S> <C> <C> <C>
Balances at January 1, 2000 $ (796,810) 3,100 (2,634,812)
Net loss (1,161) -- (114,944)
---------- ---------- ----------
Balances at March 31, 2000 $ (797,971) 3,100 (2,749,756)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
5
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited)
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<CAPTION>
Three months ended
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March 31, March 31,
2000 1999
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Cash flows from operating activities:
Net loss $(116,105) (78,366)
Adjustments to reconcile net loss to net cash
provided by (used in) in operating activities:
Depreciation and amortization 1,436 1,436
Equity in joint venture allocated to minority interest 47,120 (21,690)
Changes in:
Security deposits (153) (14,919)
Escrow deposits 8,884 (11,323)
Prepaid expenses 7,389 6,623
Accounts payable and accrued expenses 59,813 38,731
Payables to affiliated parties (12,636) 81,361
Accrued interest payable 24,952 (41)
Security deposits and prepaid rents (15,698) (4,913)
--------- ---------
Net cash provided by (used in) operating
activities 5,002 (3,101)
Cash flows from investing activities - additions to property
and equipment (5,851) --
Cash flows from financing activities - principal payments
on mortgage loan (6,034) (5,517)
--------- ---------
Net decrease in cash (6,883) (8,618)
Cash at beginning of period 6,883 8,618
--------- ---------
Cash at end of period $ -- --
========= =========
Supplemental disclosures:
Cash paid during the period for interest $ 40,877 64,991
========= =========
Conversion of joint venture payable to minority
interest equity $ 70,486 --
========= =========
</TABLE>
See accompanying notes to financial statements.
6
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Notes to Financial Statements
Three months ended March 31, 2000 and 1999
(Unaudited)
(1) Basis of Presentation
--------------------------
The accompanying interim financial statements have been prepared in
accordance with generally accepted accounting principles and, in the
opinion of management, contain all necessary adjustments for a fair
presentation. The Partnership's significant accounting policies are set
forth in its December 31, 1999 Form 10-K. The interim financial
statements should be read in conjunction with the financial statements
included therein. The interim results should not be considered
indicative of the annual results. Certain reclassifications of prior
period numbers may have been made to conform to the current period
presentation.
(2) Organization
-----------------
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 investments.
The general partners are Realmark Properties, Inc. (the corporate
general partner) and Joseph M. Jayson (the individual general partner).
Joseph M. Jayson is the sole stockholder 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
their affiliates can receive compensation for services rendered, and
reimbursement for expenses incurred on behalf of the Partnership. The
Partnership's principal asset is a 60% interest in a joint venture that
is consolidated. The Venture's only asset is an operating property,
Carriage House of Englewood. The other 40% of the Venture is owned by
Realmark Property Investors Limited Partnership - VIA, an entity
affiliated through common general partners.
(3) Property and Equipment
---------------------------
In July 1996, a plan was established to dispose of Carriage House of
Englewood. Management has determined that a sale of the property is in
the best interest of the limited partners and continues to actively
market the property for sale. Therefore, the assets are carried at the
lower of depreciated cost or fair value less costs to sell and have not
been depreciated during the disposal period. Depreciation expense not
recorded for the three months ended March 31, 2000 and 1999 was
approximately $30,000 for each period.
7
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Notes to Financial Statements, Continued
(4) Current Accounting Pronouncements
--------------------------------------
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 - "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an Amendment of
Statement No. 133" which amends certain provisions of Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative
Instruments and Hedging Activities". These statements establish
accounting and financial reporting for derivative instruments and
hedging activities. These statements become effective for the
Partnership on January 1, 2001. The effect, if any, that Statements No.
133 and 138 will have on the Partnership's operations and financial
position will not be material.
(5) Going Concern Considerations
---------------------------------
The Partnership has sustained recurring losses from operations, has cash
flow difficulties, and an accumulated partners' deficiency, these items
raise substantial doubt about the Partnership's ability to continue as
a going concern. Management has established 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 obtain leases. Operating expense reductions are planned as a result
of a reduction in deferred maintenance and replacements at the property
as compared to prior years.
(6) Subsequent Events - Contingency
------------------------------------
The Partnership, as a nominal defendant, the General Partners of the
Partnership and the three individuals constituting the officers and
directors of the Corporate General Partner, as defendants, were served
with a Summons and Complaint on August 21, 2000 in a class and
derivative action instituted by Sean O'Reilly and Louise Homburger, in
Supreme Court, County of Erie, State of New York. The action alleges
breach of contract and breach of fiduciary duty and seeks, among other
things, an accounting, the removal of the General Partners, the
liquidation of the Partnership and the appointment of a receiver to
supervise the liquidation, and damages. The General Partners and the
officers and directors of the Corporate General Partner are presently
reviewing the complaint and intend to vigorously pursue their defense.
8
<PAGE>
PART I - Item 2: Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
And Results of Operations
-------------------------
Liquidity and Capital Resources
-------------------------------
The Partnership continues operating with cash flow shortages and losses from
operations. Although total revenue increased when comparing the three months
ended March 31, 2000 and 1999, the Partnership still relies on funds advanced
from the Corporate General Partner and/or its affiliates. Additionally, the
Corporate General Partner and/or its affiliates have not taken fees or
reimbursements they are entitled to so that the Partnership may otherwise cover
its other obligations. The General Partner is under no obligation to make
advances and there is no assurance that the General Partner will continue to do
so. The General Partner has advanced $1,809,132, as of March 31, 2000, payable
on demand. Interest is accrued on the average outstanding balance at the rate of
11% per annum.
The Partnership does not anticipate making any distributions until its 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 Partnership could default on the mortgage. The
General Partner has been corresponding with the guarantor of the mortgage loan,
the United States Department of Housing and Urban Development (HUD), and the
mortgagee in search of means of obtaining more usable cash to operate the
property.
The General Partner is attempting to stabilize the property's cash flow by
increasing occupancy (i.e., bring it to full occupancy even if it means lowering
target rents). Full occupancy will improve cash flow to physically improve the
property and anything else necessary to make the property more attractive to
potential renters. Once cash flow improves, rents can be increased. At March 31,
2000, occupancy was approximately 85% and management believes the complex will
continue to see a steady increase in occupancy over the next several months.
The General Partner continues to aggressively seek a buyer for the property as
it is felt that the sale of the property is in the best interests of the limited
partners. At this time it is highly unlikely that the Limited Partners will
receive any proceeds from the sale.
Results of Operations
---------------------
For the three months ended March 31, 2000, the Partnership's loss before
minority interest decreased approximately $31,000 compared to the quarter ended
March 31, 1999.
The primary reason for the improvement was rental income increasing by
approximately $38,000. The change is attributable to increased occupancy and
improved collections. Property operations expenses increased approximately
$14,000 in the three months ended March 31, 2000, with several expense
categories accounting for the increase, each to a minor degree.
The Partnership is making every effort to control/maintain property operation
and administrative expenses, however additional expenses, such as cleaning,
painting, and carpeting costs related to preparing units for new tenants, are
expected to result in higher property operations expenses in the future. Such
expenses are deemed necessary in order to improve occupancy.
9
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PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership's cash equivalents are short-term, interest-bearing bank
accounts and its mortgage loans are fixed-rate. It has not entered
into any derivative contracts. Therefore, it has no market risk
exposure.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
--------------------------
The Partnership, as a nominal defendant, the General Partners of the
Partnership and the three individuals constituting the officers and
directors of the Corporate General Partner, as defendants, were served
with a Summons and Complaint on August 21, 2000 in a class and
derivative action instituted by Sean O'Reilly and Louise Homburger, in
Supreme Court, County of Erie, State of New York. The action alleges
breach of contract and breach of fiduciary duty and seeks, among other
things, an accounting, the removal of the General Partners, the
liquidation of the Partnership and the appointment of a receiver to
supervise the liquidation, and damages. The General Partners and the
officers and directors of the Corporate General Partner are presently
reviewing the second complaint and intend to vigorously pursue their
defense.
Items 2, 3, 4 and 5
-------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
The Partnership reported a change in independent accountants under item 4
of Form 8-K, filed on January 19, 2000 and amended on February 3, 2000,
April 17, 2000 and May 2, 2000.
10
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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 PARTNERHIP
By: /s/ Joseph M. Jayson 11/15/2000
----------------------------------- --------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
11
