FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
June 30, 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 [ ]
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Form 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
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<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Operations - Three and six month periods ended
June 30, 2000 and 1999 4
Statement of Partners' Deficiency - Six months ended June 30, 2000 5
Statements of Cash Flows - Six months ended June 30, 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
<PAGE>
PART I - Item 1. Financial Statements
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Balance Sheets
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
Assets 2000 1999
------ ---- ----
<S> <C> <C>
Property and equipment:
Land $ 182,500 182,500
Land improvements 185,000 185,000
Buildings 2,494,354 2,487,824
Furniture, fixtures and equipment 169,992 169,992
----------- -----------
3,031,846 3,025,316
Less accumulated depreciation 1,753,995 1,753,995
----------- -----------
Net property and equipment 1,277,851 1,271,321
Cash 15,731 6,883
Due from minority interest in consolidated joint venture -- 8,644
Security deposits 43,754 40,365
Escrow deposits 20,650 52,598
Prepaid expenses 15,166 15,555
Deferred mortgage costs, less accumulated amortization of
$46,891 in 2000 and $44,020 in 1999 154,060 156,931
----------- -----------
Total assets $ 1,527,212 1,552,297
=========== ===========
Liabilities and Partners' Deficiency
------------------------------------
Liabilities:
Mortgage loan payable 2,855,281 2,867,486
Accounts payable and accrued expenses 171,166 207,133
Payable to affiliated parties 1,890,556 1,821,768
Accrued interest payable 46,458 21,506
Security deposits and prepaid rents 49,310 66,026
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Total liabilities 5,012,771 4,983,919
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Minority interest in consolidated joint venture 111,709 --
----------- -----------
Partners' deficiency:
General partners (798,466) (796,810)
Limited partners (2,798,802) (2,634,812)
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Total partners' deficiency (3,597,268) (3,431,622)
----------- -----------
Contingency
Total liabilities and partners' deficiency $ 1,527,212 1,552,297
=========== ===========
</TABLE>
See accompanying notes to financial statements
3
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Statements of Operations
Three and six month periods ended June 30, 2000 and 1999
(Unaudited)
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<CAPTION>
Three months ended Six months ended
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June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental $ 219,031 177,766 416,970 337,367
Interest and other income 7,313 21,088 17,500 35,804
--------- --------- --------- ---------
Total income 226,344 198,854 434,470 373,171
--------- --------- --------- ---------
Expenses:
Property operations 131,313 119,815 251,837 225,972
Interest:
Affiliated parties 35,138 42,613 75,974 83,644
Other 67,652 66,300 133,506 132,686
Administrative:
Affiliated parties 11,432 24,033 24,617 46,111
Other 27,603 23,432 64,315 62,153
--------- --------- --------- ---------
Total expenses 273,138 276,193 550,249 550,566
--------- --------- --------- ---------
Loss before minority interest in joint
venture operations (46,794) (77,339) (115,779) (177,395)
Minority interest in joint venture operations (2,747) 12,832 (49,867) 34,522
--------- --------- --------- ---------
Net loss $ (49,541) (64,507) (165,646) (142,873)
========= ========= ========= =========
Net loss per limited partnership unit $ (15.82) (20.60) (52.90) (45.63)
========= ========= ========= =========
Weighted average number of limited
partnership units outstanding 3,100 3,100 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
Six months ended June 30, 2000
(Unaudited)
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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 (1,656) -- (163,990)
---------- ---------- ----------
Balances at June 30, 2000 $ (798,466) 3,100 (2,798,802)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP
Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------
June 30, June 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(165,646) (142,873)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,871 2,871
Equity in joint venture allocated to minority interest 49,867 (34,522)
Changes in:
Security deposits (3,389) (24,452)
Escrow deposits 31,948 (32,874)
Prepaid expenses 389 14,528
Accounts payable and accrued expenses (34,116) 31,777
Payables to affiliated parties 139,275 181,474
Accrued interest payable 24,952 (41)
Security deposits and prepaid rents (16,716) 6,653
--------- ---------
Net cash provided by
operating activities 29,434 2,541
Cash flows from investing activities - additions to property
and equipment (8,381) --
Cash flows from financing activities-
principal payments on mortgage loan (12,205) (11,159)
--------- ---------
Net increase (decrease) in cash and cash equivalents 8,848 (8,618)
Cash at beginning of period 6,883 8,618
--------- ---------
Cash at end of period $ 15,731 --
========= =========
Supplemental disclosures:
Cash paid during the period for interest $ 105,213 129,857
========= =========
Property and equipment financed by accounts payable $ 4,000 --
========= =========
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
Six months ended June 30, 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 - VI-A, 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 and management 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
six months ended June 30, 2000 and 1999 was approximately $60,000 for
each period. For the three months ended June 30, 2000 and 1999, the
amount was $30,000 in each period.
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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 to sustain operating losses and negative cash flow
before consideration of increases in the advances from affiliates. Although
total revenue increased in the six months ended June 30, 2000, 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 to which they are entitled. 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
$1,890,556, as of June 30, 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 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. In 2000,
occupancy continues to show a steady increase to more than 90% at June 30, 2000.
The General Partner continues to aggressively seek a buyer for the property. At
this time it is unlikely that the Limited Partners will receive any proceeds
from the sale.
Results of Operations
---------------------
For the three months ended June 30, 2000, the Partnership's loss before minority
interest decreased approximately $31,000 compared to the quarter ended June 30,
1999 while, for the six month 2000 period, it decreased approximately $61,000.
The primary reason for the improvement was rental income increasing by
approximately $41,000 and $80,000 in the three and six month periods,
respectively. The change is attributable to the aforementioned increased
occupancy and improved collections. The reduction in other income was the result
of a decline in furniture rental income in both 2000 periods. Property
operations expenses increased approximately $11,000 and $26,000 in the three and
six months ended June 30, 2000, respectively, with several expense categories
accounting for the increase, none to a significant degree.
The Partnership is striving to control property operations and administrative
expenses. However, additional expenses, such as cleaning, painting, and
carpeting costs related to preparing units for new tenants, are being incurred
and are expected in the future since they are necessary to improve occupancy.
9
<PAGE>
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.
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 12/01/00
------------------------------------ -----------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
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