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, 1997 0-11909
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
(Exact Name of Registrant as specified in its Charter)
Delaware 16-1212761
- -------------------- --------------------------------
(State of Formation) (IRS Employer Identification No.)
2350 North Forest Road
Suite 12-A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-0280
Indicate by a check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-Q or any
amendment to this Form 10-Q. (X)
As of June 30, 1997, the issuer had 10,000 units of limited partnership interest
outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
--------------------------------------------------
INDEX
-----
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
June 30, 1997 and December 31, 1996 3
Statements of Operations -
Three Months Ended June 30, 1997 and 1996 4
Statements of Operations -
Six Months Ended June 30, 1997 and 1996 5
Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 6
Statements of Partners' (Deficit) -
Six Months Ended June 30, 1997 and 1996 7
Notes to Financial Statements 8 - 18
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -------- FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS 19 - 20
----------
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Property, at cost:
Land $ 848,015 $ 848,015
Buildings and improvements 8,907,138 8,907,138
Furniture and fixtures 425,000 425,000
------------ ------------
10,180,153 10,180,153
Less accumulated depreciation 5,077,300 4,987,317
------------ ------------
Property, net 5,102,853 5,192,836
Cash 0 7,121
Cash - security deposits 70,012 50,510
Escrow deposits 372,885 259,109
Accounts receivable, net of allowance for doubtful
accounts of $146,282 and $125,129, respectively 10,004 6,423
Mortgage costs, net of accumulated
amortization of $92,657 and $90,558 249,739 253,937
Other assets 20,299 36,120
------------ ------------
Total Assets $ 5,825,792 $ 5,806,056
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Cash overdraft $ 171,956 $ 0
Mortgages payable 5,433,678 5,514,863
Accounts payable and accrued expenses 397,150 526,132
Account payable - affiliates 12,914 0
Accrued interest 41,352 49,080
Security deposits and prepaid rents 110,428 81,779
------------ ------------
Total Liabilities 6,167,478 6,171,854
------------ ------------
Losses of unconsolidated joint ventures
in excess of investment 920,914 917,376
------------ ------------
Minority interest in consolidated
joint venture 507,322 371,120
------------ ------------
Partners' (Deficit):
General partners (213,853) (210,366)
Limited partners (1,556,069) (1,443,328)
------------ ------------
Total Partners' (Deficit) (1,769,922) (1,653,694)
------------ ------------
Total Liabilities and Partners' (Deficit) $ 5,825,792 $ 5,806,656
============ ============
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF OPERATIONS
Three Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1997 1996
Income:
Rental $ 445,269 $ 411,373
Interest and other income 35,318 20,758
--------- ---------
Total income 480,587 432,131
--------- ---------
Expenses:
Property operations 173,887 193,618
Interest 123,953 131,970
Depreciation and amortization 49,634 101,165
Administrative:
Paid to affiliates 67,168 52,424
Other 77,607 70,642
--------- ---------
Total expenses 492,249 549,819
--------- ---------
Loss before allocated loss from joint venture
and loss allocated to minority interest (11,662) (117,688)
Allocated loss from joint venture (1,927) (10,274)
(Income) loss allocated to minority interest (60,288) 41,341
--------- ---------
Net loss ($ 73,877) ($ 86,621)
========= =========
Loss per limited partnership unit ($ 7.17) ($ 8.40)
========= =========
Distributions per limited partnership unit $ 0.00 $ 0.00
========= =========
Weighted average number of
limited partnership units
outstanding 10,000 10,000
========= =========
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
<S> <C> <C>
Income:
Rental $ 917,302 $ 849,979
Interest and other income 46,926 47,206
----------- -----------
Total income 964,228 897,185
----------- -----------
Expenses:
Property operations 368,281 471,439
Interest 248,701 260,189
Depreciation and amortization 96,725 199,996
Administrative:
Paid to affiliates 106,586 76,431
Other 120,423 120,046
----------- -----------
Total expenses 940,716 1,128,101
----------- -----------
Income (loss) before allocated loss from joint venture
and (income) loss allocated to minority interest 23,512 (230,916)
Allocated loss from joint venture (3,538) (31,048)
(Income) loss allocated to minority interest (136,202) 55,623
----------- -----------
Net loss ($ 116,228) ($ 206,341)
=========== ===========
Loss per limited partnership unit ($ 11.27) ($ 20.02)
=========== ===========
Distributions per limited partnership unit $ 0.00 $ 0.00
=========== ===========
Weighted average number of
limited partnership units
outstanding 10,000 10,000
=========== ===========
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Cash flow from operating activities:
Net loss ($116,228) ($206,341)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 96,725 199,996
Loss from joint venture 3,538 31,048
Minority interest share of net income (loss) 136,202 (55,623)
Changes in operating assets and liabilities:
Cash - security deposits (19,502) (375)
Escrow deposits (113,776) 70,188
Accounts receivable (3,581) 5,660
Other assets 11,778 31,049
Accounts payable and accrued expenses (128,982) (67,404)
Accrued interest (7,728) 0
Security deposits 28,649 15,938
--------- ---------
Net cash (used in) provided by operating activities (112,905) 24,136
--------- ---------
Cash flow from investing activities and Net
cash (used in) provided by investing activities 0 0
--------- ---------
Cash flows from financing activities:
Cash overdraft 171,956 41,301
Accounts payable - affiliates 12,914 (35,050)
Principal payments on mortgages and notes (81,185) (60,911)
Mortgage costs 2,099 0
Distributions to partners 0 0
--------- ---------
Net cash provided by (used in) financing activities 105,784 (54,660)
--------- ---------
Increase (decrease) in cash (7,121) (30,524)
Cash - beginning of period 7,121 30,524
--------- ---------
Cash - end of period $ 0 $ 0
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 256,429 $ 309,327
========= =========
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF PARTNERS' (DEFICIT)
Six Months Ended June 30, 1997 and 1996
(Unaudited)
General Limited Partners
Partners --------------------------
Amount Units Amount
------ ----- ------
Balance, January 1, 1996 ($ 197,803) 10,000 ($1,037,114)
Net loss (6,190) 0 (200,151)
----------- ----------- -----------
Balance, June 30, 1996 ($ 203,993) 10,000 ($1,237,265)
=========== =========== ===========
Balance, January 1, 1997 ($ 210,366) 10,000 ($1,443,328)
Distributions to partners 0 0 0
Net loss (3,487) 0 (112,741)
----------- ----------- -----------
Balance, June 30, 1997 ($ 213,853) 10,000 ($1,556,069)
=========== =========== ===========
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
1. GENERAL PARTNER'S DISCLOSURE
----------------------------
In the opinion of the General Partners of Realmark Property Investors
Limited Partnership II, all adjustments necessary for the fair
presentation of the Partnership's financial position, results of
operations, and changes in cash flows for the six months ended June 30,
1997 and 1996 have been made in the financial statements. The financial
statements are unaudited and subject to any year-end adjustments which may
be necessary.
2. FORMATION AND OPERATION OF PARTNERSHIP
--------------------------------------
Realmark Property Investors Limited Partnership II (the "Partnership"), a
Delaware Limited Partnership, was formed March 25, 1982, to invest in a
diversified portfolio of income-producing real estate.
In September 1982, the Partnership commenced the public offering of units
of limited partnership interest. Other than matters relating to
organization, it had no business activities and, accordingly, had not
incurred any expenses or earned any income until the first interim closing
(minimum closing) of the offering which occurred January 31, 1983. All
items of income and expense arose subsequent to this date. On August 31,
1983, the offering was concluded, at which time 10,000 units of limited
partnership interest were outstanding. The General Partners are Realmark
Properties, Inc., a Delaware corporation, the corporate General Partner,
and Mr. Joseph M. Jayson, the individual General Partner. Joseph M. Jayson
is the sole shareholder of J.M. Jayson & Company, Inc. (JMJ) and Realmark
Properties, Inc. is a wholly-owned subsidiary of J.M. Jayson & Company,
Inc.
Under the Partnership agreement, the General Partners and affiliates can
receive compensation for services rendered and reimbursement for expenses
incurred on behalf of the Partnership.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
--------------------------------------------------
Net income or loss arising from the sale or refinancing shall be
distributed first to the limited partners in an amount equivalent to a 7%
return on the average of their adjusted capital contributions, then in an
amount equal to their capital contributions, then an amount equal to an
additional 5% of the average of their adjusted capital contributions after
the general partners receive a disposition fee, then to all partners in an
amount equal to their respective positive capital balances, and finally,
in the ratio of 86% to the limited partners and 14% to the general
partners.
Partnership income or loss not arising from sale or refinancing shall be
allocated 97% to the limited partners and 3% to the general partners.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
Cash - security deposits
------------------------
Cash - security deposits represents cash on deposit in accordance with
terms of a U.S. Department of Housing and Urban Development (HUD)
regulatory agreement for multi-family housing projects under Section
223(f).
Property and depreciation
-------------------------
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. Expenditures for maintenance and
repairs are expensed as incurred, and major renewals and betterments are
capitalized. The Accelerated Cost Recovery System are used to calculate
depreciation expense for tax purposes.
Minority interest in consolidated joint venture
-----------------------------------------------
The minority interest in a consolidated joint venture is stated at the
amount of capital contributed by the minority investor adjusted for its
share of joint venture losses.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Rental income
-------------
Rental income is recognized under the operating method. The outstanding
leases with respect to rental properties owned are for terms of no more
than one year for residential properties and five years for commercial
buildings.
Escrow deposits
---------------
Escrow deposits represent cash which is restricted for the payment of
property taxes or for repairs and replacements in accordance with the
mortgage agreement.
4. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
----------------------------------------------
In January 1984 the Partnership acquired a 120 unit apartment complex
(Colony of Kettering) located in Kettering, Ohio for a purchase price of
$2,769,650, which included $197,032 in acquisition fees. The property was
sold in December 1986 for $3,850,000 which generated a total net gain for
financial statement purposes of $1,482,290. For income tax purposes, the
gain is being recognized under the installment method.
In February 1984 the Partnership acquired a 250 unit complex (Foxhunt)
located in Dayton, Ohio for a purchase price of $5,702,520, which included
$455,637 in acquisition fees.
In December 1983 the Partnership acquired an office complex (Northwind)
located in East Lansing, Michigan for a purchase of $3,876,410, which
included $123,950 in acquisition fees.
In July of 1996, the Partnership entered into a plan to dispose of the
property, plant and equipment of Foxhunt Apartments with a carrying amount
of $2,886,577. Management has determined that a sale of the property is in
the best interest of the investors. As of June 30, 1997, the agreement,
with an anticipated sales price of $7.4 million, was canceled by the
buyer.
-10-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
----------------------------------------------------------
Financial Accounting Standards Statement No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
Of (the "Statement") requires that assets to be disposed of be recorded at
the lower of carrying value or fair value, less costs to sell. The
Statement also requires that such assets not be depreciated during the
disposal period, as the assets will be recovered through sale rather than
through operations. In accordance with this Statement, the long-lived
assets of the Partnership, classified as held for sale on the balance
sheet, are recorded at the carrying amount which is the lower of carrying
value or fair value less costs to sell, and have not been depreciated
during the disposal period. Depreciation expense, not recorded during the
disposal period, for the six months ended June 30, 1997 totaled
approximately $93,000.
5. INVESTMENT IN JOINT VENTURES
----------------------------
In December 1983 the Partnership entered into an agreement with Adaron
Group (Adaron) and formed Research Triangle Industrial Park West
Associates Joint Venture (Joint Venture), the primary purpose of which was
to construct office/warehouse buildings as income producing property.
Under the terms of the agreement, the Partnership was to provide the
majority of the capital required for the purchase of land and completion
of the Joint Venture's development, while Adaron was to provide
development supervision and management services.
The initial phase of development, which was sold in June 1987, consisted
of two buildings: a 101,000 square foot office/distribution building and a
42,000 square foot office building. The purchaser of the property was not
affiliated with either joint venture partner. The Partnership received
approximately $2,300,000 in proceeds from the sale, and in July 1987 these
proceeds were distributed to the limited partners.
On August 20, 1992 Realmark Property Investors Limited Partnership VI-A
(RPILP VI-A) purchased Adaron's Joint Venture interest, acquiring
substantially all of the rights previously held by Adaron. Ownership of
the Joint Venture is now divided equally between the Partnership and RPILP
VI-A. The original Joint Venture agreement provided that the Partnership
be allocated 95% of any income or loss incurred during phase I, while the
most recent agreement provides for the allocation of 50% of any income or
loss from phase II to both the Partnership and RPILP VI-A.
-11-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
----------------------------------------
Net cash flow from the Joint Venture is to be distributed as follows:
To the Partnership until it has received a return of 8% (10.25% prior to
September 1986) per annum on the amount of capital contributed by the
Partnership. To the extent such return is not received from year to year,
it will accrue and be paid from the next available cash flow; to the Joint
Venturer up to an amount equal to that paid to the Partnership. No amount
will be accrued in favor of the other investor; any remaining amounts will
be distributed 60% to the Joint Venturer and 40% to the Partnership.
To the extent there are net proceeds from any sale or refinancing of the
subject property, said proceeds will be paid first to the Partnership to
the extent the 8% (10.25% prior to September 1986) per annum return on its
invested capital is unpaid. Any additional net proceeds will be payable to
the Partnership until it has received an amount equal to its capital
contributions, reduced by any prior distribution of sale or refinancing
proceeds. Thereafter, any remaining net proceeds will be divided 50% to
the Partnership and 50% to the other Joint Venturer.
On August 20, 1992, the Partnership entered into an agreement with Adaron
Group to form the Research Triangle Land Joint Venture. The primary
purpose of this joint venture is to develop land on the site of Research
Triangle. The ownership of the joint venture is 50% attributable to Adaron
Group and 50% to the Partnership. The value allocated to the land in this
joint venture is shown at cost of $412,500. This joint venture had no
operations and limited expenses, including real estate taxes and insurance
expense, for the six month period ended June 30, 1997.
A summary of the combined assets, liabilities and equity of the joint
venture as of June 30, 1997 and December 31, 1996, and the results of its
operations for the six month periods ended June 30, 1997 and 1996 are as
follows:
-12-
<PAGE>
RESEARCH TRIANGLE INDUSTRIAL PARK JOINT VENTURES
BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 867,420 $ 745,127
Property, net of accumulated depreciation 1,383,391 1,601,125
Other assets 359,400 317,913
----------- -----------
Total Assets $ 2,610,211 $ 2,664,165
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Notes payable $ 4,956,326 $ 4,996,884
Accounts payable - affiliates 29,829 $ 37,406
Accounts payable and accrued expenses 97,699 96,443
----------- -----------
Total Liabilities 5,083,854 5,130,733
----------- -----------
Partners' (Deficit):
General partners (1,137,405) (1,133,867)
Other investors (1,336,239) (1,332,701)
----------- -----------
Total Partners' (Deficit) (2,473,643) (2,466,568)
----------- -----------
Total Liabilities and Partners' (Deficit) $ 2,610,211 $ 2,664,165
=========== ===========
</TABLE>
-13-
<PAGE>
RESEARCH TRIANGLE INDUSTRIAL PARK JOINT VENTURES
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Income:
Rental $ 499,029 $ 506,807
Interest and other income 2,562 380
--------- ---------
Total income 501,591 507,187
--------- ---------
Expenses:
Property operations 30,299 66,756
Interest 214,654 218,250
Depreciation and amortization 227,735 255,315
Administrative 35,978 28,961
--------- ---------
Total expenses 508,666 569,282
--------- ---------
Net loss ($ 7,075) ($ 62,095)
========= =========
Allocation of net loss:
The Partnership ($ 3,538) ($ 31,048)
RPILP II (3,537) (31,047)
--------- ---------
($ 7,075) ($ 62,095)
========= =========
A reconciliation of the investments in Research Triangle Industrial Park Joint
Ventures:
Investment in Joint Venture at beginning of period ($1,133,867)
Allocated loss (3,538)
-----------
Investment in Joint Venture at end of period ($1,137,405)
===========
-14-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
----------------------------------------
On September 27, 1991 the Partnership entered into an agreement to form a
joint venture with Realmark Property Investors Limited Partnership VI-A
(RPILP VI-A) and Realmark Property Investors Limited Partnership VI-B
(RPILP VI-B). The joint venture was formed for the purpose of operating
the Foxhunt Apartment complex owned by the Partnership. Under the terms of
the agreement, RPILP VI-A contributed $390,000 and RPILP VI-B $1,041,568
to buy out the promissory note on the property. The Partnership
contributed the property net of the first mortgage.
The original joint venture agreement provided that any income, loss, gain,
cash flow, or sale proceeds be allocated 63.14% to the Partnership, 10.04%
to RPILP VI-A and 26.82% to RPILP VI-B. On April 1, 1992, utilizing
proceeds from a mortgage refinancing, the Partnership bought out RPILP
VI-A's interest and decreased RPILP VI-B's ownership interest to 11.5%.
The net loss of the joint venture from the date of inception through June
30, 1997 has been allocated to the minority interests in accordance with
the agreements and has been recorded as a reduction of their capital
contributions.
A reconciliation of the minority interests share in the Foxhunt Joint
Venture is as follows:
Balance, January 1, 1997 $ 371,120
Allocated income 136,202
---------
Balance, June 30, 1997 $ 507,322
=========
6. MORTGAGES PAYABLE
-----------------
Northwind Office Park
---------------------
A mortgage with a balance of $620,864 and $706,262 at June 30, 1997 and
1996, respectively, bearing interest at 9.75%. The mortgage provides for
annual principal and interest payments of $147,660, payable in equal
monthly installments with the remaining balance due December 2002.
A mortgage with a balance of $299,171 and $331,619 at June 30, 1997 and
1996, respectively, bearing interest at 9.00%. The mortgage provides for
annual principal and interest payments of $57,936, payable in equal
monthly installments with the remaining balance originally due September
1995. The Partnership has not been granted an extension and therefore the
loan is currently callable on demand.
-15-
<PAGE>
MORTGAGES PAYABLE (CONTINUED)
-----------------------------
Foxhunt Apartments
------------------
A mortgage with a balance of $4,513,643 and $4,542,292 at June 30, 1997
and 1996, respectively, bearing interest at 9.00%. Annual principal and
interest payments of $436,296 are due in equal monthly installments until
maturity in March 2027.
The aggregate maturities of the mortgages for each of the next five years
and thereafter are as follows:
Year Amount
1997 $ 439,747
1998 128,394
1999 141,220
2000 155,328
2001 170,847
Thereafter 4,479,327
------------
TOTAL $ 5,514,863
============
7. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for the management of Partnership properties are paid to
an affiliate of the General Partner. 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 $47,596
and $33,000 for the six months ended June 30, 1997 and 1996, respectively.
According to the terms of the Partnership agreement, the general partners
are entitled to receive a Partnership management fee equal to 7% of net
cash flow (as defined in the Partnership agreement), 2% of which is
subordinated to the limited partners having received an annual cash return
equal to 7% of their adjusted capital contributions. No such fee has been
paid or accrued by the Partnership for the six months ended June 30, 1997
and 1996.
Accounts payable - affiliates amounted to $12,914 at June 30, 1997. This
balance is payable on demand.
-16-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partner. The fee is based upon the number of
apartment units and totaled $2,280 for both the six months ended June 30,
1997 and 1996, respectively.
The general partners are also allowed to collect a property disposition
fee upon the sale of acquired properties. This fee is not to exceed the
lesser of 50% of amounts customarily charged in arm's-length transactions
by others rendering similar services for comparable properties or 3% of
the sales price. The property disposition fee is subordinate to payments
to the limited partners of a cumulative annual return (not compounded)
equal to 7% of their average adjusted capital balances and to repayment to
the limited partners of an amount equal to their original capital
contributions. Fees earned on the sale of Colony of Kettering and Research
Phase I are approximately $115,500 and $315,000, respectively. These
amounts will not be recorded as Partnership liabilities until such time as
payment becomes probable.
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.
-17-
<PAGE>
INCOME TAXES (CONTINUED)
------------------------
The reconciliation of net loss for the six month periods ended June 30,
1997 and 1996 as reported in the statements of operations, and as would be
reported for tax purposes respectively, is as follows:
June 30, June 30,
1997 1996
---- ----
Net loss -
Statement of operations $ (116,228) $ (206,340)
(Add to) deduct from:
Difference in depreciation (39,490) (31,366)
Difference in amortization of
loan discount - 1,110
Allowance for doubtful accounts 13,780 11,000
Difference in depreciation -
Joint Ventures 57,790 96,592
----------- -----------
Net (loss) for tax purposes $ ( 84,148) $ (129,004)
=========== ===========
The reconciliation of partner's (deficit) at June 30, 1997 and December
31, 1996 as reported in the balance sheets, and as reported for tax
purposes, is as follows:
June 30, December 31,
1997 1996
---- ----
Partner's (Deficit) - balance sheet $ (1,769,922) $ (1,653,694)
Add to (deduct from):
Accumulated difference in
depreciation (3,866,709) (3,827,219)
Accumulated amortization
of discounts on mortgage
payables 1,208,424 1,208,424
Syndication fees 1,133,176 1,133,176
Gain on sale of property (561,147) (561,147)
Allowance for doubtful
accounts 126,789 113,009
Other (102,558) (102,558)
Difference in Investment
in Joint Venture 636,280 578,490
------------ ------------
Partner's (Deficit) - tax return $ (3,195,667) $ (2,701,946)
============ =============
-18-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- -------------------------------
Although the Partnership continues to operate with a net loss for the six month
period ended June 30, 1997, there are definite signs of improvement as compared
to the same six month period in the previous year. Rental income has increased
significantly from the six month period ended June 30, 1997 as compared to the
same period in 1996 due to management's continued efforts to increase both
occupancies and collections. Successful controls over expenses, such as closer
monitoring of payroll and other operating expenses, continue to result in
decreased expenses. Fox Hunt Apartments and Research Triangle Office Complex
have maintained stable, if not increased, occupancies, while Northwind Office
Park continues to struggle with lower than expected occupancies. The General
Partners have been sending out packages to lenders to refinance the Northwind
property at a lower interest rate than is currently being paid, but with the low
occupancy, there is no guaranty that they will be successful. Management
continues to undertake activities to stabilize occupancies, increase rents, and
otherwise enhance the value of the portfolio in anticipation of the possible
refinancing or sale of properties.
The Partnership made no distributions during the six month period ended June 30,
1997, and the General Partner does not anticipate making any distributions until
the cash flow from the properties improves and necessary capital improvements to
the properties have been completed. The General Partner is seeking a new
purchaser for the Fox Hunt Apartments; the previously reported signed sales
contract was terminated by the purchaser since the local government was opposed
to a one-hundred percent low income housing project, and accordingly would not
support the issuance of the tax exempt bonds through the State Housing Agency.
Due to the opposition from the local government, the purchaser decided that the
likelihood of obtaining a bond allocation would be difficult and opted to
terminate the contract.
Results of Operations:
- ----------------------
For the quarter ended June 30, 1997, the Partnership's net loss was $73,877 or
$7.17 per limited partnership unit. Net loss for the quarter ended June 30, 1996
amounted to $86,621 or $8.40 per unit. For the six month period ended June 30,
1997, the net loss was $116,228 or $11.27 per limited partnership unit as
compared to $206,341 or $20.02 per limited partnership unit for the six month
period ended June 30, 1996.
-19-
<PAGE>
Results of Operations (continued):
- -----------------------------------
Partnership revenue for the quarter ended June 30, 1997 totaled $480,587, an
increase of slightly over $48,000 from the 1996 amount of $432,131. Total rental
revenue increased almost $34,000, while interest and other income increased just
over $14,500. The increase in rental revenue during the quarter can be
attributed to increased economic occupancy levels and improved collections at
Foxhunt Apartments. Research Triangle Industrial Park continues to add financial
strength to the Partnership as it maintains high occupancy due to the demand in
its location for commercial office space. For the six month period ended June
30, 1997, Partnership revenue totaled $964,228 as compared to $897,185 for the
same period in the previous year.
For the quarter ended June 30, 1997, Partnership expenses amounted to $492,249,
decreasing by just in excess of $57,500 from the 1996 quarter amount. For the
six month period ended June 30, 1997, Partnership expenses decreased by over
$187,000 from the same period in 1996. A large decrease in property operations
expenditures should be noted; in this area, specifically, a considerable
decrease of over $54,000 in payroll and associated costs at the Foxhunt
Apartments. There were also large decreases in repairs and maintenance and
contracted services at Fox Hunt due to increased amounts of such work being
performed by on-site maintenance personnel. There was also a large decrease in
total expenses for the first six months of 1997 as compared to the same period
in 1996 at Northwind Office Building. Administrative expenses for the quarter
ended June 30, 1997 increased over $21,000 as compared to the quarter ended June
30, 1996. The largest increase can be seen in increased management fees due to
the higher revenues being collected.
The Research Triangle Industrial Park Joint Venture generated a total net loss
of $7,075 for the six month period ended June 30, 1997 with 50% or $3,538 of the
loss allocated to each joint venturer. The joint venture generated a net loss of
$62,095 for the six month period ended June 30, 1996 with $31,048 allocated to
each venturer. The loss has decreased primarily due to better controls over
property operations costs which were higher in the previous year due to repairs
to roofs that were being completed.
For the six months ended June 30, 1997, the Partnership generated a tax loss of
$84,148 or $8.16 per limited partnership unit. The tax loss for the first six
months of 1996 totaled $129,004 or $12.51 per unit.
-20-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
--------------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership is not a party to, nor are any of the Partnership's properties
subject to any material pending legal proceedings other than ordinary, routine
litigation incidental to the Partnership's business.
Items 2, 3, 4 and 5
- -------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
- -----------------------------------------
Form 8-K was filed August 1, 1997 to report the termination of a sales contract
previously reported on Form 8-K filed in July 1996.
-21-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP II
By: /s/Joseph M. Jayson August 8, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed 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 August 8, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
President and Director
/s/Michael J. Colmerauer August 8, 1997
------------------------------ ------------------------
Michael J. Colmerauer Date
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II FOR
SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 70,012
<SECURITIES> 0
<RECEIVABLES> 156,286
<ALLOWANCES> 146,282
<INVENTORY> 0
<CURRENT-ASSETS> 473,200
<PP&E> 10,180,153
<DEPRECIATION> 5,077,300
<TOTAL-ASSETS> 5,825,792
<CURRENT-LIABILITIES> 733,800
<BONDS> 5,433,678
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,825,792
<SALES> 0
<TOTAL-REVENUES> 964,228
<CGS> 0
<TOTAL-COSTS> 940,716
<OTHER-EXPENSES> 139,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,701
<INCOME-PRETAX> (116,228)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (116,228)
<EPS-PRIMARY> (11.27)
<EPS-DILUTED> 0
</TABLE>
