FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1996 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 March 31, 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 -
March 31, 1997 and December 31, 1996 3
Statements of Operations -
Three Months Ended March 31, 1997 and 1996 4
Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
Statements of Partners' (Deficit) -
Three Months Ended March 31, 1997 and 1996 6
Notes to Financial Statements 7 - 17
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS 18 - 19
----------
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
March 31, 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 5,032,308 4,987,317
------------ ------------
Property, net 5,147,845 5,192,836
Cash -- 7,721
Cash - security deposits 69,572 50,510
Escrow deposits 312,326 259,109
Accounts receivable, net of allowance for doubtful
accounts of $125,129 and $125,129, respectively 9,764 6,423
Accounts receivable - affiliates -- --
Mortgage costs, net of accumulated
amortization of $90,558 and $89,944 251,838 253,937
Other assets 30,582 36,120
------------ ------------
Total Assets $ 5,821,927 $ 5,806,656
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Cash overdraft $ 170,907 $ --
Mortgages payable 5,478,964 5,514,863
Accounts payable and accrued expenses 351,441 526,132
Accrued interest 49,255 49,080
Security deposits and prepaid rents 101,383 81,779
------------ ------------
Total Liabilities 6,151,950 6,171,854
------------ ------------
Losses of unconsolidated joint ventures
in excess of investment 918,987 917,376
------------ ------------
Minority interest in consolidated
joint venture 447,034 371,120
------------ ------------
Partners' (Deficit):
General partners (211,637) (210,366)
Limited partners (1,484,407) (1,443,328)
------------ ------------
Total Partners' (Deficit) (1,696,044) (1,653,694)
------------ ------------
Total Liabilities and Partners' (Deficit) $ 5,821,927 $ 5,806,656
============ ============
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
Income:
Rental $ 472,033 $ 438,606
Interest and other income 11,608 26,448
--------- ---------
Total income 483,641 465,054
--------- ---------
Expenses:
Property operations 194,394 277,821
Interest 124,748 128,219
Depreciation and amortization 47,091 98,831
Administrative:
Paid to affiliates 39,418 24,007
Other 42,816 49,404
--------- ---------
Total expenses 448,467 578,282
--------- ---------
Income (loss) before allocated loss from joint venture
and loss allocated to minority interest 35,174 (113,228)
Allocated loss from joint venture (1,611) (20,774)
(Income) loss allocated to minority interest (75,914) 14,282
--------- ---------
Net loss $ (42,350) $(119,719)
========= =========
Loss per limited partnership unit $ (4.11) $ (11.61)
========= =========
Distributions per limited partnership unit $ -- $ --
========= =========
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 CASH FLOWS
Three Months Ended March 31, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
Cash flow from operating activities:
Net loss $ (42,350) $ 119,719)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization 47,091 98,831
Loss from joint venture 1,611 20,774
Minority interest share of net income (loss) 75,914 (14,282)
Changes in operating assets and liabilities:
Cash - security deposits (19,062) (222)
Escrow deposits (53,217) (40,240)
Accounts receivable (3,341) 4,638
Other assets 5,538 18,732
Accounts payable and accrued expenses (174,691) (4,828)
Accrued interest 175 --
Security deposits 19,604 26,277
--------- ---------
Net cash (used in) operating activities (142,729) (10,039)
--------- ---------
Cash flow from investing activities:
Accounts receivable - affiliates -- 12,925
Capital expenditures -- --
Distributions from joint venture -- --
--------- ---------
Net cash (used in) provided by investing activities -- 12,925
--------- ---------
Cash flows from financing activities:
Cash overdraft 170,907 --
Principal payments on mortgages and notes (35,899) (32,409)
Distributions to partners -- --
--------- ---------
Net cash provided by (used in) financing activities 135,008 (32,409)
--------- ---------
(Decrease) in cash (7,721) (29,523)
Cash - beginning of period 7,721 30,524
--------- ---------
Cash - end of period $ -- $ 1,001
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 124,573 $ 128,219
========= =========
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
STATEMENTS OF PARTNERS' (DEFICIT)
Three Months Ended March 31, 1997 and 1996
(Unaudited)
General Limited Partners
Partners --------------------------
Amount Units Amount
------ ----- ------
Balance, January 1, 1996 $ (197,803) 10,000 $(1,037,114)
Distributions to partners -- -- --
Net loss (3,592) -- (116,128)
----------- ----------- -----------
Balance, March 31, 1996 $ (201,395) 10,000 $(1,153,242)
=========== =========== ===========
Balance, January 1, 1997 $ (210,366) 10,000 $(1,443,328)
Distributions to partners -- -- --
Net loss (1,271) -- (41,079)
----------- ----------- -----------
Balance, March 31, 1997 $ (211,637) 10,000 $(1,484,407)
=========== =========== ===========
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP II
NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 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 three months ended March 31,
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.
-7-
<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.
-8-
<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 March 31, 1997, the agreement,
with an anticipated sales price of $7.4 million, was canceled by the
buyer.
-9-
<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 three months ended March 31, 1997 totaled
approximately $46,500.
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.
-10-
<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 three month period ended March 31, 1997.
A summary of the combined assets, liabilities and equity of the joint
venture as of March 31, 1997 and December 31, 1996, and the results of its
operations for the three month periods ended March 31, 1997 and 1996 are
as follows:
-11-
<PAGE>
RESEARCH TRIANGLE INDUSTRIAL PARK JOINT VENTURES
BALANCE SHEETS
March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 768,972 $ 745,127
Property, net of accumulated depreciation 1,492,258 1,601,125
Other assets 320,225 317,913
----------- -----------
Total Assets $ 2,581,455 $ 2,664,165
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Notes payable $ 4,976,751 $ 4,996,884
Accounts payable - affiliates 23,822 37,406
Accounts payable and accrued expenses 50,670 96,443
----------- -----------
Total Liabilities 5,051,243 5,130,733
----------- -----------
Partners' (Deficit):
General partners (1,135,478) (1,133,867)
Other investors (1,334,311) (1,332,701)
----------- -----------
Total Partners' (Deficit) (2,469,789) (2,466,568)
----------- -----------
Total Liabilities and Partners' (Deficit) $ 2,581,455 $ 2,664,165
=========== ===========
</TABLE>
-12-
<PAGE>
RESEARCH TRIANGLE INDUSTRIAL PARK JOINT VENTURES
STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
Income:
Rental $ 246,104 $ 242,961
Interest and other income 1,448 140
--------- ---------
Total income 247,552 243,101
--------- ---------
Expenses:
Property operations 12,436 17,074
Interest 107,553 127,659
Depreciation and amortization 113,867 109,347
Administrative 16,917 30,568
--------- ---------
Total expenses 250,773 284,648
--------- ---------
Net loss $ (3,221) $ (41,547)
========= =========
Allocation of net loss:
The Partnership $ (1,611) $ (20,774)
Other investors (1,610) (20,773)
--------- ---------
$ (3,221) $ (41,547)
========= =========
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 (1,611)
-----------
Investment in Joint Venture at end of period $ (1,135,478)
============
-13-
<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 income/loss of the joint venture from the date of inception
through March 31, 1997 has been allocated to the minority interests in
accordance with the agreements and has been recorded as an
addition/reduction to 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 9,864
---------
Balance, March 31, 1997 $ 380,984
=========
6. MORTGAGES AND NOTES PAYABLE
---------------------------
Northwind Office Park
---------------------
A mortgage with a balance of $642,473 and $723,330 at March 31, 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 $306,912 and $336,284 at March 31, 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.
-14-
<PAGE>
MORTGAGES AND NOTES PAYABLE (CONTINUED)
---------------------------------------
Foxhunt Apartments
------------------
A mortgage with a balance of $4,521,048 and $4,549,062 at March 31, 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 $23,698
and $16,500 for the three months ended March 31, 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 three months ended March 31,
1997 and 1996.
-15-
<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 $1,140 and $915 for the three months ended
March 31, 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.
-16-
<PAGE>
INCOME TAXES (CONTINUED)
------------------------
The reconciliation of net loss for the three month periods ended March 31,
1997 and 1996 as reported in the statements of operations, and as would be
reported for tax purposes respectively, is as follows:
March 31, March 31,
1997 1996
---- ----
Net loss -
Statement of operations $ ( 42,350) $ (119,719)
(Add to) deduct from:
Difference in depreciation ( 19,745) ( 15,683)
Difference in amortization of
loan discount - 555
Allowance for doubtful accounts 6,890 5,500
Difference in depreciation -
Joint Ventures 28,895 48,296
------------ ----------
Net loss for tax purposes $ ( 26,310) $ ( 81,051)
============ ==========
The reconciliation of partner's (deficit) at March 31, 1997 and December
31, 1996 as reported in the balance sheets, and as reported for tax
purposes, is as follows:
March 31, December 31,
1997 1996
---- ----
Partner's (Deficit) - balance sheet$ (1,696,044) $ (1,653,694)
Add to (deduct from):
Accumulated difference in
depreciation (3,846,964) (3,827,219)
Accumulated amortization
of discounts on mortgage
payables 1,208,979 1,208,424
Syndication fees 1,133,176 1,133,176
Gain on sale of property ( 561,147) ( 561,147)
Allowance for doubtful
accounts 119,899 113,009
Other ( 102,558) ( 102,558)
Difference in Investment
in Joint Venture 607,385 578,490
------------ ------------
Partner's (Deficit) - tax return $ (3,137,274) $ (3,111,519)
============= =============
-17-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership's net loss for the quarter ended March 31, 1997 was
significantly lower than that which resulted in the same quarter of 1996.
Research Triangle Office Complex continues to generate the cash which the
Partnership needs to fund the shortfalls which Northwind Office Park generates.
Foxhunt Apartments had a very good quarter which not only saw its occupancy
percentage increase, but also a vast improvement in its collections. Management
is continually monitoring the operations of both Research Triangle and Foxhunt
to insure continued positive cash flow for the Partnership.
Management continues to market vacant space at the Northwind Office Park in
search of tenants. The low occupancy has caused the property to fall behind in
the payment of its real estate taxes and has made it virtually impossible to
refinance the property. One of the mortgages on the property came due in 1995,
and although the lender continues to accept payments, a formal extension has not
been granted, and therefore the loan is technically in default. Without an
increase in occupancy, the lack of cash flow could result in the property being
lost in a foreclosure.
Foxhunt Apartments came under contract for sale during July 1996. The contract
was subject to a number of contingencies and was cancelable at any time by the
buyer. During the first quarter of 1997, this contract was canceled. The
corporate General Partner is aggressively seeking a new buyer for this property
as it is felt that the sale of the property is in the best interests of the
limited partners.
There were no Partnership distributions for either the three months ended March
31, 1997 or 1996. Management continues to look for a lender to refinance both
Northwind and Research Triangle in an attempt to reduce debt service by securing
lower interest rates. If cash flow improves in the coming quarters, the General
Partners envision making a distribution to the partners.
Results of Operations:
- ----------------------
For the quarter ended March 31, 1997, the Partnership's net loss was $42,350 or
$4.11 per limited partnership unit. Net loss for the quarter ended March 31,
1996 amounted to $119,719 or $11.61 per limited partnership unit.
-18-
<PAGE>
Results of Operations (continued):
- -----------------------------------
Partnership revenue for the quarter ended March 31, 1997 totaled $483,641, an
increase of almost $19,000 from the 1996 amount of $465,054. Total rental
revenue was responsible for the entire increase in revenues; the increase in
rental income totaled over $33,400. Interest and other income decreased just
under $15,000. The decrease in other income can be attributed to decreases in
laundry income, late charges and security deposits forfeited. The increase in
rental income is primarily the result of a decrease in vacancies totaling
$24,795.
For the quarter ended March 31, 1997, Partnership expenses amounted to $448,467,
decreasing over $129,000 from the 1996 quarter amount. A decrease in property
operations expenditures was responsible for $83,000 of this decrease.
Specifically, large decreases in utility expenses, contracted service costs and
repairs and maintenance expenses were the primary contributors to the drop in
operations expenses. Interest expense remained fairly constant between the
quarters ended March 31, 1997 and 1996, while administrative charges increased
between the two years. Improved occupancies and collections resulted in an
increase in management fees; a large increase in portfolio management and
accounting fees was also noted. These increases were primarily due to activities
undertaken to stabilize occupancies and otherwise enhance the value of the
portfolio in anticipation of the possible refinancing or sale of properties.
The Research Triangle Industrial Park Joint Venture generated a total net loss
of $3,221 for the three month period ended March 31, 1997 with one-half of the
loss allocated to each joint venturer. The joint venture generated a net loss of
$41,547 for the three month period ended March 31, 1996. A slight increase in
rental revenue resulted, but large decreases in interest and administrative
expenses were responsible for the improvement during this quarter as compared to
the same three months in 1996.
For the three months ended March 31, 1997, the Partnership generated a tax loss
of $26,310 or $2.55 per limited partnership unit. The tax loss for the first
three months of 1996 totaled $81,051 or $7.86 per unit.
-19-
<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
- -----------------------------------------
None.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP II
By: /s/Joseph M. Jayson May 17, 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 May 17, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
President and Director
/s/Michael J. Colmerauer May 17, 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
THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 69,572
<SECURITIES> 0
<RECEIVABLES> 134,893
<ALLOWANCES> 126,129
<INVENTORY> 0
<CURRENT-ASSETS> 422,244
<PP&E> 10,180,153
<DEPRECIATION> 5,032,308
<TOTAL-ASSETS> 5,821,927
<CURRENT-LIABILITIES> 672,986
<BONDS> 5,476,964
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,821,927
<SALES> 0
<TOTAL-REVENUES> 483,641
<CGS> 0
<TOTAL-COSTS> 448,467
<OTHER-EXPENSES> 77,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127,748
<INCOME-PRETAX> (42,350)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,350)
<EPS-PRIMARY> (4.11)
<EPS-DILUTED> 0
</TABLE>