FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934. (NO FEE
REQUIRED)
Commission File Number 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) 636-9090
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of limited
partnership interest
Indicate by 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-K or any
amendment to this Form 10-K.(X)
DOCUMENTS INCORPORATED BY REFERENCE
See page 13 for a list of all documents incorporated by reference
<PAGE>
PART I
------
ITEM I: BUSINESS
- - -------- --------
The registrant, Realmark Property Investors Limited Partnership-II ("the
Partnership"), is a Delaware limited partnership organized in 1982 pursuant to
an Agreement and Certificate of Limited Partnership (the "Partnership
Agreement"), under the revised Delaware Uniform Limited Partnership Act. The
Partnership's general partners are Realmark Properties, Inc. (the "Corporate
General Partner"), a Delaware corporation, and Joseph M. Jayson (the "Individual
General Partner"). During 1988, Realmark Properties II Associates ("Associates")
and RPI Investors-II, Inc. (formally the "Corporate General Partner") were
merged with Realmark Properties, Inc. (the "Corporate General Partner").
The Registrant commenced the public offering of its limited partnership
units, registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on September 3, 1982, and concluded the
offering on August 31, 1983, having raised a total of $10,000,000 before sales
commissions and expenses of the offering.
The Partnership's primary business and its only industry segment is to own
and operate income-producing real property for the benefit of its limited
partners. The Partnership presently owns an office complex in Michigan
(Northwind Office Park), and is a partner in three joint ventures: the Research
Triangle Joint Venture, which it still holds and is developing approximately 19
acres of land in Durham County, North Carolina; the Research Land Joint Venture
which is developing approximately 16 acres of land also in Durham County, North
Carolina; and the Foxhunt Apartments Joint Venture formed for the purpose of
operating a 250 unit apartment complex in Kettering, Ohio. The Partnership sold
the Colony of Kettering Apartments, located in Kettering, Ohio in December 1986
and Phase-I of Research Triangle Joint Venture in June 1987.
The business of the Partnership is not seasonal. The Partnership, as of
December 31, 1996, did not directly employ any persons in a full-time position.
All regular employees who rendered services on behalf of the Partnership through
December 31, 1996 were employees of the Corporate General Partner or its
affiliates.
The Partnership's investment objectives are to (1) provide a return of
capital plus capital gains from the sale of appreciated properties; (2) provide
partners with cash distributions until properties are sold; (3) preserve and
protect partners capital; and (4) achieve build-up of equity through the
reduction of mortgage loans.
For the year ended December 31, 1996, approximately 75% of total
Partnership revenue was generated by the Foxhunt Apartments. The remaining 25%
is attributed to Northwind. For the years ended December 31, 1995 and 1994,
Foxhunt accounted for 74% and 70% of the total Partnership revenue, with
Northwind generating roughly 26% and 30% of total revenue, respectively.
2
<PAGE>
ITEM 2: PROPERTIES
- - ------- ----------
As of December 31, 1996, the Partnership continues to own Northwind Office
Park, an office complex located in East Lansing, Michigan. The property consists
of five office buildings, two stories each, containing a total of 89,200 gross
square feet, and 70,713 net rentable square feet. At December 31, 1996,
Northwind was 57% occupied. The 1995 occupancy was 58%, while 1994 occupancy was
81%.
The first mortgage in the amount of $663,562 bears interest at 9.75% and
provides for monthly principal and interest payments of $12,305, with the
remaining balance due in December 2002.
The second mortgage with a carrying amount of $314,481 bears interest at 9%
and provides for monthly principal and interest payments of $4,828. The
remaining balance was originally due in September 1995. No extension has been
granted to the Partnership. The balance is currently payable on demand, while
the Partnership continues to seek refinancing.
The Partnership, as of December 31, 1996, continues to own a 50% interest
in Research Triangle Industrial Park West Joint Venture ("Joint Venture"). In
December 1983, the Joint Venture acquired approximately 56.3 acres of land from
Research Triangle Industrial Park West Associates (A North Carolina General
Partnership) ("Research"), and subsequently constructed a 42,000 square foot
office building and a 101,000 square foot office/warehouse distribution building
in Phase-I (which was sold in June 1987), and a 117,000 square foot
office/warehouse distribution building in Phase-II. For the third consecutive
year, Research Triangle was 100% occupied.
Pursuant to an agreement dated September 27, 1991, the Partnership formed a
joint venture for the purposes of operating the Foxhunt apartment complex
located in Kettering, Ohio. The other two joint venturers originally contributed
a combined $1,431,568 to the joint venture, while the Partnership contributed
the property net of the first mortgage. Subsequently, the Partnership bought out
one joint venturer while reducing the ownership percentage held by the other. At
December 31, 1996 the mortgage balance was $4,528,289, carrying an interest rate
of 9%. Annual principal and interest payments of $436,296 are due in equal
monthly installments until maturity in March 2027.
The apartment complex consists of 250 units and is situated on 14.7 acres
of land. The current agreement provides that the Partnership be allocated 88.5%
of any income, loss, gain, cash flow, or sale proceeds. The property is managed
by Realmark Corporation, an affiliate of the General Partner. Occupancy for
Foxhunt in 1996 was 89%. The 1995 occupancy was 95%, while 1994 occupancy was
94%.
3
<PAGE>
ITEM 2: PROPERTIES (Con't.)
- - ------- -------------------
On August 20, 1992, the Partnership entered into an agreement with the
Adaron Group to form the Research Triangle Land Joint Venture. The primary
purpose of this joint venture is to develop additional land on the site of
Research Triangle Industrial Park West. This land was placed in the Land Joint
Venture by Research Triangle Industrial Park West. The value allocated to the
land in this joint venture is shown at cost of $432,984. This joint venture has
no outstanding debt at December 31, 1996.
ITEM 3: LEGAL PROCEEDINGS
- - ------- -----------------
The Partnership is not a party to, nor is any of the Partnership's property
the subject of, any material pending legal proceedings.
ITEM 4: SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY
- - ------- --------------------------------------------
HOLDERS
-------
None.
PART II
-------
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED
- - ------- ----------------------------------------
PARTNERSHIP INTEREST
--------------------
There is currently no active trade market for the units of Limited
Partnership Interest of the Partnership and it is not anticipated that any will
develop in the future.
As of December 31, 1996, there were 1,232 record holders of units of
Limited Partnership Interest.
There were no Partnership distributions for the year ended December 31,
1996. For the years ended December 31, 1995 and 1994, distributions amounted to
$68,040 or $6.60 per limited partnership unit and $17,010 or $1.65 per limited
partnership unit, respectively.
4
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
- - --------------------------------
<TABLE>
<CAPTION>
Realmark Properties Investors Limited Partnership II
----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total assets $ 5,806,656 $ 6,306,118 $ 6,875,605 $ 9,871,580 $ 10,484,296
============ ============ ============ ============ ============
Mortgages and
notes payable $ 5,514,863 $ 5,649,616 $ 5,771,898 $ 8,310,555 $ 8,461,894
============ ============ ============ ============ ============
_____________________________________________________________________________________________________________
Income $ 1,816,085 $ 1,946,238 $ 1,953,911 $ 2,253,442 $ 2,320,070
Expenses $ 2,196,931 $ 2,615,580 $ 2,572,654 $ 2,597,019 $ 2,617,686
------------ ------------ ------------ ------------ ------------
Loss before allocated
loss from Joint
Venture and
Minority Interest $ (380,846) $ (669,342) $ (618,743) $ (343,577) $ (297,616)
Loss from Joint Venture $ (52,873) $ (92,939) $ (116,739) $ (117,203) $ (118,364)
Loss allocated to
Minority Interest $ 14,942 $ 31,098 $ 19,538 $ 3,960 $ 8,347
------------ ------------ ------------ ------------ ------------
Net Loss $ (418,777) $ (731,183) $ (715,944) $ (456,820) $ (407,633)
============ ============ ============ ============ ============
_____________________________________________________________________________________________________________
Net cash (used in)
provided by operating
activities $ (28,291) $ (24,770) $ 53,095 $ 90,220 $ (294,463)
Collection of
mortgage receivable -- -- $ 2,600,000 -- --
Principal payments on
long-term debt net of
payments made from
Joint Venture proceeds
and debt refinancing $ (134,753) $ (124,500) $ (2,539,483) $ (211,286) $ (300,758)
------------ ------------ ------------ ------------ ------------
Net cash (used in)
provided by
operating activities
and collection of
mortgage receivable
less principal payments
on long-term debt $ (163,044) $ (149,270) $ 113,612 $ (121,066) $ (595,221)
_____________________________________________________________________________________________________________
Loss per limited
partnership unit $ (41) $ (71) $ (69) $ (44) $ (40)
============ ============ ============ ============ ============
Distributions per
limited partnership
unit $ -- $ 6.60 $ 1.65 $ 4.95 $ --
============ ============ ============ ============ ============
Weighted average
number of units
outstanding $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
============ ============ ============ ============ ============
_____________________________________________________________________________________________________________
</TABLE>
5
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources:
- - --------------------------------
The Partnership continues to rely heavily on cash generated from the
Research Triangle Office Complex. As has been true for several years, this
commercial property continues to benefit from high occupancy due to tenant
retention. The location of the building is in a rapidly growing area both in
population and in the business environment. At December 31 1996, management is
aggressively seeking new financing of the mortgage on this property; a closing
some time in early 1997 is anticipated. Foxhunt Apartments has steadily seen an
increase in occupancy figures throughout 1996. Although not at a level where it
was in previous years (i.e. 95% for 1995), management feels that the occupancy
level of 89% for 1996 will continue to increase in the coming year as has been
the trend throughout 1996. Northwind Office Complex continues to experience cash
flow difficulties stemmed from its low occupancy level(s). Management is
aggressively marketing this property in local rental guides and newspapers in
search of tenants, however market conditions in East Lansing, Michigan have made
it more difficult to compete with newer, more updated office buildings which
have been built in the same area. Northwind's cash flow shortages have caused it
to fall behind in the payment of its real estate taxes. One of Northwind's
outstanding mortgages came due in September 1995, and to date management has
been unable to refinance the debt. The mortgage holder continues to accept
payments of interest and principal, although the mortgage holder is unwilling to
grant a "formal" extension and therefore the debt is technically in default.
Unless management is able to refinance this property in the near future, the
property could be lost in a foreclosure, thus reducing the equity of the
Partnership.
Foxhunt Apartments came under contract for sale during July 1996. The sale
was subject to a number of contingencies and was cancelable at any time by the
buyer. Until such time as all of the buyer's due diligence was performed, no
closing date could be established. It appears as of the date of this writing
that the sale will in fact not close. The General Partners feel, however, that
the sale of this property is in the best interest of the Limited Partners, so
management continues to look for potential buyers.
Management has once again implemented corrective action plans in response
to the going concern consideration discussed in Note 11 to the financial
statements, as well as to deal with the United States Department of Housing and
Urban Development (HUD) noncompliance detailed in the notes to the financial
statements. These plans include tighter cash management through the closer
monitoring of expenses such as payroll, advertising and maintenance, which have
typically been the expenses that have increased from year to year. Additionally,
tighter credit policies have been put into place as a means of avoiding the
collection problems which Foxhunt incurred during the past year. The HUD
noncompliance detailed in the notes technically puts the Partnership in default
of the mortgage which could result in fines or interest charges being levied, or
the take over of the property by HUD. A concerted effort at correcting the
noncompliance will hopefully lead to the ultimate cure of such default.
The Partnership made no distributions during the year ended December 31,
1996, unlike in 1995 when distributions totaling $68,040 or $6.60 per limited
partnership unit were made, and in 1994 when distributions of $17,010 or $1.65
per limited partnership unit were made. Management hopes to once again make
distributions in the coming year, but at this date, all available cash is being
utilized to fund necessary improvements to the properties.
6
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
------------------------------------------------------
Results of Operations:
- - ----------------------
For the year ended December 31, 1996, the Partnership incurred a net loss
of $418,777 or $40.62 per limited partnership unit. This is an improvement from
the years ended December 31, 1995 and 1994 when losses incurred totaled $731,183
or $70.92 per limited partnership unit and $715,944 or $69.45 per limited
partnership unit, respectively.
Partnership revenues for the year ended December 31, 1996 totaled
$1,816,085, consisting of rental income of $1,746,543 and other income, which
includes interest, laundry income, and other miscellaneous sources of income of
$69,542. The decrease in rental revenue from that of the two previous years is
evidence of the continual struggle with low occupancy levels at Northwind and
the decline at Foxhunt Apartments. In order to increase occupancies, management
offered incentive programs throughout the year; although this was successful in
increasing occupancies at Foxhunt, it did result in the short-term in a decrease
in revenues. Rental revenues in the year ended December 31, 1995 amounted to
$1,857,310 and in the year ended December 31, 1994 totaled $1,868,216. There was
also a noticeable decline in other income during the year ended December 31,
1996, which approximated 20%. Increasing occupancy, as well as decreasing
delinquencies, remains the major focus of management. Tighter credit policies
and extended and attractive incentive programs continue to be management's means
of reaching the income levels needed to improve the cash flow in the
Partnership.
Partnership expenses for the year ended December 31, 1996 totaled
$2,196,931, a substantial decrease over the expenses of the years ended December
31, 1995 and 1994 which were $2,615,580 and $2,572,654, respectively. The
majority of the decrease is the result of lower property operations costs.
Through regular monitoring and measuring of expenses related to payroll, repairs
and maintenance and contracted services, the Partnership has achieved a decrease
of in excess of $300,000 or 24% in operations expenses as compared to the
previous year. Total administrative expenses of $423,182 remained fairly
constant as compared to the year ended December 31, 1995 when they totaled
$426,233 and the year ended December 31, 1994 when they totaled $433,182. The
decrease in administrative expenses paid to affiliates is the result of
decreased accounting and portfolio management fees, while the offsetting
increase in other administrative expenses is due to increased legal fees and
more costly advertising campaigns, undertaken to increase occupancies.
The Partnership expects to incur higher than "normal" property operations
expenses in the near future at both Foxhunt Apartments and at Northwind Office
Complex due to the costs associated with preparing units/space for new tenants
(i.e. cleaning, painting, appliance and carpeting costs). Although this work is
necessary in order to increase rental revenue(s) generated at both of these
properties, management continues to keep in mind that expenditures must be
closely monitored so as not to worsen the cash flow situation of the
Partnership. One means of controlling such expenses has been management's
success at obtaining large price discounts on paint, carpeting and appliances
through negotiations with large national companies, such as Whirlpool.
7
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- - ------- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
------------------------------------------------------
Results of Operations (Con't.):
- - -------------------------------
The Research Triangle Industrial Park West Joint Venture had a net loss of
$91,104 for the year ended December 31, 1996. This loss is a fairly significant
decrease as compared to that of 1995 which amounted to $185,878 and that of 1994
which was $233,478, primarily due to the increase in rental income which the
property has generated. Regular increases in rental income can be expected due
to rental escalation clauses in several of the tenants' leases. In accordance
with the joint venture agreement, one-half of the loss is allocated to each
joint venturer.
The Foxhunt Joint Venture generated a net loss of $129,930 for the year
ended December 31, 1996 as compared to the loss which resulted in the years
ended December 31, 1995 and 1994 of $270,419 and $169,905, respectively. In
accordance with the joint venture agreement, $14,942 of the 1996 loss is
allocated to the other joint venture partner; $31,098 of the 1995 loss was
allocable to the other joint venturer, while for the year 1994, $19,538 was
allocable to the other venturer.
For the year ended December 31, 1996, the tax basis loss was $409,573 or
$39.73 per limited partnership unit compared to a tax loss of $557,113 or $54.04
per unit for the year ended December 31, 1995 and a tax loss of $714,759 or
$69.33 per limited partnership unit for the year ended December 31, 1994. The
Partnership agreement provides for the taxable income or losses to be allocated
97% to the Limited Partners and 3% to the General Partners, and in accordance
with this and the Internal Revenue Code, the loss for the year ended December
31, 1996 was allocated in this fashion.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ------- -------------------------------------------
Listed under Item 14 of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- - ------- ---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- - -------- --------------------------------------------------
The Partnership, as an entity, does not have any directors or officers.
The Individual General Partner of the Partnership is Joseph M. Jayson. The
directors and executive officers of Realmark Properties, Inc., the Partnership's
Corporate General Partner, as of March 1, 1997, are listed below. Each director
is subject to election on an annual basis.
8
<PAGE>
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Con't.)
- - -------- ---------------------------------------------------------
Title of All Positions
----------------------
Name Held with the Company Year First Elected Director
- - ---- --------------------- ---------------------------
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice President, and Director 1979
Michael J. Colmerauer Secretary
Joseph M. Jayson, President and Director of Realmark Properties, Inc. and
Judith P. Jayson, Vice President and Director of Realmark Properties, Inc., are
married to each other.
The Directors and Executive Officers of the Corporate General Partner and
their principal occupations and affiliations during the last five years or more
are as follows:
Joseph M. Jayson, age 58, is Chairman, Director and sole stockholder of J.
M. Jayson and Company, Inc. and certain of its affiliated companies:
Westmoreland Capital Corporation, Oilmark Corporation and U.S. Energy
Development Corporation. In addition, Mr. Jayson is chairman of Realmark
Corporation, Chairman of Realmark Properties, Inc., wholly-owned subsidiaries of
J. M. Jayson and Company, Inc. and co-general partner of Realmark Property
Investors Limited Partnership, Realmark Property Investors Limited
Partnership-II, Realmark Property Investors Limited Partnership-III, Realmark
Property Investors Limited Partnership-IV, Realmark Property Investors Limited
Partnership-V, Realmark Property Investors Limited Partnership-VI A, and
Realmark Property Investors Limited Partnership VI B. Mr. Jayson is a member of
the Investment Advisory Board of the Corporate General Partner. Mr. Jayson has
been in real estate for the last 34 years and is a Certified Property Manager as
designated by the Institute of Real Estate Management ("I.R.E.M."). Mr. Jayson
received a B.S. Degree in Education in 1961 from Indiana University , a Masters
Degree from the University of Buffalo in 1963, and has served on the Educational
Faculty of the Institute of Real Estate Management. Mr. Jayson has for the last
34 years been engaged in various aspects of real estate brokerage and
investment. He brokered residential properties from 1962 to 1964, commercial
investment properties from 1964 to 1967, and in 1967 left commercial real estate
to form his own investment firm. Since that time, Mr. Jayson and J. M. Jayson &
Company, Inc. have formed or participated in various ways with forming over 30
real estate related limited partnerships. For the past sixteen years, Mr. Jayson
and J.M. Jayson & Company, Inc., and an affiliate have also engaged in
developmental drilling for gas and oil.
9
<PAGE>
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Con't.)
- - -------- -----------------------------------------------------------
Judith P. Jayson, age 57, is currently Vice President and a Director of
Realmark Properties, Inc. She is also a Director of the property management
affiliate, Realmark Corporation. Mrs. Jayson has been involved in property
management for the last 34 years and has extensive experience in the hiring and
training of property management personnel and in directing, developing and
implementing property management systems and programs. Mrs. Jayson, prior to
joining the firm in 1973, taught business in the Buffalo, New York High School
System. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana, with a degree in Business Administration. Mrs. Jayson is the wife of
Joseph M. Jayson, the Individual General Partner.
Michael J. Colmerauer, 39, is Secretary and in-house legal counsel for
J.M. Jayson and Company, Inc., Realmark Corporation, Realmark Properties, Inc.
and other companies affiliated with the General Partners. He received a
Bachelor's Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.)
from the University of Tulsa in 1983. Mr. Colmerauer is a member of the American
and Erie County Bar Association and has been employed by the Jayson group of
companies for the last 13 years.
ITEM 11: EXECUTIVE COMPENSATION
- - -------- ----------------------
No direct remuneration was paid or payable by the Partnership to directors
and officers (since it has no directors or officers) for the years ended
December 31, 1996, 1995 or 1994, nor was any direct remuneration paid or payable
by the Partnership to directors or officers of Realmark Properties, Inc., the
Corporate General Partner and sponsor, for the years ended December 31, 1996,
1995 or 1994.
10
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION (Con't.)
- - -------- -------------------------------
The following table sets forth for the years ended December 31, 1996, 1995
and 1994, the compensation paid by the Partnership, directly or indirectly, to
affiliates of the General Partners:
<TABLE>
<CAPTION>
Amounts
Entity Receiving Type of -------
Compensation Compensation 1996 1995 1994
------------ ------------ ---- ---- ----
<S> <C> <C> <C> <C>
Realmark Properties, Inc.
(The Corporate General
Partner) Reimbursement for
allocated partnership
administration expenses
related to:
Investor Services $ 5,450 $ 5,506 $ 9,651
Brokerage 6,698 9,525 12,982
Portfolio Management
and Accounting 72,290 136,044 122,673
Realmark Corporation Property Management Fees 87,188 95,603 92,451
Computer Service Fees 4,560 4,560 5,760
---------- ----------- ----------
Total $ 176,186 $ 251,238 $ 243,517
========== =========== ==========
</TABLE>
The Corporate General Partner is entitled to a continuing Partnership
Management Fee equal to 7% of net cash flow (as defined in the Partnership
Agreement) of which 2% is subordinated to the receipt by the Limited Partners of
a noncumulative annual cash return equal to 7% of the average of their adjusted
Capital Contributions (as defined in the Partnership Agreement). Since the net
cash flow of the Partnership, as defined in the agreement, was negative for the
years ended December 31, 1996, 1995 and 1994, no fees were earned by the
corporate General Partner for those years. The General Partners are entitled to
3% of Distributable Cash (as defined in the Partnership Agreement) and to
certain expense reimbursements with respect to Partnership operations.
The General Partners are allowed to collect property disposition fees upon
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 a cumulative amount
equal to their capital contributions. The fees earned on the sale of Colony of
Kettering in 1986 and Phase I of Research Triangle in 1987 will not exceed
$115,500 and $315,000 respectively. These amounts will not be recorded as a
liability in the Partnership's financial statements until such time as payment
is probable.
11
<PAGE>
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- - -------- -----------------------------------------------
AND MANAGEMENT
--------------
No person is known to the Partnership to own of record or beneficially,
more than five percent (5%) of the Units of Limited Partnership Interests of the
Partnership. Excluding the General Partners' interest in the Partnership ($1,000
initial capital contribution), the Corporate General Partner, as of December 31,
1996 owned no Units of Limited Partnership Interest. Joseph M. Jayson, the
Individual General Partner and his wife, Judith P. Jayson, Vice-President of the
Corporate General Partner, owned an aggregate of eight (8) Limited Partnership
Units ($8,000) as of December 31, 1996.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - -------- ----------------------------------------------
(a) Transactions with Management and Others
---------------------------------------
No transactions have occurred between the Partnership and those in the
management of Realmark Properties, Inc. All transactions between the Partnership
and Realmark Properties, Inc. (the Corporate General Partner) and any other
affiliated organization are described in Item 11 of this report and in Note 8 to
the financial statements.
(b) Certain Business Relationships
------------------------------
No transactions have occurred between the Partnership and those in the
management of Realmark Properties, Inc. All transactions between the Partnership
and Realmark Properties, Inc. (the Corporate General Partner) and any other
affiliated organization are described in Item 11 of this report and in Note 8 to
the financial statements.
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND
- - -------- ----------------------------------------------
REPORTS ON FORM 8-K
-------------------
(a) Financial Statements and Schedules
----------------------------------
FINANCIAL STATEMENTS Page
-----------------------------------------------------------------------
(i) Independent Auditors' Report 15
(ii) Balance Sheets as of December 31, 1996 and 1995 16
(iii) Statements of Operations for years ended December 31,
1996, 1995, and 1994 17
(iv) Statements of Partners' Capital (Deficit) for years
ended December 31, 1996, 1995, and 1994 18
(v) Statements of Cash Flows for years ended
December 31, 1996, 1995, and 1994 19
(vi) Notes to Financial Statements 20 - 34
FINANCIAL STATEMENT SCHEDULES
(i) Schedule II - Valuation and Qualifying Accounts 35
(ii) Schedule III - Real Estate and Accumulated Depreciation 36 - 37
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
4. Instruments defining the rights of security holders, including
indentures
(a) Certificate of Limited Partners filed with the
Registration Statement of the Registrant Form S-11,
filed September 30, 1982 and subsequently amended,
incorporated herein by reference.
13
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND
- - -------- ----------------------------------------------
REPORTS ON FORM 8-K (Con't.)
----------------------------
10. Material contracts
------------------
(b) Property Management Agreement with Realmark Corporation
included with the Registration Statement of the Registrant
as filed and amended to date incorporated herein by
reference.
(c) Property sales agreement with unrelated third-party
included with the third quarter Form 10Q incorporated
herein by reference.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Realmark Property Investors Limited Partnership-II:
We have audited the accompanying balance sheets of Realmark Property Investors
Limited Partnership-II as of December 31, 1996 and 1995, and the related
statements of operations, partners' capital (deficit), and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the responsibility of
the General Partners. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
and Governmental Auditing Standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the General Partners, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership-II at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
The accompanying financial statements and financial statement schedules have
been prepared assuming that the Partnership will continue as a going concern. As
discussed in Note 11 to the financial statements, the Partnership's failure to
meet its Department of Housing and Urban Development regulatory agreement
requirements, as well as the necessity for restructuring or refinancing of its
mortgage on Northwind Office Park which is now payable on demand, and its
recurring losses from operations and partners' deficit raise substantial doubt
about its ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 11. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
Buffalo, New York
March 25, 1997
15
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Assets 1996 1995
- - ------ ------------ ------------
<S> <C> <C>
Property, at cost (including assets held for sale, Note 3):
Land $ 848,015 $ 848,015
Buildings and improvements 8,907,138 8,901,141
Furniture, fixtures and equipment 425,000 425,000
------------ ------------
10,180,153 10,174,156
Less accumulated depreciation 4,987,317 4,677,511
------------ ------------
Property, Net 5,192,836 5,496,645
Cash 7,721 30,524
Cash - security deposits 50,510 35,350
Escrow deposits 259,109 283,000
Accounts receivable (net of allowance for doubtful accounts of
$125,129 and $113,510 for 1996 and 1995, respectively.) 6,423 7,411
Accounts receivable - affiliates -- 146,238
Mortgage costs net of accumulated amortization
of $39,874 in 1996 and $31,480 in 1995 253,937 262,331
Other assets 36,120 44,619
------------ ------------
Total Assets $ 5,806,656 $ 6,306,118
Liabilities and Partners' Deficit
- - ---------------------------------
Liabilities:
Mortgages and note payable $ 5,514,863 $ 5,649,616
Accounts payable and accrued expenses 526,132 513,354
Accrued interest 49,080 48,846
Security deposits 81,779 78,654
------------ ------------
Total Liabilities 6,171,854 6,290,470
------------ ------------
Losses of unconsolidated joint ventures in excess of investment 917,376 864,503
------------ ------------
Minority interest in consolidated joint venture 371,120 386,062
------------ ------------
Partners' deficit:
General partners (210,366) (197,803)
Limited partners (1,443,328) (1,037,114)
------------ ------------
Total partners' deficit (1,653,694) (1,234,917)
------------ ------------
Total Liabilities and Partners' Deficit $ 5,806,656 $ 6,306,118
============ ============
</TABLE>
See notes to financial statements
16
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental $ 1,746,543 $ 1,857,310 $ 1,868,216
Interest and other 69,542 88,928 85,695
----------- ----------- -----------
Total income 1,816,085 1,946,238 1,953,911
----------- ----------- -----------
Expenses:
Property operations 945,519 1,247,610 1,166,204
Interest 508,545 525,963 575,549
Depreciation and amortization 319,685 415,774 397,719
Administrative:
Paid to affiliates 176,186 251,238 243,517
Other 246,996 174,995 189,665
----------- ----------- -----------
Total expenses 2,196,931 2,615,580 2,572,654
----------- ----------- -----------
Loss before allocated loss from joint venture
and loss allocated to minority interest (380,846) (669,342) (618,743)
Allocated loss from joint venture (52,873) (92,939) (116,739)
Loss allocated to minority interest 14,942 31,098 19,538
----------- ----------- -----------
Net loss (418,777) (731,183) (715,944)
=========== =========== ===========
Loss per limited partnership unit $ (40.62) $ (70.92) $ (69.45)
=========== =========== ===========
Distributions per limited partnership unit $ -- $ 6.60 $ 1.65
=========== =========== ===========
Weighted average number of limited partnership
units outstanding 10,000 10,000 10,000
=========== =========== ===========
</TABLE>
See notes to financial statements
17
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
General Limited Partners
Partners ----------------
Amount Units Amount
------ ----- ------
Balance, January 1, 1994 $ (151,840) $ 10,000 $ 449,100
Distributions to partners (510) -- (16,500)
Net loss (21,478) -- (694,466)
----------- ----------- -----------
Balance, December 31, 1994 (173,828) 10,000 (261,866)
Distributions to partners (2,040) -- (66,000)
Net loss (21,935) -- (709,248)
----------- ----------- -----------
Balance, December 31, 1995 (197,803) 10,000 (1,037,114)
Net loss (12,563) -- (406,214)
----------- ----------- -----------
Balance, December 31, 1996 $ (210,366) $ 10,000 $(1,443,328)
=========== =========== ===========
See notes to financial statements
18
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from operating activities:
Net loss $ (418,777) $ (731,183) $ (715,944)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 319,685 415,774 397,719
Amortization of mortgage discounts -- 2,218 21,610
Allocated loss from joint venture 52,873 92,939 116,739
Loss allocated to minority interest (14,942) (31,098) (19,538)
Changes in operating assets and liabilities:
Cash - security deposits (15,160) (870) (849)
Escrow deposits 23,891 53,623 (33,828)
Accounts receivable 988 (4,934) 116,922
Other assets 7,014 (11,416) 91,829
Accounts payable and accrued expenses 12,778 187,056 84,534
Accrued interest 234 3,116 (24,137)
Security deposits 3,125 5 18,038
----------- ----------- -----------
Net cash (used in) provided by operating activities: (28,291) (24,770) 53,095
----------- ----------- -----------
Cash flows from investing activities:
Decrease (increase) in accounts receivable - affiliates 146,238 (109,729) 21,977
Capital expenditures (5,997) (31,110) (59,124)
Distributions from joint venture -- 100,000 100,000
Payment of mortgage receivable -- -- 2,600,000
Payments on notes receivable -- 28,812 --
----------- ----------- -----------
Net cash provided by (used in) investing activities 140,241 (12,027) 2,662,853
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on mortgages and notes (134,753) (124,500) (2,560,267)
Distributions to partners -- (68,040) (17,010)
----------- ----------- -----------
Net cash used in financing activities (134,753) (192,540) (2,577,277)
----------- ----------- -----------
Net (decrease) increase in cash (22,803) (229,337) 138,671
Cash - beginning of year 30,524 259,861 121,190
----------- ----------- -----------
Cash - end of year $ 7,721 $ 30,524 $ 259,861
=========== =========== ===========
</TABLE>
See notes to financial statements
19
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. FORMATION AND OPERATION OF PARTNERSHIP:
--------------------------------------
Realmark Property Investors Limited Partnership-II (the "Partnership"), a
Delaware Limited Partnership, was formed on March 25, 1982, to invest in a
diversified portfolio of income producing real estate investments.
In September 1982, the Partnership commenced the public offering of units
of limited partnership interest. 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 wholly-owned subsidiary of
J.M. Jayson & Company, Inc. and Mr. Joseph M. Jayson, the sole shareholder of
J.M. Jayson & Company, Inc. (JMJ). 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. (See Note
8).
The Partnership agreement also provides that distribution of funds,
revenues, and costs and expenses arising from partnership activities, exclusive
of any sale or refinancing activities, are to be allocated 97% to the Limited
Partners and 3% to the General Partners. Net income or loss and proceeds arising
from a sale or refinancing shall be distributed first to the limited partners in
amounts equivalent to a 7% return of their average adjusted capital balances,
plus an amount equal to their capital contributions. Second, to Realmark
Properties, Inc. an amount equivalent to 5% of their average adjusted capital
balance. Third, to all partners, an amount equal to their respective positive
capital account balances and the remainder, if any, in the ratio of 86% to the
limited partners and 14% to the general partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
(a) Use of Estimates
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
20
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(b) Property and Depreciation
-------------------------
Depreciation is provided on the straight-line method over the estimated
useful lives of the respective assets, and totaled $309,806, $405,312 and
$384,466 for the years ended December 31, 1996, 1995 and 1994, respectively. The
useful lives of the Partnership's assets range from 15 to 25 years. Expenditures
for maintenance and repairs are expensed as incurred, major renewals and
betterments are capitalized. The Accelerated Cost Recovery System or Modified
Accelerated Cost Recovery System is used to calculate depreciation expense for
tax purposes. See Footnote 3 for further discussion.
(c) Rental Income
-------------
Rental income is recognized on the straight line method over the terms of
the leases. The outstanding leases with respect to rental properties owned are
for terms of no more than one year for residential properties and no more than
five years for commercial buildings.
(d) Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
(e) 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).
(f) 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.
(g) Mortgage Costs
--------------
Mortgage costs incurred in obtaining property mortgage financing have been
deferred and are being amortized over the terms of the respective mortgages.
21
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(h) Investment in Unconsolidated Joint Ventures
-------------------------------------------
The Partnership's investment in Research Triangle Industrial Park West
Associates Joint Venture and Research Triangle Land Joint Venture are
unconsolidated joint ventures which are accounted for on the equity method.
(i) Minority interest in consolidated Joint Venture
-----------------------------------------------
The minority interest in a consolidated joint venture formed to operate
Foxhunt Apartments is stated at the amount of capital contributed by the
minority investor adjusted for its share of joint venture losses.
3. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY:
----------------------------------------------
In December 1983, the Partnership acquired an office park (Northwind)
located in East Lansing, Michigan for a purchase price of $3,876,410, which
included $285,713 in acquisition fees. In 1984 the carrying value of the
property was increased for additional acquisition fees of $123,950.
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.
In February 1984, the Partnership acquired a 250 unit apartment complex
(Fox Hunt Apartments) located in Kettering, Ohio for a purchase price of
$5,702,520, which included $455,637 in acquisition fees.
In December 1986, the Partnership sold Colony of Kettering for a sale price
of $3,850,000 which generated a total net gain for financial statement purposes
of $1,482,290. For income tax purposes, the gain was recognized under the
installment method.
22
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (Con't.):
-------------------------------------------------------
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. Foxhunt incurred a net loss of $129,931 for the year ended December
31, 1996. Management has determined that a sale of the property is in the best
interests of the investors. As of December 31, 1996, an agreement, cancelable by
the buyer, was signed with an anticipated sales price of $7.4 million.
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 year ended December 31, 1996 totaled
approximately $93,000.
4. INVESTMENT IN JOINT VENTURES:
----------------------------
Unconsolidated 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 (the Joint Venture), the primary purpose of which was to construct
office/warehouse distribution buildings as income producing property. Under the
terms of the joint venture 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, the other joint venturer, was to
provide development supervision and management services.
The initial phase of development ("Phase I") which was sold in June 1987,
included an office distribution building containing a total of 101,000 gross
square feet, and one office building containing 42,000 gross square feet. The
purchaser of the property was not affiliated with either Joint Venturer. The
Partnership received approximately $2,300,000 in proceeds from the sale, and in
July 1987, these proceeds were distributed to the limited partners.
23
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT IN JOINT VENTURES (Con't.):
-------------------------------------
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 and claims 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 with Adaron provided that the Partnership will
be allocated 95% of any income received or loss incurred during Phase I and 50%
of any income received or loss incurred during Phase II.
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 other 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 amount will be
distributed 60% to the other Joint Venturer and 40% to the Partnership.
To the extent there are net proceeds from any sale or refinancing of the
subject property, said net proceeds will be payable 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.
A summary of combined assets, liabilities, and equity of the joint ventures
as of December 31, 1996 and 1995 and the results of its operations for the years
ended December 31, 1996, 1995, and 1994 follows:
24
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT IN JOINT VENTURES (Con't.):
-------------------------------------
RESEARCH TRIANGLE INDUSTRIAL PARK
JOINT VENTURES
BALANCE SHEETS
December 31, 1996 and 1995
Assets 1996 1995
- - ------ ----------- -----------
Cash and cash equivalents $ 745,127 $ 92,150
Property, net of accumulated depreciation 1,601,125 2,026,955
Accounts receivable - affiliates -- 322,212
Other 317,913 426,113
----------- -----------
Total Assets 2,664,165 2,867,430
=========== ===========
Liabilities and Partners' Deficit
Liabilities:
Notes payable 4,996,884 5,073,225
Accounts payable - affiliates 37,406 --
Accounts payable and accrued expenses 96,443 169,665
----------- -----------
Total liabilities 5,130,733 5,242,890
----------- -----------
Partners' Deficit:
The Partnership (1,133,867) (1,088,315)
Other investors (1,332,701) (1,287,145)
----------- -----------
Total Partners' Deficit (2,466,568) (2,375,460)
----------- -----------
Total Liabilities and Partners' Deficit $ 2,664,165 $ 2,867,430
=========== ===========
25
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT IN JOINT VENTURES (Con't.):
-------------------------------------
RESEARCH TRIANGLE INDUSTRIAL PARK
JOINT VENTURES
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
----------- ----------- -----------
Income:
Rental $ 1,029,367 $ 946,046 $ 914,129
Interest 763 431 710
----------- ----------- -----------
Total Income 1,030,130 946,477 914,839
----------- ----------- -----------
Expenses:
Administrative:
Paid to affiliates 58,987 63,527 72,416
Other 12,352 226 2,614
Depreciation and amortization 500,228 510,653 507,664
Interest 436,685 440,630 448,795
Property operations 112,982 117,319 116,828
----------- ----------- -----------
Total Expenses 1,121,234 1,132,355 1,148,317
----------- ----------- -----------
Net loss (91,104) (185,878) (233,478)
=========== =========== ===========
Allocation of net loss:
The Partnership (45,552) (92,939) (116,739)
Other investors (45,552) (92,939) (116,739)
----------- ----------- -----------
Total $ (91,104) $ (185,878) $ (233,478)
=========== =========== ===========
A reconciliation of the investments in Research Triangle Industrial Park
Joint Ventures:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Investment in joint venture at beginning of year $(1,088,315) $ (895,376) $ (678,637)
Allocated loss (45,552) (92,939) (116,739)
Distribution from joint venture -- (100,000) (100,000)
----------- ----------- -----------
Investment in joint venture at end of year $(1,133,867) $(1,088,315) $ (895,376)
=========== =========== ===========
</TABLE>
26
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT IN JOINT VENTURES (Con't.):
-------------------------------------
On August 20, 1992, the Partnership entered into an agreement with the
Adaron Group to form the Research Triangle Land Joint Venture. The primary
purpose of this joint venture is to develop the undeveloped land on the site of
Research Triangle Industrial Park West. This land was placed into the Land Joint
Venture by Research Triangle Industrial Park West. 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 upon acquisition was $412,500.
The joint venture has no outstanding debt at December 31, 1996 and 1995.
In 1994, engineering and surveying costs in the amount of $20,484 were
capitalized as part of the cost of land. The book value of the land joint
venture as of December 31, 1996, 1995 and 1994 was $432,984. The only operations
of the joint venture is the payment of real estate taxes and insurance premiums
for this vacant piece of land. Payment of these bills is to be divided equally
between the Partnership and Adaron.
Bills paid entirely by one joint venturer will be reflected through a
receivable or payable on the Partnership books. There was a $243 receivable from
Adaron and a $243 payable to an affiliate of the Partnership as of December 31,
1996 representing premiums on the 1996 insurance policy. There were no such
receivables or payables as of December 31, 1995 and 1994.
The total capital of the joint venture of $432,982 as of December 31, 1996
and $447,624 as of December 31, 1995 and 1994 is divided equally between the
Partnership and Adaron. The Partnership's capital of $216,491 as of December 31,
1996 and $223,812 as of December 31, 1995 and 1994 is included in the Investment
in Joint Ventures on the balance sheet. The Partnership's share of expenses not
previously billed by Adaron, totaling $7,321, were allocated to the Partnership
in the current year. All payments made by each joint venturer are considered
capital contributions. Such contributions are offset by the allocated loss from
such payments. A cumulative adjustment was made in 1996 to adjust capital
accounts to actual.
Minority Interest in Consolidated Joint Venture:
On September 21, 1991, the Partnership entered into an agreement and formed
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 Apartments
owned by the Partnership. Under the terms of the Joint Venture Agreement, RPILP
VI A contributed $390,000 and RPILP VI B contributed $1,041,568 to buy out the
wraparound promissory note on the property. The Partnership contributed the
property net of the first mortgage.
27
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. INVESTMENT IN JOINT VENTURES (Con't.):
-------------------------------------
Minority Interest in Consolidated Joint Venture (Con't.):
The original Joint Venture agreement provided that any income, loss, gain,
cash flow, or sales 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
HUD mortgage refinancing, the Partnership bought out RPILP VI A's interest,
while RPILP VI B's ownership interest was decreased to 11.5%. The net loss of
the Joint Venture from September 27, 1991, date of inception, through December
31, 1996 has been allocated to the minority interests in accordance with the
agreement and has been recorded as a reduction of their capital contributions.
A reconciliation of the minority interest share in the Foxhunt Joint
Venture is as follows:
RPILP VI B
------------
Balance at January 1, 1994 $ 436,698
Allocated loss (19,538)
------------
Balance at December 31, 1994 417,160
Allocated loss (31,098)
------------
Balance at December 31, 1995 386,062
Allocated loss (14,942)
------------
Balance at December 31, 1996 $ 371,120
============
5. MORTGAGES AND NOTES PAYABLE:
---------------------------
The Partnership has the following mortgages payable:
Northwind Office Park
---------------------
A mortgage with a carrying amount of $663,562 and $742,304 at December 31,
1996 and 1995, 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 in December 2002.
A mortgage with a carrying amount of $314,481 and $343,099 at December 31,
1996 and 1995, respectively, bearing interest at 9%. The mortgage provides for
annual principal and interest payments at $57,936, payable in equal monthly
installments with the remaining balance originally due in September 1995. No
extension has been granted and the loan is currently callable on demand.
28
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. MORTGAGES AND NOTES PAYABLE (Con't.):
------------------------------------
Foxhunt Apartments
------------------
A U.S. Department of Housing and Urban Development (HUD) guaranteed
mortgage with a balance of $4,528,289 and $4,555,681 at December 31, 1996 and
1995, respectively, bearing interest at 9%. Annual principal and interest
payments of $436,296 are due in equal monthly installments until maturity in
March 2027.
The mortgage is subject to a HUD regulatory agreement which places certain
restrictions on the operation of the Partnership. As of December 31, 1996, the
Partnership was not in compliance with several of these regulations including
those restricting commingling of funds.
Other
-----
A demand note with a balance of $8,531 at December 31, 1996. Monthly
principal and interest payments are scheduled for $9,000.
The aggregate maturities of mortgages and note payable 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
==========
The mortgages and note are secured by substantially all of the properties
of the partnership.
29
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
-----------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of cash,
accounts receivable, deposits held in trust, accounts payable, accrued expenses
and deposit liabilities approximate the carrying value due to the nature of
these instruments.
The fair value of the mortgages payable of Northwind, with carrying values
of $663,562 and $314,481, and the mortgage payable of Foxhunt, with a carrying
value of $4,528,289, cannot be determined because it is uncertain if comparable
mortgages could be obtained in the current market due to the poor occupancy at
Northwind and the fact that Castle Dore's mortgage payable is insured by the
Department of Housing and Urban Development (HUD). See Note 6 for a description
of the terms of the mortgages payable.
8. RELATED PARTY TRANSACTIONS:
--------------------------
Management fees for the management of Partnership properties are paid to an
affiliate of the General Partners. The management agreement provides for a
management fee of 5% of the gross monthly rental receipts of each complex. This
fee was $87,188, $95,603 and $92,451 for the years ended December 31, 1996, 1995
and 1994, respectively.
According to the terms of the partnership agreement, Realmark Properties,
Inc. is entitled to a continuing partnership management fee equal to 7% of net
cash flow (as defined in the Partnership Agreement), 2% of which is subordinated
to the receipt by the limited partners of a noncumulative annual cash return
equal to 7% of the average of their adjusted capital contributions (as defined
in the partnership agreement). No such fees were paid or accrued for the years
ended December 31, 1996, 1995 and 1994.
Accounts receivable-affiliates totaled $0 and $146,238 as of December 31,
1996 and 1995, respectively.
Computer service charges for the partnership are paid or accrued to an
affiliate of the General Partners. The fee is based upon the number of apartment
units and totaled $4,560, $4,560 and $5,760 for the years ended December 31,
1996, 1995 and 1994.
30
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
8. RELATED PARTY TRANSACTIONS (Con't.):
-----------------------------------
Pursuant to the terms of the partnership agreement, the Corporate General
partner charges the Partnership for reimbursement of certain costs and expenses
incurred by the corporate general partner and its affiliates in connection with
the administration of the Partnership. These charges were for the Partnership's
allocated share of such costs and expenses as payroll, legal, rent,
depreciation, printing, mailing, travel and communication costs related to
Partnership accounting, partner communication and relations, and property
marketing and are included in property operations. Additionally, Partnership
accounting and portfolio management fees, investor services fees and brokerage
fees are allocated based on total assets, number of partners and number of
units, respectively. These charges totaled $84,438, $151,075 and $145,306 in
1996, 1995 and 1994, respectively.
The General Partners are allowed to collect property disposition fees upon
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 return (not compounded) equal to 7% of their average adjusted capital
balances and to repayment to the limited partners of a cumulative amount equal
to their capital contributions. Since the conditions discussed above have not
been met, no fee has been paid or accrued on the sale of properties to date.
9. 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.
31
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
9. INCOME TAXES (Con't.):
---------------------
The reconciliation of net loss for the years ended December 31, 1996, 1995
and 1994, as reported in the statement of operations, and as would be reported
for tax return purposes is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net loss -
Statement of operations $(418,777) $(731,183) $(715,944)
Add to (deduct) from:
Difference in depreciation (78,980) (62,733) (132,349)
Difference in amortization of loan discount -- 2,218 826
Basis difference in investment in joint ventures 115,578 193,182 174,316
Other (54,952) -- (47,606)
Allowance for doubtful accounts 27,558 41,403 5,998
--------- --------- ---------
Net loss - tax return purposes $(409,573) $(557,113) $(714,759)
========= ========= =========
</TABLE>
The reconciliation of Partners' Capital (Deficit) for the years ended
December 31, 1996, 1995 and 1994, as reported in the balance sheet and as
reported for tax return purposes, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Partners' Capital (Deficit) - $(1,653,694) $(1,234,917) $ (435,694)
Balance Sheet
Add to (deduct from):
Accumulated difference in depreciation (3,827,219) (3,748,239) (3,685,506)
Accumulated amortization of discounts
on mortgage payables 1,208,424 1,208,424 1,206,206
Syndication fees 1,133,176 1,133,176 1,133,176
Allowance for doubtful accounts 113,009 85,451 44,048
Gain on sale of property (561,147) (561,147) (561,147)
Other (102,558) (47,606) (47,606)
Difference in investment in joint ventures 578,490 462,912 269,730
----------- ----------- -----------
Partners' Deficit - tax return purposes $(3,111,519) $(2,701,946) $(2,076,793)
=========== =========== ===========
</TABLE>
32
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
10. LEASES
All residential property rental agreements are for a duration of less than
one year. In connection with the operation of its commercial properties, the
Partnership has entered into numerous operating leases with terms from 1 to 5
years. Future rentals to be received on noncancelable operating leases with
terms of more than one year are as follows:
1997 $ 371,178
1998 127,492
1999 49,081
2000 19,944
----------
TOTAL $ 567,695
==========
______________________________________________________________________
11. GOING CONCERN CONSIDERATIONS
----------------------------
On May 5, 1992, the Partnership obtained a mortgage guaranteed by the
Department of Housing and Urban Development (HUD). The mortgage is subject to a
HUD regulatory agreement which places restrictions on the operations of the
Partnership. As of December 31, 1996 the partnership was not in compliance with
several of these regulations.
The consequences of the noncompliance with these restrictions could include
HUD-imposed sanctions such as fines or interest charges. Additionally, the
violation of the regulatory agreement could be deemed an event of default by the
mortgagor, and HUD could possibly take over as holder of the mortgage.
The Partnership's mortgage on Northwind Office park was originally due in
September 1994. A temporary extension on this loan was granted until September
1995. However, no further extension has been granted to the Partnership. The
loan is currently callable on demand. The Corporate General Partner is
continuing efforts to refinance or restructure this loan.
Because of the uncertainty surrounding default on the HUD guaranteed
mortgage, refinancing of the Northwind Office Park mortgage, and the
Partnership's recurring losses from operations and partners' deficit,
substantial doubt exists about the Partnership's ability to continue as a going
concern.
33
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. GOING CONCERN CONSIDERATIONS (Con't.)
-------------------------------------
Management is continuing its efforts to reduce expenses, increase rents and
implement actions to obtain appropriate refinancing. In addition, management is
currently negotiating a sale of the assets of the Foxhunt Apartments as
discussed in Footnote 3, and has responded to HUD regarding the aforementioned
noncompliance including its intentions to remedy the situation.
12. SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
----------------------------------------------
1996 1995 1994
---- ---- ----
Cash paid for interest $ 508,311 $ 520,629 $ 578,046
========== ========== ==========
13. RECLASSIFICATIONS
-----------------
Certain reclassifications have been made to 1994 and 1995 balances to
conform to the classifications used for 1996 balances.
14. CONTINGENCIES
-------------
Included in Accounts Payable and Accrued Expenses on the balance sheet are
delinquent taxes and interest on Northwind Office Park for the years 1994 and
1995 totaling approximately $93,500 and $27,500, respectively. The property is
scheduled to go into tax sale on May 6, 1997 should the taxes not be paid. The
result of such tax sale could be substantial penalties or the potential loss of
the property.
34
<PAGE>
SCHEDULE II
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additions Charged to
Balance Charged to Other Balance
Beginning Cost and Described Deductions at End of
Description of Period Expenses Accounts Described Period (1)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Unamortized discounts on
mortgage payable $ 2,218 $ - $ - $ 2,218 $ -
============= =========== ============ ============= ============
Year ended December 31, 1994
Unamortized discounts on
mortgage payable $ 23,828 $ - $ - $ 21,610 $(2) $ 2,218
============= =========== ============ ============= ============
</TABLE>
(1) Discounts to be amortized over remaining terms of the respective mortgages.
(2) Amortization of discounts charged to operations during the year.
35
<PAGE>
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Initial Cost to Cost
Partnership Capitalized
Property ------------------------ Subsequent to (5)
Description Encumbrances Land Buildings Acquisition Retirements
<S> <C> <C> <C> <C> <C>
Northwind
Office Park
E. Lansing, MI $ 978,043 $ 460,515 $ 3,415,895 $ 453,073 $ -
Foxhunt
Apartments
Kettering, OH 4,528,289 387,500 4,890,020 148,150 -
----------- ----------- ------------- --------- ----------
$ 5,506,332 $ 848,015 $ 8,305,915 $ 601,223 $ -
=========== =========== ============= ========= ==========
Research
Triangle JV
Research
Triangle, NC $ 4,996,884 $ 750,612 $ 4,920,738 $ 9,329 $ (412,500)
Research Triangle
Land JV
Research
Triangle, NC - 412,500 - 20,484 -
----------- ----------- ------------ --------- ----------
$ 4,996,884 $ 1,163,112 $ 4,920,738 $ 29,813 $ (412,500)
=========== =========== ============= ========== ==========
_____________________________________________________________________________________________________________________
Life on
Which
Gross amounts at which Depreciation
Carried at Close of Period in Latest
--------------------------------------------- Statement
(3)(6) Date of
Property (1)(2) Accumulated of Date Operations
Description Land Buildings Total Depreciation Construction Acquired is Computed
<S> <C> <C> <C> <C> <C> <C> <C>
Northwind
Office Park
E. Lansing, MI $ 460,515 $3,868,968 $ 4,329,483 $ 2,023,223 1973 12/83 15 - 25 Years
Foxhunt
Apartments
Kettering, OH 387,500 5,038,170 5,425,670 2,539,094 1972 02/84 15 - 25 Years
--------- ----------- ------------- -----------
$ 848,015 $ 8,907,138 $ 9,755,153 $ 4,562,317
========= =========== ============= ===========
Research
Triangle JV
Research
Triangle, NC $ 338,112 $4,930,067 $ 5,268,179 $ 3,667,054 1985 12/83 15 - 25 Years
Research Triangle
Land JV
Research
Triangle, NC 432,982 - 432,982 - - 08/92 15 - 25 Years
--------- ---------- ------------ -----------
$ 771,094 $4,930,067 $ 5,701,161 $ 3,667,054
========= ========== ============ ===========
</TABLE>
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(1) Cost for Federal income tax purposes is $9,755,153.
(2) A reconciliation of the carrying amount of land and buildings as of
December 31, 1996, 1995 and 1994 follows:
Partnership Properties
1996 1995 1994
---------- ---------- ----------
Balance at beginning of period $9,749,156 $9,718,046 $9,658,922
Additions 5,997 31,110 59,124
Dispositions -- -- --
---------- ---------- ----------
Balance at end of period $9,755,153 $9,749,156 $9,718,046
========== ========== ==========
Joint Venture Property
1996 1995 1994
---------- ---------- ----------
Balance at beginning of period $5,691,834 $5,691,834 $5,671,350
Additions 9,327 -- 20,484
Dispositions -- -- --
---------- ---------- ----------
Balance at end of period $5,701,161 $5,691,834 $5,691,834
========== ========== ==========
(3) A reconciliation of accumulated depreciation for the years ended December
31, 1996, 1995 and 1994 follows:
Partnership Properties
1996 1995 1994
---------- ---------- ----------
Balance at beginning of period $4,252,511 $3,847,199 $3,462,733
Additions charged to cost and expenses
during the period 309,806 405,312 384,466
---------- ---------- ----------
Balance at end of period $4,562,317 $4,252,511 $3,847,199
========== ========== ==========
Joint Venture Property
1996 1995 1994
---------- ---------- ----------
Balance at beginning of period $3,231,895 $2,797,047 $2,362,200
Additions charged to cost and expenses
during the period 435,159 434,848 434,847
---------- ---------- ----------
Balance at end of period $3,667,054 $3,231,895 $2,797,047
========== ========== ==========
(4) Balance applies entirely to buildings.
(5) Land transfer to Research Triangle Land Joint Venture.
(6) The life on which depreciation is computed in latest statement of
operations is 25 years.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
By: /s/ Joseph M. Jayson 3/28/97
------------------------------------------- ---------------
JOSEPH M. JAYSON, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By: /s/ Joseph M. Jayson 3/28/97
-------------------------------------------- ---------------
JOSEPH M. JAYSON, President Date
Principal Executive Officer and Director
/s/ Michael J. Colmerauer 3/28/97
-------------------------------------------- ---------------
MICHAEL J. COLMERAUER, Date
Secretary
38
<PAGE>
Supplemental Information to be Furnished with Reports Filed Pursuant
--------------------------------------------------------------------
to Section 15(d) of the Act by Registrants Which Have Not Registered
--------------------------------------------------------------------------
Securities Pursuant to Section 12 of the Act.
---------------------------------------------
The Form 10-K is sent to security holders. No other annual report is
distributed. No proxy statement, form of proxy or other proxy soliciting
material was sent to any of the registrant's security holders with respect
to any annual or other meeting or security holders.
39
<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
THE TWELVE MONTHS ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 58,231
<SECURITIES> 0
<RECEIVABLES> 131,552
<ALLOWANCES> 125,129
<INVENTORY> 0
<CURRENT-ASSETS> 359,883
<PP&E> 10,180,153
<DEPRECIATION> 4,987,317
<TOTAL-ASSETS> 5,806,656
<CURRENT-LIABILITIES> 656,991
<BONDS> 5,514,863
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,806,656
<SALES> 0
<TOTAL-REVENUES> 1,816,085
<CGS> 0
<TOTAL-COSTS> 2,196,931
<OTHER-EXPENSES> 37,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 508,545
<INCOME-PRETAX> (418,777)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (418,777)
<EPS-PRIMARY> (40.62)
<EPS-DILUTED> 0
</TABLE>
