FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
June 30, 2000 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 Number)
2350 North Forest Road
Suite 12A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-0280
Indicate by a check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Form 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Operations - Three and six months ended
June 30, 2000 and 1999 4
Statement of Partners' Deficiency - Six months ended June 30, 2000 5
Statements of Cash Flows - Six months ended June 30, 2000 and 1999 6
Notes to Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2 - 5. Not applicable 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE>
PART I - Item 1. Financial Statements
--------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Balance Sheets
June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
Assets 2000 1999
------ ---- ----
<S> <C> <C>
Property and equipment:
Land $ 848,015 848,015
Buildings and improvements 9,213,626 9,161,085
Furniture, fixtures and equipment 441,860 441,860
------------ ------------
10,503,501 10,450,960
Less accumulated depreciation 5,969,891 5,867,469
------------ ------------
Net property and equipment 4,533,610 4,583,491
Cash and cash equivalents 106,830 141,101
Escrow deposits 91,448 71,736
Accounts receivable, less allowance for doubtful accounts of
$200,108 and $153,941 for 2000 and 1999, respectively 25,481 10,479
Receivables from affiliated parties 104,982 126,347
Deferred mortgage costs, less accumulated amortization of $6,000
and $1,200 in 2000 and 1999, respectively 91,183 95,983
Other assets 12,247 10,833
------------ ------------
Total assets $ 4,965,781 5,039,970
============ ============
Liabilities and Partners' Deficiency
------------------------------------
Liabilities:
Mortgage loans payable 6,458,172 6,569,638
Accounts payable and accrued expenses 522,538 469,611
Accrued interest payable 41,486 --
Security deposits and prepaid rents 132,149 150,195
------------ ------------
Total liabilities 7,154,345 7,189,444
------------ ------------
Equity in losses of unconsolidated joint ventures in
excess of investment 1,093,647 1,085,462
Minority interest in consolidated joint venture 107,137 101,544
Partners' deficiency:
General partners (262,436) (260,850)
Limited partners (3,126,912) (3,075,630)
------------ ------------
Total partners' deficiency (3,389,348) (3,336,480)
------------ ------------
Contingency
------------ ------------
Total liabilities and partners' deficiency $ 4,965,781 5,039,970
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statements of Operations
Three and six month periods ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
(As restated) (As restated)
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental $ 565,735 496,884 1,148,297 956,612
Interest and other income 15,745 24,347 33,787 49,165
---------- ---------- ---------- ----------
Total income 581,480 521,231 1,182,084 1,005,777
---------- ---------- ---------- ----------
Expenses:
Property operations 355,240 322,256 648,944 790,658
Interest 174,875 189,705 312,396 384,866
Depreciation 56,561 113,809 104,687 187,005
Administrative:
Affiliated parties 55,853 70,466 110,127 122,597
Other 61,244 55,050 125,020 155,989
---------- ---------- ---------- ----------
Total expenses 703,773 751,286 1,301,174 1,641,115
---------- ---------- ---------- ----------
Loss before equity in earnings from
joint venture and minority interest in
consolidated joint venture
operations (122,293) (230,055) (119,090) (635,338)
Equity in earnings of joint venture 37,620 22,723 71,815 53,954
Minority interest in consolidated
joint venture operations 1,314 4,145 (5,593) 38,371
---------- ---------- ---------- ----------
Net loss (83,359) (203,187) (52,868) (543,013)
========== ========== ========== ==========
Net loss per limited partnership unit $ (8.09) (19.71) (5.13) (52.67)
========== ========== ========== ==========
Weighted average number of limited
partnership units outstanding 10,000 10,000 10,000 10,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statement of Partners' Deficiency
Six months ended June 30, 2000
<TABLE>
<CAPTION>
General Limited Partners
Partners Units Amount
-------- ----- ------
<S> <C> <C> <C>
Balances at January 1, 2000 $ (260,850) 10,000 (3,075,630)
Net loss (1,586) -- (51,282)
---------- ---------- ----------
Balances at June 30, 2000 $ (262,436) 10,000 (3,126,912)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statements of Cash Flows
Six months ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Six months ended
----------------
(As restated)
June 30, June 30,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (52,868) (543,013)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 109,487 282,226
Equity in net income of joint venture (71,815) (53,954)
Minority interest in consolidated joint venture operations 5,593 (38,371)
Changes in:
Escrow deposits (19,712) 25,376
Accounts receivable (15,002) 1,188
Receivables to affiliated parties 21,365 (24,768)
Other assets (3,679) (42,146)
Accounts payable and accrued expenses 52,927 (4,028)
Accrued interest payable 41,486 9,188
Security deposits and prepaid rents (18,046) (14,416)
--------- ---------
Net cash provided by (used in)
operating activities 49,736 (402,718)
--------- ---------
Cash flows from investing activities:
Distributions from joint venture 80,000 --
Additions to property and equipment (52,541) (9,747)
--------- ---------
Net cash used in investing activities 27,459 (9,747)
--------- ---------
Cash flows from financing activities - principal payments
on mortgage loans (111,466) (70,709)
--------- ---------
Net decrease in cash and cash equivalents (34,271) (483,174)
Cash and cash equivalents at beginning of period 141,101 498,376
--------- ---------
Cash and cash equivalents at end of period $ 106,830 15,202
========= =========
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 270,910 280,457
========= =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Notes to Financial Statements
Six months ended June 30, 2000 and 1999
(1) Basis of Presentation
--------------------------
The accompanying interim financial statements have been prepared in
accordance with generally accepted accounting principles and, in the
opinion of management, contain all necessary adjustments for a fair
presentation. The Partnership's significant accounting policies are set
forth in its December 31, 1999 Form 10-K. The interim financial
statements should be read in conjunction with the financial statements
included therein. The interim results should not be considered
indicative of the annual results. Certain reclassifications of prior
period numbers may have been made to conform to the current period
presentation.
(2) Organization
-----------------
Realmark Property Investors Limited Partnership-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,
its only industry segment. The general partners are Realmark
Properties, Inc. (the corporate general partner) and Joseph M. Jayson
(the individual general partner). Joseph M. Jayson is the sole
stockholder of J.M. Jayson & Company Inc. Realmark Properties, Inc. is
a wholly-owned subsidiary of J.M. Jayson & Company, Inc. Under the
partnership agreement, the general partners and their affiliates can
receive compensation for services rendered and reimbursement for
expenses incurred on behalf of the Partnership.
(3) Investment in Joint Ventures
---------------------------------
The Partnership has a 50% interest in Research Triangle Industrial Park
Joint Venture, with the other 50% owned by Realmark Property Investors
Limited Partnership - VIA (RPILP - VIA), an entity affiliated through
common general partnership.
A summary of the assets, liabilities and equity of the Research Triangle
Industrial Park Joint Venture as of June 30, 2000 and December 31, 1999
and the results of its operations for the six months ended June 30,
2000 and 1999 follows.
<TABLE>
<CAPTION>
June 30, December 31,
Assets 2000 1999
------ ---- ----
<S> <C> <C>
Property, net of accumulated depreciation $ 1,523,627 1,573,886
Cash 42,324 149,508
Escrow deposits 775,983 694,740
Other assets 328,678 271,914
-------------- ------------
Total assets $ 2,670,612 2,690,048
============== ============
</TABLE>
7
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Financial Statements, Continued
(3) Investment in Joint Ventures, Continued
--------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
Liabilities and Partners' Deficiency 2000 1999
------------------------------------ ---- ----
<S> <C> <C>
Liabilities:
Mortgage loan $ 5,380,358 5,418,498
Accounts payable and accrued expenses 109,361 74,287
-------------- -----------
Total liabilities 5,489,719 5,492,785
Partners' deficiency (2,819,107) (2,802,737)
-------------- -----------
Total liabilities and partners' deficiency $ 2,670,612 2,690,048
============== ===========
</TABLE>
<TABLE>
<CAPTION>
Six months ended
----------------
June 30, June 30,
2000 1999
---- ----
<S> <C> <C>
Income:
Rental $ 510,996 493,973
Interest 10,401 7,091
-------------- ------------
Total income 521,397 501,064
-------------- ------------
Expenses:
Property operations 63,477 70,275
Interest 225,921 224,617
Depreciation and amortization 50,259 63,107
Administrative 38,110 35,157
-------------- ------------
Total expenses 377,767 393,156
-------------- ------------
Net income $ 143,630 107,908
============== ============
Allocation of net income:
The Partnership $ 71,815 53,954
RPILP - VI A 71,815 53,954
-------------- ------------
Total $ 143,630 107,908
============== ============
</TABLE>
The Partnership also has an interest, with the Adaron Group, in the
Research Triangle Land Joint Venture that is included in equity in
losses of unconsolidated joint ventures in excess of investment on the
balance sheets. Capital contributions to the Venture are equal to its
net losses which have not been significant.
8
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Financial Statements, Continued
(4) Property and Equipment
---------------------------
In July 1999, a plan was established to dispose of one of the
Partnership's properties, Foxhunt Apartments. Therefore, that asset is
carried at the lower of depreciated cost or fair value less costs to
sell and has not been depreciated during the disposal period.
Depreciation of this property not recorded for the three and six months
ended June 30, 2000 was approximately $60,000 and $120,000,
respectively. Additionally, the Partnership's Northwind property was
subject to a sales plan during the first quarter of 1999. Therefore,
$40,000 of depreciation on it was not recorded in the six months ended
June 30, 1999.
(5) Mortgage Loans Payable
---------------------------
One of the Partnership's mortgage loans on Northwind Office Park, in the
approximate amount of $187,000 at June 30, 2000, matured in 1995. No
extension of the maturity has been granted and the loan is currently
callable on demand.
(6) Prior Period Adjustments
-----------------------------
The net losses for the three and six month periods ended June 30, 1999 have
been corrected to give effect to year-end 1999 adjustments as follows:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1999 1999
---- ----
<S> <C> <C>
As previously reported $ (81,291) (247,287)
Elimination of depreciation expense on Northwind
Office Park held for disposal during the period -- 40,339
Increase in interest expense of joint venture (15,000) --
Repairs and maintenance expense recorded in wrong
period (70,000) (70,000)
Reduction of minority interest in net loss of consolidated
joint venture to reflect actual (36,896) (266,065)
------------- ------------
As restated $ (203,187) (543,013)
============= ============
</TABLE>
The net loss per limited partnership unit increased $11.82 to $19.71 for
the three months ended June 30, 1999 and $28.68 to $52.67 for the six
months ended June 30, 1999.
9
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Financial Statements, Continued
(7) Current Accounting Pronouncements
--------------------------------------
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138 - "Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an Amendment of
Statement No. 133" which amends certain provisions of Statement of
Financial Accounting Standards No. 133 - "Accounting for Derivative
Instruments and Hedging Activities." These statements establish
accounting and financial reporting standards for derivative instruments
and hedging activities. These statements become effective for the
Partnership on January 1, 2001. The effect, if any, that Statements No.
133 and 138 will have on the Partnership's operations and financial
position will not be material.
(8) Contingencies
------------------
The Partnership, as a nominal defendant, the General Partners of the
Partnership and the three individuals constituting the officers and
directors of the Corporate General Partner, as defendants, were served
with a Summons and Complaint on April 19, 2000 in a class and
derivative action instituted by Ira Gaines and on August 21, 2000 in a
class and derivative action instituted by Sean O'Reilly and Louise
Homburger, each in Supreme Court, County of Erie, State of New York.
The actions allege breaches of contract and breaches of fiduciary duty
and seek, among other things, an accounting, the removal of the General
Partners, the liquidation of the Partnership and the appointment of a
receiver to supervise the liquidation, and damages. The General
Partners and the officers and directors of the Corporate General
Partner have filed a motion to dismiss the first complaint and are
presently reviewing the second complaint and intend to vigorously
pursue their defense.
Accounts payable and accrued expenses as of June 30, 2000 and December 31,
1999 include delinquent taxes and interest on Northwind Office Park
totaling approximately $243,000 and $228,000, respectively. The result
of these delinquencies could be substantial penalties or the potential
loss of the property. A range of total loss is not estimable at June
30, 2000.
10
<PAGE>
PART I - Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
-------------------------------
The improvement in the Partnership's operations discussed below resulted in the
generation of approximately $50,000 of cash in the first half of 2000, compared
to more than $400,000 of cash used by operations in the first half of 1999. The
cash from operations and an $80,000 cash distribution from its unconsolidated
joint venture investee, net of capital additions and principal payments on
mortgage loans, reduced the Partnership's cash position to $107,000 at June 30,
2000.
Results of Operations
---------------------
For the second quarter of 2000, the Partnership had a net loss of $83,359
compared to a net loss of $203,187 for the 1999 quarter, an improvement of
approximately $120,000. In the first half of 2000, the net loss decreased
approximately $490,000 from the comparable 1999 period. The results of
operations, before consideration of equity in the net income of the
unconsolidated joint venture and minority interest in the consolidated joint
venture, improved approximately $108,000 in the 2000 second quarter and
approximately $516,000 in the first six months. The primary components of the
improvement were as follows:
<TABLE>
<CAPTION>
Three months Six months
ended 6/30/00 ended 6/30/00
------------- -------------
<S> <C> <C>
Income increase - rental $ 69,000 192,000
Expense decreases (increases):
Property operations (33,000) 142,000
Interest 15,000 72,000
Depreciation 57,000 82,000
Administrative 10,000 43,000
Other (10,000) (15,000)
---------- ---------
$ 38,000 446,000
========== =========
</TABLE>
The increase in rental income was generated by: (1) Northwind Office Complex,
$45,000 in the quarter and $118,000 in the half; and (2) Foxhunt Apartments,
$18,000 in the quarter and $71,000 in the half, principally as a result of
higher occupancy and reduced concessions. Other income decreased in 2000 because
of a drop in vending machine receipts.
The largest decreases in property operations expense in the six months ended
June 30, 2000 were in the replacement costs of noncapitalized items such as
carpeting and appliances and related payroll expenses. The reduction in interest
costs reflects a $45,000 decrease in the amortization of deferred mortgage costs
as well as lower principal balances and rate. Depreciation expense in the 1999
quarter ($73,000) is related only to the Foxhunt property since the Northwind
property was considered held-for-sale at that time. The opposite is true in the
2000 quarter; the Foxhunt property is being actively marketed, while Northwind
is no longer being actively marketed. Thus, depreciation expense of $48,000 in
the 2000 quarter relates only to Northwind and is not comparable to depreciation
expense in the 1999 period. The decrease in administrative expenses in 2000 is
the net result of changes in several areas including advertising and
professional fees.
11
<PAGE>
PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership's cash equivalents are short-term, interest-bearing bank
accounts and its mortgage loans are fixed-rate. It has not entered into
any derivative contracts. Therefore, it has no market risk exposure.
PART II - OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
--------------------------
The Partnership, as a nominal defendant, the General Partners of the
Partnership and the three individuals constituting the officers and
directors of the Corporate General Partner, as defendants, were served
with a Summons and Complaint on April 19, 2000 in a class and
derivative action instituted by Ira Gaines and on August 21, 2000 in a
class and derivative action instituted by Sean O'Reilly and Louise
Homburger, each in Supreme Court, County of Erie, State of New York.
The actions allege breaches of contract and breaches of fiduciary duty
and seek, among other things, an accounting, the removal of the General
Partners, the liquidation of the Partnership and the appointment of a
receiver to supervise the liquidation, and damages. The General
Partners and the officers and directors of the Corporate General
Partner have filed a motion to dismiss the first complaint and are
presently reviewing the second complaint and intend to vigorously
pursue their defense.
Items 2, 3, 4 and 5
-------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
The Partnership reported a change in independent accountants under item 4
of Form 8-K, filed on January 19, 2000 and amended on February 3, 2000,
April 17, 2000 and May 2, 2000.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS LIMITED PARTNERHIP II
By: /s/ Joseph M. Jayson 12/01/00
--------------------------------- ----------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
12
