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
March 31, 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 [ ]
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Form 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
Balance Sheets - March 31, 2000 and December 31, 1999 3
Statements of Operations - Three months ended March 31, 2000 and 1999 4
Statement of Partners' Deficiency - Three months ended March 31, 2000 5
Statements of Cash Flows - Three months ended March 31, 2000 and 1999 6
Notes to Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and 11
Results of Operations
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
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2
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PART I - Item 1. Financial Statements
--------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Balance Sheets
March 31, 2000 and December 31, 1999
(Unaudited)
March 31, December 31,
Assets 2000 1999
------ ---- ----
<S> <C> <C>
Property and equipment:
Land $ 848,015 848,015
Buildings and improvements 9,207,376 9,161,085
Furniture, fixtures and equipment 441,860 441,860
------------ ------------
10,497,251 10,450,960
Less accumulated depreciation 5,914,461 5,867,469
------------ ------------
Net property and equipment 4,582,790 4,583,491
-------------------------- --------- ---------
Cash and cash equivalents 133,538 141,101
Escrow deposits 42,529 71,736
Accounts receivable, less allowance for doubtful accounts of
$178,923 and $153,941 for 2000 and 1999, respectively 12,206 10,479
Receivables from affiliated parties 129,840 126,347
Mortgage costs, less accumulated amortization of $ 3,600
and $1,200 in 2000 and 1999, respectively 93,583 95,983
Other assets 11,088 10,833
------------ ------------
Total assets $ 5,005,574 5,039,970
============ ============
Liabilities and Partners' Deficiency
Liabilities:
Mortgage loans payable 6,519,398 6,569,638
Accounts payable and accrued expenses 458,149 469,611
Security deposits and prepaid rents 139,298 150,195
------------ ------------
Total liabilities 7,116,845 7,189,444
------------ ------------
Equity in losses of unconsolidated joint ventures in
excess of investment 1,086,267 1,085,462
Minority interest in consolidated joint venture 108,451 101,544
Partners' deficiency:
General partners (259,935) (260,850)
Limited partners (3,046,054) (3,075,630)
------------ ------------
Total partners' deficiency (3,305,989) (3,336,480)
------------ ------------
Contingency
------------ ------------
Total liabilities and partners' deficiency $ 5,005,574 5,039,970
============ ============
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See accompanying notes to financial statements.
3
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statements of Operations
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months ended
------------------
(As restated)
March 31, March 31,
2000 1999
---- ----
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Income:
Rental $ 582,562 459,728
Interest and other income 18,042 24,818
--------- ---------
Total income 600,604 484,546
--------- ---------
Expenses:
Property operations 293,704 468,402
Interest 137,521 195,161
Depreciation 48,126 73,196
Administrative:
Affiliated parties 54,274 52,131
Other 63,776 100,939
--------- ---------
Total expenses 597,401 889,829
--------- ---------
Income (loss) before equity in earnings from joint venture
and minority interest in consolidated joint venture operations 3,203 (405,283)
Equity in earnings of joint venture 34,195 31,231
Minority interest in consolidated joint venture operations (6,907) 34,226
--------- ---------
Net income (loss) $ 30,491 (339,826)
========= =========
Net income (loss) per limited partnership unit $ 2.96 (32.96)
========= =========
Weighted average number of limited partnership
units outstanding 10,000 10,000
========= =========
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See accompanying notes to financial statements.
4
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statement of Partners' Deficiency
Three months ended March 31, 2000
(Unaudited)
General Limited Partners
Partners Units Amount
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Balances at January 1, 2000 $ (260,850) 10,000 (3,075,630)
Net income 915 -- 29,576
--------------- ---------- -----------
Balances at March 31, 2000 $ (259,935) 10,000 (3,046,054)
=============== ========== ===========
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See accompanying notes to financial statements.
5
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months ended
------------------
(As restated)
March 31, March 31,
2000 1999
---- ----
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Cash flows from operating activities:
Net income (loss) $ 30,491 (339,826)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 50,526 120,943
Equity in net income of joint venture (34,195) (31,231)
Minority interest in consolidated joint venture operations 6,907 (34,226)
Changes in:
Escrow deposits 29,207 (35,749)
Accounts receivable (1,727) 5,250
Accounts receivable to affiliated parties (3,493) (79,752)
Leasing commissions -- (1,410)
Other assets (1,389) (209,720)
Accounts payable and accrued expenses (15,657) 110,361
Accrued interest payable 4,195 9,188
Security deposits and prepaid rents (10,897) (15,723)
--------- ---------
Net cash provided by (used in)
operating activities 53,968 (501,895)
--------- ---------
Cash flows from investing activities:
Distributions from joint venture 35,000 --
Additions to property and equipment (46,291) (1,925)
--------- ---------
Net cash used in investing activities (11,291) (1,925)
--------- ---------
Cash flows from financing activities:
Increase in cash overdraft -- 40,367
Principal payments on mortgage loans (50,240) (34,923)
--------- ---------
Net cash provided by (used in)
financing activities (50,240) 5,444
--------- ---------
Net decrease in cash and cash equivalents (7,563) (498,376)
Cash and cash equivalents at beginning of period 141,101 498,376
--------- ---------
Cash and cash equivalents at end of period $ 133,538 --
========= =========
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 133,326 138,226
========= =========
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See accompanying notes to financial statements.
6
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-II
Notes to Financial Statements
Three months ended March 31, 2000 and 1999
(Unaudited)
(1) Basis of Presentation
--------------------------
The accompanying interim financial statements have been prepared in
accordance with generally accepted accounting principles and, in the
opinion of management, contain all necessary adjustments for a fair
presentation. The Partnership's significant accounting policies are set
forth in its December 31, 1999 Form 10-K. The interim financial
statements should be read in conjunction with the financial statements
included therein. The interim results should not be considered
indicative of the annual results. Certain reclassifications of prior
period numbers may have been made to conform to the current period
presentation.
(2) Organization
-----------------
Realmark Property Investors Limited Partnership-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.
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
---------------------------------
Unconsolidated 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.
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Financial Statements, Continued
(3) Investment in Joint Ventures, Continued
--------------------------------------------
A summary of the assets, liabilities and equity of the Joint Venture as
of March 31, 2000 and December 31, 1999 and the results of its
operations for the three months ended March 31, 2000 and 1999 follows.
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March 31, December 31,
Assets 2000 1999
------ ---- ----
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Property, net of accumulated depreciation $ 1,548,757 1,573,886
Cash 78,691 149,508
Escrow deposits 734,907 694,740
Other assets 337,349 271,914
----------- -----------
Total assets $ 2,699,704 2,690,048
=========== ===========
Liabilities and Partners' Deficiency
------------------------------------
Liabilities:
Mortgage loan 5,399,030 5,418,498
Accounts payable and accrued expenses 105,021 74,287
----------- -----------
Total liabilities 5,504,051 5,492,785
Partners' deficiency (2,804,347) (2,802,737)
----------- -----------
Total liabilities and partners' deficiency $ 2,699,704 2,690,048
=========== ===========
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Three months ended
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March 31, March 31,
2000 1999
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Income:
Rental $255,497 265,029
Interest 1,526 75
-------- --------
Total income 257,023 265,104
-------- --------
Expenses:
Property operations 29,089 34,666
Interest 113,342 114,913
Depreciation and amortization 25,129 35,310
Administrative 21,073 17,753
-------- --------
Total expenses 188,633 202,642
-------- --------
Net income $ 68,390 62,462
======== ========
Allocation of net income:
The Partnership 34,195 31,231
RPILP - VI A 34,195 31,231
-------- --------
$ 68,390 62,462
======== ========
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8
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Financial Statements, Continued
(3) Investment in Joint Ventures, Continued
--------------------------------------------
The Partnership also has an interest, with the Adaron Group, in the
Research Triangle Land Joint Venture which 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.
(4) Property and Equipment
---------------------------
In July 1999, a plan was established to dispose of Foxhunt Apartments.
Management of the Venture has determined that a sale of the property is
in the best interest of the owners and continues to actively market the
property for sale. Therefore, the assets are carried at the lower of
depreciated cost or fair value less costs to sell and have not been
depreciated during the disposal period. Depreciation expense not
recorded for the three months ended March 31, 2000 and 1999 was
approximately $52,000 and $40,300, respectively.
(5) Mortgage Loans Payable
---------------------------
One of the Partnership's mortgage loans on Northwind Office Park, in the
approximate amount of $205,000 at March 31, 2000, matured in 1995. No
extension of the maturity has been granted and the loan is currently
callable on demand.
(6) Prior Period Adjustments
-----------------------------
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The net loss for the quarter ended March 31, 1999 has been corrected to
give effect to certain year-end 1999 adjustments as follows:
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As previously reported $ (165,996)
Elimination of depreciation expense on Northwind
Office Park held for disposal during the quarter 40,339
Reduction of interest expense in joint venture 15,000
Reduction of minority interest in net loss of consolidated
joint venture to reflect actual (229,169)
----------
As restated $ (339,826)
==========
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The net loss per limited partnership unit increased $16.86 to $32.96.
9
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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) Subsequent Event and 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 March 31, 2000 and December 31,
1999 include delinquent taxes and interest on Northwind Office Park
totaling approximately $234,000 and $228,000, respectively. The result
of these delinquencies could be substantial penalties or the potential
loss of the property. A range of loss is not estimable at March 31,
2000.
10
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PART I - Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
-------------------------------
The significant improvement in the Partnership's operations discussed below
resulted in the generation of $54,000 of cash in the first quarter of 2000,
compared to more than $500,000 of cash used by operations in the comparable 1999
quarter. The cash from operations and a $35,000 cash distribution from its
unconsolidated joint venture, enable the partnership to establish a relatively
liquid position at March 31, 2000 of approximately $133,000, after making
capital additions and the principal payments on its mortgage loans.
Results of Operations
---------------------
For the first quarter of 2000, the Partnership had net income of $30,491
compared to a net loss of $339,826 for the 1999 quarter, an improvement of
approximately $370,000. 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 $408,000. The
primary components of the improvement were as follows:
Income increase - rental $ 123,000
Expense decreases:
Property operations 175,000
Interest 58,000
Depreciation 25,000
Administrative 35,000
Other (8,000)
---------
$ 408,000
=========
The increase in rental income was generated by the Northwind Office Complex
($71,000) and Foxhunt Apartments ($52,000), principally as a result of higher
occupancy and reduced concessions.
The largest decreases in property operations expense 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
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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.
12
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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 11/15/2000
-------------------------------- -----------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
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