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 0-13331
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
(Exact Name of Registrant as specified in its charter)
Delaware 16-1234990
--------------------------- -----------------------------------
(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 - III
Form 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
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<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 2000 and December 31, 1999 3
Statements of Operations - Three and six month periods ended
June 30, 2000 and 1999 4
Statement of Partners' Equity - 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 - 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2 - 5. Not applicable 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
<PAGE>
PART I - Item 1. Financial Statements
--------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
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 $ 777,709 777,709
Buildings and improvements 11,244,800 11,196,329
Furniture and fixtures 976,539 973,753
------------ ------------
12,999,048 12,947,791
Less accumulated depreciation 6,347,278 6,116,411
------------ ------------
Net property and equipment 6,651,770 6,831,380
Cash and cash equivalents 990,647 1,079,974
Trade accounts receivable, net of allowance for doubtful
accounts of $342,126 in 2000 and $340,735 in 1999 56,456 53,417
Receivable from affiliated parties 119,150 119,923
Escrow deposits 397,682 322,484
Other assets 116,694 156,864
------------ ------------
Total assets $ 8,332,399 8,564,042
============ ============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Mortgage loans payable 4,908,439 4,935,851
Accounts payable and accrued expenses 147,838 134,675
Accrued interest payable 55,040 55,614
Security deposits and prepaid rents 119,151 121,218
------------ ------------
Total liabilities 5,230,468 5,247,358
------------ ------------
Partners' equity (deficit):
General partners (62,397) (55,954)
Limited partners 3,164,328 3,372,638
------------ ------------
Total partners' equity 3,101,931 3,316,684
------------ ------------
Contingency
------------ ------------
Total liabilities and partners' equity $ 8,332,399 8,564,042
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Operations
Three and six month periods ended June 30, 2000 and 1999
(Unaudited)
<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 $ 624,461 594,318 1,246,281 1,171,109
Interest and other income 90,376 70,423 157,204 139,086
---------- ---------- ---------- ----------
Total income 714,837 664,741 1,403,485 1,310,195
---------- ---------- ---------- ----------
Expenses:
Property operations 440,705 560,170 908,448 1,086,917
Interest 110,586 121,135 221,976 247,713
Depreciation 115,476 53,147 230,867 106,289
Administrative:
Affiliated parties 62,611 66,190 127,162 108,028
Other 74,406 66,929 129,785 153,743
---------- ---------- ---------- ----------
Total expenses 803,784 867,571 1,618,238 1,702,690
---------- ---------- ---------- ----------
Net loss $ (88,947) (202,830) (214,753) (392,495)
========== ========== ========== ==========
Net loss per limited partnership unit $ (5.55) (12.65) (13.40) (24.48)
========== ========== ========== ==========
Weighted average number of limited
partnership units outstanding 15,551 15,551 15,551 15,551
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statement of Partners' Equity
Six months ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners Units Amount
-------- ----- ------
<S> <C> <C> <C>
Balances at January 1, 2000 $ (55,954) 15,551 3,372,638
Net loss (6,443) -- (208,310)
---------- ---------- ----------
Balances at June 30, 2000 $ (62,397) 15,551 3,164,328
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
----------------
(As restated)
June 30, June 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (214,753) (392,495)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 245,623 142,900
Changes in:
Trade accounts receivable (3,039) 2,649
Receivables from affiliated parties 773 (6,586)
Escrow deposits (75,198) (164,463)
Other assets 25,414 16,090
Accounts payable and accrued expenses 13,163 123,305
Accrued interest payable (574) (13,663)
Security deposits and prepaid rent (2,067) 19,871
----------- -----------
Net cash used in operating activities (10,658) (272,392)
----------- -----------
Cash flow from investing activities - additions to property
and equipment (51,757) (175,504)
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage loans (27,412) (8,775)
Mortgage costs -- (20,000)
----------- -----------
Net cash used in financing activities (27,412) (28,775)
----------- -----------
Net decrease in cash and cash equivalents (89,327) (476,671)
Cash and cash equivalents at beginning of period 1,079,974 1,778,425
----------- -----------
Cash and cash equivalents at end of period $ 990,647 1,301,754
=========== ===========
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 207,795 224,765
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements
Six months ended June 30, 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 - III (the
Partnership), a Delaware limited partnership, was formed on November
18, 1983, 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 shareholder 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) Property and Equipment
---------------------------
During the first six months of 1999 (through June 30, 1999), management had
a plan to sell the assets of Ambassador Towers. Effective July 1, 1999,
the plan was discontinued. The assets of Ambassador Towers were carried
at the lower of depreciated cost or fair value less costs to sell and
were not depreciated during the disposal period. Depreciation expense
not recorded for the three and six months ended June 30, 1999 was
approximately $55,500 and $111,000, respectively.
(4) 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 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.
7
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(5) Prior Period Adjustment
----------------------------
The net losses for the three and six month periods ended June 30, 1999 has
been corrected to give effect to a year-end 1999 adjustment as follows:
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1999 1999
---- ----
<S> <C> <C>
As previously reported $ (258,308) (503,451)
Elimination of depreciation expense on Ambassador
Towers held for disposal during the period 55,478 110,956
---------- --------
As restated $ (202,830) (392,495)
========== =========
</TABLE>
The net loss per limited partnership unit decreased $3.46 to $12.65 for the
three months ended June 30, 1999 and $6.92 to $24.48 for the six months
ended June 30, 1999.
(6) Contingency
----------------
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.
8
<PAGE>
PART I - Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
-------------------------------
Although the Partnership showed a cash shortfall for the first six months of
2000, management believes there is sufficient cash to complete scheduled capital
improvements and maintenance at the three properties remaining in the
Partnership, while also funding the properties' operating activities. Management
continues to be optimistic that expenses will decrease as tighter control is
being exercised over expenditures. Management is also focusing its efforts
heavily on ways to increase operating revenue.
The General Partner is completing substantial capital improvement work at the
Perrymont Office Building including re-facing the exterior of the building,
resealing of the parking lot, replacement of hallway carpeting, redecorating of
all common area restrooms, relandscaping the front of the building, new
entrances, and new signage. The work will cost approximately $450,000 and will
be completed during the fall of 2000. It is believed that the physical
improvements to the exterior of the building and the common parts of the
interior will greatly increase its curb appeal and attract new tenants and
potentially increase the value of the building.
While there were no cash distributions to partners in the six-month periods
ended June 30, 2000 and 1999, the General Partner plans to resume distributions
in the future.
Results of Operations
---------------------
In the quarter ended June 30, 2000, the Partnership's net loss was approximately
$114,000 less than the net loss for the quarter ended June 30, 1999, while
operating results for the six months ended June 30, 2000 were approximately
$178,000 more favorable than the comparable 1999 period. Both improvements were
in spite of increases in depreciation of $62,000 and $114,000 in the three and
six month periods, respectively.
The improvement was due to both income increases and expense reductions. Rent
revenue for the quarter and six months ended June 30, 2000 increased
approximately $30,000 and $75,000, respectively, primarily due to increased
occupancy at Ambassador Towers. This complex has seen a steady increase in its
occupancy due to various "new and innovative" ideas for services that are now
being provided to residents as well as improvements recently made in 1999 and
continued improvements in 2000 in upgrading hallways and common areas. The
Perrymont Office Building had a decrease in income in the three and six months
ended June 30, 2000. Improvements to the property should result in increased
occupancy and improved cash flow by the end of 2000. Inducon Amherst income
decreased in the three months ended June 30, 2000 and was flat for the six-month
period. Other income in both periods increased because of increased common area
maintenance fees.
Property operations expenses decreased by approximately $120,000 and $178,000 in
the three and six month periods ended June 30, 2000, respectively. The majority
of the decreases is attributed to a decrease in replacement and repair expense,
particularly at Ambassador Towers where many upgrades of appliances, carpet, and
wallpaper were completed in 1999.
9
<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 III
By: /s/ Joseph M. Jayson 12/01/00
---------------------------------- -------------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
10
