FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended September 30, 1998 Commission file number 000-20147
Realty Parking Properties II L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1710286
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
N/A
(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report.)
Indicate by 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>
REALTY PARKING PROPERTIES II L.P.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statement
Balance Sheets 1
Statements of Operations 2
Statements of Partners' Capital 3
Statements of Cash Flows 4
Notes to Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Part II. Other Information
Item 1. through Item 6. 9
Signatures 10
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Balance Sheets
<TABLE>
<CAPTION>
Sept. 30,
1998 December 31,
(Unaudited) 1997
Assets
<S> <C> <C>
Investment in real estate $26,660,555 $ 26,789,804
Cash and cash equivalents 995,945 887,200
Accounts receivable 281,365 283,112
Financing costs, less accumulated amortization
of $25,500 and $21,000, respectively 4,503 9,003
$27,942,368 $ 27,969,119
Liabilities and Partners' Capital
Accounts payable $ 24,201 $ 24,932
Due to affiliate 87,940 68,890
Real estate taxes payable 283,112 283,112
Note payable 2,861,000 3,061,000
3,256,253 3,437,934
Partners' Capital
General Partner (62,573) (64,122)
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,392,800 units outstanding 24,748,588 24,595,207
Subordinated Limited Partner 100 100
24,686,115 24,531,185
$27,942,368 $ 27,969,119
</TABLE>
See accompanying notes to financial statements
-1-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
Revenues
Gain from sale of property $ - $ - $ - $2,708,847
<S> <C> <C> <C> <C>
Parking lot rental 682,702 630,323 1,830,482 2,124,075
Interest income 6,586 14,456 19,915 27,882
689,288 644,779 1,850,397 4,860,804
Expenses
Administrative, due to affiliate 22,151 21,491 70,310 65,545
Professional fees 23,887 9,580 44,778 21,081
Management fees, due to affiliate 68,518 52,846 171,486 170,171
Interest expense 63,404 67,937 191,371 213,143
Depreciation 43,083 43,083 129,249 129,666
Amortization 1,500 1,500 4,500 5,866
222,543 196,437 611,694 605,472
Net earnings $ 466,745 $ 448,342 $1,238,703 $4,255,332
Net earnings per unit of assignee
and limited partnership interest-basic $ 0.33 $ 0.32 $ 0.88 $ 3.02
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
Statements of Partners' Capital
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Assignee
and Limited Subordinated
Partnership Limited General
Interests Partner Partner Total
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ 24,595,207 $ 100 $ (64,122) $ 24,531,185
Net earnings 1,226,316 - 12,387 1,238,703
Distributions to partners (1,072,935) - (10,838) (1,083,773)
Balance at September 30, 1998 $ 24,748,588 $ 100 $ (62,573) $ 24,686,115
Balance at December 31, 1996 $ 28,886,009 $ 100 $ (20,782) $ 28,865,327
Net earnings 4,212,779 - 42,553 4,255,332
Distributions to partners-operations (1,305,732) - (13,188) (1,318,920)
Distribution to partners-sale proceeds (7,132,075) - (72,041) (7,204,116)
Balance at September 30, 1997 $ 24,660,981 $ 100 $ (63,458) $ 24,597,623
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, 1998 Sept. 30, 19
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 1,238,703 $ 4,255,332
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation 129,249 129,666
Amortization 4,500 5,866
Gain from sale of property - (2,708,848)
Changes in assets and liabilities
Decrease in accounts receivable 1,747 2,828
Decrease in accounts payable (731) (99,673)
Increase in due to affiliates 19,050 31,290
Net cash provided by operating activities 1,392,518 1,616,461
Cash flows from investing activities -
sale of property, net - 7,204,117
Cash flows from financing activities
Distributions to partners (1,083,773) (8,523,036)
Repayment of note payable (200,000) -
Net cash used in financing activities (1,283,773) (8,523,036)
Net increase in cash and cash equivalents 108,745 297,542
Cash and cash equivalents
Beginning of period 887,200 694,405
End of period $ 995,945 $ 991,947
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 1 - The Fund and Basis of Preparation
The accompanying financial statements of Realty Parking Properties II L.P. (the
"Fund") do not include all of the information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles. The unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All such adjustments
are of a normal recurring nature. The unaudited interim financial information
should be read in conjunction with the financial statements contained in the
1997 Annual Report.
Note 2 - Cash and Cash Equivalents
The Fund considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. Cash and cash equivalents consist
of cash and a money market account and are stated at cost, which approximates
market value at September 30, 1998 and December 31, 1997.
Note 3 - Investment in Real Estate
Investment in real estate is stated at the lower of fair value or cost, net of
accumulated depreciation, and includes all related acquisition costs of the
properties, and is summarized as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
<S> <C> <C>
Land $21,857,657 $21,857,657
Building 5,583,532 5,583,532
27,441,189 27,441,189
Less: accumulated depreciation (780,634) (651,385)
Total $26,660,555 $26,789,804
</TABLE>
Depreciation of the garage structures is computed using the straight-line method
over 31.5 years for property placed in service prior to January 1, 1994 and 39
years for property placed in service after January 1, 1994.
Note 4 - Related Party Transactions
The general partner earned an asset-based management fee of $68,518 and $52,846
for advising the Fund and managing its investments during the three months ended
September 30, 1998 and 1997, respectively, and $171,486 and $170,171 during the
nine months ended September 30, 1998 and 1997, respectively. This fee is equal
to 0.75% of the Fund's capital contributions invested in properties and 0.5% of
capital contributions temporarily held awaiting investment in properties.
Additionally, the general partner will be reimbursed for certain costs incurred
relating to administrative services and expenses of the Fund.
Note 5 - Note payable
On July 18, 1994 the Fund closed on its $5.6 million line of credit agreement
with a bank. Borrowings under the credit agreement bear interest on the
outstanding principal amount at the bank's prime rate plus 1% per annum.
Effective July 18, 1997, the line of credit agreement was amended to a maximum
$3.5 million capacity, the interest rate on outstanding borrowings was reduced
to the bank's prime rate (8.5% at September 30, 1998) and the commitment was
extended
-5-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
September 30, 1998
(Unaudited)
Note 5 - Note payable (continued)
for an additional three years, until July 18, 2000. The principal balance at
September 30, 1998 and December 31, 1997 was $2,861,000 and $3,061,000,
respectively. The collateral security provision of the loan agreement provides
for the assignment of the Fund's rights as a lessor to its interest in the
parking lot leases, contracts and income. Interest paid on the outstanding
principal balance totaled $63,404 and $67,937 for the three months ended
September 30, 1998 and 1997, respectively, and $191,371 and $213,143 for the
nine months ended September 30, 1998 and 1997, respectively.
Note 6 - Net Earnings Per Unit of Assignee and Limited Partnership Interest
Net earnings per unit of assignee and limited partnership interest as disclosed
on the Statements of Operations is based upon 1,392,800 units outstanding.
Note 7 - Subsequent Event
On November 12, 1998, the Fund made a cash distribution totaling $367,087 of
which 99% was allocated to assignee and limited partners. This distribution was
derived from funds provided by operating activities. Assignee and limited
partners received a cash distribution of $.26 per original $25 unit.
-6-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1998, the Fund had a working capital position that
included cash and cash equivalents of $995,945 and accounts payable of $112,141.
Cash and cash equivalents increased $195,212 during the third quarter of 1998.
This increase represents the net effect of $562,291 in cash provided by
operating activities and a distribution to investors of $367,079.
On July 18, 1994, the Fund closed on its $5.6 million line of credit
agreement with a bank. Borrowings under the credit agreement bear interest on
the outstanding principal amount at the bank's prime rate plus 1% per annum.
Effective July 18, 1997, the line of credit agreement was amended to a maximum
$3.5 million capacity, the interest rate on outstanding borrowings was reduced
to the bank's prime rate (8.5% at September 30, 1998) and the commitment was
extended for an additional three years, until July 18, 2000. The principal
balance at September 30, 1998 and December 31, 1997 was $2,861,000 and
$3,061,000, respectively.
The Fund has substantially completed all major capital improvements
contemplated for its facilities. The Fund's operations and its available line of
credit provide sufficient capital to satisfy the Fund's liquidity requirements.
On November 12, 1998, the Fund made a distribution to investors of
$367,087 of which 99% was allocated to holders of assignee and limited
partnership units in accordance with the Partnership Agreement. This
distribution was derived from funds provided by operating activities.
Results of Operations
The Fund leases its facilities to parking operators under terms that
typically include a minimum rent calculated as a percentage of certain
acquisition costs. In addition, lessees are typically obligated to pay
percentage rent, calculated as a percentage of gross parking revenues.
The gain from the sale of the Seattle property, in June 1997, totaled
$2,708,847 at September 30, 1997. There have been no property sales in 1998.
Parking lot rental income totaled $682,702 and $630,323 during the
three months ended September 30, 1998 and 1997, respectively, and $1,830,482 and
$2,124,075 during the nine months ended September 30, 1998 and 1997,
respectively. The decrease in income for the nine months ended September 30,
1998, is primarily the result of two activities. The sale of the Seattle
property decreased base rental income by $152,476, and the unusually high
percentage rent earned at the Atlanta facility in 1997, as discussed below, was
not duplicated in 1998.
During the nine months ended September 30, 1998 percentage rents earned
at the Atlanta, Denver, Nashville, Phoenix and San Francisco facilities totaled
$462,733. During the nine months ended September 30, 1997 percentage rents
earned at the Atlanta, Nashville, Dallas-Metro, Phoenix and San Francisco
facilities totaled $632,441. The percentage rent earned at the Atlanta facility
in 1997 ($283,908) is largely attributable to an increase in parking lot
revenues brought about by the 1996 Olympic Games. The facility's close proximity
to the Olympic Games' Centennial Park permitted it to earn substantial revenues
before and during the Olympic events. The percentage rent earned at the Atlanta
facility in 1998, of $1,669, is more indicative of the recurring percentage rent
amount that may be earned at this facility.
Expenses, net of depreciation and amortization, increased $26,106 and
$8,005 during the three and nine months ended September 30, 1998, when compared
to 1997, primarily due to the professional fees related to consulting services
performed at various facilities.
-7-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations (continued)
In April 1998, the Fund signed a contract for the sale of its San
Francisco Property. The prospective buyer is interested in the site for future
development. The sale of the property is contingent upon the buyer receiving
certain development approvals. There is no assurance that the buyer will receive
all of the development approvals. However, if the sale occurs, it is likely to
take place during the first quarter of 1999.
The Fund in accordance with its original investment strategy, continues
to examine opportunities for disposition of its facilities. While it was
originally anticipated that the highest returns would be obtained from property
sales to buyers who desired sites for near-term development, management also
believes that certain properties could be sold at substantial gains based on
their parking economics.
Year 2000
The General Partner is aware of the issues associated with the
programming code in many existing computer systems (the "Year 2000" issue) as
the millennium approaches. The General Partner has conducted a review of its
computer systems to identify hardware and software affected by the Year 2000
issue. This issue affects computer systems having date sensitive programs that
may not properly recognize the Year 2000. Systems that do not properly recognize
such information could generate erroneous data or cause a system to fail
resulting in business interruption.
With respect to its existing computer systems, the General Partner is
upgrading, generally in order to meet the demands of its expanding business. In
the process, the General Partner is taking steps to identify, correct and/or
reprogram and test its existing systems for Year 2000 compliance. It is
anticipated that all new system upgrades or reprogramming efforts will be
completed by mid-1999, allowing adequate time for testing. The General Partner
presently believes that with modification to existing software the Year 2000
issue can be mitigated. However, given the complexity of the Year 2000 issues,
there can be no assurances that the General Partner will be able to address the
problem without costs and uncertainties that might affect future financial
results of the Fund or cause reported financial information of the Fund not to
be necessarily indicative of future operating results or future financial
condition.
The General Partner has incurred, and expects to incur additional,
internal costs as well as other expenses to address the necessary software
upgrades, training, data conversion, testing and implementation related to the
Year 2000 issue. Such costs are being expenses as incurred. The General Partner
does not expect the amounts required to be expensed to have a material effect on
the Fund's financial position or results of operations. The Year 2000 issue is
expected to affect the systems of various entities with which the Fund and the
General Partner interact including the Advisor of the Fund's parking properties
as well as payors, suppliers and vendors. There can be no assurance that data
produced by systems of other entities on which the General Partner's systems
rely will be converted on a timely basis or that a failure by another entity's
systems to be Year 2000 compliant will not have a material adverse effect on the
Fund.
The Fund is in the process of developing a contingency plan and will
continue to monitor the progress of the Advisor of the Fund's parking properties
as well as payors, suppliers and vendors.
-8-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities
Inapplicable
Item 3. Defaults upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
-9-
<PAGE>
REALTY PARKING PROPERTIES II L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REALTY PARKING PROPERTIES II L.P.
DATE: 11/13/98 By: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company II, Inc.
General Partner
DATE: 11/13/98 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company II, Inc.
General Partner
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000871014
<NAME> Realty Parking Properties II L.P.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 995,945
<SECURITIES> 0
<RECEIVABLES> 281,365
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,281,813
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,942,368
<CURRENT-LIABILITIES> 395,253
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 27,942,368
<SALES> 0
<TOTAL-REVENUES> 1,850,397
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 420,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191,371
<INCOME-PRETAX> 1,238,703
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,238,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,238,703
<EPS-PRIMARY> 0.880
<EPS-DILUTED> 0.000
</TABLE>
