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 June 30, 2002
{ } 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 June 30, 2002 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_____
REALTY PARKING PROPERTIES II L.P.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
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 7-9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 10
Part II. Other Information
Item 1. through Item 6. 10
Signatures 11
REALTY PARKING PROPERTIES II L.P.
Balance Sheets
June 30,
2002 December 31,
(Unaudited) 2001
------------------ --------------------
Assets
Investment in real estate $ 5,673,264 $ 10,057,155
Properties held for sale 4,357,251 -
Cash and cash equivalents 317,690 351,264
Accounts receivable 254,841 158,302
------------------ --------------------
$ 10,603,046 $ 10,566,721
================== ====================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 79,563 $ 118,036
Due to affiliate 57,878 108,302
Real estate taxes payable 142,000 142,000
------------------ --------------------
279,441 368,338
------------------ --------------------
Partners' Capital
General Partner 1,252 -
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,392,800 units outstanding 10,322,253 10,198,283
Subordinated Limited Partner 100 100
------------------ --------------------
10,323,605 10,198,383
------------------ --------------------
$ 10,603,046 $ 10,566,721
================== ====================
See accompanying notes to financial statements
1
REALTY PARKING PROPERTIES II L.P.
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
--------------------------------------- ----------------------------------------
Revenues
Parking lot rental $ 213,832 $ 286,144 $ 313,592 $ 440,546
Interest income 1,009 4,045 2,075 9,473
------------------- ------------------ ------------------ --------------------
214,841 290,189 315,667 450,019
------------------- ------------------ ------------------ --------------------
Expenses
Administrative, including amounts
to related party 16,530 22,616 47,900 51,740
Professional fees 5,500 5,500 11,000 11,000
Management fees to related party 18,058 17,261 36,144 34,428
Interest - 7,226 - 17,921
Depreciation 1,950 4,165 3,899 8,329
------------------- ------------------ ------------------ --------------------
42,038 56,768 98,943 123,418
------------------- ------------------ ------------------ --------------------
Income from continuing operations 172,803 233,421 216,724 326,601
Discontinued operations - income from
operations of properties held for sale 58,576 60,550 113,786 92,194
------------------- ------------------ ------------------ --------------------
Net earnings $ 231,379 $ 293,971 $ 330,510 $ 418,795
=================== ================== ================== ====================
Net earnings per unit of assignee and
limited partnership interest-basic
Continuing operations $ 0.12 $ 0.17 $ 0.15 $ 0.23
Discontinued operations 0.04 0.04 0.08 0.07
------------------- ------------------ ------------------ --------------------
Total $ 0.16 $ 0.21 $ 0.23 $ 0.30
=================== ================== ================== ====================
See accompanying notes to financial statements
2
REALTY PARKING PROPERTIES II L.P.
Statements of Partners' Capital
Six Months Ended June 30, 2002 and 2001
(Unaudited)
Assignee
and Limited Subordinated
Partnership Limited General
Interests Partner Partner Total
----------------------------------------------------------------------------------
Balance at December 31, 2001 $ 10,198,283 $ 100 $ - $ 10,198,383
Net earnings 327,205 - 3,305 330,510
Distributions to partners (203,235) - (2,053) (205,288)
------------------- ------------------ ------------------ --------------------
Balance at June 30, 2002 $ 10,322,253 $ 100 $ 1,252 $ 10,323,605
=================== ================== ================== ====================
Balance at December 31, 2000 $ 13,740,841 $ 100 $ - $ 13,740,941
Net earnings 414,607 - 4,188 418,795
Distributions to partners (342,430) - (3,459) (345,889)
------------------- ------------------ ------------------ --------------------
Balance at June 30, 2001 $ 13,813,018 $ 100 $ 729 $ 13,813,847
=================== ================== ================== ====================
See accompanying notes to financial statements
3
REALTY PARKING PROPERTIES II L.P.
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, June 30,
2002 2001
-------------------------------------
Cash flows from operating activities
Net earnings $ 330,510 $ 418,795
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation 26,640 31,070
Changes in assets and liabilities
Increase in accounts receivable and
real estate taxes payable, net (96,539) (112,327)
Decrease in accounts payable
and accrued expenses (38,473) (12,659)
Decrease in due to affiliate (50,424) (1,743)
------------------ --------------------
Net cash provided by operating activities 171,714 323,136
------------------ --------------------
Cash flows from investing activities-
deposit - 15,000
------------------ --------------------
Cash flows from financing activities
Distributions to partners (205,288) (345,889)
Repayment of note payable - (300,000)
------------------ --------------------
Net cash used in financing activities (205,288) (645,889)
------------------ --------------------
Net decrease in cash and cash equivalents (33,574) (307,753)
Cash and cash equivalents
Beginning of period 351,264 769,227
------------------ --------------------
End of period $ 317,690 $ 461,474
================== ====================
See accompanying notes to financial statements
4
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
June 30, 2002
(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 accounting
principles generally accepted in the United States of America. The unaudited
interim financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of financial position, operating
results and cash flows for the interim periods presented. All such adjustments
are of a normal recurring nature. Certain amounts in the statements of
operations for 2001 have been reclassified to conform to the presentation for
2002. The unaudited interim financial information should be read in conjunction
with the financial statements contained in the 2001 Annual Report.
Note 2 - Cash and Cash Equivalents
The Fund considers all short-term investments with maturities of three months or
less at dates of purchase as cash equivalents. Cash and cash equivalents consist
of cash and a money market account and are stated at cost, which approximated
market value at June 30, 2002 and December 31, 2001.
Note 3 - Investment in Real Estate
Investment in real estate is summarized as follows:
June 30, 2002 December 31, 2001
Land $ 5,721,351 $ 9,053,445
Building - 1,432,655
5,721,351 10,486,100
Less accumulated depreciation 48,087 428,945
Total $ 5,673,264 $ 10,057,155
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 - Properties Held for Sale
At June 30, 2002, the Fund's Tulsa, Oklahoma, Dallas, Texas and Nashville,
Tennessee properties were under contract for sale and were classified as
properties held for sale in the balance sheet. In accordance with the provisions
of Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," the results of operations of these
properties are reported in discontinued operations for all periods presented in
the statements of operations. Income from operations of properties held for sale
is summarized as follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
---------------- ---------------- ---------------- -------------
Revenues $ 87,995 $ 87,995 $ 175,989 $ 175,989
Expenses 29,419 27,445 62,203 83,795
------------- ------------- ------------ ------------
$ 58,576 $ 60,550 $ 113,786 $ 92,194
============= ============= ============ ============
5
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
June 30, 2002
(Unaudited)
Note 5 - Related Party Transactions
The General Partner earned an asset-based management fee for advising the Fund
and managing its investments of $33,973 and $26,085 during the three months
ended June 30, 2002 and 2001, respectively, and $67,973 and $52,075 during the
six months ended June 30, 2002 and 2001, respectively (portions of which have
been recorded in discontinued operations). This fee is equal to 0.75% of the
Fund's capital contributions invested in certain properties or fair values based
on updated appraisals for certain other properties. Additionally, the General
Partner was reimbursed for certain costs incurred relating to administrative
services for the Fund totaling $22,905 and $20,134 during the three months ended
June 30, 2002 and 2001, respectively, and $48,845 and $51,304 during the six
months ended June 30, 2002 and 2001, respectively.
Note 6 - Note payable
In July 2000, the Fund's line of credit agreement with a bank was amended to
reduce the bank's commitment from $3,500,000 to $736,000, the principal balance
outstanding at that time. The interest rate on outstanding borrowings was the
bank's prime rate (6.75% at June 30, 2001). The principal balance at June 30,
2001 was $336,000. The line of credit was repaid in full in July 2001. Interest
expense totaled $7,226 and $17,921 during the three and six months ended June
30, 2001, respectively.
Note 7 - 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 8 - Subsequent Events
On July 19, 2002, the Fund sold the Tulsa, Oklahoma property for $1,020,000. The
Fund's investment in the property was $766,285. The gain on sale and the sale
proceeds (net of expenses) will be reported and distributed to investors during
the third quarter of 2002.
On July 31, 2002, the Fund sold the Dallas, Texas property for $2,682,500. The
Fund's investment in the property was $1,965,940, net of accumulated
depreciation of $234,792. The gain on sale and the sale proceeds (net of
expenses) will be reported and distributed to investors during the third quarter
of 2002.
On August 6, 2002, the Fund sold the Nashville, Tennessee property for
$5,000,000. The Fund's investment in the property was $1,625,026, net of
accumulated depreciation of $172,705. The gain on sale and the sale proceeds
(net of expenses) will be reported and distributed to investors during the third
quarter of 2002.
On August 12, 2002, the Fund will make a cash distribution totaling $200,000, of
which 99% will be allocated to Assignee and Limited Partners. This distribution
will be derived from funds provided by operating activities for the quarter
ended June 30, 2002. Holders of Units will receive a cash distribution of
approximately $0.14 per Unit.
6
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Fund acquired twelve Properties through 1994 and has sold seven of the
Properties through June 30, 2002. The Fund does not contemplate making any major
improvements to its properties during 2002.
At June 30, 2002, the Fund had a working capital position that includes
cash and cash equivalents of $317,690, accounts receivable (net of real estate
taxes payable) of $112,841, and accounts payable and accrued expenses of
$137,441. Cash and cash equivalents increased $10,895 during the quarter ended
June 30, 2002. This increase represents the net effect of $113,347 in cash
provided by operating activities and the quarterly cash distribution to
investors of $102,452.
On August 12, 2002, the Fund plans to make a cash distribution from
operations totaling $200,000, of which 99% will be allocated to Assignee and
Limited Partners. Assignee and Limited Partners will receive a cash distribution
of approximately $0.14 per unit.
Results of Operations
In accordance with the provisions of Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS No. 144), the statements of operations present income from
continuing operations and from discontinued operations. Discontinued operations
include the operating results of properties under contracts for sale at June 30,
2002. The prior year amounts for the properties classified as held for sale have
been reclassified to discontinued operations as required by SFAS No. 144. The
following discussion and analysis of the results of operations conforms to this
presentation in the statements of operations.
Parking lot rental income includes base rents and percentage rents earned
pursuant to lease agreements in effect during each period. The Fund leases its
facilities to Central Parking System (the "Advisor") under terms that typically
include a minimum rent calculated as a percentage of certain acquisition costs.
In addition, the Advisor is typically obligated to pay percentage rent,
calculated as a percentage of gross parking revenues.
Continuing Operations
Income from continuing operations includes results from two of the Fund's
properties (San Antonio and Phoenix) in 2002 and reflects these same two
properties and the San Diego property in 2001. Expenses not directly
identifiable with a specific property held for sale are reflected in continuing
operations.
Parking lot revenue of $213,832 was earned during the second quarter of
2002, reflecting a decrease of $72,312 from the same period in 2001. The
decrease is a result of property sales during 2001 ($54,642) and a net decrease
in percentage rents earned during 2002 ($17,670). The decrease in percentage
rents is attributed to the Phoenix airport site, which had experienced lower
parking revenues as a result of the decrease in airport traffic after the
September 11 events.
Parking lot revenue of $313,592 was earned during the six months ended
June 30, 2002, reflecting a decrease of $126,954 from the same period in 2001.
The decrease is a result of property sales during 2001 ($109,284), and a net
decrease in percentage rents earned during 2002 ($17,670). The decrease in
percentage rents is attributed to the Phoenix airport site, which experienced
lower parking revenues as a result of the decrease in airport traffic after the
September 11 events.
Expenses incurred during the three months ended June 30, 2002, net of
depreciation, totaled $40,088 reflecting a decrease of $12,515 from the same
period in 2001. Expenses incurred during the six months ended June 30, 2002, net
of depreciation, totaled $95,044 reflecting a decrease of $20,045 from the same
period in 2001. The net decreases in expenses for the three and six months ended
June 30, 2002 are primarily attributed to three factors. Administrative expenses
decreased primarily because
7
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Income from Continuing Operations - continued
of decreases in the level of support services required by the Fund. Management
fees increased as a result of updated appraisals that increased the fair market
basis of the assets. The Fund made the final principal payment on the note in
July 2001, and, therefore, there was no interest expense recorded during 2002.
Discontinued Operations - Income from Operating Properties Held for Sale
Discontinued operations - income from operating properties held for sale
reflects parking revenue from the Fund's three properties in Tulsa, Oklahoma,
Dallas, Texas and Nashville, Tennessee and expenses that can be directly
attributed to these three properties.
Parking lot revenue of $87,995 and $175,989 for the three and six months
ended June 30, 2002, respectively, was unchanged from the same periods in 2001.
Expenses incurred during the three months ended June 30, 2002 totaled
$29,419 reflecting a small increase from the same period in 2001. Expenses
incurred during the six months ended June 30, 2002 totaled $62,203 reflecting a
decrease of $21,592 from the same period in 2001. The decrease in the six months
ended June 30, 2002 is the result of lower Tennessee franchise and excise taxes
on the Fund's Nashville property, net of higher management fees based on updated
appraisals obtained in late 2001.
Sales
On July 19, 2002, the Fund sold the Tulsa, Oklahoma property for
$1,020,000. The Fund's investment in the property was $766,285. The gain on sale
and the sale proceeds (net of expenses) will be reported and distributed to
investors during the third quarter of 2002.
On July 31, 2002, the Fund sold the Dallas, Texas property for $2,682,500.
The Fund's investment in the property was $1,965,940, net of accumulated
depreciation of $234,792. The gain on sale and the sale proceeds (net of
expenses) will be reported and distributed to investors during the third quarter
of 2002.
On August 6, 2002, the Fund sold the Nashville, Tennessee property for
$5,000,000. The Fund's investment in the property was $1,625,026, net of
accumulated depreciation of $172,705. The gain on sale and the sale proceeds
(net of expenses) will be reported and distributed to investors during the third
quarter of 2002.
Outlook
While the Fund's original investment strategy had anticipated that the
highest returns might be obtained by selling properties at a price reflective of
their development potential, strong returns can also be earned from selling
properties based on their parking economics. The Fund's two properties not under
contract are being actively marketed for sale in 2002.
8
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Critical Accounting Policies
Critical accounting policies are those that are both important to the
presentation of financial condition and results of operations and require
management's most difficult, complex or subjective judgments. The Fund's
critical accounting policy relates to the evaluation of impairment of long-lived
assets.
If events or changes in circumstances indicate that the carrying value of
a property to be held and used may be impaired, a recoverability analysis is
performed based on estimated undiscounted cash flows to be generated from the
property in the future. If the analysis indicates that the carrying value is not
recoverable from future cash flows, the property is written down to its
estimated fair value and an impairment loss is recognized. If the Fund decides
to sell a property, it evaluates the recoverability of the carrying amount of
the assets. If the evaluation indicates that the carrying value is not
recoverable from estimated net sales proceeds, the property is written down to
estimated fair value less costs to sell and an impairment loss is recognized.
The estimates of cash flows and fair values of the properties are based on
current market conditions and consider matters such as each of the parking
properties' parking rates, operating expenses and/or the terms of a net lease
with a parking operator, recent sales data for comparable properties and, where
applicable, contracts or the results of negotiations with purchasers or
prospective purchasers. These estimates are subject to revision as market
conditions, and the Fund's assessment of them, change.
9
REALTY PARKING PROPERTIES II L.P.
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
None
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities and Use of Proceeds
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
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K: None
10
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: 8/6/02 By: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company II, Inc.
General Partner
DATE: 8/6/02 By: /s/ Timothy M.Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company II, Inc.
General Partner
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