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, 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 September 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
Item 4. Controls and Procedures 10
Part II. Other Information
Item 1. through Item 6. 10
Signatures 11
REALTY PARKING PROPERTIES II L.P.
Balance Sheets
September 30,
2002 December 31,
(Unaudited) 2001
------------------ --------------------
Assets
Investment in real estate $ 5,671,315 $ 10,057,155
Cash and cash equivalents 580,858 351,264
Accounts receivable 42,000 158,302
------------------ --------------------
$ 6,294,173 $ 10,566,721
================== ====================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 34,382 $ 118,036
Due to affiliate 57,095 108,302
Real estate taxes payable 37,000 142,000
------------------ --------------------
128,477 368,338
------------------ --------------------
Partners' Capital
General Partner - -
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,392,800 units outstanding 6,165,596 10,198,283
Subordinated Limited Partner 100 100
------------------ --------------------
6,165,696 10,198,383
------------------ --------------------
$ 6,294,173 $ 10,566,721
================== ====================
See accompanying notes to financial statements
1
REALTY PARKING PROPERTIES II L.P.
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
--------------------------------------- ----------------------------------------
Revenues
Parking lot rental $ 101,481 $ 154,403 $ 415,074 $ 594,949
Interest income 12,836 1,888 14,910 11,361
------------------- ------------------ ------------------ --------------------
114,317 156,291 429,984 606,310
------------------- ------------------ ------------------ --------------------
Expenses
Administrative, including amounts
to related party 13,276 23,177 61,176 74,917
Professional fees 5,500 14,754 16,500 25,754
Management fees to related party 23,079 17,107 59,222 51,535
Interest - 695 - 18,616
Depreciation 1,949 4,165 5,848 12,494
------------------- ------------------ ------------------ --------------------
43,804 59,898 142,746 183,316
------------------- ------------------ ------------------ --------------------
Income from continuing operations 70,513 96,393 287,238 422,994
Discontinued operations 3,967,336 242,709 4,081,122 334,903
------------------- ------------------ ------------------ --------------------
Net earnings $ 4,037,849 $ 339,102 $ 4,368,360 $ 757,897
=================== ================== ================== ====================
Net earnings per unit of assignee and
limited partnership interest-basic
Continuing operations $ 0.05 $ 0.07 $ 0.20 $ 0.30
Discontinued operations 2.79 0.17 2.87 0.24
------------------- ------------------ ------------------ --------------------
Total $ 2.84 $ 0.24 $ 3.07 $ 0.54
=================== ================== ================== ====================
See accompanying notes to financial statements
2
REALTY PARKING PROPERTIES II L.P.
Statements of Partners' Capital
Nine Months Ended September 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 4,284,350 - 84,010 4,368,360
Distributions to partners -
Operations (401,235) - (4,053) (405,288)
Sales proceeds, net (7,915,802) - (79,957) (7,995,759)
------------------- ------------------ ------------------ --------------------
Balance at September 30, 2002 $ 6,165,596 $ 100 $ - $ 6,165,696
=================== ================== ================== ====================
Balance at December 31, 2000 $ 13,740,841 $ 100 $ - $ 13,740,941
Net earnings 750,318 - 7,579 757,897
Distributions to partners (549,841) - (5,554) (555,395)
------------------- ------------------ ------------------ --------------------
Balance at September 30, 2001 $ 13,941,318 $ 100 $ 2,025 $ 13,943,443
=================== ================== ================== ====================
See accompanying notes to financial statements
3
REALTY PARKING PROPERTIES II L.P.
Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30, September 30,
2002 2001
-------------------------------------
Cash flows from operating activities
Net earnings $ 4,368,360 $ 757,897
Adjustments to reconcile net earnings to net cash
provided by operating activities
Gain on sales of properties, net (3,738,508) -
Depreciation 28,589 46,605
Changes in assets and liabilities
(Increase) decrease in accounts receivable
and real estate taxes payable, net 11,302 (162,233)
Increase (decrease) in accounts payable
and accrued expenses (83,654) 55
Decrease in due to affiliate (51,207) (1,322)
------------------ --------------------
Net cash provided by operating activities 534,882 641,002
------------------ --------------------
Cash flows from investing activities
Proceeds from sales of properties, net 8,095,759 -
Deposit - 15,000
------------------ --------------------
Net cash provided by investing activities 8,095,759 15,000
------------------ --------------------
Cash flows from financing activities
Distributions to partners (8,401,047) (555,395)
Repayment of note payable - (636,000)
------------------ --------------------
Net cash used in financing activities (8,401,047) (1,191,395)
------------------ --------------------
Net increase (decrease) in cash and cash equivalents 229,594 (535,393)
Cash and cash equivalents
Beginning of period 351,264 769,227
------------------ --------------------
End of period $ 580,858 $ 233,834
================== ====================
See accompanying notes to financial statements
4
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
September 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 September 30, 2002 and December 31, 2001.
Note 3 - Investment in Real Estate
Investment in real estate is summarized as follows:
September 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 50,036 428,945
------------- ---------------
Total $ 5,671,315 $ 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 - Sales of Properties
On August 6, 2002, the Fund sold its Nashville, Tennessee property for
$5,000,000. The Fund's investment in the property was $1,625,026, net of
accumulated depreciation of $172,706. The gain from the sale totaled $2,832,124,
net of expenses of $542,850.
On July 31, 2002, the Fund sold its Dallas, Texas property for $2,682,500.
Additionally, the Fund received a settlement of $111,138 from the original title
company as compensation for the diminished value of the property resulting from
an undisclosed easement. The Fund's investment in the property was $1,854,802,
net of the settlement payment and accumulated depreciation of $234,792. The gain
from the sale totaled $680,555, net of expenses of $147,143.
On July 19, 2002, the Fund sold its Tulsa, Oklahoma property for $1,020,000. The
Fund's investment in the property was $766,285. The gain from the sale totaled
$225,829, net of expenses of $27,886.
-5-
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
September 30, 2002
(Unaudited)
Note 5 - Discontinued Operations
During the third quarter of 2002 the Fund's Tulsa, Oklahoma, Dallas, Texas and
Nashville, Tennessee properties were sold. 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 discontinued operations is summarized
as follows:
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2002 2001 2002 2001
------------ ------------ ------------- -----------
Revenues $ 242,972 $ 271,428 $ 418,960 $ 447,416
Expenses (14,144) (28,719) (76,346) (112,513)
Gain on sale
of properties 3,738,508 - 3,738,508 -
------------ ------------ ------------- ------------
$ 3,967,336 $ 242,709 $ 4,081,122 $ 334,903
============ ============ ============= ============
Note 6 - Related Party Transactions
The General Partner earned an asset-based management fee for advising the Fund
and managing its investments of $31,672 and $25,931 during the three months
ended September 30, 2002 and 2001, respectively, and $99,645 and $78,006 during
the nine months ended September 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 $25,423 and $20,709 during the
three months ended September 30, 2002 and 2001, respectively, and $74,268 and
$72,012 during the nine months ended September 30, 2002 and 2001, respectively.
Note 7 - 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. The line of credit was repaid in full in July 2001. Interest
expense totaled $695 and $18,616 during the three and nine months ended
September 30, 2001, respectively.
Note 8 - 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 9 - Subsequent Event
On November 14, 2002, the Fund plans to make a cash distribution totaling
$300,000, of which 99% will be allocated to Assignee and Limited Partners. This
distribution is derived from funds provided by operating activities for the
quarter ended September 30, 2002. Holders of Units will receive a cash
distribution of approximately $0.21 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 sold ten of the
Properties through September 30, 2002. The Fund does not contemplate making any
major improvements to its properties during 2002.
At September 30, 2002, the Fund had a working capital position that
includes cash and cash equivalents of $580,858, accounts receivable (net of real
estate taxes payable) of $5,000, and accounts payable and accrued expenses of
$91,477. Cash and cash equivalents increased $263,168 during the quarter ended
September 30, 2002. This increase represents the net effect of $363,168 in cash
provided by operating activities, $8,095,759 of proceeds from the sales of three
properties, net of the quarterly distribution to investors totaling $200,000,
and sales proceeds distributions to investors totaling $7,995,759.
On November 14, 2002, the Fund plans to make a cash distribution totaling
$300,000, of which 99% will be allocated to Assignee and Limited Partners. This
distribution is derived from funds provided by operating activities for the
quarter ended September 30, 2002. Holders of Units will receive a cash
distribution of approximately $0.21 per Unit.
On September 10, 2002, the Fund made a sales proceeds distribution (from
the three property sales discussed below) totaling $7,995,759, of which 99% was
allocated to Assignee and Limited Partners. Holders of Units received a cash
distribution of approximately $5.69 per Unit.
On August 6, 2002, the Fund sold its Nashville, Tennessee property for
$5,000,000. The Fund's investment in the property was $1,625,026, net of
accumulated depreciation of $172,706. The gain from the sale totaled $2,832,124,
net of expenses of $542,850.
On July 31, 2002, the Fund sold its Dallas, Texas property for $2,682,500.
Additionally, the Fund received a settlement of $111,138 from the original title
company as compensation for the diminished value of the property resulting from
an undisclosed easement. The Fund's investment in the property was $1,854,802,
net of the settlement payment and accumulated depreciation of $234,792. The gain
from the sale totaled $680,555, net of expenses of $147,143.
On July 19, 2002, the Fund sold its Tulsa, Oklahoma property for
$1,020,000. The Fund's investment in the property was $766,285. The gain from
the sale totaled $225,829, net of expenses of $27,886.
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 sold in 2002. The prior year amounts
for these properties 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.
-7-
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Income from 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 sold in the fourth quarter of 2001.
Expenses not directly identifiable with a specific property held for sale are
reflected in continuing operations.
Parking lot revenue of $101,481 was earned during the three months ended
September 30, 2002, reflecting a decrease of $52,922 from the same period in
2001. The decrease is a result of the San Diego property sale during 2001
($54,642), and an increase in percentage rent earned during the third quarter of
2002 ($1,720).
Parking lot revenue of $415,074 was earned during the nine months ended
September 30, 2002, reflecting a decrease of $179,875 from the same period in
2001. The decrease is a result of the San Diego property sale during 2001
($163,925), and a net decrease in percentage rents earned during 2002 ($15,950).
The decrease in percentage rents is primarily 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 September 30, 2002, net of
depreciation, totaled $41,855 reflecting a decrease of $13,878 from the same
period in 2001. Expenses incurred during the nine months ended September 30,
2002, net of depreciation, totaled $136,898 reflecting a decrease of $33,924
from the same period in 2001. The net decreases in expenses for the three and
nine months ended September 30, 2002 are primarily attributed to four factors.
Administrative expenses decreased primarily because of decreases in the level of
support services required by the Fund. Professional fees decreased because
consulting expenses incurred during 2001 were not incurred during 2002.
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
its note payable in July 2001, and, therefore, there was no interest expense
recorded during 2002.
Discontinued Operations
Discontinued operations reflects parking revenue from the Fund's
properties in Tulsa, Oklahoma, Dallas, Texas and Nashville, Tennessee and
expenses that can be directly attributed to these three properties.
Parking lot revenue of $242,973 and $418,960 was earned during the three
and nine months ended September 30, 2002, respectively, reflecting a decrease of
$28,456 from the same periods in 2001. The decrease is the result of property
sales during 2002.
Expenses incurred during the three months ended September 30, 2002, net of
depreciation, totaled $14,143 reflecting a decrease of $3,206 from the same
period in 2001. Expenses incurred during the nine months ended September 30,
2002 totaled $53,606 reflecting a decrease of $24,797 from the same period in
2001. The decrease in the nine months ended September 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 2001.
Outlook
The Fund is currently undergoing serious negotiations with separate buyers
for the two remaining properties in San Antonio, Texas and Phoenix, Arizona.
Should these negotiations result in sales of these final two properties, the
Fund will conclude its operations.
-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
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this quarterly report,
an evaluation was performed under the supervision and with the
participation of the Fund's management, including the Chief Executive
Officer and Chief Financial Officer of the general partner, of the
effectiveness of the design and operation of disclosure controls and
procedures as defined in Rule 13a-14 of the rules promulgated under the
Securities and Exchange Act of 1934, as amended. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the design and operation of these disclosure controls
and procedures were effective. There have been no significant changes
in our internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
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.
Exhibit 99.3 Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.4 Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K:
Form 8-K dated July 19, 2002 described the Fund's sales of the
Tulsa, Oklahoma, Dallas, Texas, and Nashville, Tennessee
properties.
-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: 11/13/02 By: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company II, Inc.
General Partner
DATE: 11/12/02 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company II, Inc.
General Partner
-11-