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 March 31, 2003
{ } 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 March 31, 2003 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_____
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes No X___
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 7-8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 9
Item 4. Controls and Procedures 9
Part II. Other Information
Item 1. through Item 6. 9-13
Signatures 14
REALTY PARKING PROPERTIES II L.P.
Balance Sheets
March 31,
2003 December 31,
(Unaudited) 2002
------------------ --------------------
Assets
Investment in real estate $ 3,304,549 $ 3,304,549
Property held for sale - 2,364,816
Cash and cash equivalents 365,334 327,576
Accounts receivable 36,000 37,000
------------------ --------------------
$ 3,705,883 $ 6,033,941
================== ====================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 34,421 $ 109,430
Due to affiliate 38,524 40,771
Real estate taxes payable 34,000 37,000
------------------ --------------------
106,945 187,201
------------------ --------------------
Partners' Capital
General Partner - -
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,392,800 units outstanding 3,598,838 5,846,640
Subordinated Limited Partner 100 100
------------------ --------------------
3,598,938 5,846,740
------------------ --------------------
$ 3,705,883 $ 6,033,941
================== ====================
See accompanying notes to financial statements
1
REALTY PARKING PROPERTIES II L.P.
Statements of Operations
(Unaudited)
Three Months Ended
March 31, March 31,
2003 2002
----------------------------------------
Revenues
Parking lot rental $ 58,562 $ 58,562
Contract default income 50,000 -
Interest income 1,936 1,066
------------------ --------------------
110,498 59,628
------------------ --------------------
Expenses
Administrative, including amounts
to related party 13,829 31,370
Professional fees 10,574 5,500
Management fees to related party 9,357 11,768
Depreciation - 1,950
------------------ --------------------
33,760 50,588
------------------ --------------------
Income from continuing operations 76,738 9,040
Discontinued operations 785,210 90,091
------------------ --------------------
Net earnings $ 861,948 $ 99,131
================== ====================
Net earnings per unit of assignee and
limited partnership interest-basic
Continuing operations $ 0.05 $ 0.01
Discontinued operations 0.55 0.06
------------------ --------------------
Total $ 0.60 $ 0.07
================== ====================
See accompanying notes to financial statements
2
REALTY PARKING PROPERTIES II L.P.
Statements of Partners' Capital
Three Months Ended March 31, 2003 and 2002
(Unaudited)
Assignee
and Limited Subordinated
Partnership Limited General
Interests Partner Partner Total
----------------------------------------------------------------------------------
Balance at December 31, 2002 $ 5,846,640 $ 100 $ - $ 5,846,740
Net earnings 830,850 - 31,098 861,948
Distribution to partners -
sale proceeds, net (3,078,652) - (31,098) (3,109,750)
------------------- ------------------ ------------------ --------------------
Balance at March 31, 2003 $ 3,598,838 $ 100 $ - $ 3,598,938
=================== ================== ================== ====================
Balance at December 31, 2001 $ 10,198,283 $ 100 $ - $ 10,198,383
Net earnings 98,140 - 991 99,131
Distribution to partners - operating (101,808) - (1,028) (102,836)
------------------- ------------------ ------------------ --------------------
Balance at March 31, 2002 $ 10,194,615 $ 100 $ (37) $ 10,194,678
=================== ================== ================== ====================
See accompanying notes to financial statements
3
REALTY PARKING PROPERTIES II L.P.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31, March 31,
2003 2002
-------------------------------------
Cash flows from operating activities
Net earnings $ 861,948 $ 99,131
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Gain on sale of property, net (744,934) -
Proceeds from contract default (50,000) -
Depreciation - 13,320
Changes in assets and liabilities
(Increase) decrease in accounts receivable
and real estate taxes payable, net (2,000) 16,302
Decrease in accounts payable and
accrued expenses (75,009) (22,024)
Decrease in due to affiliate (2,247) (48,362)
------------------ --------------------
Net cash provided by (used in) operating activities (12,242) 58,367
------------------ --------------------
Cash flows from investing activities
Proceeds from sale of property, net 3,109,750 -
Proceeds from contract default 50,000 -
------------------ --------------------
Net cash provided by investing activities 3,159,750 -
------------------ --------------------
Cash flows from financing activities -
distributions to partners (3,109,750) (102,836)
------------------ --------------------
Net increase (decrease) in cash and cash equivalents 37,758 (44,469)
Cash and cash equivalents
Beginning of period 327,576 351,264
------------------ --------------------
End of period $ 365,334 $ 306,795
================== ====================
See accompanying notes to financial statements
4
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
March 31, 2003
(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 2002 have been reclassified to conform to the presentation for
2003. The unaudited interim financial information should be read in conjunction
with the financial statements contained in the 2002 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 March 31, 2003 and December 31, 2002.
Note 3 - Investment in Real Estate
Investment in real estate totals $3,304,549, net of accumulated depreciation of
$51,985, at March 31, 2003 and December 31, 2002.
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 - Sale of Property
On February 20, 2003, the Fund sold its San Antonio, Texas property for
$3,300,000. The Fund's investment in the property was $2,364,816. The gain from
the sale totaled $744,934, net of expenses of $190,250.
Note 5 - Contract Default Income
The Fund had a signed contract for the Phoenix, Arizona property. The buyer
defaulted in consummating the purchase of the property and the Fund recorded the
buyer's nonrefundable deposit of $50,000 as income.
5
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
March 31, 2003
(Unaudited)
Note 6 - Discontinued Operations
The Fund's property in San Antonio, Texas was sold during the first quarter of
2003. In accordance with the provisions of Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," which was effective on January 1, 2002 with respect to the Fund, the
results of operations of this property and the three properties which were sold
during 2002 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
March 31, March 31,
2003 2002
----------------- -----------------
Revenues $ 53,467 $ 129,193
Expenses (13,191) (39,102)
Gain on sale
of property 744,934 -
----------------- -----------------
$ 785,210 $ 90,091
================= =================
Note 7 - Related Party Transactions
The General Partner earned an asset-based management fee for advising the Fund
and managing its investments of $15,545 and $34,000 during the three months
ended March 31, 2003 and 2002, respectively (portions of which have been
recorded in discontinued operations). This fee is equal to 0.75% of the fair
values of the properties. Additionally, the General Partner was reimbursed for
certain costs incurred relating to administrative services for the Fund totaling
$22,979 and $25,940 during the three months ended March 31, 2003 and 2002,
respectively.
Pursuant to an Investment Advisory Agreement, the Advisor earns a fee upon
disposition of a property equal to 1.5% of the contract price for the sale of
the property. Such fee is earned for services rendered to advise the General
Partner on the timing and pricing of property sales. The Advisor earned an
advisory fee of $49,500 in 2003 in connection with the sale of a property.
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.
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 eleven of the
Properties through March 31, 2003. The Fund currently has no plans to use
working capital to perform major repairs or improvements to its final property.
At March 31, 2003, the Fund had a working capital position that includes
cash and cash equivalents of $365,334, accounts receivable (net of real estate
taxes payable) of $2,000, and accounts payable and accrued expenses of $72,945.
Cash and cash equivalents increased $37,758 during the quarter ended March 31,
2003. This increase represents the net effect of $12,242 in cash used in
operating activities, $50,000 of proceeds from a contract default, $3,109,750 of
proceeds from the sale of a property, and the sale proceeds distribution to
investors totaling $3,109,750.
On February 20, 2003, the Fund sold its San Antonio, Texas property for
$3,300,000. The Fund's investment in the property was $2,364,816. The gain from
the sale totaled $744,934, net of expenses of $190,250.
On March 17, 2003, the Fund made the San Antonio sale proceeds
distribution totaling $3,109,750, of which 99% was allocated to Assignee and
Limited Partners. Assignee and Limited Partners received a cash distribution of
approximately $2.21 per original $25 Unit.
The Fund retains only one property, therefore, future cash distributions
from operations will cease until its final property is sold.
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 the properties sold in 2003 and 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 the Fund's
properties classified as investment in real estate on the balance sheet.
Expenses not directly identifiable with a specific property held for sale are
reflected in continuing operations.
The Fund had a signed contract for the Phoenix, Arizona property. The
buyer defaulted in consummating the purchase of the property and the Fund
recorded the buyer's nonrefundable deposit of $50,000 as income.
Parking lot revenue of $58,562 was earned during the three months ended
March 31, 2003 and 2002.
Expenses incurred during the three months ended March 31, 2003, net of
depreciation, totaled $33,760 reflecting a decrease of $14,878 from the same
period in 2002. The decrease is the result of lower administrative expenses and
management fees, as a result of property sales, net of legal fees paid.
Discontinued Operations
Discontinued operations reflect parking revenue from the Fund's property
in San Antonio (sold during 2003) and the Nashville, Tulsa, and Dallas
properties (sold during 2002) and expenses that can be directly attributed to
these properties.
Parking lot revenue of $53,467 was earned during the three months ended
March 31, 2003, reflecting a decrease of $75,726 from the same period in 2002.
The decrease is a result of property sales during 2002.
Expenses incurred during the three months ended March 31, 2003, net of
depreciation, totaled $13,191 reflecting a decrease of $14,541 from the same
period in 2002. The decrease is a result of lower management fees during 2003 as
a result of property sales during 2002.
Outlook
The Fund has signed a contract for the sale of its final property in
Phoenix, Arizona. This contract is in its due diligence period and there is no
assurance that this contract will result in a sale. However, if this contract
results in a sale of the final property, the Fund will conclude its 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.
8
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 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 February 20, 2003 described the Fund's sale of the
San Antonio, Texas property.
9
Exhibit 99.1
REALTY PARKING PROPERTIES II L.P.
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of Realty Parking Properties II L.P.'s (the
"Fund") Report on Form 10-Q for the period ended March 31, 2003 with the
Securities and Exchange Commission on the date hereof (the "Report"), I, John M.
Prugh, the Chief Executive Officer of Realty Parking Company II, Inc., General
Partner of the Fund, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Fund.
By: /s/John M. Prugh
John M. Prugh
Chief Executive Officer
Realty Parking Company II, Inc.
General Partner
May 12, 2003
10
Exhibit 99.2
REALTY PARKING PROPERTIES II L.P.
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of Realty Parking Properties II L.P.'s (the
"Fund") Report on Form 10-Q for the period ended March 31, 2003 with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy
M. Gisriel, the Chief Financial Officer of Realty Parking Company II, Inc.,
General Partner of the Fund, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Fund.
By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Chief Financial Officer
Realty Parking Company II, Inc.
General Partner
May 12, 2003
11
Exhibit 99.3
REALTY PARKING PROPERTIES II L.P.
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John M. Prugh, certify that:
1. I have reviewed this report of Realty Parking Properties II L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in this report;
4. The issuer's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the issuer and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this report
(the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The issuer's other certifying officer and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of
issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls; and
6. The issuer's other certifying officer and I have indicated in this
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: 5/12/03 By: /s/ John M. Prugh
John M. Prugh
Chief Executive Officer
Realty Parking Company II, Inc.
General Partner
-12-
Exhibit 99.4
REALTY PARKING PROPERTIES II L.P.
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Timothy M. Gisriel, certify that:
1. I have reviewed this report of Realty Parking Properties II L.P.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in this report;
4. The issuer's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the issuer and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this report
(the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The issuer's other certifying officer and I have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of
issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record, process,
summarize and report financial data and have identified for the issuer's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls; and
6. The issuer's other certifying officer and I have indicated in this
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: 5/12/03 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Chief Financial Officer
Realty Parking Company II, Inc.
General Partner
-13-
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: 5/12/03 By: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company II, Inc.
General Partner
DATE: 5/12/03 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company II, Inc.
General Partner
14