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, 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 June 30, 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. 9-12
Signatures 13
REALTY PARKING PROPERTIES II L.P.
Balance Sheets
June 30,
2003 December 31,
(Unaudited) 2002
------------------ --------------------
Assets
Investment in real estate $ - $ 3,304,549
Property held for sale 3,304,549 2,364,816
Cash and cash equivalents 393,610 327,576
Accounts receivable 39,000 37,000
------------------ --------------------
$ 3,737,159 $ 6,033,941
================== ====================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 27,024 $ 109,430
Due to affiliate 27,485 40,771
Real estate taxes payable 34,000 37,000
------------------ --------------------
88,509 187,201
------------------ --------------------
Partners' Capital
General Partner - -
Assignee and Limited Partnership
Interests - $25 stated value per
unit, 1,392,800 units outstanding 3,648,550 5,846,640
Subordinated Limited Partner 100 100
------------------ --------------------
3,648,650 5,846,740
------------------ --------------------
$ 3,737,159 $ 6,033,941
================== ====================
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,
2003 2002 2003 2002
--------------------------------------- ----------------------------------------
Revenue
Interest income $ 644 $ 1,009 $ 2,581 $ 2,075
------------------- ------------------ ------------------ --------------------
Expenses
Administrative, including amounts
to related party 17,503 16,530 31,332 47,900
Professional fees 5,500 5,500 16,074 11,000
Management fees 446 346 2,116 717
------------------- ------------------ ------------------ --------------------
23,449 22,376 49,522 59,617
------------------- ------------------ ------------------ --------------------
Loss from continuing operations (22,805) (21,367) (46,941) (57,542)
Discontinued operations 72,517 252,746 958,601 388,052
------------------- ------------------ ------------------ --------------------
Net earnings $ 49,712 $ 231,379 $ 911,660 $ 330,510
=================== ================== ================== ====================
Net earnings (loss) per unit of assignee
and limited partnership interest-basic
Continuing operations $ (0.02) $ (0.02) $ (0.03) $ (0.04)
Discontinued operations 0.06 0.18 0.66 0.27
------------------- ------------------ ------------------ --------------------
Total $ 0.04 $ 0.16 $ 0.63 $ 0.23
=================== ================== ================== ====================
See accompanying notes to financial statements
2
REALTY PARKING PROPERTIES II L.P.
Statements of Partners' Capital
Six Months Ended June 30, 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 880,562 - 31,098 911,660
Distribution to partners -
sale proceeds, net (3,078,652) - (31,098) (3,109,750)
------------------- ------------------ ------------------ --------------------
Balance at June 30, 2003 $ 3,648,550 $ 100 $ - $ 3,648,650
=================== ================== ================== ====================
Balance at December 31, 2001 $ 10,198,283 $ 100 $ - $ 10,198,383
Net earnings 327,205 - 3,305 330,510
Distributions to partners - operating (203,235) - (2,053) (205,288)
------------------- ------------------ ------------------ --------------------
Balance at June 30, 2002 $ 10,322,253 $ 100 $ 1,252 $ 10,323,605
=================== ================== ================== ====================
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,
2003 2002
-------------------------------------
Cash flows from operating activities
Net earnings $ 911,660 $ 330,510
Adjustments to reconcile net earnings to net
cash provided by operating activities
Gain on sale of property, net (744,934) -
Proceeds from contract default (50,000) -
Depreciation - 26,640
Changes in assets and liabilities
Increase in accounts receivable and
real estate taxes payable, net (5,000) (96,539)
Decrease in accounts payable and
accrued expenses (82,406) (38,473)
Decrease in due to affiliate (13,286) (50,424)
------------------ --------------------
Net cash provided by operating activities 16,034 171,714
------------------ --------------------
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) (205,288)
------------------ --------------------
Net increase (decrease) in cash and cash equivalents 66,034 (33,574)
Cash and cash equivalents
Beginning of period 327,576 351,264
------------------ --------------------
End of period $ 393,610 $ 317,690
================== ====================
See accompanying notes to financial statements
4
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
June 30, 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 June 30, 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 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. Land improvements
are depreciated using the straight-line method over 15 years.
Note 4 - Property Held for Sale and Discontinued Operations
At December 31, 2002, the Fund owned properties in San Antonio, Texas and
Phoenix, Arizona. The Fund's property in San Antonio was sold during the first
quarter of 2003. The Phoenix property was under contract for sale and was
classified as property held for sale at June 30, 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 these
properties 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:
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.
5
REALTY PARKING PROPERTIES II L.P.
Notes to Financial Statements
June 30, 2003
(Unaudited)
Note 4 - Property Held for Sale and Discontinued Operations (continued)
At June 30, 2003, the Fund had a committed contract for sale of the Phoenix
property and, accordingly, the property was classified as held for sale. On July
15, 2003, the Fund sold the property for $5,200,000. The Fund's investment in
the property was $3,304,549, net of depreciation of $51,985 at June 30, 2003.
During the first quarter of 2003, a prospective purchaser of the Phoenix
property defaulted on its purchase contract and the Fund recorded the buyer's
nonrefundable deposit of $50,000 as income.
Note 5 - Related Party Transactions
The General Partner earned an asset-based management fee for advising the Fund
and managing its investments of $10,196 and $33,973 during the three months
ended June 30, 2003 and 2002, respectively, and $25,741 and $67,973 during the
six months ended June 30, 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 $17,289 and $22,905 during the three months ended June 30, 2003 and
2002, respectively, and $40,268 and $48,845 during the six months ended June 30,
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 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.
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 June 30, 2003. The final property was sold on July 15, 2003.
At June 30, 2003, the Fund had a working capital position that includes
cash and cash equivalents of $393,610, accounts receivable (net of real estate
taxes payable) of $5,000, and accounts payable and accrued expenses of $54,509.
Cash and cash equivalents increased $28,276 from operating activities during the
quarter ended June 30, 2003.
On July 15, 2003, the Fund sold its final property in Phoenix, Arizona for
$5,200,000. The Fund's investment in the property was $3,304,549, net of
depreciation of $51,985 at June 30, 2003.
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 classified as held for sale or
sold in 2003 and 2002. Where applicable, 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.
Income from Continuing Operations
Income and expenses not directly identifiable with a specific property
held for sale or sold are reflected in continuing operations.
Expenses incurred during the three months ended June 30, 2003 totaled
$23,449 reflecting an increase of $1,073 from the same period in 2002. Expenses
incurred during the six months ended June 30, 2003 totaled $49,522 reflecting a
decrease of $10,095 from the same period in 2002. The decrease is the result of
lower administrative expenses, as a result of property sales.
Discontinued Operations
Discontinued operations reflect parking revenue from the Fund's properties
in Phoenix (held for sale), 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.
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.
During the first quarter of 2003, a prospective purchaser defaulted in
consummating the purchase of the Phoenix property and the Fund recorded the
buyer's nonrefundable deposit of $50,000 as income.
Parking lot revenue of $82,267 was earned during the three months ended
June 30, 2003, reflecting a decrease of $219,559 from the same period in 2002.
Parking lot revenue of $194,295 was earned during the six months ended June 30,
2003, reflecting a decrease of $295,284 from the same period in 2002. The
decreases are a result of property sales during 2003 and 2002.
Expenses incurred during the three months ended June 30, 2003 totaled
$9,750 reflecting a decrease of $26,010 from the same period in 2002, net of
depreciation. Expenses incurred during the six months ended June 30, 2003
totaled $30,628 reflecting a decrease of $44,259 from the same period in 2002,
net of depreciation. The decreases are a result of lower management fees and
other expenses during 2003 as a result of property sales during 2003 and 2002.
7
REALTY PARKING PROPERTIES II L.P.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Outlook
The Phoenix sale proceeds and remaining cash will be distributed to
investors once all expenses of the sale are known and current liabilities have
been paid. The Fund expects to be dissolved before September 30, 2003.
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 31.1 Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 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:
Form 8-K dated July 15, 2003 described the Fund's sale its final
property in Phoenix, Arizona.
9
Exhibit 32
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") Quarterly Report on Form 10-Q for the period ending June 30, 2003 with
the Securities and Exchange Commission on the date hereof (the "Report"), We
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.
Date: 7/31/03 By: /s/ John M. Prugh
John M. Prugh
Chief Executive Officer
Realty Parking Company II, Inc.
General Partner
Date: 7/31/03 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Chief Financial Officer
Realty Parking Company II, Inc.
General Partner
-10-
Exhibit 31.1
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 quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures [as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, 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 registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: 7/31/03 By: /s/ John M. Prugh
John M. Prugh
Chief Executive Officer
Realty Parking Company II, Inc.
General Partner
-11-
Exhibit 31.2
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 quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures [as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, 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 registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: 7/31/03 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Chief Financial Officer
Realty Parking Company II, Inc.
General Partner
-12-
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: 7/31/03 By: /s/ John M. Prugh
John M. Prugh
President and Director
Realty Parking Company II, Inc.
General Partner
DATE: 7/31/03 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Realty Parking Company II, Inc.
General Partner
-13-