FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-11909
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
----------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Delaware 16-1212761
- -------------------- ---------------------------------
(State of Formation) (IRS Employer Identification No.)
2350 North Forest Road
Suite 12-A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-9090
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
Indicate by a 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 a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
See Item 14 for a list of all documents incorporated by reference
PART I
ITEM 1: BUSINESS
The Registrant, Realmark Property Investors Limited Partnership-II
("the Partnership"), is a Delaware limited partnership organized in 1982
pursuant to a First Amended and Restated Agreement and Certificate of Limited
Partnership (the "Partnership Agreement"), under the Revised Delaware Uniform
Limited Partnership Act. The Partnership's general partners are Realmark
Properties, Inc. (the "Corporate General Partner"), a Delaware corporation, and
Joseph M. Jayson (the "Individual General Partner").
The Registrant commenced the public offering of its limited partnership
units, registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on September 3, 1982, and concluded the
offering on August 31, 1983, having raised a total of $10,000,000 before
deducting sales commissions and expenses of the offering.
The Partnership's primary business and its only industry segment is to
own and operate income-producing real property for the benefit of its partners.
At December 31, 2001, the Partnership, either directly or through its limited
liability subsidiary company, owned an office complex in Michigan (Northwind
Office Park), and is a partner in two joint ventures. It has a 50% interest in
Research Triangle Industrial Park Joint Venture and Research Triangle Land Joint
Venture, both in Durham County, North Carolina. The Partnership had an 88.5%
interest in Foxhunt Apartments Joint Venture that owned a 250 unit apartment
complex in Kettering, Ohio. This is a consolidated subsidiary and the property
was sold on March 1, 2001. A portion of the interest in the Research Triangle
Land Joint Venture was also sold in March 2001. All of the other properties are
currently being actively marketed for sale. On March 22, 2002, the Partnership
entered into a $4,250,000 sale agreement with an unaffiliated entity, for the
sale of Northwind Office Park. This sale, if closed, will result in a gain of
approximately $1,930,000 to the Partnership for tax purposes; however, this
doesn't necessarily mean that cash proceeds would be available for distribution
in an amount equal to the gain.
It is anticipated that the Partnership will be entering into sales
contracts in the near future (one to six months) which will be subject to sales
conditions which are customary for sales contracts and there is no assurance
that the sales will be consummated.
The business of the Partnership is not seasonal and it competes on the
basis of rental rates and property operations with similar types of properties
in vicinities in which the partnership's properties are located. The Partnership
has no real property investments located outside the United States. The
Partnership does not segregate revenue or assets by geographic region, since, in
management's view, such a presentation would not be significant to an
understanding of the Partnership's business or financial results taken as a
whole. As of December 31, 2001, the Partnership did not directly employ any
persons in a full-time position. All persons who regularly rendered services on
behalf of the Partnership through December 31, 2001 were employees of the
Corporate General Partner or its affiliates.
The percent of total Partnership revenue generated by each complex for
the last three years was as follows:
2001 2000 1999
---- ---- ----
Northwind Office Park 76% 34% 28%
Foxhunt Apartments 24% 66% 72%
This annual report contains certain forward-looking statements
concerning the Partnership's current expectations as to future results. Words
such as "believes", "forecasts", "intends", "possible", "expects", "estimates",
"anticipates" or "plans" and similar expressions are intended to identify
forward-looking statements. Such statements may not ultimately turn out to be
2
accurate due to, among other things, economic or market conditions or the
failure of the Partnership to sell an investment which is under contract.
ITEM 2: PROPERTIES
As of December 31, 2001, the Partnership owned Northwind Office Park,
an office complex located in East Lansing, Michigan. The property consists of
five office buildings containing a total of 89,200 gross square feet, and 70,713
net rentable square feet. At December 31, 2001, Northwind was 87% occupied. The
2000 and 1999 year end occupancy rates were 90% and 86%, respectively.
There is a 9.75% first mortgage loan on the Northwind property with a
balance of $116,112 at December 31, 2001, maturing in December 2002. The 9%
second mortgage loan on the property had a balance of $121,522 at December 31,
2001 and matured in September 1995. While no extension of the due date has been
granted and the balance is currently payable on demand, the Partnership
continues to make monthly principal and interest payments on the loan. On March
22, 2002, the Partnership entered into an agreement to sell this property (Item
1).
The Research Triangle Industrial Park Joint Venture owns a 117,000
square foot office/warehouse distribution building in Raleigh, North Carolina.
The building has been 100% occupied for several years. The first mortgage loan
on the property had a balance of $5,254,865 at December 31, 2001.
The Research Triangle Land Joint Venture owns unencumbered land near
the site of Research Triangle Industrial Park Joint Venture's building.
ITEM 3: LEGAL PROCEEDINGS
As previously reported, the Partnership, as a nominal defendant, the
General Partners of the Partnership and of affiliated public partnerships, (the
"Realmark Partnerships") and the officers and directors of the Corporate General
Partner, as defendants, had been involved in a class action litigation at the
state court level regarding the payment of fees and other management issues.
On August 29, 2001, the parties entered into a Stipulation of
Settlement (the "Settlement"). On October 4, 2001, the Court issued an "Order
Preliminary Approving Settlement" (the "Hearing Order") and on November 29,
2001, the court issued an "Order and Final Judgment Approving Settlement and
Awarding Fees and Expenses" and dismissing the complaints with prejudice. The
Settlement provided, among other things, that all of the Realmark Partnerships'
properties be disposed of. The General Partners will continue to have primary
authority to dispose of the Partnerships' properties. If either (i) the General
Partners have not sold or contracted to sell 50% of the Partnerships' properties
(by value) by April 2, 2002 or (ii) the General Partners have not sold or
contracted to sell 100% of the Partnerships' properties by September 29, 2002,
then the primary authority to dispose of the Partnerships' properties will pass
to a sales agent designated by plaintiffs' counsel and approved by the Court. As
of April 2, 2002, the General Partners have contracted to sell more than 50% of
the Partnerships' properties (by value).
The settlement also provided for the payment by the Partnerships of
fees to the plaintiffs' attorneys. These payments, which are not calculable at
this time but may be significant, are payable out of the proceeds from the sale
of all of the properties owned by all of the Realmark Partnerships, following
the sale of the last of these properties in each partnership. Plaintiff's
counsel will receive 15% of the amount by which the sales proceeds distributable
to limited partners in each partnership exceeds the value of the limited
partnership units in each partnership (based on the weighted average of the
units' trading prices on the secondary market as reported by Partnership
Spectrum for the period May through June 2001). In no event may the increase on
which the fees are calculated exceed 100% of the market value of the units as
calculated above.
3
ITEM 4: SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST
There is currently no active trading market for the units of limited
partnership interest of the Partnership and it is not anticipated that any will
develop in the future. Accordingly, information as to the market value of a unit
at any given date is not available. As of December 31, 2001, there were 1,125
record holders of units of limited partnership interest.
The Partnership is a limited partnership and, accordingly, does not pay
dividends. It does, however, make distributions of cash to its partners. The
partnership agreement provides for the distribution to the partners of net cash
flow from operations. In connection with the pending sale of the Partnership's
properties (Item 3), it is anticipated that there will be no future
distributions of net cash flow from operations. All future distributions of net
cash from sales proceeds will be distributed, to the extent available, 100% to
the Limited Partners until there has been a return of the Limited Partner's
capital contribution plus an amount sufficient to provide a 7%, not compounded,
return on their adjusted capital contributions for all years following the
termination of the offering of the units. It is anticipated that there will not
be sufficient cash flow from the sale of the Partnership's remaining properties
to provide this return to the Limited Partners. There were no distributions to
partners made in 2001, 2000 or 1999.
The gain on the sale of the properties will be allocated in the same
proportions as distributions of distributable cash from sale proceeds
(anticipated to be 100% to the Limited Partners). In the event there is no
distributable cash from sale proceeds, taxable income will be allocated 86% to
the Limited Partners and 14% to the General Partners. Any tax loss arising from
a sale will be allocated 97% to the Limited Partners and 3% to the General
Partners. The above is subject to tax laws that were applicable at the time of
the formation of the Partnership and may be adjusted due to subsequent changes
in the Internal Revenue Code.
4
ITEM 6: SELECTED FINANCIAL DATA
At or for the years ended December 31,
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2001 2000 1999 1998 1997
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Balance sheet data
Net rental property $2,170,349 4,534,501 4,583,491 4,689,806 4,800,158
Total assets 2,619,014 4,907,962 5,039,970 5,782,341 5,349,284
Mortgage loans payable 237,634 6,361,767 6,569,638 6,710,685 5,343,052
Partners' equity (deficit) 1,049,338 (3,460,292) (3,336,480) (2,815,029) (1,816,222)
================================================================================
Operating data
Rental income 1,050,604 2,204,179 1,993,775 1,786,424 1,896,470
Other income 41,874 76,160 134,745 144,297 89,554
--------------------------------------------------------------------------------
Total revenue 1,092,478 2,280,339 2,128,520 1,930,721 1,986,024
--------------------------------------------------------------------------------
Property operating costs 662,336 1,284,066 1,434,757 1,535,654 1,015,681
Depreciation - 176,647 262,181 215,334 412,446
Interest expense 117,342 581,572 709,493 960,557 528,571
Administrative expenses 335,555 489,572 420,104 414,109 383,706
--------------------------------------------------------------------------------
Total expenses 1,115,233 2,531,857 2,826,535 3,125,654 2,340,404
--------------------------------------------------------------------------------
Loss before joint venture
operations and gain on sale
of property (22,755) (251,518) (698,015) (1,194,933) (354,380)
Equity in earnings of
unconsolidated joint ventures 317,105 131,175 122,437 87,609 196,633
Minority interest in
consolidated venture operations (545,015) (3,469) 54,127 108,517 (4,781)
Gain on sale of property 4,760,295 - - - -
--------------------------------------------------------------------------------
Net loss 4,509,630 (123,812) (521,451) (998,807) (162,528)
================================================================================
Cash flow data
Net cash provided (used) by:
Operating activities (408,352) 216,778 (173,320) (797,509) 99,930
Investing activities 7,351,841 10,991 176,088 149,240 (16,135)
Financing activities (6,770,710) (211,321) (360,043) 1,146,645 (91,516)
--------------------------------------------------------------------------------
Net increase (decrease) in cash
and equivalents 172,779 16,448 (357,275) 498,376 (7,721)
================================================================================
Per limited partnership unit:
Net income (loss) $ 389.11 (12.01) (50.58) (96.88) (15.77)
================================================================================
5
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources:
Effective January 1, 2001, management began formally marketing all
remaining properties in the Partnership for sale. Foxhunt Apartments had been
actively marketed for sale since January 1, 1999 and on March 1, 2001, the
Partnership sold the property to an unaffiliated entity, for cash of $7,600,000.
After satisfaction of the $5,942,000 mortgage loan on the property and payment
of closing costs, the proceeds available to the Partnership and its joint
venture partner amounted to approximately $1.1 million. The proceeds from the
sale were distributed to the Partnership and the minority interest in the joint
venture after satisfying the remaining net liabilities of Foxhunt. The cash
proceeds received by the Partnership were used to satisfy delinquent Northwind
liabilities, primarily real estate taxes, and to complete improvements to the
Northwind property. Additionally, a portion of the Research Triangle land was
sold on March 16, 2001 for a gain of $180,199. The Partnership made no
distributions to limited partners in 2001, 2000 or 1999. In accordance with the
settlement of the lawsuit (Item 3), it is anticipated that with the sale of the
remaining property and joint ventures, the Partnership may be in a position to
make distributions to the Limited Partners. These distributions will be reduced
by the amount of fees payable to the plaintiffs' legal counsel in connection
with the settlement agreement (Item 3), any outstanding liabilities and any
mortgage prepayment penalties incurred with regard to the sale of the
Partnership's properties.
Limited Partners should be aware that it is possible that they will
receive an allocation of income from gain on sale of properties on which they
will be required to pay income taxes and there is no assurance that
distributions from the sale of the properties will be sufficient to satisfy
these obligations.
Except as described above and in the consolidated financial statements,
the General Partner is not aware of any trends or events, commitments or
uncertainties that may impact liquidity in a material way.
Results of Operations:
The results of operations of the Partnership, excluding equity in
earnings from joint ventures and gain on sale of property for the year ended
December 31, 2001, produced a net loss of $22,755. Effective January 1, 2001,
management began formally marketing all properties in the Partnership for sale.
Therefore, the properties were not depreciated in 2001. The results compare to a
net loss, excluding depreciation, of $74,871 in 2000 and a net loss, excluding
depreciation, of $435,834 in 1999.
If the sale of Foxhunt Apartments had occurred in January 1, 2000, the
results for the year ended December 31, 2000 would have been a net loss,
excluding depreciation, of $105,000, resulting from decreases in revenue and
expense of $1,501,000 and $1,471,000, respectively. If the sale of Foxhunt
Apartments had occurred on January 1, 1999, the results for the year ended
December 31, 1999 would have been a net loss, excluding depreciation, of
$74,000, resulting from decreases in revenue and expense of $1,510,000 and
$1,872,000, respectively. For the year ended December 31, 2001, net loss would
have been $2,000, resulting from decreases in revenue and expense of $258,000
and $279,000, respectively.
Inflation has been consistently low during the periods presented in the
consolidated financial statements and, as a result, has not had a significant
effect on the operations of the Partnership or its properties.
2001 as compared to 2000
Rental income decreased 52% for the year ended December 31, 2001 as
6
compared to 2000. Excluding Foxhunt Apartments (the "Sold Asset") rental income
increased approximately 4% due to occupancy during the year remaining at
approximately 90% at Northwind. Other income, excluding the Sold Asset,
increased by approximately $22,000 in 2001 due to an increase in the amount of
interest income received during the year.
Total expenses, excluding the operations for the Sold Asset, decreased
approximately 21% for the year ended December 31, 2001. Property operations
decreased approximately 8% due primarily to a decrease in repairs and
maintenance work and contracted service work at Northwind. Other administrative
expense, excluding the Sold Asset, decreased approximately 26% due to decreased
professional fees. Administrative expense to affiliated parties, excluding the
Sold Asset, increased approximately $58,000 because of an allocation revision
and an increase in management fees due to an increase in rental income. Interest
expense decreased approximately $12,000 due to a larger portion of each mortgage
payment being applied towards principal due to amortization of the mortgages at
Northwind.
2000 as compared to 1999
In 2000, excluding the Sold Asset, rental income increased
approximately 32% due to the increase in occupancy of 90% at December 31, 2000
at Northwind. Other income decreased approximately $29,000 due to less
nonrecurring income than that realized in the previous year, primarily
reimbursements by tenants of build out of costs.
Total expenses, excluding the Sold Asset, increased approximately 25%
for the year ended December 31, 2000 as compared to 1999. Property operations
expense increased approximately 34% due to the continuation of the Northwind
improvement projects. Other administrative expenses, excluding the Sold Asset,
increased approximately $38,000 due to increased professional fees.
Administrative expense to affiliated parties, excluding the Sold Asset,
increased approximately $28,000 due to increased management fees as a result of
higher occupancy.
Joint Ventures
The Foxhunt Joint Venture generated net income of $30,165 in 2000 as
compared to a 1999 net loss of $470,672. The decrease in the loss was primarily
the result of increased rental income of approximately $26,000, a decrease in
interest and other income of $35,000, and a decrease in property operations,
interest and depreciation expenses of approximately $510,000. The latter
decreased approximately $109,000 in 2000 since the Foxhunt property became the
subject of a formal plan of disposal of July 1, 1999. The Foxhunt property was
sold on March 1, 2001 resulting in a gain on sale of property in the amount of
$4,760,295.
The Research Triangle Joint Venture once again experienced high
occupancy, however, rental income decreased approximately 12% in 2001 due to the
sole tenant of Research Triangle not paying timely and an allowance being
established for the remaining receivable. There is a shortage of rental payments
from the tenant of approximately $12,000 per month, which the Partnership is
negotiating because of a new lease with the tenant. The sole tenant's lease has
expired and they are on a month-to-month lease, pending said negotiation. Total
expenses, excluding depreciation, decreased less than 4%. Because the joint
venture has had net income during each of the last three years, the
partnership's 50% equity interest has enabled the Partnership to receive cash
distributions from the Venture of $104,500 in 2001, $135,000 in 2000 and
$330,000 in 1999.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership invests only in short term money market instruments, in
amounts in excess of daily working cash requirements. The rates of earnings on
those investments increase or decrease in line with the general movement of
7
interest rates. The mortgage loans on the Partnership's properties are fixed
rate and therefore, are not subject to market risk.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed under Item 14 of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any directors or officers.
The Individual General Partner of the Partnership is Joseph M. Jayson. The
directors and executive officers of Realmark Properties, Inc., the Partnership's
Corporate General Partner, as of December 31, 2001, are listed below. Each
director is subject to election on an annual basis.
Title of All Positions Held with
Name the Corporate General Partner Year First Elected to Position
- ---- ----------------------------- ------------------------------
Joseph M. Jayson Chairman of the Board, President 1979
and Treasurer
Judith P. Jayson Vice President and Director 1979
Joseph M. Jayson and Judith P. Jayson are married to each other.
The Directors and Executive Officers of the Corporate General Partner
and their principal occupations and affiliations during the last five years or
more are as follows:
Joseph M. Jayson, age 63, is Chairman, Director and sole stockholder of
J. M. Jayson and Company, Inc. and certain of its affiliated companies: U.S.
Apartments LLC, Westmoreland Capital Corporation, Oilmark Corporation and U.S.
Energy Development Corporation. In addition, Mr. Jayson is Chairman of Realmark
Corporation, Chairman, President and Treasurer of Realmark Properties, Inc.,
wholly-owned subsidiaries of J. M. Jayson and Company, Inc. and co-general
partner of Realmark Property Investors Limited Partnership, Realmark Property
Investors Limited Partnership-II, Realmark Property Investors Limited
Partnership-III, Realmark Property Investors Limited Partnership-IV, Realmark
Property Investors Limited Partnership-V, Realmark Property Investors Limited
Partnership-VI A, and Realmark Property Investors Limited Partnership-VI B. Mr.
Jayson has been in the real estate business for the last 39 years and is a
Certified Property Manager as designated by the Institute of Real Estate
Management ("I.R.E.M."). Mr. Jayson received a B.S. Degree in Education in 1961
from Indiana University , a Masters Degree from the University of Buffalo in
1963, and has served on the Educational Faculty of the Institute of Real Estate
Management. Mr. Jayson has for the last 39 years been engaged in various aspects
of real estate brokerage and investment. He brokered residential properties from
1962 to 1964, commercial investment properties from 1964 to 1967, and in 1967
left commercial real estate to form his own investment firm. Since that time,
Mr. Jayson and J. M. Jayson & Company, Inc. have formed or participated in
various ways with forming over 30 real estate related limited partnerships. For
the past 20 years, Mr. Jayson and an affiliate have also engaged in
developmental drilling for gas and oil.
Judith P. Jayson, age 61, is currently Vice President and a Director of
Realmark Properties, Inc. She is also a Director of the property management
affiliate, Realmark Corporation. Mrs. Jayson has been involved in property
management for the last 30 years and has extensive experience in the hiring and
8
training of property management personnel and in directing, developing and
implementing property management systems and programs. Mrs. Jayson, prior to
joining the firm in 1973, taught business in the Buffalo, New York High School
System. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana, with a degree in Business Administration.
ITEM 11: EXECUTIVE COMPENSATION
No direct remuneration was paid or payable by the Partnership to
directors and officers (since it has no directors or officers), nor was any
direct remuneration paid or payable by the Partnership to directors or officers
of Realmark Properties, Inc., the Corporate General Partner and sponsor, for the
year ended December 31, 2001. The Corporate General Partner and its affiliate,
Realmark Corporation, are entitled to fees and to certain expense reimbursements
with respect to Partnership operations, as set forth in item 13 hereof and in
the notes to the consolidated financial statements.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known to the Partnership to own of record or beneficially,
more than 5% of the units of limited partnership interests of the Partnership,
except for affiliates of the General Partners that own 907 units of limited
partnership interest amounting to approximately 9.1% of the Partnership interest
at December 31, 2001. The General Partners and the executive officers of the
Corporate General Partner, as of December 31, 2001, owned 8 units of limited
partnership interest. The General Partners and affiliates will receive their
proportionate share, as limited partners, of any distributable proceeds from the
sale of the properties.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The properties of the Partnership and its subsidiary are managed by
Realmark Corporation, an affiliate of the Partnership's Corporate General
Partner, for a fee of generally 5% of annual net rental income of the
properties. Realmark Corporation and the Corporate General Partner are also
reimbursed for disbursements made on behalf of the Partnership. Those
transactions are further described, and quantified, in the note to the
consolidated financial statements entitled "Related Party Transactions".
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) Consolidated Financial Statements Page
----
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 2001 and 2000 F-2
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999 F-3
Consolidated Statements of Partners' Equity for the years
ended December 31, 2001, 2000, and 1999 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000, and 1999 F-5
Notes to Consolidated Financial Statements F-7
FINANCIAL STATEMENT SCHEDULE
(i) Schedule III - Real Estate and Accumulated Depreciation F-17
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or the notes thereto.
(b) Reports on Form 8-K
None.
9
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement, liquidation,
or succession
(a) Stipulation of Settlement Agreement dated August 29, 2001
is filed herewith.
(b) Order and Final Judgment Approving Settlement and Awarding
Fees and Expenses dated November 29, 2001 is filed
herewith.
4. Instruments defining the rights of security holders,
including indentures
(a) First Amended and Restated Agreement and Certificate of
Limited Partnership filed with the Registration Statement
of the Registrant Form S-11, filed September 30, 1982 and
subsequently amended, incorporated herein by reference.
10. Material contracts
(a) Property Management Agreement with Realmark Corporation
included with the Registration Statement of the Registrant
as filed and amended to date incorporated herein by
reference.
(b) Property sales agreement with an unrelated third-party
included with the Partnership's report on Form 8-K on
March 15, 2001 is incorporated herein by reference.
(c) Property sales agreement with an unrelated third-party
dated March 22, 2002 is filed herewith.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP - II
By: /s/ Joseph M. Jayson April 15, 2002
-------------------------------------- --------------------
JOSEPH M. JAYSON, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: REALMARK PROPERTIES, INC.
Corporate General Partner
/s/ Joseph M. Jayson April 15, 2002
-------------------------------------- --------------------
JOSEPH M. JAYSON, Date
President, Treasurer and Director
/s/ Judith P. Jayson April 15, 2002
-------------------------------------- ---------------------
JUDITH P. JAYSON, Date
Vive President and Director
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INDEPENDENT AUDITOR'S REPORT
----------------------------
The Partners
Realmark Property Investors Limited
Partnership - II:
We have audited the accompanying consolidated balance sheets of Realmark
Property Investors Limited Partnership - II and Subsidiary as of December 31,
2001 and 2000, and the related consolidated statements of operations, partners'
equity, and cash flows for each of the three years in the period ended December
31, 2001. Our audits also included the financial statement schedule listed in
the index at Item 14. These consolidated financial statements and the financial
statement schedule are the responsibility of the General Partners. Our
responsibility is to express an opinion on the consolidated financial statements
and the financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the General Partners, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Realmark Property
Investors Limited Partnership - II and Subsidiary as of December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
As discussed in note 8 to the consolidated financial statements, the Partnership
settled a class and derivative lawsuit in which it was involved. As a result of
this settlement, the Partnership is currently in the process of winding up its
operations and disposing of its investments. It is anticipated that this process
will take place within the next twelve months.
TOSKI, SCHAEFER & CO., P.C.
Williamsville, New York
March 25, 2002, except for Note 8,
as to which the date is April 2, 2002
F-1
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 2001 and 2000
Assets 2001 2000
------ ----------- -----------
Property and equipment, at cost, all held for sale in 2001:
Land $ 460,515 848,015
Buildings and improvements 4,233,421 9,280,849
Furniture and equipment 7,893 449,753
----------- -----------
4,701,829 10,578,617
Less accumulated depreciation 2,531,480 6,044,116
----------- -----------
Net property and equipment 2,170,349 4,534,501
Cash and equivalents 330,328 157,549
Accounts receivable, net of allowance for doubtful accounts of
$16,300 in 2001 and $21,888 in 2000 3,680 12,137
Receivables from affiliated parties 49,866 34,696
Escrow deposits 11,406 72,500
Deferred mortgage costs, net of accumulated amortization of
$10,798 in 2000 -- 86,385
Other assets 53,385 10,194
----------- -----------
Total assets $ 2,619,014 4,907,962
=========== ===========
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Mortgage loans payable 237,634 6,361,767
Accounts payable and accrued expenses 82,284 693,123
Security deposits and prepaid rents 106,215 129,649
----------- -----------
Total liabilities 426,133 7,184,539
----------- -----------
Losses of unconsolidated joint ventures in excess of investment 1,143,543 1,082,153
Minority interest in consolidated joint venture -- 101,562
Partners' equity (deficit):
General partners 353,962 (264,564)
Limited partners 695,376 (3,195,728)
----------- -----------
Total partners' equity (deficit) 1,049,338 (3,460,292)
----------- -----------
Total liabilities and partners' equity $ 2,619,014 4,907,962
=========== ===========
See accompanying notes to consolidated financial statements.
F-2
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- -----------
Income:
Rental $ 1,050,604 2,204,179 1,993,775
Interest and other 41,874 76,160 134,745
----------- ----------- -----------
Total income 1,092,478 2,280,339 2,128,520
----------- ----------- -----------
Expenses:
Property operations 662,336 1,284,066 1,434,757
Interest 117,342 581,572 709,493
Depreciation -- 176,647 262,181
Administrative:
Affiliated parties 168,454 205,962 165,863
Other 167,101 283,610 254,241
----------- ----------- -----------
Total expenses 1,115,233 2,531,857 2,826,535
----------- ----------- -----------
Loss before equity in earnings of unconsolidated
joint ventures, minority interest in consolidated
joint venture operations, and gain on sale
of property (22,755) (251,518) (698,015)
Equity in earnings of unconsolidated joint ventures 317,105 131,175 122,437
Minority interest in consolidated joint
venture operations (545,015) (3,469) 54,127
Gain on sale of property 4,760,295 -- --
----------- ----------- -----------
Net income (loss) $ 4,509,630 (123,812) (521,451)
=========== =========== ===========
Net income (loss) per limited partnership unit $ 389.11 (12.01) (50.58)
=========== =========== ===========
Weighted average number of limited partnership
units outstanding 10,000 10,000 10,000
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-3
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Consolidated Statements of Partners' Equity
Years ended December 31, 2001, 2000 and 1999
Limited Partners
General ----------------
Partners Units Amount
-------- ----- ------
Balances at December 31, 1998 $ (245,206) 10,000 (2,569,823)
Net loss (15,644) -- (505,807)
---------- ---------- ----------
Balances at December 31, 1999 (260,850) 10,000 (3,075,630)
Net loss (3,714) -- (120,098)
---------- ---------- ----------
Balances at December 31, 2000 (264,564) 10,000 (3,195,728)
Net income 618,526 -- 3,891,104
---------- ---------- ----------
Balances at December 31, 2001 $ 353,962 10,000 695,376
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-4
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 4,509,630 (123,812) (521,451)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 10,262 190,793 402,391
Equity in earnings of joint ventures (317,105) (138,309) (127,673)
Minority interest in consolidated joint
venture operations 545,015 3,469 (54,127)
Gain on sale of property (4,760,295) -- --
Changes in:
Accounts receivable 8,457 (1,658) (888)
Receivables from affiliated parties 14,605 91,651 (47,931)
Escrow deposits (12,917) (764) 304,097
Other assets (55,864) (3,909) (11,378)
Accounts payable and accrued expenses (398,578) 219,863 (124,300)
Security deposits and prepaid rents 48,438 (20,546) 7,940
----------- ----------- -----------
Net cash provided by (used in)
operating activities (408,352) 216,778 (173,320)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of property 7,084,969 -- --
Additions to property and equipment (81,848) (124,009) (153,912)
Distributions from joint venture 348,720 135,000 330,000
----------- ----------- -----------
Net cash provided by investing
activities 7,351,841 10,991 176,088
----------- ----------- -----------
Cash flows from financing activities:
Mortgage acquisition costs -- -- (107,283)
Distributions to minority interest in consolidated
joint venture (646,577) (3,450) (111,713)
Proceeds from mortgage refinancing -- -- 6,000,000
Principal payments upon refinancing -- -- (6,000,000)
Principal payments on mortgage loans (6,124,133) (207,871) (141,047)
----------- ----------- -----------
Net cash used in financing
activities (6,770,710) (211,321) (360,043)
----------- ----------- -----------
(Continued)
F-5
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
2001 2000 1999
---- ---- ----
Net increase (decrease) in cash and equivalents 172,779 16,448 (357,275)
Cash and equivalents at beginning of year 157,549 141,101 498,376
----------- ----------- -----------
Cash and equivalents at end of year $ 330,328 157,549 141,101
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 111,184 528,462 573,947
=========== =========== ===========
Property and equipment financed by
accounts payable $ -- 3,648 --
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-6
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 2001, 2000 and 1999
(1) Formation and Operation of Partnership
Realmark Property Investors Limited Partnership - II (the Partnership) is a
Delaware limited partnership formed on March 25, 1982, to invest in a
diversified portfolio of income producing real estate investments.
In 1982 and 1983, the Partnership sold, through a public offering, 10,000
units of limited partnership interest. The General Partners are Realmark
Properties, Inc. (the Corporate General Partner) and Joseph M. Jayson
(the Individual General Partner) who is the sole shareholder of J.M.
Jayson & Company, Inc. Realmark Properties, Inc. is a wholly-owned
subsidiary of J.M. Jayson & Company, Inc.
Under the partnership agreement, the General Partners and their affiliates
can receive compensation for services rendered, and reimbursement for
expenses incurred on behalf of the Partnership (note 6).
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting and Consolidation
The accompanying consolidated financial statements have been prepared
on the accrual basis of accounting and include the accounts of the
Partnership and its subsidiary, Realmark/Foxhunt Limited Partnership
which owned and operated the Foxhunt Apartments, a 250 unit
apartment complex located in Dayton, Ohio, acquired in 1984 for
$5,702,520 and sold in 2001. The Partnership also owns Northwind
Office Park.
In consolidation, all intercompany accounts and transactions have been
eliminated.
(b) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of
the assets, from 5 to 25 years. Significant improvements are
capitalized, while expenditures for maintenance and repairs and
replacements are charged to expense as incurred. Upon disposal of
depreciable property, the appropriate property accounts are reduced
by the related costs and accumulated depreciation and gains and
losses are reflected in the consolidated statements of operations.
F-7
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies, Continued
(c) Property and Equipment, Continued
The Partnership reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount
of the assets may not be recoverable. In determining whether there
is an impairment of long-lived assets, the Partnership compares the
sum of the expected future net cash flows (undiscounted and without
interest charges) to the carrying amount of the assets. At December
31, 2001, no impairment in value has been recognized.
The Partnership and its ventures' policy is to consider a property to
be held for sale or disposition when the Partnership or venture has
committed to a plan to sell or dispose of such property and active
marketing activity has commenced or is expected to commence in the
near term or the Partnership or venture has concluded that it may
dispose of the property by no longer funding operating deficits or
debt service requirements of the property thus allowing the lender
to realize upon its security. Any properties identified as "held for
sale of disposition" are no longer depreciated. All the properties
were held for sale in 2001.
(d) Cash and Equivalents
Cash and equivalents include money market accounts and any highly
liquid debt instruments purchased with a maturity of three months or
less.
(e) Deferred Mortgage Costs
Costsincurred in obtaining mortgage financing are deferred and
amortized using the straight-line method over the life of the
respective mortgages.
(f) Unconsolidated Joint Ventures
The Partnership's investment in Research Triangle Industrial Park West
Associates Joint Venture and Research Triangle Land Joint Venture
are unconsolidated joint ventures which are accounted for on the
equity method. These joint ventures are not consolidated in the
Partnership's financial statements because the Partnership is not
the majority owner.
(g) Minority Interest in Consolidated Joint Venture
The minority interest in a consolidated joint venture formed to operate
Foxhunt Apartments is stated at the amount of capital contributed by
the minority investor adjusted for its share of joint venture losses
and distributions.
(h) Rental Income
Rental income is recognized as earned according to the terms of the
leases. Leases for residential properties are generally for periods
of one year or less, payable monthly. Commercial leases are
generally for periods of one to five years. Delinquent residential
property rent is not recorded.
F-8
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies, Continued
(i) Per Unit Data
Per limited partnership unit is based on the weighted average number of
limited partnership units outstanding for the year.
(j) Fair Value of Financial Instruments
The fair value of the Partnership's financial instruments approximated
their carrying values at December 31, 2001.
(k) Income Allocation and Distributable Cash Flow
The partnership agreement provides that income not arising from sale
and refinancing activities and all partnership losses are to be
allocated 97% to the Limited Partners and 3% to the General
Partners. Partnership income arising from sale or refinancing
activities is allocated in the same proportion as distributions of
distributable cash from sale proceeds. In the event there is no
distributable cash from sale proceeds, taxable income will be
allocated 87% to the Limited Partners and 13% to the General
Partners. The above is subject to tax laws that were applicable at
the time of the formation of the Partnership and may be adjusted due
to subsequent changes in the Internal Revenue Code.
The partnership agreement also provides for the distribution to the
partners of net cash flow from operations. In connection with the
pending sale of the Partnership's properties (note 8), it is
anticipated that there will be no future distributions of net cash
flow from operations. Sale or refinancing proceeds are distributed
to the extent available, 100% to the Limited Partners until there
has been a return of the Limited Partner's capital contribution plus
an amount sufficient to provide a 7%, not compounded, return on
their adjusted capital contributions for all years following the
termination of the offering of the units. It is anticipated that
there will not be sufficient cash flow from the sale of the
Partnership's remaining properties to provide this return to the
Limited Partners. There were no distributions to partners made in
2001, 2000 or 1999.
(l) Income Taxes
No income taxes are included in the consolidated financial statements
since the taxable income or loss of the Partnership is reportable by
the partners on their income tax returns. At December 31, 2001, net
assets for financial reporting purposes were $555,000 more than the
tax bases of the net assets.
(m) Segment Information
The Partnership's operating segments all involve the ownership and
operation of income-producing real property and are aggregated into
one reporting segment.
(n) Recent Pronouncements
In June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." Under
these new standards, all acquisitions subsequent to June 30, 2001
F-9
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies, Continued
(n) Recent Pronouncements, Continued
must be accounted for under the purchase method of accounting and
purchased goodwill is no longer amortized over its useful life.
Rather, goodwill will be subject to a periodic impairment test based
upon its fair value.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 establishes
accounting standards for recognition and measurement of a liability
for the costs of asset retirement obligations. Under SFAS 143, the
costs of retiring an asset will be recorded as a liability when the
retirement obligation arises, and will be amortized to expense over
the life of the asset.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144
addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and discontinued operations.
The Partnership is currently evaluating the impact of these
pronouncements to determine the effect, if any, they may have on the
consolidated financial position and results of operations. The
Partnership is required to adopt each of these standards in the
first quarter of 2002.
(3) Disposal of Rental Property
Since 1992, Partnership has held an 88.5% interest in a consolidated joint
venture, Realmark/Foxhunt Limited Partnership ("Foxhunt"). The
Partnership acquired its interest by transferring to Foxhunt beneficial
title to an apartment complex property in Ohio. The 11.5% minority
interest in Foxhunt was owned by Realmark Property Investors Limited
Partnership VI-B, a publicly held entity affiliated with the Partnership
through common general partners. Effective January 1, 1999, the
Partnership entered into a plan to dispose of the property of Foxhunt
Apartments. On March 1, 2001, the property was sold to an unaffiliated
entity, for $7,600,000. After satisfaction of the $5,942,000 mortgage
loan on the property and payment of closing costs, the proceeds
available to the venturers were approximately $1.1 million.
During the first three months of 1999 (through March 31, 1999), management
continued its plans to sell the assets of Northwind Office Park.
Effective April 1, 1999, management discontinued its plans to sell the
property. In 2001, the Partnership resumed its plans to sell the
property. The carrying value of the assets of Northwind Office Park was
$2,170,349 at December 31, 2001, and the property generated net income
of $125,935 during the year then ended.
Depreciation expense, not recorded during the disposal periods on Foxhunt
Apartments and Northwind Office Park amounted to $215,000, $212,000 and
$124,000, for the years ended December 31, 2001, 2000 and 1999,
respectively.
F-10
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) Investments in Joint Ventures
(a) Unconsolidated Joint Ventures
The Partnership has a 50% interest in a joint venture with Realmark
Property Investors Limited Partnership-VIA (RPILP-VIA), an entity
affiliated through common general partners. The venture owns and
operates the Research Triangle Industrial Park West, an
office/warehouse facility located in Research Triangle Park, North
Carolina. The joint venture agreement provides that any income,
loss, gain, cash flow, or sale proceeds be allocated 50% to the
Partnership and 50% to RPILP-VIA.
Summary financial information of the Venture follows:
Balance Sheet Information
-------------------------
December 31
-----------
Assets 2001 2000
------ ----------- -----------
Property, net of accumulated depreciation $ 1,473,368 1,473,368
Cash and equivalents 55,158 19,187
Escrow deposits 876,539 779,012
Other assets 252,727 332,959
----------- -----------
Total assets $ 2,657,792 2,604,526
=========== ===========
Liabilities and Partners' Deficit
---------------------------------
Liabilities:
Mortgage loan payable 5,254,865 5,340,629
Accounts payable and accrued expenses 134,234 60,016
----------- -----------
Total liabilities 5,389,099 5,400,645
----------- -----------
Partners' deficit:
The Partnership (1,266,238) (1,298,644)
RPILP - VI A (1,465,069) (1,497,475)
----------- -----------
Total partners' deficit (2,731,307) (2,796,119)
----------- -----------
Total liabilities and partners' deficit $ 2,657,792 2,604,526
=========== ===========
F-11
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) Investments in Joint Ventures, Continued
(a) Unconsolidated Joint Ventures, Continued
Operating Information
---------------------
Years ended December 31,
------------------------
2001 2000 1999
---- ---- ----
Income:
Rental $ 899,322 1,026,251 1,009,978
Other 11,812 13,456 11,823
----------- ----------- -----------
Total income 911,134 1,039,707 1,021,801
----------- ----------- -----------
Expenses:
Property operations 127,047 133,400 135,252
Interest 442,817 450,766 455,838
Depreciation -- 100,518 103,480
Administrative:
Affiliated parties 47,449 67,413 63,230
Other 20,009 10,992 8,655
----------- ----------- -----------
Total expenses 637,322 763,089 766,455
----------- ----------- -----------
Net income $ 273,812 276,618 255,346
=========== =========== ===========
Allocation of net income:
The Partnership 136,906 138,309 127,673
RPILP - VI A 136,906 138,309 127,673
----------- ----------- -----------
Total $ 273,812 276,618 255,346
=========== =========== ===========
A reconciliation of the Partnership's investment in Research Triangle
Industrial Park Joint Venture is as follows:
2001 2000 1999
---- ---- ----
Losses in excess of investment at
beginning of year $(1,298,644) (1,301,953) (1,099,626)
Allocated net income 136,906 138,309 127,673
Distribution from joint venture (104,500) (135,000) (330,000)
----------- ----------- -----------
Losses in excess of investment at
end of year $(1,266,238) (1,298,644) (1,301,953)
=========== =========== ===========
F-12
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(4) Investments in Joint Ventures, Continued
(a) Unconsolidated Joint Ventures
In 1992, the Partnership entered into an agreement with the Adaron
Group to form the Research Triangle Land Joint Venture. The primary
purpose of this joint venture is to develop the undeveloped land on
the site of Research Triangle Industrial Park West. This land was
placed into the Land Joint Venture by Research Triangle Industrial
Park West. The ownership of the joint venture is 50% attributable to
Adaron Group and 50% to the Partnership. The value allocated to the
land in this joint venture upon acquisition was $412,500. In 2001, a
portion of the land was sold for a gain of $180,199. The
Partnership's remaining interest at December 31, 2001 is $122,695.
(b) Minority Interest in Consolidated Joint Venture
A reconciliation of the minority interest share in the Foxhunt Joint
Venture is as follows:
Balance at December 31, 1998 $ 267,383
Distributions (111,713)
Allocated loss (54,127)
------------
Balance at December 31, 1999 101,543
Distributions (3,450)
Allocated income 3,469
------------
Balance at December 31, 2000 101,562
Distributions (646,577)
Allocated income 545,015
------------
Balance at December 31, 2001 $ --
============
(5) Mortgage Loans Payable
Mortgage loans payable are as follows:
Total Balance
Interest monthly December 31,
Property collateral rate Maturity payment 2001 2000
------------------- ---- -------- ------- ---- ----
Northwind Office Park 9.75% 2002 $ 12,305 $ 116,112 245,516
Northwind Office Park 9.00% Demand 4,779 121,522 165,878
Foxhunt Apartments 8.05% -- 44,235 -- 5,950,373
======== ------------ ---------
$ 237,634 6,361,767
============ =========
F-13
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(6) Related Party Transactions
The Corporate General Partner and its affiliates earn fees, principally for
property and partnership management and are reimbursed for services
rendered to the Partnership, as provided for in the partnership
agreement. A summary of those items follows:
2001 2000 1999
---- ---- ----
Property management fees based on a percent-
age (generally 5%) of the rental income $ 82,191 111,513 100,939
Reimbursement for cost of services to the
Partnership that include investor relations,
marketing of properties, supplies, professional
fees, communications, accounting, printing,
postage and other items 86,263 94,449 64,924
--------- -------- --------
$ 168,454 205,962 165,863
========= ======== ========
In addition to the above, other property specific expenses such as
payroll, benefits, etc. are charged to property operations on the
Partnership's consolidated statements of operations. Receivables from
affiliated parties are payable on demand and bear interest at 11%.
Loan placement fees are paid or accrued to an affiliate of the General
Partners. The fee is calculated at 1% of the mortgage loan amounts.
These fees totaled $60,000 for the year ended December 31, 1999. No
such fees were paid during the years ended December 31, 2001 and 2000.
Property Disposition Fee
According to the terms of the partnership agreement, the General Partners
are also allowed to collect a property disposition fee upon sale of
acquired properties. This fee is not to exceed the lesser of 50% of
amounts customarily charged in arm's-length transactions by others
rendering similar services for comparable properties or 3% of the sales
price. The property disposition fee is subordinate to payments to the
Limited Partners of a cumulative annual return (not compounded) equal
to 7% of their average adjusted capital balances and to repayment to
the Limited Partners of an amount equal to their original capital
contributions. Since these conditions described above have not been
met, no disposition fees have been paid or accrued on properties sold
in prior years.
F-14
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) Leases
All residential property rental agreements are for a duration of one year
or less. In connection with the operation of Northwind, a commercial
property, the Partnership has entered into numerous operating leases
with terms from 1 to 5 years. Future rentals to be received on
noncancelable operating leases with terms of more than one year are as
follows:
2002 $ 633,243
2003 322,739
2004 207,384
2005 158,164
2006 77,461
============
(8) Settlement of Lawsuit
As previously reported, the Partnership, as a nominal defendant, the
General Partners of the Partnership and of affiliated public
Partnerships (the "Realmark Partnerships") and the officers and
directors of the Corporate General Partner, as defendants, had been
involved in a class action litigation at the state court level
regarding the payment of fees and other management issues.
On August 29, 2001, the parties entered into a Stipulation of Settlement
(the "Settlement"). On October 4, 2001, the Court issued an "Order
Preliminary Approving Settlement' (the "Hearing Order") and on November
29, 2001, the court issued an "Order and Final Judgment Approving
Settlement and Awarding Fees and Expenses" and dismissing the
complaints with prejudice. The Settlement provided, among other things,
that all of the Realmark Partnerships' properties be disposed of. The
General Partners will continue to have primary authority to dispose of
Partnerships' properties. If either (i) the General Partners have not
sold or contracted to sell 50% of the Partnerships' properties (by
value) by April 2, 2002 or (ii) the General Partners have not sold or
contracted to sell 100% of the Partnerships' properties by September
29, 2002, then the primary authority to dispose of the Partnerships'
properties will pass to a sales agent designated by plaintiffs' counsel
and approved by the Court. As of April 2, 2002, the General Partners
have contracted to sell more than 50% of the Partnerships' properties
(by value).
The settlement also provided for the payment by the Partnerships of fees to
the plaintiffs' attorneys. These payments, which are not calculable at
this time but may be significant, are payable out of the proceeds from
the sale of all of the properties owned by all of the Realmark
Partnerships, following the sale of the last of these properties in
each partnership. Plaintiffs' counsel will receive 15% of the amount by
which the sales proceeds distributable to limited partners in each
partnership exceeds the value of the limited partnership units in each
partnership (based on the weighted average of the units' trading prices
on the secondary market as reported by Partnership Spectrum for the
period May through June 2001). In no event may the increase on which
the fees are calculated exceed 100% of the market value of the units as
calculated above.
F-15
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(9) Subsequent Event
On March 22, 2002, the Partnership entered into a $4,250,000 sale
agreement with an unaffiliated entity, for the sale of Northwind Office
Park. This sale, if closed, will result in a gain of approximately
1,930,000 to the Partnership.
F-16
Schedule III
------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Real Estate and Accumulated Depreciation
December 31, 2001
Gross amounts at which
Initial Cost to Cost Carried at Close of Period
Partnership capitalized --------------------------
Property --------------- subsequent to Buildings and Accumulated
Description Encumbrances Land Buildings acquisition Retirements Land improvements Total depreciation
- ----------- ------------ ---- --------- ----------- ----------- ---- ------------ ----- ------------
Northwind
Office Park
E. Lansing, Ml $ 237,634 460,515 3,415,895 817,526 -- 460,515 4,233,421 4,693,936 2,530,690
========== ========= ========= ======== ======== ======= ========= ========= =========
Research
Triangle JV
Raleigh, NC 5,254,865 750,612 4,920,738 9,329 (412,500) 338,112 4,930,067 5,268,179 3,794,811
Research Triangle
Land JV
Raleigh, NC -- 412,500 -- 20,484 (194,842) 238,142 -- 238,142 --
---------- --------- --------- -------- --------- ------- --------- --------- ---------
$5,254,865 1,163,112 4,920,738 29,813 (607,342) 576,254 4,930,067 5,506,321 3,794,811
========== ========= ========= ======== ======== ======= ========= ========= =========
(RESTUBBED TABLE)
Life
on which
depreciation
in latest
Date statement of
of Date operations
construction acquired is computed
------------ -------- -----------
Northwind
Office Park
E. Lansing, Ml 1973 12/83 -- *
==== ===== ===
Research
Triangle JV
Raleigh, NC 1983 12/83 -- *
Research Triangle
Land JV
Raleigh, NC -- 8/92 --
---- ----- ---
*In accordance with Statement of Financial Accounting Standards No. 121, no
depreciation was recorded during the disposal period, January 1, 2001 through
December 31, 2001.
F-17
Schedule III, Cont.
-------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
AND SUBSIDIARY
Real Estate and Accumulated Depreciation
December 31, 2001, 2000 and 1999
(1) Cost for Federal income tax purposes is $4,693,936.
(2) A reconciliation of the carrying amount of land and buildings as of
December 31, 2001, 2000 and 1999 follows:
Partnership Properties
----------------------
2001 2000 1999
---- ---- ----
Balance at beginning of year $10,128,864 10,009,100 9,857,401
Additions 78,200 119,764 151,699
Dispositions (5) (5,513,128) -- --
----------- ---------- ----------
Balance at end of year $ 4,693,936 10,128,864 10,009,100
=========== ========== ==========
Joint Venture Properties
------------------------
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 5,701,163 5,701,163 5,701,163
Dispositions (6) (194,842) -- --
----------- --------- ----------
Balance at end of year $ 5,506,321 5,701,163 5,701,163
=========== ========= ==========
(3) A reconciliation of accumulated depreciation for buildings and
improvements for the years ended December 31, 2001, 2000 and 1999 follows:
Partnership Properties
----------------------
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 5,613,710 5,437,852 5,180,777
Dispositions (5) (3,083,020) -- --
Depreciation expense -- 175,858 212,562
----------- ---------- ----------
Balance at end of year (4) $ 2,530,690 5,613,710 5,393,339
=========== ========== ==========
Joint Venture Properties
------------------------
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 3,794,811 3,694,293 3,590,813
Depreciation expense -- 100,518 103,480
----------- ---------- ----------
Balance at end of year (4) $ 3,794,811 3,794,811 3,694,293
=========== ========== ==========
(4) Balance applies entirely to buildings and improvements.
(5) Sale of Foxhunt Apartments in 2001.
(6) Sale of portion of Research Triangle land in 2001.
F-18