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 0-16561
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
---------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Delaware 16-1275925
- ------------------- --------------------------------
(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-V (the
"Partnership"), is a Delaware limited partnership organized in 1986, pursuant to
an 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 July 14, 1986, and concluded the offering
on October 31, 1987, having raised a total of $20,999,800 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 limited
liability, wholly owned subsidiary companies, owned: a 205 unit apartment
complex in Louisville, KY (Camelot East); a 65,000 square foot office/warehouse
building in Nashville, Tennessee (The Paddock); an 115,000 square foot office
complex in Durham, North Carolina (Commercial Park West); and an
office/warehouse complex in Amherst, New York (Inducon East and Inducon East
Phase III), totaling 196,500 square feet. All of these properties are currently
being actively marketed for sale. On March 20, 2002, the Partnership entered
into a $6,800,000 sale agreement with an unaffiliated entity, for the sale of
Camelot East Apartments. This sale, if closed, will result in a gain of
approximately $3,300,000 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 occupancy for each complex as of December 31 was as follows:
2001 2000 1999
---- ---- ----
Camelot East Apartments 94% 92% 93%
The Paddock Building 67% 49% 71%
Commercial Park West 84% 100% 100%
Inducon East 78% 84% 94%
Inducon East Phase III 91% 100% 92%
2
The percent of total Partnership revenue generated by each complex for
the last three years was as follows:
2001 2000 1999
---- ---- ----
Camelot East Apartments 25% 25% 24%
The Paddock Building 6% 7% 7%
Commercial Park West 33% 32% 32%
Inducon East 28% 28% 29%
Inducon East Phase III 8% 8% 8%
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
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
The following is a list of properties owned by the Partnership at
December 31, 2001:
Property Name
and Location General Character of Property Purchase Date
------------ ----------------------------- -------------
Camelot East Apts. Apartment complex; 23 buildings on 6 acres; May 1988
Louisville, KY 205 units, securing a 7.4% mortgage with a balance
at December 31, 2001 of $4,712,509, maturing in 2027.
The Paddock Building Office/warehouse building; 65,334 square May 1987
Nashville, TN feet, securing a 7.7% mortgage with a balance
at December 31, 2001 of $1,626,625, maturing in 2009.
Commercial Park West Office complex of 3 buildings totaling June 1991
Durham, NC 115,021 square feet, securing an 8.07% mortgage
with a balance at December 31, 2001 of
$5,900,420, maturing in 2029.
Inducon East Office/warehouse complex; 6 buildings on Partially acquired
Amherst, NY 15 acres; approximately 150,000 sq. ft of April 1987 as a
rentable space, securing a 7.74% mortgage Joint Venturer;
with a balance at December 31, 2001 fully acquired
of $5,938,750, maturing 2009. November 1997
Inducon East Phase III Two office/warehouse buildings totaling Partially acquired
Amherst, NY 46,500 sq. ft., securing a 7.74% mortgage September 1992
with a balance at December 31, 2001 of as a JointVenturer;
$1,794,546, maturing in 2009. fully acquired
November 1997
3
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. 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.
ITEM 4: SUBMISSION 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 2,124
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.
4
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 87% to
the Limited Partners and 13% 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.
ITEM 6: SELECTED FINANCIAL DATA
At or for the years ended December 31,
---------------------------------------------------------------------------------
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------
Balance sheet data
Net rental property $ 17,634,501 17,398,050 18,012,850 18,816,863 19,659,945
Total assets 20,818,089 20,757,064 21,184,642 21,760,675 25,243,111
Mortgage loans payable 19,972,850 20,223,880 20,458,106 20,035,113 18,507,664
Partners' equity (deficit) 328,658 (70,996) 168,131 757,469 5,595,782
==============================================================================
Operating data
Rental income 4,242,309 4,505,231 4,443,569 4,074,844 6,685,019
Other income 972,325 881,638 686,368 676,589 383,763
------------------------------------------------------------------------------
Total revenue 5,214,634 5,386,869 5,129,937 4,751,433 7,068,782
------------------------------------------------------------------------------
Property operating costs 2,204,230 2,108,079 2,095,210 1,753,725 3,326,437
Depreciation -- 1,045,409 1,167,970 1,212,114 1,094,232
Interest expense 1,643,099 1,663,018 1,742,422 2,222,855 3,306,719
Administrative expenses 967,651 809,490 713,673 820,582 1,423,999
------------------------------------------------------------------------------
Total expenses 4,814,980 5,625,996 5,719,275 6,009,276 9,151,387
------------------------------------------------------------------------------
Loss before equity in joint
venture operations & gain on sale 399,654 (239,127) (589,338) (1,257,843) (2,082,605)
Equity in joint venture operations -- -- -- -- (625,953)
Gain on sale of properties -- -- -- -- 5,009,787
------------------------------------------------------------------------------
Net income (loss) 399,654 (239,127) (589,338) (1,257,843) 2,301,229
==============================================================================
Cash flow data
Net cash provided (used) by:
Operating activities 230,276 579,465 828,330 (577,144) (917,481)
Investing activities (279,477) (387,583) (299,721) (388,559) 815,666
Financing activities (251,030) (234,226) 287,148 (2,706,458) 3,297,490
------------------------------------------------------------------------------
Net increase (decrease) in cash
and equivalents (300,231) (42,344) 815,757 (3,672,161) 3,195,675
==============================================================================
Per limited partnership unit:
Net income (loss) $ 18.46 (11.04) (27.22) (58.09) 99.31
Distributions -- -- -- 165.36 --
==============================================================================
5
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources:
Cash provided through the sale and refinancing of properties prior to
1999, was used to absorb past losses and has permitted the Partnership to
perform almost $950,000 in capital improvements to the properties. In the past
three years, operating activities produced a total of $1.6 million of cash to
fund the aforementioned capital improvements, as well as to meet debt service
requirements. There was no distribution to partners made in 2001, 2000 or 1999.
In accordance with the settlement of the lawsuit (item 3), it is anticipated
that with the sale of the properties, 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 for the year ended
December 31, 2001 produced net income of $399,654. Effective January 1, 2001,
management began formally marketing all properties in the Partnership for sale,
therefore, the properties were not depreciated in 2001. Excluding depreciation,
the results of operations were net income of $806,282 in 2000 and $578,632 in
1999.
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 6% for the year ended December 31, 2001 as
compared to 2000. Rental income decreased due to increased vacancies at both
Commercial Park West and Inducon East, with the largest decrease of
approximately $93,000 occurring at Commercial Park West, where occupancy
decreased from 100% at December 31, 2000 to 84% at December 31, 2001. This
decrease was caused by a tenant who had occupied 15% of the buildings moving out
in August of 2001. Other income, which consists primarily of common area
maintenance charges, increased by 10% in 2001 due to an increase in the common
area maintenance charges, security deposit forfeitures and cleaning/damages of
approximately $117,000, $15,000 and $14,000, respectively, offset by a decrease
in early lease termination fees of $58,000.
Total expenses, excluding depreciation, increased approximately 5% for
the year ended December 31, 2001. Property operations increased approximately
$96,000 due primarily to an increase in gas and electric expense of
approximately $58,000 at Camelot East, an increase in maintenance and repair
work of approximately $23,000 at The Paddock, an increase in real estate taxes
for The Paddock of approximately $12,000 due to an increase in its tax
assessment, and an increase in snow removal costs of approximately $13,000 at
Inducon East and Inducon East Phase III. Other administrative expense decreased
approximately 22% due to decreased legal fees and a decrease in management fees
6
paid to an unaffiliated management agent as Commercial Park West was managed by
an affiliate party during 2001. Administrative expense to affiliated parties
increased 51% because of an allocation revision and Commercial Park West's
management fee now being paid to the affiliated party. Interest expense remained
consistent from 2001 to 2000 with a decrease of approximately $20,000 due to a
larger portion of each mortgage payment being applied towards principal due to
amortization of the mortgages.
2000 as compared to 1999
In 2000, rental income increased approximately $62,000 due to overall
occupancy improving at Inducon East Phase III and continued strong occupancy at
Commercial Park West. The increase at Inducon East Phase III and Commercial Park
West was offset by a decrease at The Paddock due in large part to the loss of a
large tenant in 2000. Other income increased approximately 28% due to increased
common area maintenance charges and an increase in early lease termination fees.
Total expenses, excluding depreciation, increased approximately $29,000
for the year ended December 31, 2000 as compared to 1999. Property operations
expenses remained relatively stable with an increase of less than 1%. Interest
expense decreased approximately 5% due to higher interest expense being incurred
in 1999 prior to the refinancing of Commercial Park West. Other administrative
expenses increased approximately $57,000 due to increased professional fees.
Administrative expense to affiliated parties increased approximately $38,000 due
to increased management fees associated with the improved occupancy levels.
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
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 Year First
Name the Corporate General Partner 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:
7
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
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 1643.3 units of limited
partnership interest amounting to approximately 7.8% 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 17 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's subsidiaries 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
8
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 Auditor's 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-6
FINANCIAL STATEMENT SCHEDULE
(i) Schedule III - Real Estate and Accumulated Depreciation F-13
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
(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 holder, 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 February 28, 1986, and
subsequently amended, incorporated herein by reference.
10. Material Contracts
(a) Property Management Agreement with Realmark Corporation
included with the Registration Statement, Form S-11, of
the Registrant as filed and amended to date, incorporated
herein by reference.
(b) Property sales agreement with an unrelated third-party
dated March 20, 2002 is filed herewith.
9
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 - V
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
Vice President and Director
10
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Partners
Realmark Property Investors Limited
Partnership - V:
We have audited the accompanying consolidated balance sheets of Realmark
Property Investors Limited Partnership - V and Subsidiaries 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 - V and Subsidiaries 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 - V
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2001 and 2000
Assets 2001 2000
------ ---- ----
Property and equipment, at cost, all held for sale in 2001:
Land and improvements $ 2,775,253 2,700,401
Buildings and improvements 26,698,923 26,537,324
Furniture and equipment 531,773 531,773
------------ ------------
30,005,949 29,769,498
Less accumulated depreciation 12,371,448 12,371,448
------------ ------------
Net property and equipment 17,634,501 17,398,050
Cash and equivalents 662,069 962,300
Accounts receivable, less allowance for doubtful accounts
of $78,566 in 2001 and $110,318 in 2000 26,627 52,393
Receivables from affiliated parties -- 26,366
Escrow deposits 1,209,767 957,559
Deferred mortgage costs, less accumulated amortization
of $204,575 in 2001 and $170,277 in 2000 677,690 738,932
Investment in land 417,473 417,473
Other assets 189,962 203,991
------------ ------------
Total assets $ 20,818,089 20,757,064
============ ============
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Mortgage loans payable 19,972,850 20,223,880
Accounts payable and accrued expenses 167,957 247,966
Payable to affiliated parties 6,737 --
Accrued interest payable 120,912 122,967
Security deposits and prepaid rents 220,975 233,247
------------ ------------
Total liabilities 20,489,431 20,828,060
------------ ------------
Partners' equity (deficit):
General partners (402,077) (414,067)
Limited partners 730,735 343,071
------------ ------------
Total partners' equity (deficit) 328,658 (70,996)
------------ ------------
Total liabilities and partners' equity $ 20,818,089 20,757,064
============ ============
See accompanying notes to consolidated financial statements.
F-2
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Income:
Rental $4,242,309 4,505,231 4,443,569
Interest and other 972,325 881,638 686,368
---------- ---------- ----------
Total income 5,214,634 5,386,869 5,129,937
---------- ---------- ----------
Expenses:
Property operations 2,204,230 2,108,079 2,095,210
Interest 1,643,099 1,663,018 1,742,422
Depreciation -- 1,045,409 1,167,970
Administrative:
Affiliated parties 696,851 462,594 424,113
Other 270,800 346,896 289,560
---------- ---------- ----------
Total expenses 4,814,980 5,625,996 5,719,275
---------- ---------- ----------
Net income (loss) $ 399,654 (239,127) (589,338)
========== ========== ==========
Net income (loss) per limited partnership unit $ 18.46 (11.04) (27.22)
========== ========== ==========
Weighted average number of limited partnership
units outstanding 21,002.8 21,002.8 21,002.8
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-3
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Consolidated Statements of Partners' Equity
Years Ended December 31, 2001, 2000 and 1999
Limited Partners
General ----------------
Partners Units Amount
-------- ----- ------
Balances at December 31, 1998 $ (389,213) 21,002.8 1,146,682
Net loss (17,680) -- (571,658)
---------- -------- ----------
Balances at December 31, 1999 (406,893) 21,002.8 575,024
Net loss (7,174) -- (231,953)
---------- -------- ----------
Balances at December 31, 2000 (414,067) 21,002.8 343,071
Net loss 11,990 -- 387,664
---------- -------- ----------
Balances at December 31, 2001 $ (402,077) 21,002.8 730,735
========== ======== ==========
See accompanying notes to consolidated financial statements.
F-4
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 399,654 (239,127) (589,338)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 119,011 1,167,787 1,342,882
Changes in:
Accounts receivable 25,766 (44,511) 220,120
Receivables from affiliated parties 26,366 (26,366) --
Escrow deposits (252,208) (243,982) 267,404
Other assets (43,740) (37,085) (3,050)
Accounts payable and accrued expenses (36,983) 50,894 (191,547)
Payable to affiliated parties 6,737 (107,861) (230,390)
Accrued interest payable (2,055) 11,167 46,382
Security deposits and prepaid rents (12,272) 48,549 (34,133)
----------- ----------- -----------
Net cash provided by operating
activities 230,276 579,465 828,330
----------- ----------- -----------
Cash flows from investing activities - additions to
property and equipment (279,477) (387,583) (299,721)
----------- ----------- -----------
Cash flows from financing activities:
Mortgage acquisition costs -- -- (135,845)
Principal payments upon refinancing -- -- (5,400,000)
Mortgage proceeds from refinancing -- -- 6,000,000
Principal payments on mortgage loans (251,030) (234,226) (177,007)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (251,030) (234,226) 287,148
----------- ----------- -----------
Net increase (decrease) in cash and equivalents (300,231) (42,344) 815,757
Cash and equivalents at beginning of year 962,300 1,004,644 188,887
----------- ----------- -----------
Cash and equivalents at end of year $ 662,069 962,300 1,004,644
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 1,570,892 1,592,044 1,530,007
=========== =========== ===========
Property and equipment financed by
accounts payable $ -- 43,026 --
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2001, 2000 and 1999
(1) Formation and Operation of Partnership
Realmark Property Investors Limited Partnership - V (the Partnership) is a
Delaware limited partnership formed on February 28, 1986, to invest in
a diversified portfolio of income-producing real estate investments.
In 1986 and 1987, the Partnership sold, through a public offering,
21,002.8 units of limited partnership interest for $20,999,800. 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 in accordance with accounting
principles generally accepted in the United States of America and
include the accounts of the Partnership and its two subsidiaries
that are wholly-owned:
(1) Realmark Camelot, LLC that owns Camelot East Apartments, a 205
unit apartment complex located in Louisville, Kentucky,
acquired in 1988 for $6,328,363.
(2) Realmark Commercial, LLC that owns Commercial Park West, a
115,021 square foot office complex located in Durham, North
Carolina, acquired in 1991 for $5,773,633.
In addition, the Partnership owns four commercial properties as
follows:
* The Paddock Building
* Inducon East - Phase I
* Inducon East - Phase II
* Inducon East - Phase III
In consolidation, all intercompany accounts and transactions have been
eliminated.
(b) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
F-6
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(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, 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.
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 Partnerships' policy is to consider a property to be held for sale
or disposition when the Partnership 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 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 or
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 mortgage.
(f) 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.
(g) Per Unit Data
Per limited partnership unit data is based on the weighted average
number of limited partnership units outstanding for the year.
F-7
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(h) Fair Value of Financial Instruments
The fair value of the Partnership's financial instruments approximated
their carrying values at December 31, 2001.
(i) 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 Partners 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.
(j) 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 $2,333,000 less
than the tax bases of the net assets.
(k) 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.
F-8
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(l) 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
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
In 2001, all of the properties are being actively marketed for sale. The
carrying value of the assets as of December 31, 2001, and the
properties net income or loss and depreciation expense not recorded for
the year ended December 31, 2001 is as follows:
Depreciation
expense
Carrying value Net income not
Property of assets (loss) recorded
-------- --------- ------ --------
The Paddock Building $ 1,723,130 (40,503) 138,000
Camelot East Apartments 3,284,063 (134,740) 236,000
Commercial Park West 4,865,195 691,690 255,000
Inducon East 5,522,597 215,084 357,000
Inducon East Phase III 2,239,516 82,945 70,000
========= ======== ========
F-9
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Mortgage Loans Payable
Mortgage loans payable are as follows:
Total Balance
Interest monthly December 31,
Property collateral rate Maturity payment 2001 2000
------------------- ---- -------- ------- ---- ----
The Paddock Building 7.70% 2009 $ 12,785 $ 1,626,625 1,651,479
Camelot East Apartments 7.40% 2027 33,927 4,712,509 4,763,963
Commercial Park West 8.07% 2029 44,319 5,900,420 5,947,388
Inducon East 7.74% 2009 46,827 5,938,750 6,036,858
Inducon East Phase III 7.74% 2009 14,150 1,794,546 1,824,192
======== ----------- -----------
$19,972,850 20,223,880
=========== ===========
The aggregate maturities of the mortgages for each of the five years
following 2001 and thereafter, assuming principal payments are not
accelerated, are as follows:
2002 $ 282,851
2003 308,029
2004 332,707
2005 359,363
2006 388,156
Thereafter 18,301,744
------------
$ 19,972,850
============
(5) Investment in Land
The Partnership owns approximately 96 acres of vacant land in Amherst, New
York carried at its cost of $417,473, which approximates its fair
value.
(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:
F-10
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Related Party Transactions, Continued
2001 2000 1999
---- ---- ----
Property management fees based on a percent-
age (generally 3-6%) of rental income $ 343,512 231,737 208,024
Reimbursement for costs of services to the
Partnership that include investor relations,
marketing of properties, professional fees,
communications, supplies, accounting,
printing, postage and other items 353,339 230,857 216,089
---------- ------- -------
$ 696,851 462,594 424,113
========== ======= =======
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
and payables to 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 Fees
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 2.75% 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.
(7) Leases
In connection with the commercial properties owned, the Partnership has
entered into lease agreements with terms of one to five years. Minimum
future rentals to be received for each of the next five years, under
noncancelable operating leases are as follows:
2002 $ 1,996,163
2003 1,003,456
2004 549,294
2005 423,378
2006 167,440
===========
F-11
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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
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. 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.
(9) Subsequent Event
On March 20, 2002, the Partnership entered into a $6,800,000 sale
agreement with an unaffiliated entity, for the sale of Camelot East
Apartments. This sale, if closed, will result in a gain of
approximately $3,300,000 to the Partnership.
F-12
Schedule III
------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Real Estate and Accumulated Depreciation
December 31, 2001
Initial cost to Gross amounts at which
Partnership Cost carried at close of period
--------------- capitalized --------------------------
Property Land and Buildings and subsequent to Land and Buildings and
Description Encumbrances improvements improvements acquisition improvements improvements Total
----------- ------------ ------------ ------------- ----------- ------------ ------------ -----
The Paddock Building
Nashville, TN $ 1,626,625 261,000 2,902,324 375,395 276,302 3,262,417 3,538,719
Camelot Apartments
Louisville, KY 4,712,509 297,250 5,518,613 243,503 297,250 5,762,116 6,059,366
Commercial Park West
Durham, NC 5,900,420 800,000 5,191,538 1,643,319 1,104,843 6,530,014 7,634,857
Inducon East
Amherst, NY 5,938,750 177,709 -- 9,394,755 955,458 8,617,006 9,572,464
Inducon East Phase III
Amherst, NY 1,794,546 141,400 -- 2,527,370 141,400 2,527,370 2,668,770
----------- --------- ---------- ---------- --------- ---------- ----------
Total $19,972,850 1,677,359 13,612,475 14,184,342 2,775,253 26,698,923 29,474,176
=========== ========= ========== ========== ========= ========== ==========
(RESTUBBED TABLE)
Life
on which
depreciation
in latest
Date statement of
Accumulated of Date operations
depreciation construction acquired is computed
------------ ------------ -------- -----------
The Paddock Building
Nashville, TN 1,815,589 1987 5/87 -- *
Camelot Apartments
Louisville, KY 2,777,519 1988 5/88 -- *
Commercial Park West
Durham, NC 2,769,662 1991 6/91 -- *
Inducon East
Amherst, NY 4,059,084 1987 4/87 -- *
Inducon East Phase III
Amherst, NY 433,864 1992 9/92 -- *
---------- ---- ---- -----
Total 11,855,718
==========
*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-13
Schedule III, Cont.
-------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
AND SUBSIDIARIES
Real Estate and Accumulated Depreciation
December 31, 2001, 2000 and 1999
(1) Cost for Federal income tax purposes is $29,474,176.
(2) A reconciliation of the carrying amount of land and buildings for the
years ended December 31, 2001, 2000 and 1999 follows:
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 29,237,725 28,822,478 28,525,361
Additions 236,451 415,247 297,117
------------ ----------- -----------
Balance at end of year $ 29,474,176 29,237,725 28,822,478
============ =========== ===========
(3) A reconciliation of accumulated depreciation for the years ended December
31, 2001, 2000 and 1999 is as follows:
2001 2000 1999
---- ---- ----
Balance at beginning of year $ 11,855,718 10,812,627 9,709,674
Depreciation expense -- 1,043,091 1,102,953
------------ ----------- -----------
Balance at end of year (4) $ 11,855,718 11,855,718 10,812,627
============ =========== ===========
(4) Balance applies entirely to buildings and improvements.
F-14