FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002
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 organization) (IRS Employer Identification No.)
2350 North Forest Road, Suite 12A,Getzville, New York 14068
- ------------------------------------------------------------
(Address of principal executive offices)
(716) 636-0280
- --------------
(Registrant's telephone number)
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 [ ]
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
-------------------------------------
June 30, December 31,
2002 2001
---------------- ----------------
Assets
- --------------------------------------------------
Cost of property and equipment, all held for sale $ 4,703,885 4,701,829
Less accumulated depreciation 2,531,480 2,531,480
---------------- ----------------
2,172,405 2,170,349
Cash and equivalents 272,612 330,328
Other assets 135,464 118,337
---------------- ----------------
Total assets $ 2,580,481 2,619,014
================ ================
Liabilities and Partners' Equity
- --------------------------------------------------
Mortgage loans payable 144,620 237,634
Accounts payable and accrued expenses 69,021 82,284
Other liabilities 110,145 106,215
Equity in losses of unconsolidated joint ventures
in excess of investment 1,126,478 1,143,543
Partners' equity (deficit) 1,130,217 1,049,338
---------------- ----------------
Total liabilities and partners' equity $ 2,580,481 2,619,014
================ ================
Condensed Consolidated Statements of Operations
-----------------------------------------------
Three months ended June 30, Six months ended June 30,
------------------------------ --------------------------
2002 2001 2002 2001
---------- ----------- ---------- ----------
Rental income $ 222,586 153,379 442,453 599,735
Other income 2,790 37,445 6,067 54,039
---------- ---------- ---------- ----------
Total income 225,376 190,824 448,520 653,774
---------- ---------- ---------- ----------
Property operating costs 135,048 173,701 272,957 463,334
Administrative expense - affiliates 31,049 31,430 61,346 80,065
Other administrative expense 51,421 24,639 82,806 90,946
Interest 4,844 9,495 10,597 100,100
---------- ---------- ---------- ----------
Total expenses 222,362 239,265 427,706 734,445
---------- ---------- ---------- ----------
Operating income (loss) 3,014 (48,441) 20,814 (80,671)
Gain on sale of property of
consolidated joint venture -- -- -- 4,765,442
Minority interest in consolidated
joint venture net income -- -- -- (546,503)
Equity in earnings of joint ventures 34,261 208,556 60,065 295,044
---------- ---------- ---------- ----------
Net income $ 37,275 160,115 80,879 4,433,312
========== ========== ========== ==========
Net income per limited partnership unit $ 3.62 15.53 7.85 430.03
========== ========== ========== ==========
Weighted average limited partnership units 10,000 10,000 10,000 10,000
========== ========== ========== ==========
2
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
Six months ended June 30,
--------------------------
Cash provided (used) by: 2002 2001
----------- -----------
Operating activities:
Net income $ 80,879 4,433,312
Adjustments:
Net nonoperating gains (60,065) (4,513,983)
Other, principally changes in other assets and liabilities (26,460) (362,189)
----------- -----------
Net cash used in operating activities (5,646) (442,860)
----------- -----------
Investing activities:
Additions to property and equipment (2,056) (66,320)
Net proceeds from sale of property and joint venture interest -- 7,327,000
Distribution from joint venture 43,000 79,500
----------- -----------
Net cash provided by investing activities 40,944 7,340,180
----------- -----------
Financing activities:
Principal payments on mortgage loans (93,014) (6,035,253)
Distribution to minority interest in consolidated venture -- (117,541)
----------- -----------
Net cash used in financing activities (93,014) (6,152,794)
----------- -----------
Net increase (decrease) in cash and equivalents (57,716) 744,526
Cash and equivalents at beginning of period 330,328 157,549
----------- -----------
Cash and equivalents at end of period $ 272,612 902,075
=========== ===========
Notes to Consolidated Financial Statements
Six months ended June 30, 2002 and 2001
Organization
- ------------
Realmark Property Investors Limited Partnership-II (the Partnership), a Delaware
limited partnership was formed on March 25, 1982, to invest in a diversified
portfolio of income-producing real estate investments. The general partners are
Realmark Properties, Inc. (the corporate general partner) and Joseph M. Jayson
(the individual general partner). Joseph M. Jayson is the sole stockholder 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 receive compensation for services rendered
and reimbursement for expenses incurred on behalf of the Partnership.
Basis of Presentation
- ---------------------
The accompanying interim financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and, in the opinion of management, contain all necessary adjustments for a fair
presentation. The Partnership's significant accounting policies are set forth in
its December 31, 2001 Form 10-K. The interim financial statements should be read
in conjunction with the financial statements included therein. The interim
results should not be considered indicative of the annual results.
3
Property and Equipment
- ----------------------
At June 30, 2002, the Partnership owned and operated an office complex in
Michigan (Northwind Office Park), and was a partner in two joint ventures. It
has a 50% interest in Research Triangle Industrial Park Joint Venture with the
other 50% owned by Realmark Property Investors Limited Partnership VI-A (RPILP
VI-A), an entity affiliated through common general partners. It also has a 50%
interest in Research Triangle Land Joint Venture. In 2001, the Venture sold a
portion of its land, with a gain of $202,000 allocated to the Partnership.
All of the Partnership and venture properties are being actively marketed for
sale and therefore, are not being depreciated. Depreciation expense not recorded
during the three and six month periods ended June 30, 2002 was approximately
$46,000 and $92,000, respectively. Depreciation expense not recorded during the
three and six month periods ended June 30, 2001 and was approximately $50,000
and $100,000, respectively. The sale agreement previously reported for Northwind
Office Park was terminated.
Investment in Research Triangle Industrial Park Joint Venture
- -------------------------------------------------------------
The Venture owns and operates the Research Triangle Industrial Park West, an
office/warehouse facility located in Durham County, North Carolina. Summary
financial information of the Venture follows:
Balance Sheet Information
-------------------------
June 30, December 31,
2002 2001
----------- -----------
Net property, held for sale $ 1,473,368 1,473,368
Cash and equivalents 13,965 55,158
Escrow deposits 899,600 876,539
Other assets 198,804 252,727
----------- -----------
Total assets $ 2,585,737 2,657,792
=========== ===========
Liabilities:
Mortgage loan payable 5,208,707 5,254,865
Accounts payable and accrued expenses 73,422 134,234
----------- -----------
5,282,129 5,389,099
----------- -----------
Partners' deficit:
The Partnership (1,248,781) (1,266,238)
RPILP VI-A (1,447,611) (1,465,069)
----------- -----------
(2,696,392) (2,731,307)
----------- -----------
Total liabilities and partners' deficit $ 2,585,737 2,657,792
=========== ===========
4
Operating Information
---------------------
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
-------- -------- -------- --------
Rental income $199,907 182,620 361,646 401,240
Other 47,283 49,037 94,988 95,678
-------- -------- -------- --------
Total income 247,190 231,657 456,634 496,918
-------- -------- -------- --------
Property operating costs 42,033 30,177 80,293 59,161
Interest 108,276 110,241 216,405 220,121
Administrative 28,841 13,973 39,022 32,966
-------- -------- -------- --------
Total expenses 179,150 154,391 335,720 312,248
-------- -------- -------- --------
Net income $ 68,040 77,266 120,914 184,670
======== ======== ======== ========
Allocation of net income:
RPILP II 34,020 38,633 60,457 92,335
RPILP VI-A 34,020 38,633 60,457 92,335
-------- -------- -------- --------
$ 68,040 77,266 120,914 184,670
======== ======== ======== ========
5
PART I - Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Liquidity and Capital Resources
- -------------------------------
The net proceeds from the sale in 2001 of Foxhunt and a portion of the Research
Triangle land, were distributed to the Partnership and the minority interest in
the joint venture. 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. Although cash decreased
approximately $57,000 during the first six months of 2002, the partnership has
adequate cash remaining from the sales proceeds to fund capital improvements and
to make scheduled debt payments. The Partnership made no distributions to the
limited partners in 2002 or 2001.
Results of Operations
- ---------------------
As compared to the first six months of 2001, the Partnership's loss, excluding
Foxhunt Apartments, which was sold in March 2001, and before equity in earnings
from joint ventures decreased approximately $74,000 from a loss of $53,000 in
2001 to income of $21,000 in 2002.
Rental income at Northwind Office Park increased approximately $88,000 for the
first six months due to an increase in average rental rates. Other income
decreased $39,000, due primarily to $23,000 in insurance proceeds received in
June 2001 and a $16,000 decrease in interest income. The increase in income was
offset by an increase in property operating costs of $25,000, and a decrease in
interest expense of $6,000. The increase in property operating costs was
primarily attributable to an increase in payroll expense and cleaning costs.
Administrative expenses were consistent for the six months ended June 30, 2002
and 2001.
PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership's cash equivalents are short-term, interest-bearing bank
accounts and its mortgage loans are fixed-rate. It has not entered into any
derivative contracts. Therefore, it has no market risk exposure.
PART II - OTHER INFORMATION
-----------------
Item 1. 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 in New York State
court. The Partnership's settlement of this litigation is described in its
Annual Report on Form 10-K for the year ended December 31, 2001.
Item 5. Other Information
-----------------
The Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is attached as an exhibit in this
report.
6
SIGNATURES
----------
Pursuant to the requirements 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 PARTNERHIP - II
August 14, 2002 /s/ Joseph M. Jayson
--------------- ----------------------------
Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
7
Exhibit
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002.
In connection with the Quarterly Report of Realmark Property Investors
Limited Partnership - II (the "Partnership") on Form 10-Q for the period ending
June 30, 2002 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Joseph M. Jayson, Individual General Partner and
Principal Financial Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of the operations of the
Partnership.
August 14, 2002 /s/ Joseph M. Jayson
--------------- ----------------------------
Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer