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 September 30, 2002
Commission File Number: 0-11909
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
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(Exact name of registrant as specified in its charter)
Delaware 16-1212761
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(State of organization) (IRS Employer Identification No.)
2350 North Forest Road, Suite 12A,Getzville, New York 14068
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(Address of principal executive offices)
(716) 636-0280
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(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
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Condensed Consolidated Balance Sheets
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September 30, December 31,
2002 2001
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Assets
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Cost of property and equipment, all held for sale $ 4,710,296 4,701,829
Less accumulated depreciation 2,531,480 2,531,480
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2,178,816 2,170,349
Cash and equivalents 259,992 330,328
Other assets 139,714 118,337
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Total assets $ 2,578,522 2,619,014
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Liabilities and Partners' Equity
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Mortgage loans payable 96,178 237,634
Accounts payable and accrued expenses 84,110 82,284
Other liabilities 107,783 106,215
Equity in losses of unconsolidated joint ventures
in excess of investment 1,116,457 1,143,543
Partners' equity 1,173,994 1,049,338
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Total liabilities and partners' equity $ 2,578,522 2,619,014
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Condensed Consolidated Statements of Operations
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Three months ended Sept. 30, Nine months ended Sept. 30,
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2002 2001 2002 2001
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Rental income $ 226,840 219,374 669,293 819,109
Other income 1,410 9,225 7,477 63,264
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Total income 228,250 228,599 676,770 882,373
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Property operating costs 153,470 177,016 426,427 640,350
Administrative expense - affiliates 31,615 39,940 92,961 120,005
Other administrative expense 20,783 67,094 103,589 158,040
Interest 3,626 7,467 14,223 107,567
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Total expenses 209,494 291,517 637,200 1,025,962
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Operating income (loss) 18,756 (62,918) 39,570 (143,589)
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 25,021 38,449 85,086 333,492
----------------- ------------------ ---------------- ---------------
Net income (loss) $ 43,777 (24,469) 124,656 4,408,842
================= ================== ================ ===============
Net income (loss) per limited partnership unit $ 4.25 (2.37) 12.09 427.66
================= ================== ================ ===============
Weighted average limited partnership units 10,000 10,000 10,000 10,000
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Condensed Consolidated Statements of Cash Flows
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Nine months ended September 30,
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2002 2001
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Cash provided (used) by:
Operating activities:
Net income $ 124,656 4,408,842
Adjustments:
Net nonoperating gains (85,086) (4,552,431)
Other, principally changes in other assets and liabilities (17,983) (418,686)
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Net cash provided (used) by operating activities 21,587 (562,275)
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Investing activities:
Additions to property and equipment (8,467) (66,320)
Net proceeds from sale of property and joint venture interest -- 7,084,969
Distribution from joint ventures 58,000 391,500
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Net cash provided by investing activities 49,533 7,410,149
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Financing activities:
Principal payments on mortgage loans (141,456) (6,079,081)
Distribution to minority interest in consolidated venture -- (648,066)
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Net cash used in financing activities (141,456) (6,727,147)
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Net increase (decrease) in cash and equivalents (70,336) 120,727
Cash and equivalents at beginning of period 330,328 157,549
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Cash and equivalents at end of period $ 259,992 278,276
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Notes to Consolidated Financial Statements
Nine months ended September 30, 2002 and 2001
Organization
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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 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
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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.
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Property and Equipment
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At September 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 nine month periods ended September 30, 2002 was
approximately $46,000 and $138,000, respectively. Depreciation of the Northwind
property not recorded during the three and nine month periods ended September
30, 2001 was approximately $45,000 and $130,000, respectively. The sale
agreement previously reported for Northwind Office Park was terminated.
Current Accounting Pronouncements
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Statements of Financial Accounting Standards Nos. 145, 146 and 147 which concern
accounting for gains and losses from the extinguishments of debt, exit or
disposal activities, and acquisitions of certain financial institutions will
become effective for the Partnership in the first quarter of 2003. 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.
Investment in Research Triangle Industrial Park Joint Venture
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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
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September 30, December 31,
2002 2001
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Net property, held for sale $ 1,473,368 1,473,368
Cash and equivalents 6,633 55,158
Escrow deposits 907,891 876,539
Other assets 209,702 252,727
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Total assets $ 2,597,594 2,657,792
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Liabilities:
Mortgage loan payable 5,186,079 5,254,865
Accounts payable and accrued expenses 85,996 134,234
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5,272,075 5,389,099
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Partners' deficit:
The Partnership (1,237,825) (1,266,238)
RPILP VI-A (1,436,656) (1,465,069)
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(2,674,481) (2,731,307)
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Total liabilities and partners' deficit $ 2,597,594 2,657,792
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Investment in Research Triangle Industrial Park Joint Venture, Continued
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Operating Information
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Three months ended Sept. 30, Nine months ended Sept. 30,
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2002 2001 2002 2001
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Rental income $ 236,943 218,620 598,589 655,860
Other 5,780 48,457 100,768 144,135
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Total income 242,723 267,077 699,357 799,995
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Property operating costs 59,203 31,570 139,496 90,731
Interest 108,990 111,761 325,395 331,882
Administrative 22,618 46,846 61,640 115,812
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Total expenses 190,811 190,177 526,531 538,425
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Net income $ 51,912 76,900 172,826 261,570
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Allocation of net income:
RPILP II 25,956 38,450 86,413 130,785
RPILP VI-A 25,956 38,450 86,413 130,785
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$ 51,912 76,900 172,826 261,570
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PART I - Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Liquidity and Capital Resources
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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 $70,000 during the first nine 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
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As compared to the first nine 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 $158,000 from a loss of $118,000 in
2001 to income of $40,000 in 2002.
Rental income at Northwind Office Park increased approximately $98,000 for the
first nine months due to an increase in average rental rates and occupancy.
Other income decreased $47,000, due primarily to $23,000 insurance proceeds
received in June 2001 and a $24,000 decrease in interest income. Total expenses
decreased $107,000 as a result of a decrease in property operating costs of
$51,000, a decrease in administrative expenses to affiliates of $9,000, a
decrease in other administrative expenses of $37,000, and a decrease in interest
expense of $10,000. The decrease in administrative expenses was a result of a
decrease in professional fees.
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PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
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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 I - Item 4. Controls and Procedures
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Within the 90 days prior to the filing date of this report, the Partnership
carried out an evaluation, under the supervision and with the participation of
the Partnership's management, including Joseph M. Jayson (the Partnership's
Individual General Partner and Principal Financial Officer), of the
effectiveness of the design and operation of the Partnership's disclosure
controls and procedures. Based upon that evaluation, the Principal Financial
Officer concluded that the Partnership's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Partnership (including its consolidated subsidiaries) required to be included in
the Partnership's periodic SEC filings. There have been no significant changes
in the Partnership's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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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 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. Subsequent to
September 30, 2002, the court appointed a sales agent to work with the General
Partners to continue to sell the Partnership's remaining properties.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
99.1 Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
99.2 Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None.
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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
November 14, 2002 /s/ Joseph M. Jayson
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Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
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