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 March 31, 2003
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
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Item 1. Financial Statements
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Condensed Consolidated Balance Sheets
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(Unaudited)
March 31, December 31,
2003 2002
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Assets
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Property and equipment, all held for sale $ 4,724,397 4,718,207
Less accumulated depreciation 2,531,480 2,531,480
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2,192,917 2,186,727
Cash and equivalents 216,783 235,302
Other assets 209,250 170,867
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Total assets $ 2,618,950 2,592,896
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Liabilities and Partners' Equity
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Mortgage loan payable 60,121 73,058
Accounts payable and accrued expenses 68,463 81,681
Other liabilities 110,850 100,174
Equity in losses of unconsolidated joint ventures
in excess of investment 1,115,272 1,112,413
Partners' equity 1,264,244 1,225,570
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Total liabilities and partners' equity $ 2,618,950 2,592,896
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Condensed Consolidated Statements of Operations
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(Unaudited)
Three months ended March 31,
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2003 2002
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Rental income $ 212,416 219,867
Other income 5,301 3,277
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Total income 217,717 223,144
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Property operating costs 140,834 137,909
Administrative expense - affiliates 34,448 30,297
Other administrative expense 42,452 31,385
Interest 1,450 5,753
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Total expenses 219,184 205,344
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Operating income (loss) (1,467) 17,800
Equity in earnings of joint venture 40,141 25,804
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Net income $ 38,674 43,604
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Net income per limited partnership unit $ 3.75 4.23
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Weighted average limited partnership units outstanding 10,000 10,000
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Condensed Consolidated Statements of Cash Flows
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(Unaudited)
Three months ended March 31,
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2003 2002
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Cash provided (used) by:
Operating activities:
Net income: $ 38,674 43,604
Adjustments:
Equity in earnings of joint ventures (40,141) (25,804)
Other, principally changes in other assets and liabilities (40,925) (31,754)
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Net cash used in operating activities (42,392) (13,954)
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Investing activities:
Additions to property and equipment (6,190) --
Distributions from joint venture 43,000 33,000
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Net cash provided by investing activities 36,810 33,000
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Financing activities - principal payments on mortgage loans (12,937) (45,712)
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Net decrease in cash and equivalents (18,519) (26,666)
Cash and equivalents at beginning of period 235,302 330,328
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Cash and equivalents at end of period $ 216,783 303,662
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Notes to Consolidated Financial Statements
Three months ended March 31, 2003 and 2002
(Unaudited)
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 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
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The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the instructions to Form 10-Q. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete financial
statements. The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation, have been included. The Partnership's significant
accounting policies are set forth in its December 31, 2002 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.
Property and Equipment
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At March 31, 2003, the Partnership owned and operated an office complex in
Michigan (Northwind Office Park), and was a partner in two joint ventures. It
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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.
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 month period ended March 31, 2003 and 2002 was approximately
$45,000.
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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March 31, December 31,
2003 2002
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Net property, held for sale $ 1,473,368 1,473,368
Cash and equivalents 9,966 34,606
Escrow deposits 838,513 861,615
Other assets 275,495 272,481
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Total assets $ 2,597,342 2,642,070
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Liabilities:
Mortgage loan payable 5,135,938 5,161,824
Accounts payable and accrued expenses 126,115 140,633
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5,262,053 5,302,457
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Partners' deficit:
The Partnership (1,232,940) (1,230,778)
RPILP VI - A (1,431,771) (1,429,609)
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(2,664,711) (2,660,387)
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Total liabilities and partners' deficit $ 2,597,342 2,642,070
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Operating Information
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Three months ended March 31,
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2003 2002
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Rental income $ 199,500 161,739
Other 47,944 47,705
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Total income 247,444 209,444
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Property operating costs 42,096 38,260
Interest 106,293 108,129
Administrative 17,379 10,181
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Total expenses 165,768 156,570
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Net income $ 81,676 52,874
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Allocation of net income:
The Partnership 40,838 26,437
RPILP VI - A 40,838 26,437
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$ 81,676 52,874
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Current Accounting Pronouncements
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Statements of Financial Accounting Standards Nos. 145, 146, 147, and 148 which
concern accounting for gains and losses from the extinguishments of debt, exit
or disposal activities, acquisitions of certain financial institutions, and
accounting for stock-based compensation, respectively, became effective for the
Partnership on January 1, 2003 and did not have any effect on the Partnership's
consolidated financial statements.
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of variable Interest Entities." The Partnership does not
believe that this Interpretation will have a material impact on its consolidated
financial statements.
PART I - Item 2. Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Liquidity and Capital Resources
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Effective January 1, 2001, management began formally marketing all remaining
properties in the Partnership for sale. The Partnership continues to maintain a
cash position adequate to fund capital improvements and to make scheduled debt
payments. Cash decreased approximately $18,500 during the first three months of
2003. The Partnership made no distributions to limited partners in the first
quarter of 2003. In accordance with the settlement of the lawsuit (Part II, Item
1), 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.
Results of Operations
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As compared to the first three months of 2002, the Partnership's income,
excluding equity in earnings from joint ventures, decreased approximately
$19,000 from income of $17,800 in 2002 to a net loss of $1,500 in 2003.
Rental income decreased approximately 3% as compared to the first three months
of 2002, due to a decrease in occupancy at Northwind Office Park (Northwind).
Other income increased by approximately $2,000 in 2003.
Total expenses increased approximately $14,000. Property operating costs
increased approximately $3,000 due primarily to an increase in payroll at
Northwind. Other administrative expense, increased approximately $11,000 due to
increased legal and professional fees and advertising. Administrative expense to
affiliated parties increased approximately $4,000 due to portfolio management
expenses. Interest expense decreased approximately $4,000 due to a larger
portion of each mortgage payment being applied to the principal and the final
payment on one of the mortgages at Northwind in October 2002.
PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
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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.
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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. 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
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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 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, 2002.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
99. Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 is filed herewith.
(b) Reports on Form 8-K
None.
SIGNATURES
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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
May 15, 2003 /s/ Joseph M. Jayson
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Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph M. Jayson, Individual General Partner and Principal Financial Officer
of Realmark Property Investors Limited Partnership - II, hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ended March 31, 2003 of Realmark Property Investors Limited
Partnership - II;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Partnership and I have:
a. Designed such disclosure controls and procedures to ensure the
material information relating to the Partnership, including its
consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this
quarterly report was being prepared;
b. Evaluated the effectiveness of the Partnership disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on
my evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
Partnership's auditors and the audit committee of the board of
directors (or persons performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the Partnership's
ability to record, process, summarize and report financial data
and have identified for the Partnership's auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the Partnership's
internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of my most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
May 15, 2003 /s/ Joseph M. Jayson
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Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
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