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, 2003
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Commission File Number: 0-11909
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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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(Unaudited)
June 30, December 31,
2003 2002
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Assets
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Property and equipment, all held for sale $ 4,743,805 4,718,207
Less accumulated depreciation 2,531,480 2,531,480
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2,212,325 2,186,727
Cash and equivalents 219,156 235,302
Other assets 196,308 170,867
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Total assets $ 2,627,789 2,592,896
==================== ===================
Liabilities and Partners' Equity
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Mortgage loan payable 45,643 73,058
Accounts payable and accrued expenses 82,948 81,681
Other liabilities 88,046 100,174
Equity in losses of unconsolidated joint ventures
in excess of investment 1,099,757 1,112,413
Partners' equity 1,311,395 1,225,570
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Total liabilities and partners' equity $ 2,627,789 2,592,896
==================== ===================
Condensed Consolidated Statements of Operations
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(Unaudited)
Three months ended June 30, Six months ended June 30,
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2003 2002 2003 2002
------------------- ---------------- ---------------- -----------------
Rental income $ 215,657 222,586 428,073 442,453
Other income 7,294 2,790 12,595 6,067
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Total income 222,951 225,376 440,668 448,520
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Property operating costs 140,552 135,048 281,386 272,957
Administrative expense - affiliates 30,570 31,049 65,018 61,346
Other administrative expense 28,052 51,421 70,504 82,806
Interest 1,141 4,844 2,591 10,597
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Total expenses 200,315 222,362 419,499 427,706
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Operating income 22,636 3,014 21,169 20,814
Equity in earnings of joint ventures 24,515 34,261 64,656 60,065
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Net income $ 47,151 37,275 85,825 80,879
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Net income per limited partnership unit $ 4.57 3.62 8.33 7.85
=================== ================ ================ =================
Weighted average limited partnership units
outstanding 10,000 10,000 10,000 10,000
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Condensed Consolidated Statements of Cash Flows
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(Unaudited)
Six months ended June 30,
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2003 2002
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Cash provided (used) by:
Operating activities:
Net income $ 85,825 80,879
Adjustments:
Equity in earnings of joint ventures (64,656) (60,065)
Other, principally changes in other assets and liabilities (36,302) (26,460)
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Net cash used in operating activities (15,133) (5,646)
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Investing activities:
Additions to property and equipment (25,598) (2,056)
Distributions from joint venture 52,000 43,000
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Net cash provided by investing activities 26,402 40,944
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Financing activities - principal payments on mortgage loans (27,415) (93,014)
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Net decrease in cash and equivalents (16,146) (57,716)
Cash and equivalents at beginning of period 235,302 330,328
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Cash and equivalents at end of period $ 219,156 272,612
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Notes to Consolidated Financial Statements
Six months ended June 30, 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.
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Property and Equipment
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At June 30, 2003, 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.
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, 2003 was approximately
$46,000 and $92,000, respectively. Depreciation expense not recorded during the
three and six month periods ended June 30, 2002 and was approximately $46,000
and $92,000, respectively.
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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June 30,
2003 December 31, 2002
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Net property, held for sale $ 1,473,368 1,473,368
Cash and equivalents 6,308 34,606
Escrow deposits 882,514 861,615
Other assets 262,930 272,481
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Total assets $ 2,625,120 2,642,070
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Liabilities:
Mortgage loan payable 5,111,810 5,161,824
Accounts payable and accrued expenses 145,597 140,633
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5,257,407 5,302,457
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Partners' deficit:
The Partnership (1,216,728) (1,230,778)
RPILP VI - A (1,415,559) (1,429,609)
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(2,632,287) (2,660,387)
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Total liabilities and partners' deficit $ 2,625,120 2,642,070
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Operating Information
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Three months ended June 30, Six months ended June 30,
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2003 2002 2003 2002
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Rental income $ 199,500 199,907 399,000 361,646
Other 50,773 47,283 98,717 94,988
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Total income 250,273 247,190 497,717 456,634
----------------- ---------------- ---------------- -----------------
Property operating costs 73,900 42,033 115,996 80,293
Interest 106,856 108,276 213,149 216,405
Administrative 19,093 28,841 36,472 39,022
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Total expenses 199,849 179,150 365,617 335,720
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Net income $ 50,424 68,040 132,100 120,914
================= ================ ================ =================
Allocation of net income:
The Partnership 25,212 34,020 66,050 60,457
RPILP VI - A 25,212 34,020 66,050 60,457
----------------- ---------------- ---------------- -----------------
$ 50,424 68,040 132,100 120,914
================= ================ ================ =================
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Current Accounting Pronouncements
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Statements of Financial Accounting Standards (SFAS) 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 April 2003, the Financial Accounting Standards Board issued SFAS No. 149
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities."
This statement is effective for contract and hedging relationships entered into
or modified after June 30, 2003. In May 2003, the Financial Accounting Standards
Board issued SFAS No. 150 "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equities." This statement is effective
for financial instruments entered into or modified after May 31, 2003 and is
effective for all other financial instruments as of the first interim period
beginning after June 15, 2003. The Partnership does not believe that either
statement will have a material impact on its 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 the 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 $16,000 during the first six months of
2003. The Partnership made no distributions to limited partners in the first six
months 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 six months of 2002, the Partnership's income, excluding
equity in earnings from joint ventures, increased approximately 2% from income
of $20,800 in 2002 to a net income of $21,200 in 2003.
Rental income decreased approximately 3% as compared to the first six months of
2002, due to a decrease in occupancy at Northwind. Other income increased by
approximately $7,000 in 2003.
Total expenses decreased approximately $8,000. Property operations increased
approximately $8,000 due primarily to an increase in payroll at Northwind. Other
administrative expense, decreased approximately $12,000 due to decreased legal
and professional fees. Administrative expense to affiliated parties increased
approximately $4,000 due to portfolio management expenses. Interest expense
decreased approximately $8,000 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.
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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 general movement of interest. The
mortgage loans on the Partnership's properties are fixed-rate and therefore, is
not subject to market risk.
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
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
31. Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is
filed herewith.
32. 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 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
August 14, 2003 /s/ Joseph M. Jayson
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Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
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