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, 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
Item 1. Financial Statements
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Condensed Consolidated Balance Sheets
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(Unaudited)
September 30, December 31,
2003 2002
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Assets
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Cost of 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 175,236 235,302
Other assets 236,125 170,867
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Total assets $ 2,623,686 2,592,896
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Liabilities and Partners' Equity
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Mortgage loan payable 30,205 73,058
Accounts payable and accrued expenses 49,340 81,681
Other liabilities 77,481 100,174
Equity in losses of unconsolidated joint ventures
in excess of investment 1,081,983 1,112,413
Partners' equity 1,384,677 1,225,570
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Total liabilities and partners' equity $ 2,623,686 2,592,896
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Condensed Consolidated Statements of Operations
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(Unaudited)
Three months ended Sept. 30, Nine months ended Sept. 30,
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2003 2002 2003 2002
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Rental income $ 215,079 226,840 643,152 669,293
Other income 7,280 1,410 19,875 7,477
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Total income 222,359 228,250 663,027 676,770
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Property operating costs 137,932 153,470 419,318 426,427
Administrative expense - affiliates 28,598 31,615 93,616 92,961
Other administrative expense 19,526 20,783 90,030 103,589
Interest 795 3,626 3,386 14,223
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Total expenses 186,851 209,494 606,350 637,200
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Operating income 35,508 18,756 56,677 39,570
Equity in earnings of joint ventures 37,774 25,021 102,430 85,086
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Net income $ 73,282 43,777 159,107 124,656
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Net income per limited partnership unit $ 7.11 4.25 15.43 12.09
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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)
Nine months ended September 30,
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2003 2002
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Cash provided (used) by:
Operating activities:
Net income $ 159,107 124,656
Adjustments:
Equity in earnings in joint ventures (102,430) (85,086)
Other, principally changes in other assets and liabilities (120,292) (17,983)
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Net cash provided (used) by operating activities (63,615) 21,587
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Investing activities:
Additions to property and equipment (25,598) (8,467)
Distribution from joint venture 72,000 58,000
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Net cash provided by investing activities 46,402 49,533
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Financing activities - principal payments on mortgage loan (42,853) (141,456)
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Net decrease in cash and equivalents (60,066) (70,336)
Cash and equivalents at beginning of period 235,302 330,328
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Cash and equivalents at end of period $ 175,236 259,992
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Notes to Consolidated Financial Statements
Nine months ended September 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 September 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 nine month periods ended September 30, 2003 and 2002 was
approximately $46,000 and $138,000, 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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September 30, 2003 December 31, 2002
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Net property, held for sale $ 1,473,368 1,473,368
Cash and equivalents 7,090 34,606
Escrow deposits 898,328 861,615
Other assets 271,747 272,481
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Total assets $ 2,650,533 2,642,070
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Liabilities:
Mortgage loan payable 5,087,172 5,161,824
Accounts payable and accrued expenses 158,828 140,633
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5,246,000 5,302,457
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Partners' deficit:
The Partnership (1,198,318) (1,230,778)
RPILP - VI A (1,397,149) (1,429,609)
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(2,595,467) (2,660,387)
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Total liabilities and partners' deficit $ 2,650,533 2,642,070
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Operating Information
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Three months ended September Nine months ended June 30,
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2003 2002 2003 2002
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Rental income $ 199,500 236,943 598,500 598,589
Other 44,683 5,780 143,400 100,768
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Total income 244,183 242,723 741,900 699,357
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Property operating costs 38,994 59,203 154,990 139,496
Interest 107,481 108,990 320,630 325,395
Administrative 20,888 22,618 57,360 61,640
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Total expenses 167,363 190,811 532,980 526,531
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Net income $ 76,820 51,912 208,920 172,826
================= =================== ================ ================
Allocation of net income:
The Partnership 38,410 25,956 104,460 86,413
RPILP - VI A 38,410 25,956 104,460 86,413
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$ 76,820 51,912 208,920 172,826
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Current Accounting Pronouncements
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In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 is
applicable immediately for variable interest entities created after January 31,
2003. For variable interest entities created before February 1, 2003, the
provisions of FIN 46 are applicable no later than December 15, 2003. The
Partnership has not created any variable interest entities after January 31,
2003. The Partnership does not believe that the Interpretation will have a
material impact on its consolidated financial statements.
In May 2003, the Financial Accounting Standards Board issued SFAS No. 150
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equities." SFAS No. 150 changes the accounting for certain
financial instruments that, under previous guidance, could be classified as
equity or "mezzanine" equity, by now requiring those instruments to be
classified as liabilities (or assets in some circumstances) in the Consolidated
Balance Sheets. Further, SFAS No. 150 requires disclosure regarding the terms of
those instruments and settlement alternatives. 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 has evaluated SFAS No. 150 and
determined that it does not have an 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 $60,000 during the first nine months of
2003. The Partnership made no distributions to limited partners in the first
nine 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 nine months of 2002, the Partnership's income,
excluding equity in earnings from joint ventures, increased approximately 43%
from net income of $39,570 in 2002 to net income of $56,677 in 2003.
Rental income decreased approximately 4% as compared to the first nine months of
2002, due to a decrease in occupancy at Northwind and an increase in concessions
offered to tenants. Other income increased by approximately $12,000 in 2003.
Total expenses decreased approximately $31,000. Property operations decreased
approximately $7,000. Other administrative expense, decreased approximately
$13,000 due to decreased legal and professional fees. Interest expense decreased
approximately $11,000 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 in only 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
rates. The mortgage loan on the Partnership's property is fixed-rate and
therefore, is not subject market risk.
PART I - Item 4. Controls and Procedures
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Disclosure Controls and Procedures: The Partnership's management, with the
participation of the Partnership's Individual General Partner and Principal
Financial Officer, has evaluated the effectiveness of the Partnership's
disclosure controls and procedures (as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this report. Based on such evaluation, the Partnership's
Individual General Partner and Principal Financial Officer have concluded that,
as of the end of such period, the Partnership's disclosure controls and
procedures are effective.
Internal Control Over Financial Reporting: There have been no changes in the
Partnership's internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934, as amended) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
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 Rule 13a-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32. 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
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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
November 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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