UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
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 35B, 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 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
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Condensed Balance Sheets
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(Unaudited)
September 30, December 31,
2004 2003
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Assets
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Property and equipment, all held for sale $ 4,756,725 4,743,805
Less accumulated depreciation 2,531,480 2,531,480
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2,225,245 2,212,325
Cash and equivalents 167,449 225,551
Other assets 288,841 207,016
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Total assets $ 2,681,535 2,644,892
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Liabilities and Partners' Equity
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Mortgage loan payable -- 14,418
Accounts payable and accrued expenses 97,583 42,761
Other liabilities 81,480 88,330
Equity in losses of unconsolidated joint
ventures in excess of investment 979,330 1,046,561
Partners' equity 1,523,142 1,452,822
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Total liabilities and partners' equity $ 2,681,535 2,644,892
================ ===============
Condensed Statements of Operations
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(Unaudited)
Three months ended Sept 30, Nine months ended Sept 30,
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2004 2003 2004 2003
--------------- --------------- -------------- --------------
Rental income $ 218,540 215,079 645,780 643,152
Other income 4,117 7,280 9,371 19,875
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Total income 222,657 222,359 655,151 663,027
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Property operating costs 150,347 137,932 461,173 419,318
Administrative expense - affiliates 25,111 28,598 86,942 93,616
Other administrative expense 36,677 19,526 103,855 90,030
Interest -- 795 92 3,386
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Total expenses 212,135 186,851 652,062 606,350
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Income before equity in earnings of
joint ventures 10,522 35,508 3,089 56,677
Equity in earnings of joint ventures 24,877 37,774 67,231 102,430
--------------- --------------- -------------- --------------
Net income $ 35,399 73,282 70,320 159,107
=============== =============== ============== ==============
Net income per limited partnership unit $ 3.43 7.11 6.82 15.43
=============== =============== ============== ==============
Weighted average limited partnership units
outstanding 10,000 10,000 10,000 10,000
=============== =============== ============== ==============
2
Condensed Statements of Cash Flows
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(Unaudited)
Nine months ended September 30,
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2004 2003
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Cash provided by (used in):
Operating activities:
Net income $ 70,320 159,107
Adjustments:
Equity in earnings of joint ventures (67,231) (102,430)
Other, principally changes in other assets and liabilities (33,853) (120,292)
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Net cash used in operating activities (30,764) (63,615)
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Investing activities:
Additions to property and equipment (12,920) (25,598)
Distributions from joint venture -- 72,000
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Net cash provided by (used in) investing activities (12,920) 46,402
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Financing activities - principal payments on mortgage loans (14,418) (42,853)
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Net decrease in cash and equivalents (58,102) (60,066)
Cash and equivalents at beginning of period 225,551 235,302
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Cash and equivalents at end of period $ 167,449 175,236
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Notes to Financial Statements
Nine months ended September 30, 2004 and 2003
(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
- ---------------------
The accompanying unaudited interim 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, 2003 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, 2003 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
- ----------------------
At September 30, 2004, 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, 2004 and 2003 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
-------------------------
September 30, December 31,
2004 2003
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Assets:
Net property, held for sale $ 1,737,281 1,684,255
Cash and equivalents -- 26,667
Escrow deposits 749,104 871,080
Other assets 238,404 245,242
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Total assets $ 2,724,789 2,827,244
=============== ===============
Liabilities:
Mortgage loan payable 4,981,049 5,060,888
Accounts payable and accrued expenses 132,583 288,337
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Total liabilities 5,113,632 5,349,225
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Partners' deficit:
The Partnership (1,095,006) (1,161,575)
RPILP - VI A (1,293,837) (1,360,406)
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Total partners' deficit (2,388,843) (2,521,981)
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Total liabilities and partners' deficit $ 2,724,789 2,827,244
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Operating Information
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Three months ended Sept 30, Nine months ended Sept 30,
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2004 2003 2004 2003
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Rental income $ 199,500 199,500 598,500 598,500
Other 45,981 44,683 138,493 143,400
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Total income 245,481 244,183 736,993 741,900
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Property operating costs 60,060 38,994 206,674 154,990
Interest 105,017 107,481 315,926 320,630
Administrative 30,650 20,888 81,255 57,360
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Total expenses 195,727 167,363 603,855 532,980
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Net income $ 49,754 76,820 133,138 208,920
============== ============= ============= =============
Allocation of net income:
The Partnership 24,877 38,410 66,569 104,460
RPILP - VI A 24,877 38,410 66,569 104,460
-------------- ------------- ------------- -------------
$ 49,754 76,820 133,138 208,920
============== ============= ============= =============
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Current Accounting Pronouncements
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In January 2003, the Financial Accounting Standards Board (FASB) issued
Financial Interpretation (FIN) No. 46, "Consolidation of Variable Interest
Entities." In December 2003, the FASB reissued FIN No. 46R with certain
modifications and clarifications. This pronouncement became effective for the
Partnership on March 31, 2004 and did not have any effect on its 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. Cash decreased
approximately $58,000 during the first nine months of 2004. The Partnership made
no distributions to limited partners in the first nine months of 2004. 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 2003, the Partnership's income,
excluding equity in earnings from joint ventures, decreased approximately
$53,500 from net income of $56,677 in 2003 to a net income of $3,089 in 2004.
Rental income remained relatively unchanged as compared to the first nine months
of 2003. Other income decreased by approximately $10,000 in 2004.
Total expenses increased approximately $46,000. Property operations increased
approximately $42,000 due to increases in utilities of approximately $14,000,
leasing services of $7,000, landscaping of $5,000, cleaning services of $10,000
and health insurance of $6,000. Other administrative expense, increased
approximately $14,000 due to increased legal and professional fees.
Administrative expense to affiliates decreased approximately $7,000 due to
decreased management expenses. Interest expense decreased approximately $3,000
as a result of the mortgage loan being paid off in February 2004.
PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
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The Partnership's cash equivalents are short-term, non-interest bearing bank
accounts. The mortgage loan on the Partnership's property is fixed rate and,
therefore, is not subject to market risk.
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PART I - Item 4. Controls and Procedures
-----------------------
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 upon 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 significant
changes in the Partnership's internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities and 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
-----------------
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, 2003.
Item 5. Other Information
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(a) Reports on Form 8-K
None.
Item 6. 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.
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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 15, 2004 /s/ Joseph M. Jayson
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Date Joseph M. Jayson,
Individual General Partner and
Principal Financial Officer
8