Attached files
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 March 31, 2014
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
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
(Exact name of registrant as specified in its charter)
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Delaware
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16-1212761
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(State of organization)
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(IRS Employer Identification No.)
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2350 North Forest Road, Getzville, New York 14068
(Address of principal executive offices)
(716) 636-9090
(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 [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files) Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer (Do not check if a smaller reporting company) [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [X]
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Consolidated Balance Sheets
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(Unaudited)
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||||||
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Assets
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March 31, 2014
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December 31, 2013
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||||
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Property and equipment, at cost:
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||||||
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Land and improvements
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$
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518,481
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$ |
518,481
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Buildings and improvements
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4,374,048
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4,374,048
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Furniture and equipment
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9,950
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9,950
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4,902,479
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4,902,479
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Less accumulated depreciation
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(3,906,955)
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(3,899,393)
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||||
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Net property and equipment
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995,524
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1,003,086
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Equity interest in unconsolidated joint ventures
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1,200,160
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1,211,771
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Cash
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4,714
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33,986
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Accounts receivable, net
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5,533
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2,275
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Receivables from affiliates, net
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212,905
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178,564
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Other assets
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70,605
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115,987
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Total assets
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$
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2,489,441
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$
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2,545,669
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Liabilities and Partners' Equity
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||||||
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Liabilities:
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Accounts payable and accrued expenses
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89,844
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107,153
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Security deposits and prepaid rents
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38,785
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46,702
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Total liabilities
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128,629
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153,855
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Partners' deficit:
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||||||
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General partners
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639,555
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641,038
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Limited partners
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1,721,257
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1,750,777
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Total partners' equity
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2,360,812
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2,391,814
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Total liabilities and partners' equity
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$
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2,489,441
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$
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2,545,669
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See accompanying notes to the Consolidated Financial Statements
2
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
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Consolidated Statements of Operations
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for the three months ended March 31,
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(Unaudited)
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2014
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2013
(restated)
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Income:
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Rental
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$ |
115,662
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$
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139,406
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Interest and other
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16,001
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437
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Total Income
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131,663
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139,843
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Expenses:
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Property operations
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154,629
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135,036
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Administrative:
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Affiliates
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10,808
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30,054
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Other
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11,742
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13,641
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Depreciation expenses
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7,562
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7,267
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Total Expenses
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184,741
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185,999
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Loss before equity in earnings of
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unconsolidated joint ventures
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(53,078)
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(46,156)
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Equity in earnings of unconsolidated
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joint ventures
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22,646
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31,384
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Net loss
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$ |
(30,432)
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$
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(14,772)
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Net loss per limited partnership unit
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$ |
(2.95)
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$
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(1.43)
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Weighted average number of limited
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||||||
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partnership units outstanding
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10,000
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10,000
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See accompanying notes to the Consolidated Financial Statements
3
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
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for the three months ended March 31,
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(Unaudited)
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2014
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2013
(restated)
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Cash flows from operating activities:
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Net loss
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$ |
(30,432)
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$ |
(14,772)
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Adjustments to reconcile net loss to net cash
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||||||
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used in operating activities:
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Depreciation
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7,562
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7,267
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Equity in earnings of joint ventures
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(22,646)
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(31,384)
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Changes in:
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Accounts receivable
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(3,342)
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(35,331)
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Other assets
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45,383
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27,175
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Accounts payable and accrued expenses
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(17,310)
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(11,387)
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Security deposits and prepaid rents
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(7,917)
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(10,454)
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Net cash used in operating activities
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(28,702)
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(68,885)
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Cash flows investing activities-
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Repurchased shares
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(570)
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-
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Net cash provided by investing activities
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(570)
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-
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Net decrease in cash
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(29,272)
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(68,885)
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Cash at beginning of period
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33,986
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364,890
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Cash at end of period
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$ |
4,714
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$ |
296,005
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Cash paid for interest
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$ |
-
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$ |
-
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Non-cash investing activities:
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Proceeds from return in capital advanced to affiliate
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$ |
34,256
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$ | - | ||
See accompanying notes to the Consolidated Financial Statements
4
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Consolidated Financial Statements
Three Months ended March 31, 2014 and 2013
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1)
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Formation and Operation of Partnership
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Realmark Property Investors Limited Partnership - II (the Partnership) is a Delaware limited partnership formed on March 25, 1982, to invest in a diversified portfolio of income producing real estate investments.
In 1982 and 1983, the Partnership sold, through a public offering, 10,000 units of limited partnership interest. At December 31, 2013, the general partners were Realmark Properties, Inc. (the Corporate General Partner) and Joseph M. Jayson (the Individual General Partner) who was the sole shareholder of J.M. Jayson & Company, Inc. Realmark Properties, Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc. Joseph M. Jayson passed away on June 27, 2014. A successor Individual General Partner was not appointed following Mr. Jayson’s death. Refer to Item 9B: Other Information in the December 31, 2013 Form 10K/A for further background on the changes in Corporate General Partner’s Board and Management.
Under the partnership agreement, the general partners and their affiliates can receive compensation for services rendered, and reimbursement for expenses incurred on behalf of the Partnership.
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2)
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Restatement of Consolidated Financial Statements
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The accompanying consolidated financial statements have been restated for March 31, 2013 from the unaudited version previously made available to reflect additional adjustments and reclassifications. The nature of these adjustments are discussed in detail in the 2013 Form 10 K/A.
The summary impacts of the restatement adjustments on the Company’s previously reported consolidated statements of operations for the three months ended March 31, 2013 (in thousands):
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March 31, 2013
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||
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Net Loss - Previously reported
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$ |
(46)
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Equity in earnings of unconsolidated joint ventures
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31 | |
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Net Loss - Restated
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$ |
(15)
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3) Summary of Significant Accounting Policies
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(a)
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Basis of Presentation
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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 consolidated balance sheet at December 31, 2013 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.
5
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Consolidated Financial Statements
Three Months ended March 31, 2014 and 2013
The Partnership’s significant accounting policies are set forth in its December 31, 2013 Form 10-K/A. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements included therein. The interim results should not be considered indicative of the annual results.
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(b)
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Fair Value of Financial Instruments
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Due to the short-term nature and interest rates that approximate market rates, the fair value of the Partnership’s financial instruments approximated their carrying values at March 31, 2014 and December 31, 2013.
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(c)
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Property and Equipment
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At March 31, 2014, the Partnership owned and operated an office complex in Michigan (Northwind Office Park).
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(d)
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Investment in Other Joint Ventures
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The consolidated financial statements at March 31, 2014, reflect the closing entries for the interest that the Partnership held in a land joint venture. The final accounting contributing an additional $13,075 in equity income in the unconsolidated joint venture derived primarily from interest income on the notes held from the sale of the land and cash of $34,256 representing the net cash due the partnership. The carrying value of this equity method investment as of December 31, 2013 was $21,121.
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(e)
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Investment in Research Triangle Industrial Park Joint Venture
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The Partnership has a 50% interest in Research Triangle Industrial Park Joint Venture (the Venture) with Realmark Property Investors Limited Partnership – VIA (RPILP – VIA), an entity affiliated through common general partners. The joint venture owned and operated the Research Triangle Industrial Park West, an office/warehouse facility in Durham, North Carolina, which was sold in December 2006.
6
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Consolidated Financial Statements
Three Months ended March 31, 2014 and 2013
The joint venture agreement provides that any income, loss, gain, cash flow, or sale proceeds be allocated 50% to the Partnership and 50% to RPILP – VIA. Summary financial information of the Venture follows:
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Balance Sheet Information
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|||||
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(Unaudited)
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|||||
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March 31, 2014
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December 31, 2013
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||||
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Assets
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|||||
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Cash and Equivalents
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$ |
1,029
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$
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1,181
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Receivables from affiliates
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1,956,635
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1,958,468
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|||
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Accrued interest receivable from affiliate
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612,656
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591,529
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Total Assets
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$ |
2,570,320
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$
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2,551,178
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Liabilities and Partners' Equity
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|||||
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Liabilities
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|||||
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Payable to affiliates
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$ |
170,000
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$
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170,000
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Total Liabilities
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170,000
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170,000
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Partners Equity
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|||||
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The Partnership
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1,200,160
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1,190,589
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RPILP - VIA
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1,200,160
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1,190,589
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Total Partners Equity
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2,400,320
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2,381,178
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Total liabilities and Partners Equity
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$ |
2,570,320
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$
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2,551,178
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Operating Information
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Three Months Ended March 31,
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||||||
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2014
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2013
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|||||
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Income - interest
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$
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21,126
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$
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63,378
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Expenses
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||||||
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Administrative
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1,985
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611
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||||
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Total Expenses
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1,985
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611
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||||
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Net Income
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$
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19,141
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$
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62,767
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Allocation of Net income
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||||||
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The partnership
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9,571
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31,384
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||||
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RPILP - VIA
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9,571
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31,384
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Total
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$
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19,141
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$
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62,767
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||
The Corporate General Partner and its affiliates earn fees, principally for property and partnership management and are reimbursed for services rendered to the Partnership, as provided for in the partnership agreement.
7
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Consolidated Financial Statements
Three Months ended March 31, 2014 and 2013
A summary of those items for the three months ended March 31, is as follows:
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2014
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2013
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||
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Property management fees based on a percentage (generally 6%) of the rental income
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$ 6,098
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$ 8,354
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Reimbursement for cost of services to the Partnership that include investor
relations, marketing of properties, supplies, professional fees, communications,
accounting, printing, postage and other items
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4,710
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21,700
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| $10,808 | $30,054 |
In addition to the above, other property specific expenses such as payroll, benefits, etc. are charged to property operations on the Partnership’s consolidated statements of operations. Certain receivables from affiliated parties are payable on demand and bear interest at 8% in 2014 and 2013.
At March 31, 2014 and December 2013, the Partnership has receivables from affiliates amounting to $212,905 and $178,564, respectively. The $212,905 receivable at March 31, 2014 consists of an advance to the unconsolidated joint venture of $170,000 and $42,905 of other corporate affiliated balances. At March 31, 2014 and December 31, 2013, the Partnership has equity interest in unconsolidated joint ventures of $1,200,160 and $1,190,590, respectively.
Memorandum of Understanding
The Partnership has a 50% interest in the unconsolidated joint venture in Realmark Research, LLC (known as Research Triangle Industrial Park Joint Venture). Realmark Research, LLC (Research) advanced a portion of its sales proceeds in the amount of $1,066,719 to an affiliate under a Memorandum of Understanding Agreement dated December 8, 2006. Under the terms of this agreement, the affiliate agrees to repay this loan plus interest at a rate of 8% per annum, upon the sale of a remaining property, which is currently being marketed for sale. The outstanding balance, including accrued interest, related to this loan amounted to $1,668,958 and $1,647,832 at March 31, 2014 and December 31, 2013, respectively.
Property Disposition Fee
According to the terms of the partnership agreement, the general partners are also allowed to collect a property disposition fee upon sale of acquired properties. This fee is not to exceed the lesser of 50% of amounts customarily charged in arm’s-length transactions by others rendering similar services for comparable properties or 3% of the sales price. The property disposition fee is subordinate to payments to the limited partners of a cumulative annual return (not compounded) equal to 7% of their average adjusted capital balances and to repayment to the limited partners of an amount equal to their original capital contributions. Since these conditions described above have not been met, no disposition fees have been paid or accrued on properties sold in prior years.
8
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Notes to Consolidated Financial Statements
Three Months ended March 31, 2014 and 2013
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(5)
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Investments in Real Estate
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Effective January 1, 2001, the Partnership entered into a plan to dispose of the property of Northwind Office Park. The carrying value of the assets of Northwind Office Park amounts to $995,524 and $1,003,086 at March 31, 2014, and December 31, 2013, respectively. The property generated a net loss of $19,141 and $62,767 for the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014 and December 31, 2013, based on market conditions, there was not an active program in place to sell the assets and they were not being actively marketed for sale. Accordingly, the assets have not been classified as assets held for sale. Subsequent to March 31, 2014, a real estate agent was retained and the assets are being actively marketed and a subsequent sale is probable. Accordingly, the classification is expected to change for the year ended December 31, 2014.
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(6)
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Settlement of Lawsuit
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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 at the state court level regarding the payment of fees and other management issues.
On August 29, 2001, the parties entered into a Stipulation of Settlement (the “Settlement”). On October 4, 2001, the Court issued an “Order Preliminary Approving Settlement’ (the “Hearing Order”) and on November 29, 2001, the Court issued an “Order and Final Judgment Approving Settlement and Awarding Fees and Expenses” and dismissing the complaints with prejudice. The Settlement provided, among other things, that all of the Realmark Partnerships’ properties be disposed of. The general partners will continue to have primary authority to dispose of Partnerships’ properties. If either (i) the general partners have not sold or contracted to sell 50% of the Partnerships’ properties (by value) by April 2, 2002 or (ii) the general partners have not sold or contracted to sell 100% of the Partnerships’ properties by September 29, 2002, then the primary authority to dispose of the Partnerships’ properties will pass to a sales agent designated by plaintiffs’ counsel and approved by the Court. On October 4, 2002, the Court appointed a sales agent to work with the general partners to continue to sell the Partnerships’ remaining properties.
The settlement also provided for the payment by the Partnerships of fees to the plaintiffs’ attorneys. These payments, which are not calculable at this time but may be significant, are payable out of the proceeds from the sale of all of the properties owned by all of the Realmark Partnerships, following the sale of the last of these properties in each partnership. Plaintiffs’ counsel will receive 15% of the amount by which the sales proceeds distributable to limited partners in each partnership exceeds the value of the limited partnership units in each partnership (based on the weighted average of the units’ trading prices on the secondary market as reported by Partnership Spectrum for the period May through June 2001). In no event may the increase on which the fees are calculated exceed 100% of the market value of the units as calculated above.
9
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Management Discussion and Analysis
Three Months ended March 31, 2014 and 2013
PART I - Item 2. Management’s Discussion and Analysis of Financial Condition and Result of Operations
Liquidity and Capital Resources
Effective January 1, 2001, management began formally marketing all remaining properties in the Partnership for sale. The Partnership made no distributions to partners in 2014 or 2013. In connection with the pending sale of the Partnership’s properties, it is anticipated that there will be no future distributions of net cash flow from operations. If there are any distributions as a result of the pending sale itself they will be reduced by the amount of fees payable to the plaintiffs’ legal counsel in connection with the settlement agreement (Part II, Item 1) and any outstanding liabilities incurred with regard to the sale of the Partnership’s properties.
Subsequent to March 31, 2014, management has retained national representation to market the Northwind Office Park property for sale at a price that is reasonable in relation to its current market value. While the remaining property has been actively managed during a period of depressed real estate values, the sale of the asset is probable and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. As a result, the accounting is expected to change to show the property as an asset as held for sale. This does not impact the accounting treatment of the property as of the date of these consolidated financial statements.
Limited partners should be aware that it is possible that they will receive an allocation of income from gain on sale of properties on which they will be required to pay income taxes and there is no assurance that cash distributions from the sale of the properties will be sufficient to satisfy these obligations.
Except as described above and in the consolidated financial statements, the general partner is not aware of any trends or events, commitments or uncertainties that may impact liquidity in a material way.
Results of Operations
The results of operations of the Partnership, excluding equity in earnings from joint ventures for the three months ended March 31, 2014 and 2013, produced a net loss of approximately $53,000 and approximately $46,000, respectively.
Inflation has been consistently low during the periods presented in the consolidated financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties.
2014 as compared to 2013
Rental income decreased approximately $24,000 due to an increase in vacancies. The equity interest in the income in unconsolidated joint ventures of approximately $23,000 in 2014 is inclusive of the one-time gain recorded on the land joint venture discussed in Note 3(d) to the consolidated financial statements.
10
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Management Discussion and Analysis
Three Months ended March 31, 2014 and 2013
The partnership recorded Interest and other income of approximately $16,000 for the three months ended March 31, 2014. Total expenses were approximately the same for the three months ended March 31, 2014 and 2013, respectively.
Joint Venture
The Partnership owns 50% of a Joint Venture, which owned the Research Triangle Industrial Park West, an office/warehouse facility located in Durham County, North Carolina, which was sold in December 2006. The investment is accounted for under the equity method and the resulting income was approximately $10,000 less in 2014 compared to the restated value from 2013 of $31,000.
PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk
None.
The Partnership maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Partnership in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. An evaluation was carried out under the supervision and with the participation of the Partnership’s management, including the Partnership’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the Partnership’s disclosure controls and procedures as of the end of the period covered by this interim report. Based on that evaluation, the Partnership’s Principal Executive Officer and Principal Financial Officer concluded that the Partnership’s disclosure controls and procedures were not effective as of such period end. Management will endeavor to enhance the Partnership’s disclosure controls and procedures to cause them to become 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 was described in its Annual Report on Form 10-K/A for the year ended December 31, 2013.
Item 5. Other Information
Reports on Form 8-K
None.
11
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - II
Three Months ended March 31, 2014 and 2013
Item 6. Exhibits
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31.
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Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.
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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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101.INS
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XBRL Instance Document*
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101.SCH
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XBRL Taxonomy Extension Schema Document*
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document*
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document*
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document*
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document*
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* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be “furnished” and not “filed.”
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||
12
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
|
/s/ Matthew P. Iak
|
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Matthew P. Iak
|
||
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Date: July 8, 2015 |
Principal Executive Officer and
|
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Principal Financial Officer
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13