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 September 30, 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: 0-16561
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - V
(Exact name of registrant as specified in its charter)
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Delaware
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16-1275925
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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 – V
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Item 1 - Financial Statements
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Consolidated Balance Sheets
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As of September 30, 2014 and December 31, 2013
(Unaudited)
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September 30, 2014
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December 31, 2013
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| Assets | |||
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Property and equipment, at cost:
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Land and improvements
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$ 299,744
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$ 299,744
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Buildings and improvements
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2,088,990
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2,029,646
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2,388,734
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2,329,390
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Less accumulated depreciation
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(1,823,651)
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(1,759,295)
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Net property and equipment
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565,083
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570,095
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Cash
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7,798
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-
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Accounts receivable, net
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7,891
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1,105
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Other assets
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9,985
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-
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Total assets
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$ 590,757
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$ 571,200
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Liabilities and Partners' Deficit
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Liabilities:
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Senior secured loan and accrued interest payable to affiliated party
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$ 1,711,210
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$ 1,647,832
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Payables to affiliated parties, including accrued interest
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2,121,718
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1,763,473
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Accounts payable and accrued expenses
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110,698
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140,211
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Note payable and accrued interest
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-
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121,274
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Security deposits and prepaid rents
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37,204
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27,474
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Total liabilities
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3,980,830
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3,700,264
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Partners' deficit:
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General partners
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(283,433)
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(275,602)
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Limited partners
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(3,106,640)
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(2,853,462)
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Total partners' deficit
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(3,390,073)
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(3,129,064)
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Total liabilities and partners' deficit
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$ 590,757
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$ 571,200
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See accompanying notes to consolidated financial statements.
2
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Consolidated Statements of Operations
(unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||
| 2014 | 2013 | 2014 | 2013 | ||||
| (restated) | (restated) | ||||||
| Income: | |||||||
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Rental
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$ 124,325
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$ 96,469
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$ 349,013
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$ 277,488
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Interest and other
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10,102
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65
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28,050
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925
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Total income
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134,427
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96,534
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377,063
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278,413
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Expenses:
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Property operations
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127,002
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100,212
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343,727
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293,341
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Interest to affiliates
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53,638
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45,756
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155,616
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179,519
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Administrative:
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Affiliates
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11,137
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8,627
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31,133
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33,964
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Other
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26,745
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2,527
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43,239
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22,161
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Depreciation expense
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22,965
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20,050
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64,356
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60,521
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Total expenses
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241,487
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177,172
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638,071
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589,506
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Net loss
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$ (107,060)
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$ (80,638)
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$ (261,008)
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$ (311,093)
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Net loss per limited partnership unit
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$ (5.10)
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$ (3.72)
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$ (12.05)
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$ (14.37)
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Weighted average number of limited
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partnership units outstanding
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21,002.80
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21,002.80
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21,002.80
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21,002.80
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See accompanying notes to consolidated financial statements.
3
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
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Consolidated Statements of Cash Flows
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for the nine months ended September 30, 2014 and 2013
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(Unaudited)
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2014
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2013
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(restated)
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Cash flows from operating activities:
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Net loss
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$
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(261,008)
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$
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(311,093)
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Adjustments to reconcile net loss to net cash
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provided by (used in) operating activities:
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Depreciation
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64,356
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60,521
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Changes in:
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Accounts receivable
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(6,786)
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(689)
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Other assets
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(9,985)
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6,887
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Accounts payable, accrued expenses and payable to affiliates
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77,548
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358,890
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Accrued interest payable
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133,942
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(105,630)
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Security deposits and prepaid rents
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9,731
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4,078
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Net cash provided by operating
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activities
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7,798
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12,964
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Cash flows used in investing activities -
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additions to property and equipment
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(59,344)
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(13,200)
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| Cash flows from financing activities - | ||||
| Advance from Affiliates | $ | 59,344 | $ | - |
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Net increase (decrease) in cash
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7,798
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(236)
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Cash at beginning of period
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-
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236
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Cash at end of year of period
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$
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7,798
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$
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-
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Cash paid for interest
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$
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-
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$
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-
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Non-cash financing activities increase in affiliate advance
for the note settled on Partnership’s behalf
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$
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99,600
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$
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-
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See accompanying notes to Consolidated Financial Statements.
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4
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Notes to Consolidated Financial Statements
Nine Months ended September 30, 2014 and 2013
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(1)
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Formation & Operation of Partnership
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Realmark Property Investors Limited Partnership - V (the Partnership) is a Delaware limited partnership formed on February 28, 1986, to invest in a diversified portfolio of income-producing real estate investments.
In 1986 and 1987, the Partnership sold, through a public offering, 21,002.8 units of limited partnership interest for $20,999,800. At December 31, 2013, the general partners were Realmark Properties, Inc. (the Corporate General Partner) and Joseph M. Jayson (the Individual General Partner) who was the sole shareholder of J.M. Jayson & Company, Inc. Realmark Properties, Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc. J.M. Jayson & Company also owns 1.6423 units of limited partnerships units. Joseph M. Jayson passed away on June 27, 2014. A successor Individual General Partner was not appointed following Mr. Jayson’s death. Refer to Item 9B: Other Information in the December 31, 2013 Form 10K/A for further background on the changes in Corporate General Partner’s Board and Management.
Under the partnership agreement, the general partners and their affiliates can receive compensation for services rendered and reimbursement for expenses incurred on behalf of the Partnership.
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(2)
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Restatement of Consolidated Financial Statements
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The accompanying consolidated financial statements have been restated for September 30, 2013 from the unaudited version previously made available to reflect additional adjustments and reclassifications. The nature of these adjustments are discussed in detail in the 2013 Form 10 K/A.
The summary impacts of the restatement adjustments on the Company’s previously reported consolidated net income for the three and nine months ended September 30, 2013 (in thousands):
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Three
months ended
September 30, 2013
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Nine
months ended
September 30, 2013
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Net Loss - Previously reported
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$ (58)
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$ (203)
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Interest Expense
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(23)
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(108)
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Net Loss - Restated
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$ (81)
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$ (311)
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(3)
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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 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, 2013 has been derived from the audited consolidated 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.
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Notes to Consolidated Financial Statements
Nine Months ended September 30, 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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Going Concern
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The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Partnership has experienced negative cash flows from operations in recent years, and had an accumulated partners’ deficit at September 30, 2014 of approximately $3.4 million. The Partnership has funded its activities in recent years generally with advances from affiliated parties. Management intends to meet its operating cash flow requirements by increasing the occupancy of the Partnership’s real estate asset, and preparing the property for a sale at a reasonable price. Until the property achieves a break-even cash flow, advances from affiliates will be required to maintain operations. While management believes that it will be successful in obtaining increased occupancy and selling the property, the Partnership cannot be certain that it will be able to obtain these objectives. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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(c)
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Fair Value of Financial Instruments
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Due to their short-term nature and interest rates that approximate market rates, the fair value of the Partnership’s financial instruments approximated their carrying values at September 30, 2014 and December 31, 2013.
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(d)
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Property and Equipment
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Two of the nine buildings of the office complex known as Commercial Park West in Durham, North Carolina were sold in December 2006. The mortgage on the buildings was paid off in the amount of $5,606,725 at the closing date with the sales proceeds and an advance from an affiliate in the amount of $790,000. At September 30, 2014, the Partnership owned and operated the one remaining building at the complex known as Commercial Park West.
The Corporate General Partner and its affiliates earn fees, principally for property and partnership management and are reimbursed for services rendered to the Partnership, as provided for in the partnership agreement. A summary of those items for the nine months ended September 30, 2014 and 2013 is as follows:
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2014
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2013
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Property management fees based on a percent-
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age (generally 6%) of the rental income
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$
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21,306
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$
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15,964
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Reimbursement for cost of services to the
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Partnership that include investor relations,
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marketing of properties, professional fees,
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communications, supplies, accounting,
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printing, postage and other items
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9,827
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18,000
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$
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31,133
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$
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33,964
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Notes to Consolidated Financial Statements
Nine Months ended September 30, 2014 and 2013
In addition to the above, other property specific expenses incurred by affiliates such as payroll, benefits, etc., amounting to $109,388 are charged to property operations on the Partnership’s consolidated statements of operations. Certain payables to affiliated parties are payable on demand and bear interest at 8% in 2014 and 2013.
Payable to Affiliated Parties
Payable to affiliates amounted to $ 3,832,928 and $ 3,411,305 at September 30, 2014 and December 31, 2013, respectively. Of this amount, $1,066,719 is payable to an affiliate under a Memorandum of Understanding Agreement dated December 8, 2006. Under the terms of this agreement, the Partnership agrees to repay this loan plus interest at a rate of 8% per annum, upon the sale of the remaining building at Commercial Park West, 2327 Englert Drive, which is currently being marketed for sale. As of September 30, 2014 and December 31, 2013, accrued interest from this agreement, totaled $ 654,908 and $591,529, respectively. J.M. Jayson & Company, Realmark Properties, Inc. and other subsidiaries of J.M. Jayson and Company have advanced additional amounts to the Partnership and deferred collection of amounts owed for services to fund working capital needs. These advances bear interest at the rate of 8% and amount to $2,022,118 and $1,763,473 as of September 30, 2014 and December 31, 2013, respectively, including accrued interest. Also included in payable to affiliates at September 30, 2014 is $99,600 that was borrowed from an affiliate to settle a note payable that was borrowed from an affiliate to settle a note payable to a third party. The third party note including interest aggregating to $121,274 at December 31, 2013 was settled for payments aggregating $99,600 resulting in a gain of $21,674 included in other income. The advance does not bear interest. Total interest expense incurred on amounts owed to affiliated parties for the nine months ended September 30, 2014 and 2013 was $155,616 and $179,519, respectively.
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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 Commercial Park West. The carrying value of the assets of Commercial Park West amounted to $565,083 and $570,095 at September 30, 2014 and December 31, 2013, respectively. The property generated a net loss of $264,474 and $311,093 for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014 and 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 September 30, 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.
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Notes to Consolidated Financial Statements
Nine Months ended September 30, 2014 and 2013
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 the 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 September 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.
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REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Management Discussion and Analysis
Nine Months ended September 30, 2014 and 2013
PART I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources:
Effective January 1, 2001, the Partnership has been operating under the order referenced in Part II, Item 1. The partnership has held minimal cash since 2006, when a mortgage was repaid with proceeds from the sale of a portion of Commercial Park West and proceeds from advances from affiliated parties, aggregate amounts outstanding to affiliates for this advance and others amounted to $3,832,928 and $3,411,305 at September 30, 2014 and December 31, 2013, respectively. 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 eventual 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 September 30, 2014, management has retained national representation to market the Commercial Park West 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
As compared to the first nine months of 2013, the Partnership’s loss decreased approximately $51,000 from a loss of approximately $311,000 in 2013 to a loss of approximately $260,000 in 2014.
As compared to the first nine months of 2013, income at Commercial Park West increased approximately $72,000 and $28,000 for the nine months ended September 30, 2014 due to an increase in rental income due to increased occupancy and interest and other income as a result of a gain on the note settled, respectively.
As compared to the first nine months of 2013, total expenses increased by approximately $49,000. Property operating expenses have increased by approximately $53,000 in the first nine months of 2014 due primarily to repairs and maintenance of the HVAC, roofing and landscaping. The affiliated admin expenses are less by approximately $3,000 and other administrative expenses have increased approximately $21,000, respectively, compared to September 2013.
PART I - Item 4. Controls and Procedures
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.
9
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Management Discussion and Analysis
Nine Months ended September 30, 2014 and 2013
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 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/A for the year ended December 31, 2013.
Item 5. Other Information
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(a)
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Reports on Form 8-K
None.
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10
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP – V
Nine Months ended September 30, 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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11
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 - V
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/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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12