FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-13331
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 16-1234990
- ------------------- --------------------------------
(STATE OF FORMATION) (IRS EMPLOYER IDENTIFICATION NO.)
2350 NORTH FOREST ROAD
SUITE 12-A
GETZVILLE, NEW YORK 14068
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER: (716) 636-9090
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: UNITS OF LIMITED
PARTNERSHIP INTEREST
INDICATE BY A CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY A CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14 FOR A LIST OF ALL DOCUMENTS INCORPORATED BY REFERENCE
1
PART I
ITEM 1: BUSINESS
The Registrant, Realmark Property Investors Limited Partnership-III (the
"Partnership"), is a Delaware Limited Partnership organized in 1983, pursuant to
a Second Amended and Restated Agreement and Certificate of Limited Partnership
(the "Partnership Agreement"), under the Delaware Revised Uniform Limited
Partnership Act. The Partnership's general partners are Realmark Properties,
Inc. (the "Corporate General Partner"), a Delaware corporation, and Joseph M.
Jayson (the "Individual General Partner").
The Registrant commenced the public offering of its Limited Partnership
Units, registered with the Securities and Exchange Commission under the
Securities Act of 1933 as amended on February 1, 1984, and concluded the
offering on January 31, 1985, having raised a total of $15,551,000 before
deducting sales commissions and expenses of the offering.
The Partnership's primary business and its only industry segment is to own
and operate income-producing real property for the benefit of its partners. As
of December 31, 1999, the Partnership owned one (1) apartment complex with 280
units and two office buildings with 124,960 total square feet of rentable space.
Each of the complexes is managed for the Partnership by Realmark Corporation, an
affiliate of the General Partners.
The Partnership's acquisition and disposition of rental property, as well
as its future plans concerning dispositions, is described in Note 3 to the
financial statements.
Occupancy for each complex as of December 31, 1999, 1998 and 1997 was as
follows:
1999 1998 1997
---- ---- ----
Ambassador Towers/Canterbury Court 87% 81% 80%
(formerly Cedar Ridge)
Perrymont 51% 75% 68%
Inducon Amherst 79% 82% 91%
The operations of the Partnership's properties are consolidated. The
following chart lists the percentage of total Partnership revenue generated by
each complex for the year indicated:
1999 1998 1997
---- ---- ----
Ambassador Towers/Canterbury Court
(formerly Cedar Ridge) 69% 65% 51%
Perrymont 14% 16% 11%
Inducon Amherst 17% 19% 3%
Castle Dore - - 35%
The business of the Partnership is not seasonal. As of December 31, 1999,
the Partnership did not directly employ any persons in a full-time position. All
persons who regularly rendered services on behalf of the Partnership through
December 31, 1999 were employees of the Corporate General Partner or its
affiliates.
2
ITEM 1: BUSINESS (CONT'D)
This annual report contains certain forward-looking statements concerning
the Partnership's current expectations as to future results. Such
forward-looking statements are contained in Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations. Words such as
"believes", "forecasts", "intends", "possible", "expects", "estimates",
"anticipates" or "plans" and similar expressions are intended to identify
forward-looking statements.
ITEM 2: PROPERTIES
Following is a listing of properties and joint ventures owned by the Partnership
at December 31, 1999:
NAME
AND LOCATION GENERAL CHARACTER OF PROPERTY PURCHASE DATE
- ------------ ----------------------------- -------------
Ambassador Towers/ December 1985
Canterbury Court Apartment complex; 6 buildings
(Formerly Cedar Ridge.) on 11.6 acres; 280 units. The
Monroeville, PA The outstanding mortgage balance
at December 31, 1999 was $3,117,720.
The mortgage calls for monthly
installments of principal and
interest at 8.25% through maturity in
February 2004.
Perrymont Office Bldg. Office building; one building on 2.3 August 1985
Pittsburgh, PA acres; 47,000 square feet. As
discussed in note 4 to the
financial statements the mortgage
obligation was satisfied
in April 1998.
Inducon Amherst Four office/warehouse buildings on April 1985
Amherst, NY 4 acres with approximately 84,960
square feet of rentable space. The
outstanding mortgage balance at December
31, 1999 was $1,818,131. The mortgage
requires monthly payments of principal and
interest of $15,250 at a rate of 8.62%.
The mortgage matures March 2022.
ITEM 3: LEGAL PROCEEDINGS
The Partnership is not a party to, nor are any of the Partnership's
properties the subject of, any material pending legal proceedings that would
impact the future financial position and operations of the Partnership.
3
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
PART II
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED
PARTNERSHIP INTEREST
There is currently no established trading market for the units of Limited
Partnership Interest of the Partnership and it is not anticipated that any will
develop in the future.
There were no distributions during the years ended December 31, 1999, 1998
and 1997.
As of December 31, 1999, there were 1,902 record holders of units of
Limited Partnership Interest.
4
ITEM 6: SELECTED FINANCIAL DATA
REALMARK PROPERTIES INVESTORS LIMITED PARTNERSHIP-III
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec.31, 1999 Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec.31, 1995
------------ -------------- ------------ --------------- ------------
Total assets $ 8,564,042 $ 9,113,917 $ 10,757,121 $ 8,869,221 $ 12,403,691
============ ============== ============ =============== ============
Notes payable and
long-term obligations $ 4,935,851 $ 4,970,797 $ 6,216,763 $ 5,431,000 $ 10,276,248
============ ============== ============ =============== ============
Revenue $ 2,714,957 $ 2,432,298 $ 3,115,179 $ 4,429,043 $ 4,632,199
Expenses 3,235,825 2,840,623 4,196,309 5,357,211 5,931,484
----------- ------------- ------------ --------------- ------------
Loss before allocated
loss from joint venture
gain on sale of
properties and
extraordinary gain (520,868) (408,325) (1,081,130) (928,168) (1,299,285)
Allocated Loss from
joint venture - - (213,416) (142,165) (93,698)
Gain on sale of property - - 3,095,376 3,501,323 -
Extraordinary Gain on
extinguishments of debt - 318,213 - - -
----------- -------------- ------------ --------------- ------------
Net (loss) income $ (520,868) (90,112) 1,800,830 2,430,990 (1,392,983)
=========== ============== ============ =============== ============
------------
Net cash used in
operating activities $ (174,423) $ (365,527) $ (749,357) $ (275,818 $ (229,343)
Proceeds from refinancing _ - 5,813,000 - -
Principal payments upon
refinancing _ - (4,803,977) - -
Principal payments upon
sale _ - (2,240,764) (4,592,357) -
Principal payments on
long-term debt (34,946) (962,518) (554,380) (313,548) (282,015)
----------- -------------- ------------ --------------- ------------
Net cash used in
operating activities
less principal payments $ $ (1,328,045) $ (2,535,478) $ (5,181,723) $
(209,369) (511,358)
========== =============== ============ =============== ============
(Loss) income per
limited partnership unit $ (32.49) (5.62) 105.38 141.68 (86.89)
=========== =============== ============ =============== ============
Distributions per limited
partnership unit $ - $ - $ - $ - $ -
=========== ================ ============ =============== ============
Weighted average
number of Limited
Partnership units
outstanding 15,551 15,551 15,551 15,551 15,551
=========== ============== =========== =============== ============
5
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Although the Partnership had negative cash flow from operations during the
year ended December 31, 1999, the Partnership has been able, due to the sale of
three properties in the last three years, to maintain sufficient cash to enable
it to not only fund operating activities, but also to provide for significant
capital improvements at the remaining properties.
In the beginning of April 1998, management satisfied the mortgage on the
Perrymont Building. This mortgage was in default and the lender was threatening
to begin foreclosure procedures. As a result of the payoff of the outstanding
mortgage, the lender gave the Partnership a sizable discount on the mortgage
resulting in an extraordinary gain totaling $318,213 being recognized in 1998
due to this extinguishment of debt.
In January of 1998, a contract for the sale of the Perrymont Office
Building was signed. The contract had a sales price of $1,750,000. The contract
was soon canceled by the potential buyer and management did not continue to look
for a purchaser for the property and determined instead to undertake renovation
work. Ambassador Tower/Canterbury Court was held for sale in 1997, 1998 and
until June 30, 1999. Management determined to remove it from the market in order
to undertake renovations which could potentially increase the sales price when
the property is ultimately sold.
Increasing occupancy, as well as decreasing delinquencies, remains the
major focus of management. Management's plans include considerable renovation
work at Perrymont Office Building including re-facing of the exterior of the
building to give it a more updated appearance, landscaping, redecorating of all
common area restrooms, and a new sprinkler system. The work cost approximately
$336,000 in 1999 and was funded by proceeds from previous sales of properties.
By improving the physical appearance of the building, both inside and out,
management is hopeful that new tenants will be attracted to the building. Still
to be completed are the replacement of hallway carpeting, fresh paint throughout
the building, foyer alterations, new signage, new doors, fencing at the entrance
and driveway repairs which are expected to cost approximately $147,000 and are
expected to be funded by proceeds from previous sales of properties.
Low occupancies required capital improvements due to the aging portfolio of
the Partnership, and the repayment of a mortgage loan have reduced the
Partnership's cash reserves, however management believes there is still adequate
liquidity and reserves to otherwise pay its expenses. The Partnership made no
distributions during 1999, 1998 or 1997. It is uncertain as to when the
Partnership will be in a position to resume making distributions, although
management is hopeful that a distribution will be made in the coming year once
the capital improvement work scheduled at the properties is either completed or
the full costs may be measured.
Ambassador Towers/Canterbury Court, since the end of 1999, has seen a
significant improvement in its occupancy (i.e., as of April 2000, occupancy
reached approximately 93%). The success seen by this complex is primarily the
result of new on-site staff who came to this complex from one of the
competitors; these employees came with considerable experience and innovative
ideas. The complex began offering new services in 1998 to its residents such as
a concierge office which provides dry cleaning services and travel services, and
a van service taking residents to the bank, the post office, the grocery store,
etc. Additionally, the complex offers free cable to all of its residents (rents
were increased on a per unit basis to cover these costs to the complex). This
has continued in 1999 and has contributed to its success. Management also
believes that the property has become more attractive to
6
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
LIQUIDITY AND CAPITAL RESOURCES (CONT'D)
potential renters since the construction of a plaza containing a large grocery
store chain, completed during 1998 immediately next to the property. All
hallways in the building have been re-carpeted and freshly painted and
wallpapered. Carpets and appliances within units of this complex are being
replaced on an as-needed basis; moreover, new cabinets, countertops and mirrors
are being added to units when such improvements are deemed necessary to rent
vacant units or retain current tenants. Management is optimistic that this
complex will continue to see increased occupancy in the coming year.
The three complexes held by this Partnership are all deemed to be in "good"
locations and competitive rental markets. With this in mind, management
continues to monitor its expenses closely while also closely monitoring the
rents charged and services offered by its local competition.
The Partnership conducted a review of its computer systems to identify the
systems that could have been affected by the "year 2000 issue" and implemented a
plan to resolve such issues. The year 2000 issue is the result of computer
programs being written using two digits rather than four digits to define the
applicable year. Computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could have resulted in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Management contracted with outside independent computer consultants to resolve
this issue. The majority of the software in use is "2000 compliant" or was added
at no significant cost. Management also engaged a computer firm to re-write its
tax software making it Year 2000 compliant. Management did not experience any
significant problems with its computers as a result of the year 2000 issue and
does not anticipate any such problems in the future.
RESULTS OF OPERATIONS:
For the year ended December 31, 1999, the Partnership incurred a net loss
of $520,868 or $32.49 per limited partnership unit. For the years ended December
31, 1998 and 1997, the Partnership had net loss of $90,112 or $5.62 per limited
partnership unit and net income of $1,800,830 or $105.38 per limited partnership
unit, respectively. The net income in 1997 was the result of the gain on the
sale of Castle Dore Apartments. The Partnership had a net loss before the gains
recognized upon this sale of $1,294,546 for the year ended December 31, 1997.
Partnership revenues for the year ended December 31, 1999 totaled
$2,714,957, consisting of rental income of $2,400,717 and other income, which
includes interest, laundry income, and other miscellaneous sources of income of
$314,240. Rental revenue in the year ended December 31, 1998 amounted to
$2,050,131 and in the year ended December 31, 1997 totaled $2,828,947. The
rental income increased $350,586 from 1998 to 1999. The increase in rental
revenue is attributed to the increased occupancy of Ambassador Tower/Canterbury
Court. In 1997 the partnership owned more residential apartment complexes which
were reporting income (i.e., in 1997 there was one more complex which reported
rental income of approximately $976,000).
7
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T.)
RESULTS OF OPERATIONS (CONT'D):
A decrease in rental income at Perrymont of approximately $8,000 or 2.3%
was noted when comparing 1999 and 1998. Occupancy at December 31, 1999 was 51%.
The decrease in occupancy occurred toward the end of 1999 due in large part to
the loss of the building's major tenant. There was also a decrease of
approximately $68,000 in the Partnership's total interest and other income
between the years ended December 31, 1999 and 1998. This decrease is the result
of lower interest income earned on the investment of the proceeds from the
previous year's sale of Castle Dore Apartments.
Partnership expenses for the year ended December 31, 1999 totaled
$3,235,825, a significant increase from the $2,840,623, in expenses for the year
ended December 31, 1998, and a decrease from the $4,196,309 in expenses in 1997.
The increase totaled approximately $395,000. This was due to an increase in
property operation expenses of approximately $318,000. Approximately $133,000
was spent on new appliances at Ambassador Tower/Canterbury Court. The capital
improvement to Perrymont of $336,000 also took place in 1999. In 1998 and 1999
the Partnership has one less property contributing to the total expenses as
compared to the year ended December 31, 1997, when expenses related to the
property, which was sold, totaled approximately $1,600,000.
Most other expenses for 1999 remained consistent with 1998 except for an
increase in depreciation expense of $118,180. This was due to Ambassador
Tower/Canterbury Court no longer being held for sale after June 30, 1999 and the
capitalization of the Perrymont capital improvements. There was a decrease in
expenses of $960,484 or 23% between years ended December 31, 1999 and 1997. The
decrease is not only attributed to there being fewer properties owned by the
Partnership during 1999 as compared to 1997, but also that there is no longer a
mortgage on the Perrymont Office Building; in the beginning of April 1998,
management satisfied this mortgage with the lender giving the Partnership a
sizable discount on the mortgage resulting in an extraordinary gain on
extinguishments of debt totaling $318,213 in 1998.
For the year ended December 31, 1999, the tax basis loss was $621,698 or
$38.78 per limited partnership unit compared to a tax basis income of $372,451
or $23.23 per unit for the year ended December 31, 1998 and income of $2,135,244
or $133.19 per limited partnership unit for the year ended December 31, 1997.
The gain for tax purposes resulting from the sale of Castle Dore Apartments in
1997 totaled $4,003,583.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Partnership does not have investments in instruments which are subject
to significant fluctuations in market risk (e.g., derivatives, options or other
interest sensitive instruments).
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed under Item 14 of the report.
8
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As reported on Form 8-K/A, filed with the Securities and Exchange
Commission on April 17, 2000, and incorporated herein by reference in its
entirety: (i) Deloitte & Touche LLP notified the Company on January 11, 2000
that its relationship as the principal accountants to audit the Company's
financial statements had ceased; and (ii) effective January 28, 2000, the
Company engaged Toski, Schaefer & Co., P.C. as its independent accountants.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The Partnership, as an entity, does not have any directors or officers. The
Individual General Partner of the Partnership is Joseph M. Jayson. The directors
and executive officers of Realmark Properties, Inc., the Partnership's Corporate
General Partner, as of December 31, 1999, are listed below. Each director is
subject to election on an annual basis.
Title of All Positions Year First
Name Held With the Company Elected to Position
- ---- --------------------- -------------------
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice President and Director 1979
Michael J. Colmerauer Secretary 1991
Joseph M. Jayson, President and Director of Realmark Properties, Inc. and
Judith P. Jayson, Vice President and Director of Realmark Properties, Inc., are
married to each other.
The Director and Executive Officers of the Corporate General Partner and
their principal occupations and affiliations during the last six years or more
are as follows:
Joseph M. Jayson, age 61, is Chairman, Director and sole stockholder of
J.M. Jayson & Company, Inc. and certain of its affiliated companies: U.S.
Apartments LLC, Westmoreland Capital Corporation, Oilmark Corporation and U.S.
Energy Development Corporation. In addition, Mr. Jayson is President and
Director of Realmark Corporation and Realmark Properties, Inc., wholly owned
subsidiaries of J.M. Jayson & Company, Inc. and co-general Partner of Realmark
Properties Investors Limited Partnership, Realmark Properties Investors Limited
Partnership-II, Realmark Properties Investors Limited Partnership-III, Realmark
Properties Investors Limited Partnership-IV, Realmark Properties Investors
Limited Partnership-V, Realmark Properties Investors Limited Partnership-VI A
and Realmark Properties Investors Limited Partnership-VI B. Mr. Jayson has been
engaged in real estate business for the last 37 years and is a Certified
Property Manager as
9
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT (CONT'D)
designated by the Institute of Real Estate Management ("I.R.E.M."). Mr. Jayson
received a B.S. Degree in Education in 1961 from Indiana University, a Masters
Degree from the University of Buffalo in 1963, and has served on the Educational
Faculty of the Institute of Real Estate Management. Mr. Jayson has for the last
37 years been engaged in various aspects of real estate brokerage and
investment. He brokered residential properties from 1962 to 1964, commercial and
investment properties from 1964 to 1967, and in 1967 left commercial real estate
to form his own investment firm. Since that time, Mr. Jayson and J.M. Jayson &
Company, Inc. have formed, or participated in various ways in forming, over 30
real estate related limited partnerships. For the past eighteen years, Mr.
Jayson and a affiliate have also engaged in developmental drilling for gas and
oil.
Judith P. Jayson, age 59, is currently Vice-President and Director of
Realmark Properties, Inc. She is also a Director of the property management
affiliate, Realmark Corporation. Mrs. Jayson has been involved in property
management for the last 28 years and has extensive experience in the hiring and
training of property management personnel and in directing, developing and
implementing property management systems and programs. Mrs. Jayson, prior to
joining the firm in 1973, taught business in the Buffalo, New York high school
system. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana, with a degree in Business Administration. Mrs. Jayson is the wife of
Joseph M. Jayson, the Individual General Partner.
Michael J. Colmerauer, 42, is Secretary and in-house legal counsel for J.M.
Jayson & Company, Inc., Realmark Corporation, Realmark Properties, Inc. and
other companies affiliated with the General Partners. He received a Bachelor's
Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar Association and has been employed by the Jayson group of companies
for the last 16 years.
ITEM 11: EXECUTIVE COMPENSATION
No direct remuneration was paid or payable by the Partnership to directors
and officers (since it has no directors or officers) for its fiscal years ended
December 31, 1999, 1998 and 1997 nor was any direct remuneration paid or payable
by the Partnership to directors or officers of Realmark Properties, Inc., the
Corporate General Partner and sponsor for the years ended December 31, 1999,
1998 and 1997.
10
ITEM 11: EXECUTIVE COMPENSATION (CONT'D)
The following table sets forth for the years ended December 31, 1999, 1998
and 1997 the compensation paid by the Partnership, directly or indirectly, to
affiliates of the General Partners (all of which are owned entirely by Joseph M.
Jayson):
Entity Receiving Type of
COMPENSATION COMPENSATION 1999 1998 1997
------------ ------------ ---- ---- ----
Realmark Properties, Inc. Interest earned on accounts
(The Corporate Receivable - affiliates $ (11,096) - -
General Partner) -------------- --------------- ----------------
Interest charged on
accounts payable -
Affiliates $ - $ 35,048 $ 49,087
-------------- -------------- ---------------
Reimbursements for
allocated expenses of the
General Partners 103,838 115,217 141,849
Realmark Corporation Property Management Fees 120,563 104,553 150,726
Computer Service Fees 4,740 5,340 8,640
-------------- -------------- ----------------
229,141 225,110 301,215
-------------- -------------- ----------------
Total $ 218,045 $ 260,158 $ 350,302
============== ============== ================
The executive officers receive compensation from J.M. Jayson & Co., Inc.
Any portion of an officer's compensation attributable to an officer's services
to the Partnership are immaterial. The directors receive no compensation from
any entity. The Corporate General Partner is entitled to a continuing
Partnership Management Fee equal to 7% of net cash flow (as defined in the
Partnership Agreement), of which 2% is subordinated to the receipt by the
Limited Partners of a noncumulative annual cash return equal to 7% of the
average of their adjusted capital contributions (as defined in the Partnership
Agreement). The Corporate General Partner is paid its 5% Partnership Management
Fee annually as cash flow allows. The 2% subordinated fee will not be paid or
accrued until such time as the Limited Partners have received their 7% return
and payment of the fee becomes probable. The General Partners are also entitled
to 3% of Distributable Cash (as defined in the Partnership Agreement) and to
certain expense reimbursements with respect to Partnership operations.
The General Partners are allowed to collect property disposition fees upon
the 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 2.75% of the sale 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 a cumulative amount
equal to their capital contributions. The fees earned on the sales of Bryn Mawr
Apartments in 1986, Parc Bordeau Apartments in 1988, Williamsburg South
Apartments, Pleasant Run and Castle Dore will not be recorded as a liability in
the Partnership's financial statements until such time as payment is probable,
which is not anticipated to occur.
11
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
No person is known to the Partnership to own of record or beneficially more
than five percent (5%) of the Units of Limited Partnership Interest of the
Partnership. Excluding the General Partners' interest in the Partnership ($1,000
initial capital contribution), the General Partners as of December 31, 1999
owned no Units of Limited Partnership Interest.
Affiliates of the General Partners own of record or beneficially 600 units
of Limited Partnership Interest constituting 3.86% of the Partnership Interest.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
No transactions have occurred between the Partnership and those in the
management of Realmark Properties, Inc. All transactions between the Partnership
and Realmark Properties, Inc. (the Corporate General Partner) and any other
affiliated entities are described in Item 11 of this report and in Notes 6 and 7
to the financial statements.
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
(a) Financial Statements and Schedules.
FINANCIAL STATEMENTS Page
(i) Independent Auditors' Report F-1
(ii) Independent Auditors' Report for the
two fiscal years ended December 31, 1998 F-2
(iii) Balance Sheets at December 31, 1999 and 1998 F-3
(iv) Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-4
(v) Statements of Partners' Equity for the
years ended December 31, 1999, 1998 and 1997 F-5
(vi) Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-6
(vii) Notes to Financial Statements F-8
FINANCIAL STATEMENT SCHEDULES
(i) Schedule III - Real Estate and Accumulated
Depreciation F-17
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or the
notes thereto.
(b) Reports on Form 8-K
None.
12
(c) Exhibits
4. Instruments defining the rights of security holder, including
indentures
(a) Second Amended and Restated Agreement and Certificate of Limited
Partnership filed with the Registration Statement of the
Registrant Form S-11, filed November 21, 1983, and subsequently
amended incorporated herein by reference.
10. Material contracts
(a) Property Management Agreement with Realmark Corporation included
with the Registration Statement of the Registrant as filed and
amended to date incorporated herein by reference.
27. Financial Data Schedule
(a) Schedule is included herewith.
13
+
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 PARTNERSHIP - III
BY: /s/JOSEPH M. JAYSON APRIL 18, 2000
---------------------------------- -------------------------------
JOSEPH M. JAYSON, DATE
INDIVIDUAL GENERAL PARTNER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
BY: REALMARK PROPERTIES, INC.
CORPORATE GENERAL PARTNER
BY: /s/JOSEPH M. JAYSON APRIL 18, 2000
---------------------------------- -------------------------------
JOSEPH M. JAYSON, DATE
PRESIDENT AND DIRECTOR
/s/ JUDITH P. JAYSON APRIL 18, 2000
---------------------------------- -------------------------------
JUDITH P. JAYSON, DATE
DIRECTOR
/s/ MICHAEL J. COLMERAUER APRIL 18, 2000
---------------------------------- -------------------------------
MICHAEL J. COLMERAUER DATE
SECRETARY
14
INDEPENDENT AUDITOR'S REPORT
The Partners
Realmark Property Investors Limited Partnership - III:
We have audited the accompanying balance sheet of Realmark Property Investors
Limited Partnership - III as of December 31, 1999, and the related statements of
operations, partners' equity, and cash flows for the year ended December 31,
1999. Our audit also included the financial statement schedule listed in the
index at Item 14. These financial statements and the financial statement
schedule are the responsibility of the General Partners. Our responsibility is
to express an opinion on the financial statements and the financial statement
schedule based on our audit. The financial statements of Realmark Property
Investors Limited Partnership - III for the years ended December 31, 1998 and
1997 were audited by other auditors whose report dated April 23, 1999 expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership - III as of December 31, 1999, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Toski, Schaefer & Co., P.C.
Williamsville, New York
March 28, 2000
F-1
INDEPENDENT AUDITORS' REPORT
The Partners
Realmark Property Investors Limited Partnership-III:
We have audited the accompanying balance sheet of Realmark Property Investors
Limited Partnership-III as of December 31, 1998, and the related statements of
operations, partners' capital (deficit), and cash flows for each of the two
years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in the Index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
General Partners. Our responsibility is to express an opinion on the financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership-III at December 31, 1998, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Buffalo, New York
April 23, 1999
F-2
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Balance Sheets
December 31, 1999 and 1998
ASSETS 1999 1998
------ ------------ ------------
Property and equipment, at cost (including assets held for sale, note 3):
Land $ 777,709 777,709
Buildings and improvements 11,196,329 10,774,134
Furniture and fixtures 973,753 973,753
------------ ------------
12,947,791 12,525,596
Less accumulated depreciation 6,116,411 5,772,493
------------ ------------
Net property and equipment 6,831,380 6,753,103
Cash 150,836 387,827
Investments in mutual funds 929,138 1,390,598
Trade accounts receivable, net of allowance for doubtful accounts
of $340,735 in 1999 and $203,157 in 1998 53,417 7,812
Accounts receivable - affiliates 119,923 103,210
Escrow deposits 322,484 272,310
Other assets 156,864 199,057
------------ ------------
TOTAL ASSETS $ 8,564,042 9,113,917
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgages payable 4,935,851 4,970,797
Accounts payable and accrued expenses 134,675 150,707
Accrued interest payable 55,614 36,249
Security deposits and prepaid rents 121,218 118,612
------------ ------------
Total liabilities 5,247,358 5,276,365
------------ ------------
Partners' equity (deficit):
General partners (55,954) (40,328)
Limited partners 3,372,638 3,877,880
------------ ------------
Total partners' equity 3,316,684 3,837,552
------------ ------------
Total liabilities and partners' equity $ 8,564,042 9,113,917
============ ============
See accompanying notes to financial statements.
F-3
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Operations
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
----------- ----------- -----------
Income:
Rental $ 2,400,717 2,050,131 2,828,947
Interest and other 314,240 382,167 286,232
----------- ----------- -----------
Total income 2,714,957 2,432,298 3,115,179
----------- ----------- -----------
Expenses:
Property operations 1,913,810 1,595,748 1,863,882
Depreciation 345,876 227,696 232,606
Interest:
To affiliates - 35,048 49,087
Other 489,199 481,870 1,519,897
Administrative:
To affiliates 229,141 225,110 301,215
Other 257,799 275,151 229,622
----------- ----------- -----------
Total expenses 3,235,825 2,840,623 4,196,309
----------- ----------- -----------
Loss before allocated loss from joint venture, gain
on sale of properties and extraordinary gain (520,868) (408,325) (1,081,130)
Allocated loss from joint venture - - (213,416)
Gain on sale of properties - - 3,095,376
Extraordinary gain on extinguishment of debt - 318,213 -
----------- ----------- -----------
Net income (loss) $ (520,868) (90,112) 1,800,830
=========== =========== ===========
Net income (loss) per limited partnership unit $ (32.49) (5.62) 105.38
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP
units outstanding 15,551 15,551 15,551
=========== =========== ===========
See accompanying notes to financial statements.
F-4
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Partners' Equity
Years ended December 31, 1999, 1998 and 1997
GENERAL LIMITED PARTNERS
PARTNERS UNITS AMOUNT
---------- ---------- ----------
Balances at December 31, 1996 $ (199,668) 15,551 2,326,502
Net income 162,043 - 1,638,787
---------- ---------- ----------
Balances at December 31, 1997 (37,625) 15,551 3,965,289
Net loss (2,703) - (87,409)
---------- ---------- ----------
Balances at December 31, 1998 (40,328) 15,551 3,877,880
Net loss (15,626) - (505,242)
---------- ---------- ----------
Balances at December 31, 1999 $ (55,954) 15,551 3,372,638
========== ========== ==========
See accompanying notes to financial statements
F-5
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---------- ---------- ----------
Cash flows from operating activities:
Net income (loss) $(520,868) (90,112) 1,800,830
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 375,664 259,676 426,277
Amortization of mortgage discounts - - 706,399
Allocated loss from joint venture - - 213,416
Gain on sale of properties - - (3,095,376)
Gain on extinguishment of debt - (318,213) -
(Increase) decrease in:
Security deposits - - 56,086
Trade accounts receivable (45,605) 28,130 (35,873)
Other assets 10,447 26,413 (116,369)
Increase (decrease) in:
Accounts payable and accrued expenses (16,032) (41,997) (673,389)
Accrued interest payable 19,365 (163,158) 85,233
Security deposits and prepaid rents 2,606 (66,266) (116,591)
---------- ---------- ----------
Net cash used in operating activities (174,423) (365,527) (749,357)
---------- ---------- ----------
Cash flows from investing activities:
(Increase) decrease in investments in mutual funds 461,460 1,117,052 (2,507,650)
(Increase) decrease in escrow deposits (50,174) (16,443) -
Proceeds from dispositions of properties - - 4,986,608
Buyout of investment in joint venture - - (55,000)
Additions to property and equipment (422,195) (138,234) (147,142)
---------- ---------- ----------
Net cash provided by (used in)
investing activities (10,909) 962,375 2,276,816
---------- ---------- ----------
Cash flows from financing activities:
INCREASE IN ACCOUNTS RECEIVABLE - AFFILIATES (16,713) - -
Decrease in accounts payable - affiliates - (138,917) (695,651)
PROCEEDS FROM MORTGAGE PAYABLE - 34,765 -
Proceeds from mortgage refinancing - - 5,813,000
Principal payments at mortgage refinancing - - (4,803,977)
Principal payments at sale of property - - (2,240,764)
Principal payments on mortgages (34,946) (962,518) (554,380)
---------- ---------- ----------
Net cash used in financing activities (51,659) (1,066,670) (2,481,772)
---------- ---------- ----------
Net decrease in cash (236,991) (469,822) (954,313)
See accompanying notes to financial statements
F-6
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Statements of Cash Flows (Continued)
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
--------- --------- ---------
Cash at beginning of year 387,827 857,649 1,811,962
--------- --------- ---------
Cash at end of year $ 150,836 387,827 857,649
========= ========= =========
Supplemental disclosure of cash flow information -
cash paid during the year for interest $ 419,876 613,048 1,227,146
========= ========= =========
See accompanying notes to financial statements.
F-7
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(1) Formation and Operation of Partnership
Realmark Property Investors Limited Partnership - III (the
Partnership), a Delaware limited partnership, was formed on November
18, 1983, to invest in a diversified portfolio of income-producing
real estate investments, its only industry segment.
In February 1984, the Partnership commenced the public offering of units
of limited partnership interest. Other than matters relating to
organization, it had no business activities and, accordingly, had not
incurred any expenses or earned any income until the first interim
closing of the public offering of limited partnership units, which
occurred on April 26, 1984. All items of income and expense arose
subsequent to this date. The maximum offering of the Partnership was
$20,000,000 (20,000 units). The offer terminated January 31, 1985 with
gross offering proceeds of $15,551,000 (15,551 units). The general
partners are Realmark Properties, Inc. (the corporate general partner)
and Mr. Joseph M. Jayson (the individual general partner). Mr. Joseph
M. Jayson is the sole shareholder 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 can receive compensation for services rendered
and reimbursement for expenses incurred on behalf of the Partnership
(note 7).
The partnership agreement also provides that distribution of funds,
revenues, costs and expenses arising from partnership activities,
exclusive of any sale or refinancing activities, are to be allocated
97% to the limited partners and 3% to the general partners. Net income
or losses and proceeds arising from a sale or refinancing shall be
distributed first to the limited partners in amounts equivalent to a
7% return on their average adjusted capital balances, plus an amount
equal to their capital contributions. The agreement also provides for
payment of property disposition fees to Realmark Properties. Inc.,
prior to additional distributions to limited partners in amounts
equivalent to 5% of their average adjusted capital balances.
Additional proceeds shall then be allocated to all partners in amounts
equal to their respective positive capital account balances and the
remainder, if any, in the ratio of 87% to the limited partners and 13%
to the general partners. Income and losses from the sale of properties
is to be allocated first to the limited partners to the extent they
receive their average adjusted capital balances plus a preferential
return of 7% and an additional 5%; after this, the income is to be
allocated 87% to the limited partners and 13% to the general partners.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting The accompanying financial statements have been
prepared on the accrual basis of accounting.
F-8
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(b) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
(c) Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using the
straight-line method. The estimated lives of the Partnership's
assets range from 5 to 25 years. Depreciation expense totaled
$345,876, $227,696 and $232,606 for the years ended December 31,
1999, 1998 and 1997, respectively. Improvements are capitalized,
while expenditures for maintenance and repairs are charged to
expense as incurred. Upon disposal of depreciable property, the
appropriate property accounts are reduced by the related costs and
accumulated depreciation. The resulting gains and losses are
reflected in the statements of operations. The accelerated cost
recovery system and modified accelerated cost recovery system are
used to calculate depreciation expense for tax purposes.
(d) Cash
For purposes of reporting cash flows, cash includes money market
accounts and any highly liquid debt instruments purchased with a
maturity of three months or less.
(e) Escrow Deposits
Escrow deposits represent cash which is restricted for the payment of
property taxes and insurance in accordance with the mortgage
agreement.
(f) Mortgage Costs
Mortgage costs incurred in obtaining the property mortgage financing
are recorded at cost less applicable amortization. Amortization is
being computed using the straight-line method over the life of the
respective mortgages.
(g) Rental Income
Rental income is recognized on the straight line method over the term
of the lease. Leases for residential properties have terms of one
year or less. Commercial leases generally have terms of one to
five years.
(h) Income Per Limited Partnership Unit
The income per limited partnership unit is based on the weighted
average number of limited partnership units outstanding for the
year.
(i) Accrued Residential Rent Receivable
Due to the nature of accrued rent receivable, all such receivables are
fully reserved at December 31, 1999 and 1998.
F-9
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(j) Investments in Mutual Funds
The investments in mutual funds are stated at fair value, which
approximates cost.
(k) Income Taxes
No income tax provision has been included in the financial statements
since profit or loss of the Partnership is required to be reported
by the respective partners on their income tax returns.
(l) Comprehensive Income
ThePartnership has adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income." SFAS 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as "the
change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources." Other than net income (loss), the Partnership has no
other sources of comprehensive income.
(m) Segment Information
SFAS No. 131 - "Disclosures about Segments of an Enterprise and
Related Information" establishes standards for the way public
business enterprises report information about operating segments
and annual financial statements. The Partnership's only operating
segment is the ownership and operation of income-producing real
property for the benefit of its partners.
(n) Accounting Changes and Developments
In June 1998, the Financial Accounting Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133 - "Accounting for
Derivative Instruments and Hedging Activities" which establishes
revised accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity
measure all derivative instruments at fair value and recognize
such instruments as either assets or liabilities in the balance
sheets. The accounting for changes in the fair value of a
derivative instrument will depend on the intended use of the
derivative as either a fair value hedge, a cash flow hedge or a
foreign currency hedge. The effect of the changes in fair value of
the derivatives and, in certain cases, the hedged items are to be
reflected in either the statements of operations or as a component
of other comprehensive income, based upon the resulting
designation. As issued, SFAS No. 133 was effective for fiscal
years beginning after June 15, 1999. In June 1999, the FASB issued
SFAS No. 137 - "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No.
133." SFAS No. 137 defers the effective date of SFAS No. 133 for
one year to fiscal years beginning after June 15, 2000. Since the
Partnership does not currently have any derivative instruments or
hedging activities, management does not believe that SFAS No. 133
will have a material effect on the Partnership financial
statements, taken as a whole.
F-10
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(o) Reclassifications
Reclassifications have been made to certain 1998 and 1997 balances in
order to conform them to the 1999 presentation.
(3) Acquisition and Dispositions of Rental Property
In August 1984, the Partnership acquired a 112 unit apartment complex
(Bryn Mawr) located in Ypsilanti, Michigan. for a purchase price of
$1,833,554, which included $134,857 in acquisition fees.
In February 1985, the Partnership acquired a 190 unit apartment complex
(Castle Dore), located in Indianapolis, Indiana for a purchase price
of $3,711,683, which included $414,279 in acquisition fees.
In February 1985, the Partnership acquired a 208 unit apartment complex
(Parc Bordeaux), located in Indianapolis, Indiana, for a purchase
price of $3,845,064, which included $371,233 in acquisition fees.
In April 1985, the Partnership entered into an agreement and formed
Inducon Joint Venture Amherst. Under the terms of the joint venture
agreement, the Partnership supplied capital to acquire the land and
undertake initial development to the extent of $545,000 in Phase I and
an additional $275,000 on Phase II.
In June 1985, the Partnership acquired a 200 unit apartment complex
(Williamsburg South Apartments) located in Atlanta, Georgia, for a
purchase price of $4,764,200, which included $368,745 in acquisition
fees. In connection with this acquisition, the Partnership obtained
from the seller a purchase money mortgage in the amount of $3,300,000.
In August 1985, the Partnership acquired an office complex containing
approximately 40,000 net rentable square feet (Perrymont Office
Building) located in Pittsburgh, Pennsylvania, for a purchase price of
$2,078,788, which included $168,697 in acquisition fees.
In November 1985, the Partnership acquired a 130 unit apartment complex
(Pleasant Run Farms) located in Cincinnati, Ohio, for a purchase price
of $3,434,728, which included $267,228 in acquisition fees.
In December 1985, the Partnership acquired a 280 unit apartment complex
(Ambassador Towers, formerly Cedar Ridge) located in Monroeville,
Pennsylvania for a purchase price of $6,423,391, which included
$646,424 in acquisition fees.
In August 1986, the Partnership sold the Bryn Mawr Apartments for a sale
price of $3,110,000 which generated a total net gain for financial
statement purposes of $1,475,313. For income tax purposes, the gain
was recognized under the installment method.
In December 1988, the Partnership sold the Parc Bordeaux Apartments for a
sale price of $5,300,000 which generated a total net gain for
financial statement purposes of $2,338,067. For income tax purposes,
the gain was recognized under the installment method.
F-11
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(3) Acquisition and Dispositions of Rental Property, Continued
In December 1996, the Partnership sold the Williamsburg South Apartments
and Pleasant Run Farms Apartments for a sales price of $4,831,000 and
$3,350,000, respectively, less related fees of $93,000. The sales
generated a total net gain of $3,501,323 for financial statement
purposes.
In November 1997, the Partnership acquired the remaining 50% interest in
Inducon Joint Venture Amherst through a buyout of the other joint
venturer. The Partnership owns 100% of the property.
In December 1997, the Partnership sold the Castle Dore Apartments for a
sales price of $5,160,000, less related fees of approximately
$174,000. The sale generated a total net gain of $3,095,376 for
financial statement purposes.
During the first six months of 1999 (through June 30, 1999), management
continued its plans to sell the assets of Ambassador Towers. Effective
July 1, 1999, management discontinued its plans to sell the property,
as this was determined to be in the best interests of the investors.
The carrying value of the assets was $3,516,633 at December 31, 1998,
and the property generated a net loss of $134,630 during the year
ended December 31, 1998.
Statement of Financial Accounting Standards No. 121 - "Accounting, for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of " (the Statement) requires that assets to be disposed of
be recorded at the lower of carrying value or fair value, less costs
to sell. The Statement also requires that such assets not be
depreciated during the disposal period, as the assets will be
recovered through sale rather than through operations. In accordance
with this Statement, the long-lived assets of the Ambassador Towers
are recorded at the carrying amount which is the lower of carrying
value or fair value less costs to sell, and have not been depreciated
during the disposal period. Fair value is determined based on
estimated future cash flows. Depreciation expense, not recorded during
the disposal period, for the years ended December 31, 1999, 1998 and
1997 totaled approximately $111,000, $222,000 and $173,000,
respectively. Management believes that the property's fair value has
not changed significantly since being classified as held for sale.
(4) Mortgages Payable
The Partnership has the following mortgages payable as of December 31,
1999 and 1998:
(a) Perrymont
The outstanding mortgage of $1,259,701 at December 31, 1997 was
satisfied in April 1998. The satisfaction of the mortgage resulted
in an extraordinary gain on the extinguishment of debt of $318,213
or $19.85 per limited partnership unit.
(b) Ambassador Towers (formerly Cedar Ridge)
This mortgage provided for payments of interest only through December
1998. Monthly installments of principal and interest are due
through maturity at February 1, 2004. The interest rate was 8.275%
during the first loan year and was adjusted to 8.25% in 1998.
F-12
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(4) Mortgages Payable, Continued
The mortgage had a balance of $3,117,720 and $3,130,049 at December 31,
1999 and 1998, respectively.
(c) Inducon Amherst
A mortgage with a balance of $1,818,131 and $1,840,748 at December
31, 1999 and 1998, respectively. The mortgage provides for monthly
principal and interest payments of $15,250 at a rate of 8.62%. The
remaining balance is due March 2022.
The above mortgages are secured by the properties to which they relate.
The aggregate maturities of mortgages for each of the next five years and
thereafter, assuming principal payments are not accelerated, are as
follows:
2000 $ 67,781
2001 73,698
2002 80,133
2003 87,129
2004 94,737
Thereafter 4,532,373
----------
$4,935,851
==========
(5) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of
accounts receivable, accounts payable, accrued expenses, deposit
liabilities approximate the carrying value due to the short-term
nature of these instruments.
Management has estimated, based on current interest rates for similar
mortgages, that the fair values of the mortgages payable on Ambassador
Towers and Inducon Amherst approximate $3,260,000 and $1,909,000 at
December 31, 1999, respectively. The carrying values of the mortgages
were approximately $3,117,000 and $1,818,000, respectively. The terms
of these mortgages are described in note 4.
(6) Investment in Joint Venture
In April 1985, the Partnership entered into an agreement and formed
Inducon Joint Venture Amherst (the Venture), for the primary purpose
of constructing office/warehouse buildings in Erie County, New York,
as income-producing property. The site is part of the Amherst Foreign
Trade Zone. This is U.S. Customs Territory under Federal Supervision
where foreign and domestic merchandise is brought for storage,
manufacture, salvage, repair, exhibit, repacking, relabeling, and
re-export. Under the terms of the joint venture agreement,
F-13
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
the Partnership supplied capital to acquire the land and undertake
initial development, to the extent of $545,000 in Phase I and an
additional $275,000 on Phase II.
The other joint venturer delivered or completed on behalf of the joint
venture all plans, specifications, maps, surveys, accounting proformas
for construction, initial leasing and operations, and cost estimates
with respect to development.
Ownership of the joint venture was divided equally between the Partnership
and the other joint venturer. The joint venture agreement provided
that the Partnership was to be allocated 95% of any income received or
loss incurred.
(6) Investment in Joint Venture, Continued
In November 1997, the Partnership acquired the interest of Delhurst
Corporation, the other joint venture partner, for $55,000. The
Partnership now owns 100% of the Inducon Amherst property. The results
of the property's operations for the period January 1, 1997 through
October 31, 1997 were allocated in accordance with the joint venture
agreement.
(7) Related Party Transactions
(a) Accounts Receivable - Affiliates
Accounts receivable from affiliates totaled $119,923 and $103,210 at
December 31, 1999 and 1998, respectively. Accounts receivable from
affiliates are due upon demand.
(b) Interest Expense to Affiliates
Interest charged on amounts due affiliates totaled $35,048 and $49,087
for the years ended December 31, 1998 and 1997, and was calculated
at a rate of 11% of the average balance. Amounts payable to
affiliates were repaid during 1998.
(c) Management Fees
Management fees for the properties are paid to an affiliate of the
general partners. The management agreement provides for 5% of gross
monthly receipts of the properties to be paid as fees for
administering the operations of the properties. These fees totaled
$120,563, $104,553 and $150,726 for the years ended December 31,
1999, 1998 and 1997, respectively.
(d) Computer Service Charges
Computer service charges for the Partnership are paid or accrued to an
affiliate of the general partners. The fee is based upon the number
of apartment units and totaled $4,740, $5,340 and $8,640 for the
years ended December 31, 1999, 1998 and 1997, respectively.
(e) Other Expenses
Pursuant to the terms of the partnership agreement, the corporate
general partner charged the Partnership for reimbursement of
certain costs and expenses incurred by the corporate general
partner and its affiliates in connection with the administration of
the Partnership and for other direct Partnership expenses. These
charges were for the Partnership's allocated share of such costs
and expenses which include payroll, legal, rent, depreciation,
printing, mailing, travel, and communication costs related to
partnership accounting, partner communication and relations,
property marketing, and refinancing and are included in property
operations. Additionally, partnership accounting and portfolio
management fees, investor services fees and brokerage fees are
allocated based on total assets, number of partners and number of
units, respectively. Such charges totaled $103,838, $115,217 and $
141,849, for the years ended December 31, 1999, 1998 and 1997,
respectively.
F-14
(7) Related Party Transactions, Continued
(f) Property Disposition Fees
According to the terms of the partnership agreement, the general
partners are allowed to collect property disposition fees upon the
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
2.75% 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 capital contributions. The general
partners have not to date received a disposition fee on the sale of
the Bryn Mawr Apartments or Parc Bordeaux, as the limited partners
of the Partnership have not received a return of 7% on their
average adjusted capital or their original capital as defined in
the partnership agreement. The fee earned in the sale of the Bryn
Mawr Apartments, Parc Bordeaux Apartments, Williamsburg South
Apartments, Pleasant Run Apartments and Castle Dore Apartments will
not be recorded as liabilities in the partnership financial
statements until such time as payment is probable.
(g) Partnership Management Fees
The corporate general partner is entitled to a continuing partnership
management fee equal to 7% of net cash flow (as defined in the
partnership agreement), of which 2% is subordinated to the receipt
by the limited partners of a non-cumulative annual cash return
equal to 7% of the average of their adjusted capital contributions
(as defined in the partnership agreement). The corporate general
partner is paid its 5% partnership management fee annually as cash
flow allows. The 2% subordinated fee will not be paid or accrued
until such time as the limited partners have received their 7%
return and payment of the fee becomes probable. No fee was paid for
the years ended December 31, 1999, 1998 and 1997.
(8) Leases
In connection with its commercial properties, the Partnership has entered
into lease agreements with terms of one to five years. Minimum future
rentals to be received for each of the next five years under noncancelable
operating leases are as follows:
2000 $ 455,865
2001 389,584
2002 293,610
2003 168,733
2004 65,571
---------
$1,373,363
==========
F-15
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Notes to Financial Statements, Continued
(9) Income Taxes
The tax returns of the Partnership are subject to examination by federal
and state taxing authorities. Under federal and state income tax laws,
regulations and rulings, certain types of transactions, may be
accorded varying interpretations and, accordingly, reported
Partnership amounts could be changed as a result of any such
examination.
The reconciliation of partners' deficit for the years ended December 31,
1999, 1998 and 1997, as reported in the balance sheets and as reported
for tax return purposes, is as follows:
1999 1998 1997
----------- ----------- -----------
Partners' equity - balance sheets $ 3,316,684 3,837,552 3,927,664
Add to (deduct from):
Accumulated difference in depreciation (4,370,190) (4,269,360) (4,386,495)
Accumulated amortization of mortgage
discounts 77,418 77,418 77,418
Syndication fees and selling expenses 1,842,060 1,842,060 1,842,060
Gain on sale of properties 1,009,847 1,009,847 1,009,847
Other nondeductible expenses/non taxable
income (326,749) (326,749) 72,725
Difference in book and tax depreciable cost
basis 915,085 915,085 915,085
Difference in book and tax basis of
investments (596,400) (596,400) (596,400)
Other (69,286) (69,286) (69,286)
----------- ----------- -----------
PARTNERS' EQUITY - TAX RETURN PURPOSES $ 1,798,469 2,420,167 2,792,618
=========== =========== ===========
The reconciliation of net income (loss) for the years ended December 31,
1999, 1998 and 1997, as reported in the statements of operations, and
as would be reported for tax return purposes is as follows:
1999 1998 1997
----------- ----------- -----------
Net income (loss) - statements of operations $ (520,868) (90,112) 1,800,830
Add to (deduct from):
Difference in depreciation (100,830) 117,135 (151,699)
Difference in gain on sale of properties - - 860,302
Non-deductible expenses/non taxable income - (399,474) (487,362)
Difference in loss of joint venture - - 113,173
----------- ----------- -----------
Net income (loss) - tax return purposes $ (621,698) (372,451) 2,135,244
=========== ======== =========
F-16
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Real Estate and Accumulated Depreciation
December 31, 1999
Initial Cost to Gross amounts at which
Partnership Cost Carried at Close of Period
---------------- Capitalized --------------------------
Property Subsequent to
Description Encumbrances Land Buildings Acquisition Land Buildings
- ------------------- ------------- ---------- ---------- ----------- ---------- ----------
Perrymont Office
Building
Pittsburgh, PA $ - 100,000 1,978,788 527,975 100,000 2,506,763
Ambassador Towers
(formerly Cedar
Ridge Apts )
Monroeville, PA 3,117,720 500,000 5,001,729 321,105 500,000 5,322,834
Inducon Amherst
Amherst, NY 1,818,131 177,709 - 3,366,732 177,709 3,366,732
---------- ---------- ---------- ---------- ---------- ----------
$4,935,851 777,709 6,980,517 4,215,812 777,709 11,196,329
========== ========== ========== ========== ========== ==========
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Real Estate and Accumulated Depreciation
December 31, 1999
(continued)
Life
on which
depreciation
in latest
statement of
Property Accumulated Date of Date operations
description Total Depreciation Construction Acquired is Computed
- ----------- ------------ ------------ ------------ ------------- -----------
Perrymont Office
Building
Pittsburgh, PA 2,606,763 1,146,234 8/85 8/85 25 years
Ambassador Towers
(formerly Cedar
Ridge Apts )
Monroeville, PA 5,822,834 2,379,332 12/85 10/85 25 years
Inducon Amherst
Amherst, NY 3,544,441 1,599,632 4/85 4/85 25 years
---------- ---------- ---------
11,974,038 5,125,198
========== =========
F-17
SCHEDULE III, CONT.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - III
Real Estate and Accumulated Depreciation
December 31, 1999
(1) Cost for Federal income tax purposes is $11,974,038.
(2) A reconciliation of the carrying amount of land, buildings and
improvements as of December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997
---------------- ---------- ----------
Balance at beginning of year $ 11,551,843 11,427,527 10,967,459
Additions 422,195 124,316 3,660,348
Dispositions - - (3,200,280)
---------------- ---------- ----------
Balance at end of year $ 11,974,038 11,551,843 11,427,527
================ ========== ==========
(3) A reconciliation of accumulated depreciation for the years ended
December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997
---------------- ---------- ----------
BALANCE AT BEGINNING OF YEAR $ 4,815,825 4,593,221 4,371,230
Depreciation expense 309,373 222,604 202,212
Additions of joint ventures - - 1,328,827
Dispositions - - (1,309,048)
---------------- ---------- ----------
Balance at end of year (4) $ 5,125,198 4,815,825 4,593,221
================ ========== ==========
(4) Balances applies entirely to buildings.
F-18