ITEM 1: BUSINESS - ------- --------
The Registrant, Realmark Property Investors Limited Partnership - VI B (the "Partnership"), is a Delaware limited partnership organized in 1987 pursuant to an Amended and Restated Certificate and Agreement of Limited Partnership (the "Partnership Agreement"), under the Revised Delaware 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 November 11, 1988. The first interim closing took place on February 2, 1989, and the initial $2,134,300 of contributed capital was released to the Partnership at which time it began operations. The offering was concluded February 28, 1990 at which time the Partnership had raised $7,862,510, before deducting sales commissions and syndication costs.
The Partnership's primary business is to own and operate income-producing real property for the benefit of its partners. As of December 31, 2003, the Partnership has disposed of its last property, Players Club North Apartments which was sold on May 30, 2002, for $5,548,000, resulting in a net gain of approximately $2,680,000 to the Partnership for tax purposes. Accordingly, the Partnership is in the process of liquidating.
The business of the Partnership is not seasonal. As of December 31, 2003, 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, 2003 were employees of the Corporate General Partner or its affiliates.
This annual report contains certain forward-looking statements concerning the Partnership's current expectations as to future results. Words such as "believes", "forecasts", "intends", "possible", "expects", "estimates", "anticipates" or "plans" and similar expressions are intended to identify forward-looking statements. Such statements may not ultimately turn out to be accurate due to, among other things, economic or market conditions.
ITEM 2:
ITEM 2: PROPERTIES - ------------------
As of December 31, 2003, the Partnership did not own any property investments.
ITEM 3:
ITEM 3: 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 at the state court level regarding the payment of fees and other management issues.
On August 29, 2001, the parties entered into a Stipulation of Settlement (the "Settlement"). On October 4, 2001, the Court issued an "Order Preliminary Approving Settlement" (the "Hearing Order") and on November 29, 2001, the court issued an "Order and Final Judgment Approving Settlement and
Awarding Fees and Expenses" and dismissing the complaints with prejudice. The Settlement provided, among other things, that all of the Realmark Partnerships' properties be disposed of. The general partners will continue to have primary authority to dispose of 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 Partnership's remaining properties.
The settlement also provided for the payment by the Partnerships of fees to the plaintiffs' attorneys. These payments are payable out of the proceeds from the sale of all of the properties owned by all of the Realmark Partnerships, following the sale of the last of these properties in each partnership. Plaintiffs' counsel will receive 15% of the amount by which the sales proceeds distributable to limited partners in each partnership exceeds the value of the limited partnership units in each partnership (based on the weighted average of the units' trading prices on the secondary market as reported by Partnership Spectrum for the period May through June 2001). In no event may the increase on which the fees are calculated exceed 100% of the market value of the units as calculated above. On May 30, 2002, the Partnership sold its remaining property, and in June 2002, a payment of $257,929 was made to the plaintiffs' attorneys.
ITEM 4:
ITEM 4: SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- ----------------------------------------------------
None.
PART II -------
ITEM 5:
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST - ------- -------------------------------------------------------------
There is currently no active trading market for the units of limited partnership interest of the Partnership and it is not anticipated that any will develop in the future. Accordingly, information as to the market value of a unit at any given date is not available. As of December 31, 2003, there were 989 record holders of units of limited partnership interest. In June and November 2002, the Partnership made distributions of its previously undistributed net cash from sales proceeds. These distributions were made in accordance with the settlement of the lawsuit (Item 3). A total of $2,257,929 was distributed on behalf of the limited partners. Of this amount, $257,929 was paid in June 2002 to legal counsel in accordance with the settlement of the lawsuit and $2,000,000 was distributed in November 2002 directly to record holders of units of limited partnership interest.
(1) The Partnership began reporting on the liquidation basis of accounting effective June 1, 2002. Therefore, operations for the years ended December 31, 2003 and 2002 are reported on the consolidated statement of changes in net assets in liquidation for the year ended December 31, 2003 and the period from June 1, 2002 to December 31, 2002, while operations for the period from January 1, 2002 to May 31, 2002 and for the years ended December 31, 2001, 2000, and 1999 are reported on the going concern basis in the consolidated statements of operations. Balance sheet data at December 31, 2003 and 2002 represents the total assets and net assets in liquidation as reported in the consolidated statement of net assets in liquidation (liquidation basis) at December 31, 2003 and 2002 (page).
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------- ----------------------------------------------------------------------- OF OPERATIONS -------------
Liquidity and Capital Resources: - -------------------------------
Since January 1, 2001, the Partnership's only remaining property, Players Club, had been actively marketed for sale. On May 30, 2002, the Partnership sold Players Club to an unaffiliated entity for cash of $5,548,000. After satisfaction of the $3,091,000 mortgage loan, including a prepayment penalty, on the property and payment of closing costs, the net proceeds available amounted to approximately $2,180,000, before satisfaction of any remaining obligations related to the property. Those proceeds enabled the partnership to make a distribution to limited partners in the last quarter of 2002 of $2,000,000 after a payment of $257,929 in June 2002 to the plaintiff's counsel in accordance with the settlement of the lawsuit (Item 3). The remaining proceeds, net of those amounts that are required to pay the estimated payables and costs of operating the partnership during liquidation, will be distributed to the limited partners.
Prior to the sale of Players Club, the Partnership maintained a cash position adequate to fund capital improvements and scheduled debt payments. The Partnership's cash position and the proceeds from the sale of Fairway Club Apartments (sold August 16, 2001) enabled the Partnership to make a $2,600,000 distribution to the limited partners in the last quarter of 2001.
Limited partners should be aware that it is possible that they will receive an allocation of income from the gain on sale of the Partnerships' properties on which they will be required to pay income taxes and there is no assurance that the distribution detailed above 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 a result of the sale of the sole remaining property, Players Club, and the establishment of a plan of liquidation, the Partnership began reporting on the liquidation basis of accounting effective June 1, 2002. Therefore, operations for the year ended December 31, 2003 and the period June 1, 2002 to December 31, 2002 are reported in the consolidated statement of changes in net assets in liquidation while the operations for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001 are reported on the going concern basis in the consolidated statements of operations.
Inflation has been consistently low during the periods presented in the consolidated financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties.
2003 as compared to 2002 - ------------------------
As discussed above, the Partnership began reporting on a liquidation basis of accounting on June 1, 2002. Operating activity for 2003 consisted of the payment of liabilities recorded at December 31, 2002.
2002 as compared to 2001 - ------------------------
As discussed above, the Partnership began reporting on a liquidation basis of accounting on June 1, 2002. The decrease in most components of the consolidated statement of operations for the period January 1, 2002 to May 31, 2002 was a result of the remaining property, Players Club, being sold on May 30, 2002 and rental operations ceasing at that time. There were no individually significant factors which caused changes in revenues and expenses as of May 31, 2002 when compared to the year ended December 31, 2001 other than the sale of Players Club.
ITEM 7A:
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------
Not applicable.
ITEM 8:
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------
Listed under Item 15 of this report.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE --------------------
None.
ITEM 9A:
ITEM 9A: 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. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Partnership's management, including the Partnership's Individual General Partner and Principal Financial Officer, of the effectiveness of the Partnership's disclosure controls and procedures. Based on that evaluation, the Partnership's Individual General Partner and Principal Financial Officer concluded that the Partnership's disclosure controls and procedures are effective.
Subsequent to the date of their most recent evaluation, there have been no significant changes in the Partnership's internal control over financial reporting or in other factors that could significantly affect the internal control over financial reporting.
PART III --------
ITEM 10:
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, 2003, are listed below. Each director is subject to election on an annual basis.
Title of All Positions Held with Year First Name the Corporate General Partner Elected to Position - ---- ----------------------------- -------------------
Joseph M. Jayson Chairman of the Board, President 1979 and Treasurer
Judith P. Jayson Vice President and Director 1979
Joseph M. Jayson and Judith P. Jayson are married to each other.
The Directors and Executive Officers of the Corporate General Partner and their principal occupations and affiliations during the last five years or more are as follows:
Joseph M. Jayson, age 65, is Chairman, Director and sole stockholder of J. M. Jayson and 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 Chairman of Realmark Corporation, Chairman, President and Treasurer of Realmark Properties, Inc., wholly-owned subsidiaries of J. M. Jayson and Company, Inc. and co-general partner of Realmark Property Investors Limited Partnership, Realmark Property Investors Limited Partnership-II, Realmark Property Investors Limited Partnership-III, Realmark Property Investors Limited Partnership-IV, Realmark Property Investors Limited Partnership-V, Realmark Property Investors Limited Partnership-VI A, and Realmark Property Investors Limited Partnership-VI B. Mr. Jayson has been in the real estate business for the last 41 years and is a Certified Property Manager as 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 41 years been engaged in various aspects of real estate brokerage and investment. He brokered residential properties from 1962 to 1964, commercial 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 with forming over 30 real estate related limited partnerships. For the past 22 years, Mr. Jayson and an affiliate have also engaged in developmental drilling for gas and oil.
Judith P. Jayson, age 63, is currently Vice President and a 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 32 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.
Audit Committee - ---------------
The Partnership has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are Joseph M. Jayson and Bryant E. Zilke.
Audit Committee Financial Expert - --------------------------------
The Directors and Executive Officers of the Corporate General Partner have determined that Bryant E. Zilke is an audit committee financial expert as defined by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Mr. Zilke is not independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act due to limited circumstances, namely that the Partnership is small in size and there is limited personnel. Mr. Zilke is not independent as a result of being an employee of an affiliate of the Corporate General Partner.
Code of Ethics - --------------
The Partnership has adopted a code of ethics for the partners, principal financial officer, and employees of the Corporate General Partner or its affiliates who render services on behalf of the Partnership. The Partnership will provide to any person without charge, upon request, a copy of the code of ethics which is available from:
Realmark Property Investors Limited Partnership - VI B Attention: Investor Relations 2350 North Forest Road Suite 12-A Getzville, New York 14068
ITEM 11:
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), 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 year ended December 31, 2003. The Corporate General Partner and its affiliate, Realmark Corporation, are entitled to fees and to certain expense reimbursements with respect to Partnership operations, as set forth in item 13 hereof and in the notes to the consolidated financial statements.
ITEM 12:
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 5% of the units of limited partnership interests of the Partnership, except for affiliates of the General Partners that own 4,046.2 units of limited partnership interest amounting to approximately 5.2% of the Partnership interest at December 31, 2003. The general partners, and the executive officers of the Corporate General Partner, as of December 31, 2003, owned 21 units of limited partnership interest. The general partners and affiliates received their proportionate share, as limited partners, of the distribution paid in the last quarter of 2002.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ----------------------------------------------
The properties of the Partnership's subsidiaries were managed by Realmark Corporation, an affiliate of the Partnership's Corporate General Partner, for a fee of generally 5% of annual net rental income of the properties. Realmark Corporation and the Corporate General Partner were also reimbursed for disbursements made on behalf of the Partnership. Those transactions are further described, and quantified, in the note to the consolidated financial statements entitled "Related Party Transactions".
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES - -------- --------------------------------------
Audit Engagement: Toski, Schaefer & Co., P.C. was engaged as the Partnership's independent auditor for years 2003 and 2002. All fees incurred in the years ended December 31, 2003 and 2002 were approved by the Audit Committee.
Audit Fees: Audit fees for the audit of the Partnership's annual financial statements included in the Partnership's annual report on Form 10-K and those financial statements included in the Partnership's quarterly reports on Form 10-Q by Toski, Schaefer & Co., P.C. for the years ended December 31, 2003 and 2002 totaled $24,150 and $18,400, respectively.
Audit-Related Fees: None.
Tax Fees: The Partnership engaged Toski, Schaefer & Co., P.C. to provide tax filing and compliance services during the year ended December 31, 2003. The fees for these services amounted to $3,558. No tax services were provided during the year ended December 31, 2002.
All Other Fees: None.
The Audit Committee has set a policy that all fees incurred by the Partnership for services performed by its independent auditors must be pre-approved by the Audit Committee. All fees related to 2003 were pre-approved by the Audit Committee.
The Audit Committee oversees the Partnership's financial reporting process. Management has the primary responsibility for the financial statements and the financial reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee has the sole authority to retain and terminate the Partnership's independent auditors and approves all fees paid to the independent auditors. During 2003 and 2002, the Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee has discussed with the independent auditors the auditors' independence from management and the Partnership, including the matters in the written disclosures required by the Independence Standards Board, and considered the scope and type of non-audit services provided by the auditor when reviewing the compatibility of those non-audit services with the auditors' independence.
The Audit Committee discussed with the Partnership's independent auditors the overall scope and plans for their audit. The Audit Committee meets with the independent auditors to discuss the results of their examination, their evaluations of the Partnership's internal controls, and the overall quality of the Partnership's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the General Partners (and the General Partners have approved) that the audited financial statements be included in the annual report on Form 10-K for the year ended December 31, 2003.
PART IV -------
ITEM 15:
ITEM 15: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K - -------- ------------------------------------------------------------------
(a) Consolidated Financial Statements Page --------------------------------- ----
Independent Auditor's Report Consolidated Statements of Net Assets in Liquidation as of December 31, 2003 and 2002 Consolidated Statements of Changes in Net Assets in Liquidation for the year ended December 31, 2003 and for the period June 1, 2002 to December 31, 2002 Consolidated Statements of Operations for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001 Consolidated Statements of Partners' Equity for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001 Consolidated Statements of Cash Flows for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001 Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULE ----------------------------
(i) Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto.
(b) Reports on Form 8-K -------------------
None.
(c) Exhibits --------
2. Plan of acquisition, reorganization, arrangement, liquidation, or succession
(a) Stipulation of Settlement Agreement dated August 29, 2001 is incorporated herein by reference.
(b) Order and Final Judgment Approving Settlement and Awarding Fees and Expenses dated November 29, 2001 is incorporated herein by reference.
4. Instruments defining the rights of security holders, including indentures.
(a) Amended and Restated Agreement and Certificate of Limited Partnership filed with the Registration Statement of the Registrant Form S-11, filed September 30, 1987, and subsequently amended, is 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 is incorporated herein by reference.
14. Code of Ethics is filed herewith.
21. Subsidiaries of the Partnership is filed herewith.
31. Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, is filed herewith.
32. Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is filed herewith.
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 - VI B
By: /s/ Joseph M. Jayson March 30, 2004 -------------------- -------------- 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
/s/ Joseph M. Jayson March 30, 2004 ----------------------------------------- -------------- JOSEPH M. JAYSON, Date President, Treasurer and Director
/s/ Judith P. Jayson March 30, 2004 ----------------------------------------- -------------- JUDITH P. JAYSON, Date Director
INDEPENDENT AUDITOR'S REPORT ----------------------------
The Partners Realmark Property Investors Limited Partnership - VI B:
We have audited the accompanying consolidated statements of net assets in liquidation of Realmark Property Investors Limited Partnership - VI B and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of changes in net assets in liquidation for the year ended December 31, 2003 and for the period June 1, 2002 to December 31, 2002. In addition, we have audited the consolidated statements of operations, partners' equity, and cash flows for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001. Our audits also included the financial statement schedule listed in the index at Item 15. These consolidated financial statements and the financial statement schedule are the responsibility of the General Partners. Our responsibility is to express an opinion on the consolidated financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 audits provide a reasonable basis for our opinion.
As discussed in note 1 to the consolidated financial statements, on May 30, 2002, the Partnership adopted a plan of termination and liquidation. As a result, the Partnership has changed its basis of accounting from the going concern to the liquidation basis effective June 1, 2002.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Realmark Property Investors Limited Partnership - VI B and Subsidiaries as of December 31, 2003 and 2002, and the related changes in net assets in liquidation for the year ended December 31, 2003 and for the period June 1, 2002 to December 31, 2002, and the results of their operations and their cash flows for the period January 1, 2002 to May 31, 2002 and for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. 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.
/s/ TOSKI, SCHAEFER & CO., P.C. ------------------------------- TOSKI, SCHAEFER & CO., P.C. Williamsville, New York March 26, 2004
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements December 31, 2003, 2002 and 2001
(1) Liquidation of the Partnership ------------------------------
On May 30, 2002, the Partnership sold its remaining property investment, Players Club North Apartments, and adopted a plan of termination and liquidation under which obligations to non-affiliates will be paid and net proceeds will be distributed to the limited partners.
(2) Formation and Operation of Partnership --------------------------------------
Realmark Property Investors Limited Partnership - VI B (the Partnership) is a Delaware limited partnership formed on September 21, 1987, to invest in a diversified portfolio of income producing real estate investments.
In 1989 and 1990, the Partnership sold, through a public offering, 78,625.1 units of limited partnership interest for $7,862,510. The general partners are Realmark Properties, Inc. (the Corporate General Partner) and Joseph M. Jayson (the Individual General Partner) who is the sole stockholder of J.M. Jayson & Company Inc. Realmark Properties, Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc.
Under the partnership agreement, the general partners and their affiliates can receive compensation for services rendered and reimbursement for expenses incurred on behalf of the Partnership (note 9).
(3) Summary of Significant Accounting Policies ------------------------------------------
(a) Basis of Accounting and Consolidation -------------------------------------
As a result of the plan of termination and liquidation, the Partnership changed its basis of accounting from the going concern basis to the liquidation basis effective June 1, 2002. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts.
In estimating liquidation values, fees paid to the plaintiffs' legal counsel, amounting to $257,929, were recorded as a loss on settlement of the lawsuit.
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Partnership and its two subsidiaries, that are wholly-owned: (1) Realmark-Players, LLC that owned Players Club North, a 144 unit apartment complex located in Lutz, Florida, acquired in 1991. On May 30, 2002, Players Club North was sold. (2) Realmark-Villa, LLC that owned Fairway Club, a 192 unit apartment complex located in Greenville, South Carolina, acquired in 1991 for $3,100,000. On August 16, 2001, Fairway Club was sold.
In consolidation, all intercompany accounts and transactions have been eliminated.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) 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 using the straight-line method over the estimated useful lives of the assets. Significant improvements are capitalized, while expenditures for maintenance, repairs and replacements are charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation and gains and losses are reflected in the consolidated statements of operations.
The Partnership reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In determining whether there is an impairment of long-lived assets, the Partnership compares the sum of the expected future net cash flows (undiscounted and without interest charges) to the carrying amount of the assets.
The Partnerships' policy is to consider a property to be held for sale or disposition when the Partnership or venture has committed to a plan to sell or dispose of such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements of the property thus allowing the lender to realize upon its security. Any properties identified as "held for sale or disposition" are no longer depreciated.
(d) Cash and Equivalents --------------------
Cash and equivalents include money market accounts and any highly liquid debt instruments purchased with a maturity of three months or less.
(e) Deferred Mortgage Costs -----------------------
Costs incurred in obtaining mortgage financing are deferred and amortized using the straight-line method over the life of the respective mortgage.
(f) Joint Ventures --------------
The Partnership's minority interests in joint ventures are accounted for on the equity method.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Summary of Significant Accounting Policies, Continued -----------------------------------------------------
(g) Rental Income -------------
Rental income is recognized as earned according to the terms of the leases that are generally for periods of one year or less, payable monthly. Delinquent rents are not recorded.
(h) Per Unit Data -------------
Per limited partnership unit data is based on the weighted average number of limited partnership units outstanding for the period.
(i) Income Allocation and Distributable Cash Flows ----------------------------------------------
The partnership agreement provides that income not arising from sale and refinancing activities and all partnership losses are to be allocated 97% to the limited partners and 3% to the general partners. Partnership income arising from sale or refinancing activities is allocated in the same proportion as distributions of distributable cash from sales proceeds. In the event there is no distributable cash from sales proceeds, taxable income will be allocated 87% to the limited partners and 13% to the general partners. The above is subject to tax laws that were applicable at the time of the formation of the Partnership and may be adjusted due to subsequent changes in the Internal Revenue Code.
The partnership agreement also provides for the distribution to the partners of net cash flow from operations. As a result of the sale of the Partnership's last property, there will be no future distributions of net cash flow from operations. Sale or refinancing proceeds are distributable to the extent available, 100% to the limited partners until there has been a return of the limited partner's capital contribution plus an amount sufficient to provide a 7%, not compounded, return on their adjusted capital contributions for all years following the termination of the offering of the units. It is anticipated that there will not be sufficient cash flow from the sale of the Partnership's remaining property to provide this return to the limited partners.
(j) Income Taxes ------------
No income taxes are included in the consolidated financial statements since the taxable income or loss of the Partnership is reportable by the partners on their income tax returns. At December 31, 2003, net assets for financial reporting purposes were equal to the tax bases of the net assets.
(k) Segment Information -------------------
The Partnership's operating segments all involve the ownership and operation of income-producing real property, and are aggregated into one reporting segment.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Summary of Significant Accounting Policies, Continued -----------------------------------------------------
(l) Reclassifications -----------------
Reclassifications have been made to certain 2002 amounts in order to conform them to the 2003 presentation.
(4) Investments in Real Estate --------------------------
On January 1, 2002, the Partnership adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 establishes the accounting and reporting standards for the impairment or disposal of long-lived assets by requiring those assets to be measured at the lower of depreciated cost or fair value less selling costs, whether reported on continuing operations or in discontinued operations. This standard does not change the fundamental provisions of SFAS No. 121; however, it resolves various implementation issues of SFAS No. 121. The adoption of this standard did not have a material effect on the Partnership's consolidated financial position or results of operations for the year ended December 31, 2002.
Players Club North Apartments was classified as property held for sale prior to the adoption of SFAS No. 144 and, accordingly, its results of operations and gain on sale have been recorded in continuing operations. On May 30, 2002, the Partnership sold Players Club North Apartments to an unaffiliated entity for cash of $5,548,000 and recognized a related gain on the sale amounting to $2,682,934.
On August 16, 2001, the Partnership sold Fairway Club Apartments to an unaffiliated entity for cash of $4,373,000 and a $326,950 note from the purchaser (note 5), and recognized a related gain on the sale amounting to $1,851,531.
(5) Note Receivable ---------------
In connection with the sale of Fairway Club Apartments on August 16, 2001, the Partnership received a note from the purchaser amounting to $326,950. The note bears interest at the rate of 7% annually through December 31, 2001 and 8% annually, thereafter, until December 31, 2002, when all principal and accrued interest shall be due and payable. In December 2002, the general partners agreed to a reduction of the note receivable in the amount of $100,000. The remaining principal and accrued interest were received in December 2002.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Estimated Costs During the Period of Liquidation ------------------------------------------------
Under the liquidation basis of accounting, the Partnership is required to estimate and record the costs associated with executing the plan of liquidation as a liability. These amounts can vary significantly due to, among other things, the costs of retaining personnel, the costs of insurance, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with cessation of the Partnership's operations. These costs are estimates and are expected to be paid out over the liquidation period. The Partnership's estimated costs during the period of liquidation as of December 31, 2003 and 2002 are as follows:
2003 2002 ---- ----
Professional fees $ 34,941 60,000 Office and administrative expense 33,804 40,000 --------- --------
Total $ 68,745 100,000 ========= ========
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Investment in Joint Venture ---------------------------
The Partnership had an 11.5% interest in a joint venture with Realmark Property Investors Limited Partnership-II (RPILP-II), an entity affiliated through common general partners. The venture owned and operated the Foxhunt Apartments located in Dayton, Ohio. The joint venture agreement provided that any income, loss, gain, cash flow, or sale proceeds be allocated 88.5% to RPILP-II and 11.5% to the Partnership. On March 1, 2001, the apartment complex was sold to an unaffiliated entity for $7,600,000, resulting in a net gain to the joint venture for financial reporting purposes of approximately $4,760,000, after considering costs of the sale. The net proceeds realized by the venture were approximately $1.1 million.
Summary financial information of the Venture follows:
Balance Sheet Information ------------------------- December 31, ----
Assets - cash $ 19,117 ======== Liabilities - accounts payable $ 19,117 ========
Operating Information --------------------- Year ended December 31, ---- Income: Rental $ 250,547 Interest and other 7,842 -------------- Total income 258,389 -------------- Expenses: Property operations 155,995 Interest 82,090 Administrative: Affiliated parties 18,437 Other 22,897 -------------- Total expenses 279,419 --------------
Net loss before gain on sale of property (21,030)
Gain on sale of property 4,760,295 -------------- Net income $ 4,739,265 ==============
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Investment in Joint Venture, Continued -------------------------------------- ---- Allocation of net income: The Partnership 545,015 RPILP-II 4,194,250 ----------- Total $ 4,739,265 ===========
A reconciliation of the Partnership's investment in the Foxhunt Joint Venture follows:
----
Beginning balance $ 101,562 Equity in net income 545,015 Cash distribution (646,577) ------------- Ending balance $ -- =============
(8) Related Party Transactions --------------------------
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 follows:
In addition to the above, other property specific expenses such as payroll, benefits, etc. are charged to property operations on the Partnership's consolidated statements of operations. Receivables from affiliated parties are payable on demand and bear interest at 11%.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Related Party Transactions, Continued -------------------------------------
Receivables from affiliated parties amounted to $245 at December 31, 2002.
Property Disposition Fee ------------------------
According to the terms of the partnership agreement, the general partners are also allowed to collect a property disposition fee upon sale of acquired properties. This fee is not to exceed the lesser of 50% of amounts customarily charged in arm's-length transactions by others rendering similar services for comparable properties or 3% of the sales price. The property disposition fee is subordinate to payments to the limited partners of a cumulative annual return (not compounded) equal to 7% of their average adjusted capital balances and to repayment to the limited partners of an amount equal to their original capital contributions. Since these conditions described above have not been met, no disposition fees have been paid or accrued on properties sold in prior years.
Distributions -------------
U.S.Apartments, LLC, is an affiliated company in which the Individual General Partner is the Chairman, Director, and sole stockholder. U.S. Apartments, LLC owns 4,046.2 units of limited partnership interest and received its proportionate share of distributable proceeds amounting to $102,989 in November 2002 from the sale of Players Club North Apartments.
(9) Settlement of Lawsuit ---------------------
As previously reported, the Partnership, as a nominal defendant, the general partners of the Partnership and of affiliated public partnerships (the "Realmark Partnerships") and the officers and directors of the Corporate General Partner, as defendants, had been involved in a class action litigation at the state court level regarding the payment of fees and other management issues.
On August 29, 2001, the parties entered into a Stipulation of Settlement (the "Settlement"). On October 4, 2001, the Court issued an "Order Preliminary Approving Settlement' (the "Hearing Order") and on November 29, 2001, the court issued an "Order and Final Judgment Approving Settlement and Awarding Fees and Expenses" and dismissing the complaints with prejudice. The Settlement provided, among other things, that all of the Realmark Partnerships' properties be disposed of. The general partners will continue to have primary authority to dispose of Partnerships' properties. If either (i) the general partners have not sold or contracted to sell 50% of the Partnerships' properties (by value) by April 2, 2002 or (ii) the general partners have not sold or contracted to sell 100% of the Partnerships' properties by September 29, 2002, then the primary authority to dispose of the Partnerships' properties will pass to a sales agent designated by plaintiffs' counsel and approved by the Court. On October 4, 2002, the court appointed a sales agent to work with the general partners to continue to sell the Partnerships' remaining properties.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Settlement of Lawsuit, Continued --------------------------------
The settlement also provided for the payment by the Partnerships of fees to the plaintiffs' attorneys. These payments are payable out of the proceeds from the sale of all of the properties owned by all of the Realmark Partnerships, following the sale of the last of these properties in each partnership. Plaintiffs' counsel will receive 15% of the amount by which the sales proceeds distributable to limited partners in each partnership exceeds the value of the limited partnership units in each partnership (based on the weighted average of the units' trading prices on the secondary market as reported by Partnership Spectrum for the period May through June 2001). In no event may the increase on which the fees are calculated exceed 100% of the market value of the units as calculated above. On May 30, 2002, the Partnership sold its remaining property, and in June 2002, a payment of $257,929 was made to the plaintiffs' attorneys.
Schedule III ------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI B AND SUBSIDIARIES
Real Estate and Accumulated Depreciation December 31, 2002 and 2001
(1) Cost for Federal income tax purposes - none.
(2) A reconciliation of the carrying amount of land and buildings as of December 31, 2002 and 2001 follows: Partnership Properties ---------------------- 2002 2001 ---- ---- Balance at beginning of year $ 3,097,879 6,821,020 Dispositions (6) (3,097,879) (3,723,141) ----------- ----------- Balance at end of year $ -- 3,097,879 =========== ===========
Joint Venture Properties ------------------------ 2002 2001 ---- ---- Balance at beginning of year $ -- 5,513,128 Dispositions (5) -- (5,513,128) ----------- ---------- Balance at end of year $ -- -- =========== ==========
(3) A reconciliation of accumulated depreciation for building and improvements for the years ended December 31, 2002 and 2001 is as follows:
Partnership Properties ---------------------- 2002 2001 ---- ---- Balance at beginning of year $ 1,032,199 2,074,141 Dispositions (6) (1,032,199) (1,041,942) ------------- ---------- Balance at end of year (4) $ -- 1,032,199 ============= ==========
Joint Venture Properties ------------------------ 2002 2001 ---- ---- Balance at beginning of year $ -- 3,083,021 Dispositions (5) -- (3,083,021) ------------ ----------- Balance at end of year (4) $ -- -- ============ ===========
(4) Balance applies entirely to buildings and improvements. (5) Sale of Foxhunt Apartments in 2001. (6) Sale of Players Club North Apartments in 2002 and Fairway Club Apartments in 2001.