ITEM 1: BUSINESS - ------- --------
The Registrant, Realmark Property Investors Limited Partnership-VI A (the "Partnership"), is a Delaware Limited Partnership organized in September 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 10, 1987, and concluded the offering on November 10, 1988, having raised a total of $15,737,790 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. At December 31, 2003 the Partnership has a 50% joint partner interest in Research Triangle Industrial Park Joint Venture, which owns an office/distribution facility in Raleigh, North Carolina. Additionally, the Partnership had a 40% joint partner interest in Realmark/Gold Key Associates, which owned the Carriage House of Englewood, Ohio apartment complex. The other interests in the ventures are owned by limited partnerships affiliated with the Partnership through common general partners. On March 1, 2001, the Carriage House property was sold. On August 28, 2002 and October 31, 2002, the Partnership sold Beaver Creek and Countrybrook Estates, respectively, to unaffiliated entities. On June 30, 2003, July 31, 2003, and December 17, 2003, the Partnership sold Pomeroy Park Apartments, Inducon Columbia, and Stonegate Townhouses, respectively, to unaffiliated entities. Refer to Item 7 and the notes to the financial statements for details of these transactions.
It is anticipated that the Partnership will be entering into a sales contract in the near future (one to six months) which will be subject to sales conditions which are customary for sales contracts and there is no assurance that the sale will be consummated.
The business of the Partnership is not seasonal and it competes on the basis of rental rates and property operations with similar types of properties in vicinities in which the Partnership's properties are located. The Partnership has no real property investments located outside the United States. The Partnership does not segregate revenue or assets by geographic region, since, in management's view, such a presentation would not be significant to an understanding of the Partnership's business or financial results taken as a whole. 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.
The occupancy for each complex at December 31 was as follows:
Property 2003 2002 2001 -------- ---- ---- ---- Beaver Creek - - 88% Countrybrook Estates - - 78% Stonegate Townhouses - 94% 93% Pomeroy Park - 70% 74% Inducon Columbia - 91% 75% Research Triangle 100% 100% 100%
The percent of total Partnership revenue generated by each complex for the last three years was as follows:
2003 2002 2001 ---- ---- ---- Beaver Creek - 8% 12% Countrybrook Estates - 25% 25% Stonegate Townhouses 48% 24% 23% Pomeroy Park 28% 28% 28% Inducon Columbia 24% 15% 12%
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 or the failure of the Partnership to sell an investment which is under contract.
ITEM 2:
ITEM 2: PROPERTIES - ------- ----------
At December 31, 2003, the Partnership and its joint venture investees owned Research Triangle Industrial Park, a 150,000 square foot office/warehouse located in Raleigh, North Carolina. The property was purchased in 1992. The first mortgage loan on the property accrues interest at 8.06% and had a balance of $5,060,888 at December 31, 2003.
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 predjudice. The Settlement provided, among other things, that:
o The payable to the general partners and/or their affiliates by the Realmark Property Investors Limited Partnership VI-A at March 31, 2001, in the amount of $481,598, cease to accrue interest.
o 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, which are not calculable at this time but may be significant, are payable out of the proceeds from the sale of all of the properties owned by all of the Realmark Partnerships, following the sale of the last of these properties in each partnership. Plaintiffs' counsel will receive 15% of the amount by which the sales proceeds distributable to limited partners in each partnership exceeds the value of the limited partnership units in each partnership (based on the weighted average of the units' trading prices on the secondary market as reported by Partnership Spectrum for the period May through June 2001). In no event may the increase on which the fees are calculated exceed 100% of the market value of the units as calculated above.
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 1,624 record holders of units of limited partnership interest.
The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make distributions of cash to its partners. The partnership agreement provides for the distribution to the partners of net cash flow from operations. In connection with the pending sale of the Partnership's properties (Item 3), it is anticipated that there will be no future distributions of net cash flow from operations. All future distributions of net cash from sales proceeds will be distributed, 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 properties to provide this return to the limited partners. In 2003, the Partnership distributed $250,000 to the limited partners. There were no distributions for 1999 through 2002.
The gain on the sale of the properties will be allocated in the same proportions as distributions of distributable cash from sale proceeds (anticipated to be 100% to the limited partners). In the event there is no distributable cash from sale proceeds, taxable income will be allocated 87% to the limited partners and 13% to the general partners. Any tax loss arising from a sale will be allocated 97% to the limited partners and 3% 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.
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------- ----------------------------------------------------------------------- OF OPERATIONS -------------
Liquidity and Capital Resources - -------------------------------
Effective January 1, 2001, the Partnership began formally marketing all of its properties for sale. On August 28, 2002, the partnership sold Beaver Creek Apartments to an unaffiliated entity for cash of $2,320,000 and a $350,000 three-year promissory note from the purchaser, resulting in a net gain of approximately $770,000. On October 31, 2002 the Partnership sold Countrybrook Estates to an unaffiliated entity for $5,200,000. After satisfaction of the $3,900,000 mortgage loan on the property and payment of closing costs, the net gain amounted to approximately $1,020,000. On June 30, 2003, the Partnership sold Pomeroy Park Apartments to an unaffiliated entity for cash of $4,000,000. After satisfaction of the $1,795,000 mortgage loan on the property, payment of closing costs, and the payment of a $150,000 termination fee, the net gain amounted to approximately $1,000,000. On July 31, 2003, the Partnership sold Inducon Columbia to an unaffiliated entity for cash of $3,150,000, resulting in a net loss of approximately $150,000. On December 17, 2003, the Partnership sold Stonegate Townhouses to an unaffiliated entity for cash of $5,150,000. After satisfaction of the $2,507,000 mortgage loan on the property and payment of closing costs, the net gain amounted to approximately $2,200,000. The sales proceeds enabled the Partnership to make a distribution to the limited partners in the last quarter of 2003 in the amount of $2,500,000. There was no distribution in 2002 or 2001. In accordance with the settlement of the lawsuit (Item 3) it is anticipated that with the sale of the remaining joint venture, the Partnership may be in a position to make distributions to the limited partners. These distributions will be reduced by the amount of fees payable to the plaintiffs' legal counsel in connection with the settlement agreement (Item 3), any outstanding liabilities and any mortgage prepayment penalties incurred with regard to the sale of the Partnership's joint venture.
Limited partners should be aware that it is possible that they will receive an allocation of income from gain on sale of properties on which they will be required to pay income taxes and there is no assurance that distributions from the sale of the properties will be sufficient to satisfy these obligations.
Except as described above and in the consolidated financial statements, the general partner is not aware of any trends or events, commitments or uncertainties that may impact liquidity in a material way.
Results of Operations: - ---------------------
As a result of the sale of its remaining wholly-owned properties, the results of operations of the Partnership for the year ended December 31, 2003, before equity in earnings of joint ventures and a gain on sale of properties, excluding Pomeroy Park Apartments, Inducon Columbia, and Stonegate Townhouses (the "Sold Assets"), which were sold in 2003, and excluding Beaver Creek and Countrybrook (the "Sold Assets"), which were sold in 2002, produced a net loss of $341,783. Excluding the Sold Assets, the results of operations, before equity in earnings of joint ventures and a gain on sale of properties, was a net loss of $387,808 in 2002 and a net loss , also excluding depreciation, of $363,104 in 2001.
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 decrease in most components of the consolidated statement of operations was a result of the remaining wholly-owned properties being sold in 2003 and rental operations ceasing at the time of the sales.
2002 as compared to 2001 - ------------------------
Rental income at the properties, excluding Beaver Creek and Countrybrook (the "Sold Assets"), which were sold during the year 2002, decreased approximately 10% for the year ended December 31, 2002 as compared to 2001. Excluding the Sold Assets, rental income decreased approximately $251,000 for the same period. This was due mainly to increased vacancies at Pomeroy Park of $157,000, $19,000 at Stonegate Townhouses and $22,000 at Inducon Columbia, and increased concessions of $38,000 at Stonegate Townhouses.
Excluding the Sold Assets, total expenses decreased $2,000 as property operation expenses increased $71,000, other administrative expenses decreased $67,000 and other expenses decreased $6,000. The increase in property operating costs was due mainly to an increase in repairs and insurance on all properties partially offset by decreases in utility costs The decrease in other administrative expenses was primarily attributable to an increase in advertising offset by a decrease in legal fees. The increase in administrative expense to affiliates was primarily for professional fees.
Joint Venture - -------------
The Research Triangle Industrial Park Joint Venture experienced 100% occupancy in 2003 and 2002. Its 2003 net income remained consistent with 2002. Rental income increased approximately 1% in 2003 due to the sole tenant of Research Triangle renewing their lease late in 2002. Total expenses increased 2% mainly due to legal fees, commissions from the lease renewal, and increased insurance expense. Because the joint venture has had net income during each of the last three years, the Partnership's 50% equity has enabled the Partnership to receive cash distributions from the Venture of $72,000 in 2003, $108,000 in 2002 and $104,500 in 2001.
ITEM 7A:
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------- ----------------------------------------------------------
The Partnership invests only in short term money market instruments, in amounts in excess of daily working cash requirements. The rates of earnings on those investments increase or decrease in line with the general movement of interest rates. The mortgage loans on the Partnership's properties are fixed rate and therefore, are not subject to market risk.
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 - VIA 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 9,811.1 units of limited partnership interest amounting to approximately 6.2% of the Partnership interest at December 31, 2003. The general partners and the executive officers of the Corporate General Partners, as of December 31, 2003, owned 90 units of limited partnership interest. The general partners and affiliates will receive their proportionate share, as limited partners, of any distributable proceeds from the sale of the properties.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ----------------------------------------------
The properties of the Partnership and its subsidiaries are 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 are 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 for 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 $40,750 and $37,850, 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 $6,745. 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 Balance Sheets as of December 31, 2003 and 2002 Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001 Consolidated Statements of Partners' Equity for the years ended December 31, 2003, 2002 and 2001 Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 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 -------------------
On January 5, 2004, the Partnership filed Form 8-K with the Securities and Exchange Commission which under Item 2 reported the sale, on December 17, 2003, of Stonegate Townhouses. The property was sold to an unaffiliated entity for $5,150,000, resulting in a net gain of approximately $2.2 million.
(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 Certificate and Agreement of Limited Partnership filed with the Registration Statement of the Registrant Form S-11, filed September 30, 1987, and subsequently amended, incorporated herein by reference.
10. Material contracts.
(a) Property Management Agreement with Realmark Corporation included with the Registration Statement, Form S-11, of the Registrant as filed and amended to date, incorporated herein by reference.
(b) Property sales agreement with an unrelated third-party included with the Partnership's report on Form 8-K on January 5, 2004 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 A
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 Vice President and Director
INDEPENDENT AUDITOR'S REPORT ----------------------------
The Partners Realmark Property Investors Limited Partnership - VI A:
We have audited the accompanying consolidated balance sheets of Realmark Property Investors Limited Partnership - VI A and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, partners' equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 15. These consolidated financial statements and 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.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Realmark Property Investors Limited Partnership - VI A and Subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, 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.
As discussed in note 9 to the consolidated financial statements, the Partnership settled a class and derivative lawsuit in which it was involved. As a result of this settlement, the Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take place within the next twelve months.
/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.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements December 31, 2003, 2002 and 2001
(1) Formation and Operation of Partnership --------------------------------------
Realmark Property Investors Limited Partnership-VI A (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 1987 and 1988, the Partnership sold, through a public offering, 157,378 units of limited partnership interest, including 30 units held by an affiliate of the general partners, for $15,737,790. 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 6).
(2) Summary of Significant Accounting Policies ------------------------------------------
(a) Basis of Accounting and Consolidation
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 four subsidiaries, that are wholly-owned:
(1) Realmark - Columbia, LLC that owned Inducon-Columbia, a three building office complex in Columbia, South Carolina, acquired in 1989 and 1991 for $4,670,991 and sold in 2003. (2) Realmark - Beaver, LLC that owned Beaver Creek, an 80 unit apartment complex located in Monaca, Pennsylvania, acquired in 1989 for $1,879,943 and sold in 2002. (3) Realmark - Countrybrook, LLC that owned Countrybrook Estates, a 240 unit apartment complex located in Louisville, Kentucky, acquired in 1989 for $5,670,984 and sold in 2002. (4) Realmark - Stonegate, LLC that owned Stonegate, a 130 unit apartment complex located in Mobile, Alabama, acquired in 1990 for $4,145,367 and sold in 2003.
The Partnership also owned a residential property, Pomeroy Park, which was sold in 2003.
In consolidation, all intercompany accounts and transactions have been eliminated.
(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.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued -----------------------------------------------------
(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, from 5 to 25 years. 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. At December 31, 2003, no impairment in value has been recognized.
The Partnership and its ventures' 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 or venture 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. All the properties were held for sale in 2003, 2002, and 2001.
(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) Unconsolidated Joint Ventures -----------------------------
The Partnership's investment in Carriage House of Englewood Joint Venture (which was sold in 2001) and Research Triangle Joint Venture is in unconsolidated joint ventures which are accounted for on the equity method. These joint ventures are not consolidated in the Partnership's financial statements because the Partnership is not the majority owner.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued -----------------------------------------------------
(g) Rental Income -------------
Rental income is recognized as earned according to the terms of the leases. Leases for residential properties are generally for periods of one year or less, payable monthly. Commercial leases are generally for periods of one to five years. Delinquent residential property rent is 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 year.
(i) Fair Value of Financial Instruments -----------------------------------
The fair value of the Partnership's financial instruments approximated their carrying values at December 31, 2003.
(j) Income Allocation and Distributable Cash Flow ---------------------------------------------
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 or distributable cash from sale proceeds. In the event there is no distributable cash from sale 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. In connection with the pending sale of the Partnership's properties (note 9), it is anticipated that there will be no future distributions of net cash flow from operations. Sale or refinancing proceeds are distributed 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 properties to provide this return to the limited partners. Distributions amounting to $2,500,000 were made in December 2003. There were no distributions to partners made in 2002 or 2001.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued -----------------------------------------------------
(k) 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.
(l) 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.
(m) Recent Pronouncements ---------------------
In January 2003, the Financial Accounting Standards Board (FASB) issued Financial Interpretation (FIN) No. 46, "Consolidation of Variable Interest Entities." In December 2003, the FASB reissued FIN No. 46R with certain modifications and clarifications. FIN No. 46R is effective on March 31, 2004 for the Partnership. The Partnership does not believe that this pronouncement will have a material impact on its financial position, cash flows, or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The adoption of this pronouncement did not have a material impact on the Partnership's financial position, cash flows, or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this pronouncement did not have a material impact on the Partnership's financial position, cash flows, or results or operations.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) 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.
On December 17, 2003, the Partnership sold Stonegate Townhouses to an unaffiliated entity for $5,150,000 and recognized a related gain on the sale amounting to $2,218,212.
On July 31, 2003, the Partnership sold Inducon Columbia to an unaffiliated entity for $3,150,000 and recognized a related loss on the sale amounting to $148,695.
On June 30, 2003, the Partnership sold Pomeroy Park Apartments to an unaffiliated entity for $4,000,000 and recognized a related gain on the sale amounting to $1,039,412.
On October 31, 2002, the Partnership sold Countrybrook Estates to an unaffiliated entity for $5,200,000 and recognized a related gain on the sale amounting to $1,020,734.
On August 28, 2002, the Partnership sold Beaver Creek Apartments to an unaffiliated entity for cash of $2,320,000 and a $350,000 note from the purchaser (note 4), and recognized a related gain on the sale amounting to $776,434.
All of the properties were classified as property held for sale prior to the adoption of SFAS No. 144 and continued to be actively marketed for sale. Accordingly, their results of operations have been recorded in continuing operations.
(4) Note Receivable ---------------
In connection with the sale of Beaver Creek Apartments on August 28, 2002, the Partnership received a note from the purchaser amounting to $350,000. The note is secured by a second mortgage on Beaver Creek Apartments and a first mortgage on a home in Beaver, Pennsylvania. The first $250,000 of the note bears interest at the rate of 7.5% annually and is payable in monthly installments of $2,000 through August 28, 2005, at which time the remaining unpaid principal and any accrued interest are due and payable. The remaining $100,000 of the note is non-interest bearing and is due on August 28, 2005. However, the payment of the $100,000 may be extended for up to 2 years by the purchaser. If extended, the $100,000 of the note will bear interest at 7.5% annually. In 2003, the Partnership agreed to accept a
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Note Receivable, Continued --------------------------
payment of $329,094 in principal and $369 in interest as payment in full on this note receivable.
(5) Mortgage Loans Payable ----------------------
Mortgage loans payable at December 31, 2002 are as follows:
Total Interest monthly Property collateral rate Maturity payment Balance ------------------- ---- -------- ------- -------
Inducon - Columbia 7.86% 2022 $ 16,787 $ 2,035,320 Stonegate Townhouses 8.43% 2027 20,207 2,534,046 Pomeroy Park 12.00% 2003 19,750 1,767,862 ======== ----------- $ 6,337,228 ===========
These mortgage loans were all repaid in 2003 in connection with the sale of the properties.
(6) 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 properties specific expenses such as payroll, benefits, etc. are charged to property operations on the Partnership's consolidated statements of operations. Payables to affiliated parties are on demand and bear interest at 11%.
Property Disposition Fees -------------------------
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
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Related Party Transactions, Continued -------------------------------------
Property Disposition Fees, Continued ------------------------------------
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 of Realmark Property Investors Limited Partnership-VIA is the sole member. U.S. Apartments, LLC owns 9,811.1 units of limited partnership interest and received its proportionate share of distributable proceeds amounting to $155,853 in 2003 from the sale of properties (note 3).
(7) Investments in Joint Ventures -----------------------------
The Partnership had a 40% interest in a joint venture with Realmark Property Investors Limited Partnership (RPILP), an entity affiliated through common general partners. The venture was formed to own and operate an apartment complex, Carriage House of Eaglewood Apartments, Englewood, Ohio. Since July 1996, when a plan to dispose of the venture's property was established, Carriage House had been carried at the lower of depreciated cost or fair value less costs to sell and was not depreciated. Carriage House was sold on March 1, 2001. While the venture recorded a net gain on the sale, the net proceeds were not sufficient to satisfy the liabilities related to the property. Therefore, the balance of the Partnership's investments in the venture, $74,813, was charged to equity in joint venture operations during 2001.
The Partnership also has a 50% interest in a joint venture with Realmark Property Investors Limited Partnership-II (RPILP-II), an entity affiliated through common general partners. The venture owns and operates the Research Triangle Industrial Park West, an office/warehouse facility located in Research Triangle Park, North Carolina. The joint venture agreement provides that any income, loss, gain, cash flow, or sale proceeds be allocated 50% to the Partnership and 50% to RPILP-II.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Investments in Joint Ventures, Continued ----------------------------------------
Summary financial information for the Venture follows:
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Investments in Joint Ventures, Continued ----------------------------------------
A reconciliation of the Partnership's investment in the Research Triangle Joint Venture is as follows:
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Lease (Lessee) --------------
In connection with the development of property in Columbia, South Carolina, the Partnership entered into an operating lease with the Richland-Lexington Airport District for a period of sixty years, at $89,000 per year. In August of 2002, the lease was renegotiated with terms to recover amounts owing from 2001. The base amount of monthly rent was reduced to $58,760 per year. The amended lease provides that effective January 1, 2007 and each successive five year period throughout the remainder of the agreement, the rental rate shall increase by 5%. The lease covers nine acres located within the boundaries of the Columbia Metropolitan Airport in an area designated as a Foreign Trade Zone. The lease agreement includes an option to lease 5.5 acres of land. The terms of the lease agreement allow for the lessor to cancel the lease if the lessee (the Partnership) fails to make payment of the agreed upon rental within 30 days after receipt of written notice from the lessor that the rental payment is past due. The lease was transferred upon the sale of Inducon Columbia on July 31, 2003 (note 3).
(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 Preliminarily 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 predjudice. The Settlement provided, among other things, that:
o The payable to the general partners and/or their affiliates by Realmark Property Investors Limited Partnership VI - A at March 31, 2001, in the amount of $481,598, cease to accrue interest. o All of the Realmark Partnerships' properties be disposed of. The general partners will continue to have primary authority to dispose of the Partnerships' properties. If either (i) the general partners have not sold or contracted to sell 50% of the Partnerships' properties (by value) by April 2, 2002 or (ii) the general partners have not sold or contracted to sell 100% of the Partnerships' properties by September 29, 2002, then the primary authority to dispose of the Partnerships' properties will pass to a sales agent designated by plaintiffs' counsel and approved by the Court. On October 4, 2002, the Court appointed a sales agent to work with the general partners to continue to sell the Partnerships' remaining properties.
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A 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, which are not calculable at this time but may be significant, are payable out of the proceeds from the sale of all of the properties owned by all of the Realmark Partnerships, following the sale of the last of these properties in each partnership. Plaintiffs' counsel will receive 15% of the amount by which the sales proceeds distributable to limited partners in each partnership exceeds the value of the limited partnership units in each partnership (based on the weighted average of the units' trading prices on the secondary market as reported by Partnership Spectrum for the period May through June 2001). In no event may the increase on which the fees are calculated exceed 100% of the market value of the units as calculated above.
(RESTUBBED TABLE)
*In accordance with Statement of Financial Accounting Standards No. 144, no depreciation was recorded during the disposal period, January 1, 2001 through December 31, 2003.
Schedule III, Cont. -------------------
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP - VI A
Real Estate and Accumulated Depreciation December 31, 2003, 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, 2003, 2002 and 2001 is as follows:
(3) A reconciliation of accumulated depreciation for the years ended December 31, 2003, 2002 and 2001 is as follows:
(4) Balance applies entirely to buildings and improvements. (5) Sale of Carriage House of Englewood Apartments in 2001. (6) Sale of Stonegate Townhouses, Inducon Columbia, and Pomeroy Park Apartments in 2003, and Countrybrook Estates and Beaver Creek Apartments in 2002.