10-Q 1 parking2filing10q093002.txt REALTY PARKING II 10Q FOR QTR ENDING 9/30/02 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) { X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 ------------------ { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to _____ For Quarter Ended September 30, 2002 Commission file number 000-20147 Realty Parking Properties II L.P. (Exact Name of Registrant as Specified in its Charter) Delaware 52-1710286 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 225 East Redwood Street, Baltimore, Maryland 21202 -------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (410) 727-4083 N/A (Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ REALTY PARKING PROPERTIES II L.P. INDEX Page No. Part I. Financial Information Item 1. Financial Statements Balance Sheets 1 Statements of Operations 2 Statements of Partners' Capital 3 Statements of Cash Flows 4 Notes to Financial Statements 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 Item 4. Controls and Procedures 10 Part II. Other Information Item 1. through Item 6. 10 Signatures 11 REALTY PARKING PROPERTIES II L.P. Balance Sheets

See accompanying notes to financial statements 1 REALTY PARKING PROPERTIES II L.P. Statements of Operations (Unaudited)

See accompanying notes to financial statements 2 REALTY PARKING PROPERTIES II L.P. Statements of Partners' Capital Nine Months Ended September 30, 2002 and 2001 (Unaudited)

See accompanying notes to financial statements 3 REALTY PARKING PROPERTIES II L.P. Statements of Cash Flows (Unaudited)

See accompanying notes to financial statements 4 REALTY PARKING PROPERTIES II L.P. Notes to Financial Statements September 30, 2002 (Unaudited) Note 1 - The Fund and Basis of Preparation The accompanying financial statements of Realty Parking Properties II L.P. (the "Fund") do not include all of the information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited interim financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Certain amounts in the statements of operations for 2001 have been reclassified to conform to the presentation for 2002. The unaudited interim financial information should be read in conjunction with the financial statements contained in the 2001 Annual Report. Note 2 - Cash and Cash Equivalents The Fund considers all short-term investments with maturities of three months or less at dates of purchase as cash equivalents. Cash and cash equivalents consist of cash and a money market account and are stated at cost, which approximated market value at September 30, 2002 and December 31, 2001. Note 3 - Investment in Real Estate Investment in real estate is summarized as follows: September 30, 2002 December 31, 2001 Land $ 5,721,351 $ 9,053,445 Building - 1,432,655 ------------- --------------- 5,721,351 10,486,100 Less accumulated depreciation 50,036 428,945 ------------- --------------- Total $ 5,671,315 $ 10,057,155 ============= =============== Depreciation of the garage structures is computed using the straight-line method over 31.5 years for property placed in service prior to January 1, 1994 and 39 years for property placed in service after January 1, 1994. Note 4 - Sales of Properties On August 6, 2002, the Fund sold its Nashville, Tennessee property for $5,000,000. The Fund's investment in the property was $1,625,026, net of accumulated depreciation of $172,706. The gain from the sale totaled $2,832,124, net of expenses of $542,850. On July 31, 2002, the Fund sold its Dallas, Texas property for $2,682,500. Additionally, the Fund received a settlement of $111,138 from the original title company as compensation for the diminished value of the property resulting from an undisclosed easement. The Fund's investment in the property was $1,854,802, net of the settlement payment and accumulated depreciation of $234,792. The gain from the sale totaled $680,555, net of expenses of $147,143. On July 19, 2002, the Fund sold its Tulsa, Oklahoma property for $1,020,000. The Fund's investment in the property was $766,285. The gain from the sale totaled $225,829, net of expenses of $27,886. -5- REALTY PARKING PROPERTIES II L.P. Notes to Financial Statements September 30, 2002 (Unaudited) Note 5 - Discontinued Operations During the third quarter of 2002 the Fund's Tulsa, Oklahoma, Dallas, Texas and Nashville, Tennessee properties were sold. In accordance with the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the results of operations of these properties are reported in discontinued operations for all periods presented in the statements of operations. Income from discontinued operations is summarized as follows: Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2002 2001 2002 2001 ------------ ------------ ------------- ----------- Revenues $ 242,972 $ 271,428 $ 418,960 $ 447,416 Expenses (14,144) (28,719) (76,346) (112,513) Gain on sale of properties 3,738,508 - 3,738,508 - ------------ ------------ ------------- ------------ $ 3,967,336 $ 242,709 $ 4,081,122 $ 334,903 ============ ============ ============= ============ Note 6 - Related Party Transactions The General Partner earned an asset-based management fee for advising the Fund and managing its investments of $31,672 and $25,931 during the three months ended September 30, 2002 and 2001, respectively, and $99,645 and $78,006 during the nine months ended September 30, 2002 and 2001, respectively (portions of which have been recorded in discontinued operations). This fee is equal to 0.75% of the Fund's capital contributions invested in certain properties or fair values based on updated appraisals for certain other properties. Additionally, the General Partner was reimbursed for certain costs incurred relating to administrative services for the Fund totaling $25,423 and $20,709 during the three months ended September 30, 2002 and 2001, respectively, and $74,268 and $72,012 during the nine months ended September 30, 2002 and 2001, respectively. Note 7 - Note payable In July 2000, the Fund's line of credit agreement with a bank was amended to reduce the bank's commitment from $3,500,000 to $736,000, the principal balance outstanding at that time. The interest rate on outstanding borrowings was the bank's prime rate. The line of credit was repaid in full in July 2001. Interest expense totaled $695 and $18,616 during the three and nine months ended September 30, 2001, respectively. Note 8 - Net Earnings Per Unit of Assignee and Limited Partnership Interest Net earnings per unit of assignee and limited partnership interest as disclosed on the Statements of Operations is based upon 1,392,800 units outstanding. Note 9 - Subsequent Event On November 14, 2002, the Fund plans to make a cash distribution totaling $300,000, of which 99% will be allocated to Assignee and Limited Partners. This distribution is derived from funds provided by operating activities for the quarter ended September 30, 2002. Holders of Units will receive a cash distribution of approximately $0.21 per Unit. -6- REALTY PARKING PROPERTIES II L.P. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Fund acquired twelve Properties through 1994 and sold ten of the Properties through September 30, 2002. The Fund does not contemplate making any major improvements to its properties during 2002. At September 30, 2002, the Fund had a working capital position that includes cash and cash equivalents of $580,858, accounts receivable (net of real estate taxes payable) of $5,000, and accounts payable and accrued expenses of $91,477. Cash and cash equivalents increased $263,168 during the quarter ended September 30, 2002. This increase represents the net effect of $363,168 in cash provided by operating activities, $8,095,759 of proceeds from the sales of three properties, net of the quarterly distribution to investors totaling $200,000, and sales proceeds distributions to investors totaling $7,995,759. On November 14, 2002, the Fund plans to make a cash distribution totaling $300,000, of which 99% will be allocated to Assignee and Limited Partners. This distribution is derived from funds provided by operating activities for the quarter ended September 30, 2002. Holders of Units will receive a cash distribution of approximately $0.21 per Unit. On September 10, 2002, the Fund made a sales proceeds distribution (from the three property sales discussed below) totaling $7,995,759, of which 99% was allocated to Assignee and Limited Partners. Holders of Units received a cash distribution of approximately $5.69 per Unit. On August 6, 2002, the Fund sold its Nashville, Tennessee property for $5,000,000. The Fund's investment in the property was $1,625,026, net of accumulated depreciation of $172,706. The gain from the sale totaled $2,832,124, net of expenses of $542,850. On July 31, 2002, the Fund sold its Dallas, Texas property for $2,682,500. Additionally, the Fund received a settlement of $111,138 from the original title company as compensation for the diminished value of the property resulting from an undisclosed easement. The Fund's investment in the property was $1,854,802, net of the settlement payment and accumulated depreciation of $234,792. The gain from the sale totaled $680,555, net of expenses of $147,143. On July 19, 2002, the Fund sold its Tulsa, Oklahoma property for $1,020,000. The Fund's investment in the property was $766,285. The gain from the sale totaled $225,829, net of expenses of $27,886. Results of Operations In accordance with the provisions of Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), the statements of operations present income from continuing operations and from discontinued operations. Discontinued operations include the operating results of properties sold in 2002. The prior year amounts for these properties have been reclassified to discontinued operations as required by SFAS No. 144. The following discussion and analysis of the results of operations conforms to this presentation in the statements of operations. Parking lot rental income includes base rents and percentage rents earned pursuant to lease agreements in effect during each period. The Fund leases its facilities to Central Parking System (the "Advisor") under terms that typically include a minimum rent calculated as a percentage of certain acquisition costs. In addition, the Advisor is typically obligated to pay percentage rent, calculated as a percentage of gross parking revenues. -7- REALTY PARKING PROPERTIES II L.P. Management's Discussion and Analysis of Financial Condition and Results of Operations Income from Continuing Operations Income from continuing operations includes results from two of the Fund's properties (San Antonio and Phoenix) in 2002 and reflects these same two properties and the San Diego property sold in the fourth quarter of 2001. Expenses not directly identifiable with a specific property held for sale are reflected in continuing operations. Parking lot revenue of $101,481 was earned during the three months ended September 30, 2002, reflecting a decrease of $52,922 from the same period in 2001. The decrease is a result of the San Diego property sale during 2001 ($54,642), and an increase in percentage rent earned during the third quarter of 2002 ($1,720). Parking lot revenue of $415,074 was earned during the nine months ended September 30, 2002, reflecting a decrease of $179,875 from the same period in 2001. The decrease is a result of the San Diego property sale during 2001 ($163,925), and a net decrease in percentage rents earned during 2002 ($15,950). The decrease in percentage rents is primarily attributed to the Phoenix airport site, which experienced lower parking revenues as a result of the decrease in airport traffic after the September 11 events. Expenses incurred during the three months ended September 30, 2002, net of depreciation, totaled $41,855 reflecting a decrease of $13,878 from the same period in 2001. Expenses incurred during the nine months ended September 30, 2002, net of depreciation, totaled $136,898 reflecting a decrease of $33,924 from the same period in 2001. The net decreases in expenses for the three and nine months ended September 30, 2002 are primarily attributed to four factors. Administrative expenses decreased primarily because of decreases in the level of support services required by the Fund. Professional fees decreased because consulting expenses incurred during 2001 were not incurred during 2002. Management fees increased as a result of updated appraisals that increased the fair market basis of the assets. The Fund made the final principal payment on its note payable in July 2001, and, therefore, there was no interest expense recorded during 2002. Discontinued Operations Discontinued operations reflects parking revenue from the Fund's properties in Tulsa, Oklahoma, Dallas, Texas and Nashville, Tennessee and expenses that can be directly attributed to these three properties. Parking lot revenue of $242,973 and $418,960 was earned during the three and nine months ended September 30, 2002, respectively, reflecting a decrease of $28,456 from the same periods in 2001. The decrease is the result of property sales during 2002. Expenses incurred during the three months ended September 30, 2002, net of depreciation, totaled $14,143 reflecting a decrease of $3,206 from the same period in 2001. Expenses incurred during the nine months ended September 30, 2002 totaled $53,606 reflecting a decrease of $24,797 from the same period in 2001. The decrease in the nine months ended September 30, 2002 is the result of lower Tennessee franchise and excise taxes on the Fund's Nashville property, net of higher management fees based on updated appraisals obtained in 2001. Outlook The Fund is currently undergoing serious negotiations with separate buyers for the two remaining properties in San Antonio, Texas and Phoenix, Arizona. Should these negotiations result in sales of these final two properties, the Fund will conclude its operations. -8- REALTY PARKING PROPERTIES II L.P. Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Critical accounting policies are those that are both important to the presentation of financial condition and results of operations and require management's most difficult, complex or subjective judgments. The Fund's critical accounting policy relates to the evaluation of impairment of long-lived assets. If events or changes in circumstances indicate that the carrying value of a property to be held and used may be impaired, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the property in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the property is written down to its estimated fair value and an impairment loss is recognized. If the Fund decides to sell a property, it evaluates the recoverability of the carrying amount of the assets. If the evaluation indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated fair value less costs to sell and an impairment loss is recognized. The estimates of cash flows and fair values of the properties are based on current market conditions and consider matters such as each of the parking properties' parking rates, operating expenses and/or the terms of a net lease with a parking operator, recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. These estimates are subject to revision as market conditions, and the Fund's assessment of them, change. -9- REALTY PARKING PROPERTIES II L.P. PART I. FINANCIAL INFORMATION Item 3. Quantitative and Qualitative Disclosures About Market Risk None Item 4. Controls and Procedures Within the 90-day period prior to the filing of this quarterly report, an evaluation was performed under the supervision and with the participation of the Fund's management, including the Chief Executive Officer and Chief Financial Officer of the general partner, of the effectiveness of the design and operation of disclosure controls and procedures as defined in Rule 13a-14 of the rules promulgated under the Securities and Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART II. OTHER INFORMATION Item 1. Legal Proceedings Inapplicable Item 2. Changes in Securities and Use of Proceeds Inapplicable Item 3. Defaults upon Senior Securities Inapplicable Item 4. Submission of Matters to a Vote of Security Holders Inapplicable Item 5. Other Information Inapplicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.3 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 99.4 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K: Form 8-K dated July 19, 2002 described the Fund's sales of the Tulsa, Oklahoma, Dallas, Texas, and Nashville, Tennessee properties. -10- REALTY PARKING PROPERTIES II L.P. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REALTY PARKING PROPERTIES II L.P. DATE: 11/13/02 By: /s/ John M. Prugh John M. Prugh President and Director Realty Parking Company II, Inc. General Partner DATE: 11/12/02 By: /s/ Timothy M. Gisriel Timothy M. Gisriel Treasurer Realty Parking Company II, Inc. General Partner -11-

REALTY PARKING PROPERTIES II LP 10-Q