10-Q 1 rp2filing10q63003.txt REALTY PARKING II 10Q FOR QUARTER ENDING 6/30/03 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 June 30, 2003 { } 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 June 30, 2003 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_____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X 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 7-8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 9 Item 4. Controls and Procedures 9 Part II. Other Information Item 1. through Item 6. 9-12 Signatures 13 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 Six Months Ended June 30, 2003 and 2002 (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 June 30, 2003 (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 2002 have been reclassified to conform to the presentation for 2003. The unaudited interim financial information should be read in conjunction with the financial statements contained in the 2002 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 June 30, 2003 and December 31, 2002. Note 3 - Investment in Real Estate Investment in real estate totals $3,304,549, net of accumulated depreciation of $51,985, at December 31, 2002. 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. Land improvements are depreciated using the straight-line method over 15 years. Note 4 - Property Held for Sale and Discontinued Operations At December 31, 2002, the Fund owned properties in San Antonio, Texas and Phoenix, Arizona. The Fund's property in San Antonio was sold during the first quarter of 2003. The Phoenix property was under contract for sale and was classified as property held for sale at June 30, 2003. In accordance with the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which was effective on January 1, 2002 with respect to the Fund, the results of operations of these properties and the three properties which were sold during 2002 are reported in discontinued operations for all periods presented in the statements of operations. Income from discontinued operations is summarized as follows: On February 20, 2003, the Fund sold its San Antonio, Texas property for $3,300,000. The Fund's investment in the property was $2,364,816. The gain from the sale totaled $744,934, net of expenses of $190,250. 5 REALTY PARKING PROPERTIES II L.P. Notes to Financial Statements June 30, 2003 (Unaudited) Note 4 - Property Held for Sale and Discontinued Operations (continued) At June 30, 2003, the Fund had a committed contract for sale of the Phoenix property and, accordingly, the property was classified as held for sale. On July 15, 2003, the Fund sold the property for $5,200,000. The Fund's investment in the property was $3,304,549, net of depreciation of $51,985 at June 30, 2003. During the first quarter of 2003, a prospective purchaser of the Phoenix property defaulted on its purchase contract and the Fund recorded the buyer's nonrefundable deposit of $50,000 as income. Note 5 - Related Party Transactions The General Partner earned an asset-based management fee for advising the Fund and managing its investments of $10,196 and $33,973 during the three months ended June 30, 2003 and 2002, respectively, and $25,741 and $67,973 during the six months ended June 30, 2003 and 2002, respectively (portions of which have been recorded in discontinued operations). This fee is equal to 0.75% of the fair values of the properties. Additionally, the General Partner was reimbursed for certain costs incurred relating to administrative services for the Fund totaling $17,289 and $22,905 during the three months ended June 30, 2003 and 2002, respectively, and $40,268 and $48,845 during the six months ended June 30, 2003 and 2002, respectively. Pursuant to an Investment Advisory Agreement, the Advisor earns a fee upon disposition of a property equal to 1.5% of the contract price for the sale of the property. Such fee is earned for services rendered to advise the General Partner on the timing and pricing of property sales. The Advisor earned an advisory fee of $49,500 in 2003 in connection with the sale of a property. Note 6 - 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. 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 eleven of the Properties through June 30, 2003. The final property was sold on July 15, 2003. At June 30, 2003, the Fund had a working capital position that includes cash and cash equivalents of $393,610, accounts receivable (net of real estate taxes payable) of $5,000, and accounts payable and accrued expenses of $54,509. Cash and cash equivalents increased $28,276 from operating activities during the quarter ended June 30, 2003. On July 15, 2003, the Fund sold its final property in Phoenix, Arizona for $5,200,000. The Fund's investment in the property was $3,304,549, net of depreciation of $51,985 at June 30, 2003. 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 the properties classified as held for sale or sold in 2003 and 2002. Where applicable, 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. Income from Continuing Operations Income and expenses not directly identifiable with a specific property held for sale or sold are reflected in continuing operations. Expenses incurred during the three months ended June 30, 2003 totaled $23,449 reflecting an increase of $1,073 from the same period in 2002. Expenses incurred during the six months ended June 30, 2003 totaled $49,522 reflecting a decrease of $10,095 from the same period in 2002. The decrease is the result of lower administrative expenses, as a result of property sales. Discontinued Operations Discontinued operations reflect parking revenue from the Fund's properties in Phoenix (held for sale), San Antonio (sold during 2003) and the Nashville, Tulsa, and Dallas properties (sold during 2002) and expenses that can be directly attributed to these properties. On February 20, 2003, the Fund sold its San Antonio, Texas property for $3,300,000. The Fund's investment in the property was $2,364,816. The gain from the sale totaled $744,934, net of expenses of $190,250. During the first quarter of 2003, a prospective purchaser defaulted in consummating the purchase of the Phoenix property and the Fund recorded the buyer's nonrefundable deposit of $50,000 as income. Parking lot revenue of $82,267 was earned during the three months ended June 30, 2003, reflecting a decrease of $219,559 from the same period in 2002. Parking lot revenue of $194,295 was earned during the six months ended June 30, 2003, reflecting a decrease of $295,284 from the same period in 2002. The decreases are a result of property sales during 2003 and 2002. Expenses incurred during the three months ended June 30, 2003 totaled $9,750 reflecting a decrease of $26,010 from the same period in 2002, net of depreciation. Expenses incurred during the six months ended June 30, 2003 totaled $30,628 reflecting a decrease of $44,259 from the same period in 2002, net of depreciation. The decreases are a result of lower management fees and other expenses during 2003 as a result of property sales during 2003 and 2002. 7 REALTY PARKING PROPERTIES II L.P. Management's Discussion and Analysis of Financial Condition and Results of Operations Outlook The Phoenix sale proceeds and remaining cash will be distributed to investors once all expenses of the sale are known and current liabilities have been paid. The Fund expects to be dissolved before September 30, 2003. 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. 8 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 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 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports on Form 8-K: Form 8-K dated July 15, 2003 described the Fund's sale its final property in Phoenix, Arizona. 9 Exhibit 32 REALTY PARKING PROPERTIES II L.P. CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of Realty Parking Properties II L.P.'s (the "Fund") Quarterly Report on Form 10-Q for the period ending June 30, 2003 with the Securities and Exchange Commission on the date hereof (the "Report"), We certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: 7/31/03 By: /s/ John M. Prugh John M. Prugh Chief Executive Officer Realty Parking Company II, Inc. General Partner Date: 7/31/03 By: /s/ Timothy M. Gisriel Timothy M. Gisriel Chief Financial Officer Realty Parking Company II, Inc. General Partner -10- Exhibit 31.1 REALTY PARKING PROPERTIES II L.P. Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, John M. Prugh, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Realty Parking Properties II L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 7/31/03 By: /s/ John M. Prugh John M. Prugh Chief Executive Officer Realty Parking Company II, Inc. General Partner -11- Exhibit 31.2 REALTY PARKING PROPERTIES II L.P. Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Timothy M. Gisriel, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Realty Parking Properties II L.P.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures [as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 7/31/03 By: /s/ Timothy M. Gisriel Timothy M. Gisriel Chief Financial Officer Realty Parking Company II, Inc. General Partner -12- 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: 7/31/03 By: /s/ John M. Prugh John M. Prugh President and Director Realty Parking Company II, Inc. General Partner DATE: 7/31/03 By: /s/ Timothy M. Gisriel Timothy M. Gisriel Treasurer Realty Parking Company II, Inc. General Partner -13-

REALTY PARKING PROPERTIES II LP 10-Q