10-Q 1 g71268e10-q.txt MARKETPLACE INCOME PROPERTIES 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (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, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 33-1889 ------- MARKETPLACE INCOME PROPERTIES, A NORTH CAROLINA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) North Carolina 56-1493986 -------------- --------------- (State of other jurisdiction of (I.R.S. Employer or organization) Identification No.) IJL Financial Center P.O. Box 1012 Charlotte, NC 28201-1012 ------------------------ (Address of principal executive offices) (Zip Code) 704/379-9164 ------------ (Registrant's telephone number, including area code) (Former name, former address and fiscal year ended, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 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[ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 3,000 limited partnership units outstanding as of August 11, 2001 Page 1 of 10 sequentially numbered pages 2 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP BALANCE SHEETS JUNE 30, 2001 AND DECEMBER 31, 2000

The accompanying notes are an integral part of the financial statements 2 3 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (unaudited)

The accompanying notes are an integral part of the financial statements 3 4 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF PARTNERS CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (unaudited) General Limited Partners Partners Total --------- --------- --------- Balance, December 31, 1999 $ 35,573 $ 776,850 $ 812,423 Net income for the period 1,589 157,275 158,864 --------- --------- --------- Balance, June 30, 2000 $ 37,162 $ 934,125 $ 971,287 ========= ========= ========= Balance, December 31, 2000 $ 32,578 $ 480,321 $ 512,899 Net income for the period 422 41,809 42,232 Distributions 0 (375,000) ($375,000) --------- --------- --------- Balance, June 30, 2001 $ 33,000 $ 147,130 $ 180,131 ========= ========= ========= The accompanying notes are an integral part of the financial statements 4 5 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 Increase (Decrease) in Cash and Cash Equivalents (unaudited)

The accompanying notes are an integral part of the financial statements 5 6 MARKETPLACE INCOME PROPERTIES, A NORTH CAROLINA LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS The financial statements of Marketplace Income Properties, A North Carolina Limited Partnership (the "Partnership") included herein have been prepared for submission to the Securities and Exchange Commission on Form 10-Q. The financial statements were prepared by the general partner without audit, and include all adjustments which are, in the opinion of the general partner, necessary for a fair presentation of the results of operations for the six month period ended June 30, 2001. The financial statements were prepared in accordance with generally accepted accounting principles, however, certain information and note disclosures normally included have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements should be read in conjunction with the Partnership's 2000 Annual Report filed with the Securities and Exchange Commission on Form 10-K. The results of operations for the six month period ended June 30, 2001, are not necessarily indicative of the results for a full year. 1. PARTNERSHIP MATTERS AND SIGNIFICANT ACCOUNTING POLICIES On November 27, 1985, the Partnership was formed under the North Carolina Uniform Limited Partnership Act. The Partnership acquired property on January 30, 1986, and will continue until December 31, 2015, unless sooner terminated under the provisions of the Partnership Agreement. The Partnership has issued 3,000 limited partner units at $5,000 per unit. The total number of investors at August 11, 2001, was 787. ISC Realty Corporation is the sole general partner. Distributions and Allocations of Income and Losses - Profits, gains and losses of the Partnership are allocated between general and limited partners, as provided in the Partnership Agreement. The net cash flow from operations in each year is to be distributed 99% to limited partners and 1% to the general partner. Certain items in the financial statements for prior periods have been reclassified to conform to the format presented for these statements. 2. RELATED PARTY TRANSACTIONS The amount earned by the general partner for the reimbursement of expenses of operating the Partnership was $12,000 for the six months ended June 30, 2001 and 2000. 6 7 PART 1. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PARTNERSHIP MATTERS The property investment portfolio consists of the Marketplace Mall in Winston-Salem, NC. Mt. Pilot Shopping Center in Pilot Mountain, NC, and Amelia Plaza in Fernandina Beach, FL were sold in 1997. Meadowbrook Manor in Siler City, NC was sold in June, 1994, and Town & Country Convalescent Center in Tampa, FL was sold in July, 1996. In 1998, during its annual planning and budgeting process, the general partner determined that primiarily due to increased competition, a decline in future expected operating income resulted in anticipated future cash flows below the carrying value of the property. Accordingly, the general partner adjusted the carrying value of the property to its estimated realizable value resulting in a non-cash impairment loss of $1,756,000. The general partner determined that additional write-downs of approximately $420,000 during 1999 and $450,000 in the fourth quarter of 2000, were necessary to adjust the carrying value of the property to its estimated realizable value. The general partner continues to market for sale the one remaining property, Marketplace Mall in Winston-Salem, NC. However, due to changing area demographics, difficulties with long term renewals that create an unstable tenant base and short term leases, offers received to date have not been in excess of the outstanding mortgage balance. The general partner estimates a lower sale price of $6,000,000 or less for Marketplace Mall that would result in liquidation of the Partnership and a final distribution to the limited partners estimated at approximately $100 - $150 per $5,000 limited partner unit. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $137,411 at June 30, 2001. The Registrant will hold these funds as reserves for the cost of operating, repairing and maintaining the property. A cash distribution of $375,000, or $125.00 per limited partner unit, was paid to the limited partners in February 2001. Carmike Theatres, located in a separate building beside the main Mall property, filed for bankruptcy in 2000 and has closed more than 41 theatres nationwide, including the location at Marketplace Mall. The general partner will file the maximum claim for future rents that is allowed under the bankruptcy code, however, it is questionable how much, if anything, will be received once the claim is settled. Our property manager is actively seeking other replacement tenants. The loss of Carmike Theatres will substantially reduce the net cash flow of the Partnership. This reduction is estimated to be approximately $283,000 per year. Based on current operating cash flow, excluding the rent from Carmike, the Partnership is expected to incur an operating cash deficit of approximately $75,000 per year. In April, 2001, the general partner decided to stop paying deferred maintence to the mortgage lender and is seriously questioning whether projected cash deficits should be funded when it is unlikely that the property can be sold for an amount in excess of the debt. By electing not to fund operating deficits and by not paying the full amount of the monthly interest and principal due on the loan, it is likely that the lender will move to foreclose on the property. The Partnership is current on all debt service with the exception of the operating reserve amount from April to June of 2001. 7 8 RESULTS OF OPERATIONS The Partnership reported net income of $42,232 for the six months ended June 30, 2001, compared to income of $158,864 for the six months ended June 30, 2000. Rental income decreased from $688,366 for the six months ended June 30, 2000, to $559,448 for the six months ended June 30, 2001. This decrease is from increased vacancy resulting in lower base rental income and lower tenant sales that reduced receipts of percentage rent. Interest and other income decreased from $21,315 for the six months ended June 30, 2000, to $10,388 for the same period in 2001. This decrease reflects less interest earned on lower cash reserves compared to the second quarter 2000 reclass of $5,200 tax escrow refund and receipt of $5,283 cash for the purchase, by a tenant in the mall, of restaurant equipment that the property manager held since a prior tenant defaulted. Interest expense for the six months ended June 30, 2000, was $238,655 compared with $229,987 for the same period of 2001. Operations and maintenance expense decreased to $253,007 for the six months ended June 30, 2001, from $269,194 for the same period in 2000. This decrease reflects lower operating and repair costs for the Mall. Professional fees increased to $13,895 for the six months ended June 30, 2001, up from $10,048 for the same 2000 period. Legal fees increased from $311 for the six months ended June 30, 2000, to $636 for the same period in 2001. Administrative and other expenses decreased to $30,080 for the current year from $32,609 for the same period in 2000. These decrease reflects the overall lower leasing activity and lower lease commissions paid to the property manager. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSIONS OF MATTER TO A VOTE OF SECURITIES HOLDERS None 8 9 ITEM 5. OTHER INFORMATION We continue to market the Marketplace Mall in Winston-Salem, NC and our goal remains to sell the mall and liquidate the Partnership. The loss of Carmike Theatres will seriously impact our ability to sell the property at an amount in excess of the debt. Should we not be able to sell the property for an amount in excess of the debt, the only proceeds to distribute to the limited partners would be the cash on hand held by the Partnership. In February 2001, a cash distribution was paid to the limited partners of $375,000 or $125 per limited partnership unit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EX-27 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY) (b) Reports on Form 8-K No reports on Form 8-K were required to be filed during the six months ended June 30, 2001. 9 10 SIGNATURES Pursuant to the requirements 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. MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP ------------------------------------ (REGISTRANT) BY: /S/J. CHRISTOPHER BOONE ----------------------- J. CHRISTOPHER BOONE ISC REALTY CORPORATION, GENERAL PARTNER AND PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT DATE: AUGUST 11, 2001 --------------- 10

MARKETPLACE INCOME PROPERTIES LIMITED PARTNERSHIP 10-Q