<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] 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: 110-9305
--------
REEVES TELECOM LIMITED PARTNERSHIP
(NAME CHANGED FROM REEVES TELECOM ASSOCIATES)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SOUTH CAROLINA 57-0700063
- --------------------------------- --------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
C/O GRACE PROPERTY MANAGEMENT, INC.
P.O. BOX 163, 55 BROOKVILLE ROAD
GLEN HEAD, NEW YORK 11545
----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 686-2201
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
------------------- WHICH REGISTERED
------------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
------------------- WHICH REGISTERED
------------------------
PARTNERSHIP UNITS NONE
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 [ ]
ON MARCH 16, 1999, THE REGISTRANT HAD OUTSTANDING 1,828,148 PARTNERSHIP UNITS.
SEE ITEM 5. THERE IS NO ACTIVE MARKET FOR THE PARTNERSHIP UNITS. WITH REGARD TO
RECENT SALES SEE ITEM 5. AS OF MARCH 16, 1999, NON-AFFILIATES HELD 1,187,803
PARTNERSHIP UNITS.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Reeves Telecom Limited Partnership (the "Registrant" or the "Partnership")
is a South Carolina Limited Partnership formed for the purpose of accepting
certain assets and liabilities from its predecessor corporation, Reeves Telecom
Corporation (the "Corporation"). The Corporation sold its principal assets
during the twelve-month period ended May 15, 1980 and distributed cash and the
limited partnership units of the Registrant to its former shareholders as a
liquidation distribution. The partnership units were registered under the
Securities Act of 1933 by the filing of a Registration Statement pursuant to
Form S-14 (File No. 2-66452) which became effective April 8, 1980 and pursuant
to which a Proxy Statement/Prospectus dated April 14, 1980 was mailed to all
shareholders. Reference is made to said Registration Statement and said Proxy
Statement/Prospectus for a description of the liquidation of the Corporation and
the formation of the Registrant. The Registrant was initially organized October
25, 1979 but had only nominal assets and no liabilities until May 15, 1980. To
reflect a change in South Carolina law, Registrant's name was changed from
Reeves Telecom Associates to Reeves Telecom Limited Partnership on January 21,
1987.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and other applicable securities laws. All statements other
than statements of historical fact are "forward-looking statements" for purposes
of these provisions, including any projections of earnings, revenues, or other
financial items; any statements of the plans, strategies, and objectives of
Management for future operation; any statements concerning proposed new services
or developments; any statements regarding future economic conditions or
performance; statements of belief; and any statement of assumptions underlying
any of the foregoing. Such forward-looking statements may be contained in the
Partnership's business description and in Management's Discussion and Analysis
of Financial Condition and Results of Operations, among other places. Although
the Partnership believes that the expectations reflected in any of its
forward-looking statements will prove to be correct, actual results could differ
materially from those projected or assumed in the Partnership's forward-looking
statements. The Partnership's future financial condition and results, as well as
any forward-looking statements, are subject to inherent risks and uncertainties
that may include, but are not limited to, regional and national economic
conditions, changes in consumer demand for real estate, changes in interest
rates and the availability of credit to the Partnership and/or potential
purchasers of real estate, changes in state and federal regulations relating to
environmental and health matters, and, in connection with Fox Squirrel, weather
conditions and changes in employee relations which may adversely affect the
ability of the Partnership to maintain Fox Squirrel as desired.
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<PAGE> 3
The Partnership cannot control these risks and uncertainties and, in many cases,
cannot predict the risks and uncertainties that could cause its actual results
to differ materially from those indicated by the forward-looking statements. The
Partnership undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
GENERAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership's business may be categorized into two industry segments:
(i) owning, developing, selling, leasing, or otherwise dealing in real estate,
and (ii) owning and operating a golf course and country club. See the audited
financial statements for financial information about each segment.
NARRATIVE DESCRIPTION OF BUSINESS
The principal asset of the Partnership is real estate for development
located in Boiling Spring Lakes, in Brunswick County, North Carolina, where the
Partnership also owns and operates a golf course and country club. The
Partnership also owns a small amount of real estate for development at Pimlico
Plantation, in Berkeley County, South Carolina (see Item 2, "Properties").
Prior to mid-1993, in view of limited resources, Management concentrated
on holding down costs and focused on a bulk sale of all or substantially all of
the assets of the Partnership. Local real estate brokers were relied upon to
generate individual lot sales, and the golf course and country club were leased
to an operator. Under this arrangement, lot sales were slow and operating
expenses generally significantly exceeded revenue from such sales. Were it not
for cash generated from activities other than the sale of real estate during
those years, the Partnership would likely have become insolvent.
Beginning in June 1993, Management has focused on the sale of individual
lots and other means of generating revenue. The Partnership also became
increasingly involved in the management and operation of the golf course and
country club.
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<PAGE> 4
BOILING SPRING LAKES
- REAL ESTATE SALES
Revenues during the last five fiscal years are as follows:
<TABLE>
<CAPTION>
No. of Individual Lots Sold
----------------------------- Large Total
Improved Unimproved Parcels Revenues
-------- ---------- ------- --------
<S> <C> <C> <C> <C>
Fiscal 1998 1 52 0 $435,046
Fiscal 1997 2 55 0 411,609
Fiscal 1996 1 49 1 463,051
Fiscal 1995 0 37 0 209,055
Transition Quarter 0 6 0 27,075
Fiscal 1994 0 37 0 314,548
</TABLE>
The Transition Quarter is the three-month period from October 1, 1994 to
December 31, 1994 and reflects the change in the Partnership's fiscal year end
from September 30 to December 31 (see Item 6, "Selected Financial Data").
Accordingly, the above figures, and the figures contained in all tables in this
Item 1, for Fiscal 1995, 1996, 1997 and 1998 are for the twelve months ended
December 31 of each such year and the figures for Fiscal 1994 are for the twelve
months ended September 30 of such year.
In the foregoing table, an "individual" lot typically comprises about
1/4-acre, an "improved" lot is an individual lot on which the Partnership has
started and, in some cases, completed, construction of a house intended for
resale, and an "unimproved" lot is an individual lot on which a house may be
built by the purchaser. In 1998, the Partnership sold one improved lot for
approximately $117,300, which generated a profit of approximately $13,700. In
1997, the Partnership sold two improved lots; the first was sold for $115,000
and generated a profit of approximately $20,000, the second was sold for
$128,000 shortly after construction of the house had commenced and generated a
profit of approximately $17,100. Since the purchaser of the second improved lot,
and not the Partnership, bore substantially all the construction cost of the
house on the second improved lot, for financial reporting purposes, the
Partnership's revenues reflect only the net proceeds received by the Partnership
upon the sale of the second improved lot in 1997.
- FOX SQUIRREL COUNTRY CLUB
The Registrant is the owner and operator of Fox Squirrel Country Club
("Fox Squirrel"), a semi-private golf course and country club. Fox Squirrel's
18-hole golf course serves, along with numerous recreational lakes and ponds, as
the centerpiece of the Boiling Spring Lakes development.
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<PAGE> 5
Prior to October 1993, Fox Squirrel was leased to an operator. Beginning
in October 1993, the Partnership began operating Fox Squirrel and the operator
became an employee of the Partnership, managing Fox Squirrel on behalf of the
Partnership. In November 1995, the Partnership hired a new manager and golf pro
of Fox Squirrel, replacing the former manager, who resigned. The new manager
also leased the kitchen and dining area in the club house from the Partnership,
which paid for certain improvements to the kitchen and dining area. Although the
lease provided for the payment to the Partnership of monthly lease payments in
varying amounts, the Partnership waived most lease payments to enable the dining
service to become financially established. In February 1998, the manager of Fox
Squirrel and the Partnership agreed to the termination of the manager's
employment agreement and related agreement to lease the kitchen and dining area.
The Partnership agreed, among other things, to purchase certain assets from, and
assume certain liabilities of, the manager in exchange for cash consideration to
the manager of $49,404. As a result of the foregoing, the Partnership became the
operator of the dining service.
Management views Fox Squirrel as being very important to the success of
the development. Its attraction as a recreational facility to those who are
considering purchasing or building a home in the region is believed to allow for
more lot sales and a higher sales price per lot than would be the case in the
absence of such a facility. As a consequence, Management currently expects to
continue operating Fox Squirrel.
The Partnership's revenue and operating income from Fox Squirrel for the
last five fiscal years are as follows:
<TABLE>
<CAPTION>
Operating
Revenue Income (Loss)
------- -------------
<S> <C> <C>
Fiscal 1998 $437,436 $(34,783)
Fiscal 1997 373,972 34,206
Fiscal 1996 358,580 8,126
Fiscal 1995 340,699 41,522
Transition Quarter 68,189 (13,269)
Fiscal 1994 345,737 44,175
</TABLE>
As previously described, the Transition Quarter is the three-month period
from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
- OTHER
From time to time the Partnership generates revenue from sources other
than real estate sales and Fox Squirrel, including, for example, the sale of
timber and pine straw on certain unsold lots. While additional revenue from such
sources continues to be sought as a means of supplementing revenue from lot
sales, such activities were not a material source of revenue in Fiscal 1997 or
1998 due principally to the harvesting of seasoned timber performed in past
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<PAGE> 6
years. The amount of revenue generated from the sale of timber and pine straw
during the last five fiscal years is as follows:
<TABLE>
<CAPTION>
Revenue
-------
<S> <C>
Fiscal 1998 $ -0-
Fiscal 1997 694
Fiscal 1996 12,866
Fiscal 1995 35,920
Transition Quarter 15,381
Fiscal 1994 91,611
</TABLE>
As previously described, the Transition Quarter is the three-month period
from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
Since the 1970's, health standards at Boiling Spring Lakes have become
increasingly stringent regarding septic tanks and on-site sewage disposal. It is
estimated that 70% to 75% of the property which would have complied with
applicable rules and regulations a number of years ago no longer meets present
day health standards. This has had a detrimental effect on the operations of the
Partnership. In a few cases the problem could be cured by the use of drains, or
by the scraping away of hard pan and adding fill dirt. In most instances,
however, health departments have declared a majority of the areas as
irremediable by ordinary measures. In such cases, the only solution would be to
install area-wide sewer systems. While the Partnership does not have the
resources to install a sewer system covering most or all of the entire
development, a small multi-user system has been installed on certain lots zoned
for commercial use. Depending upon the Partnership's financial resources, the
market for real estate in and around Boiling Spring Lakes and economic
conditions generally, among other factors, Management may consider installing
similar multi-user systems in other areas of the development in the future but
currently has no plans to do so.
PIMLICO PLANTATION
Revenues during the last five fiscal years are as follows:
<TABLE>
<CAPTION>
Number of Lots Revenues
-------------- --------
<S> <C> <C>
Fiscal 1998 -0- $ -0-
Fiscal 1997 -0- -0-
Fiscal 1996 -0- -0-
Fiscal 1995 -0- -0-
Transition Quarter -0- -0-
Fiscal 1994 23 202,075
</TABLE>
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<PAGE> 7
As previously described, the Transition Quarter is the three-month period
from October 1, 1994 to December 31, 1994 and reflects the change in the
Partnership's fiscal year end from September 30 to December 31 beginning with
Fiscal 1995.
Pursuant to a letter agreement dated September 14, 1993 and amended on
November 22, 1993, the Partnership transferred 23 lots to a major unit holder in
exchange for $10,000 cash and 492,584 partnership units held by such unit
holder. The transaction closed on December 15, 1993 and is valued by the
Partnership at $202,075. The Partnership currently owns only two lots at Pimlico
Plantation. In view of the foregoing, revenue from the sale of lots at Pimlico
Plantation in future years is expected to represent, at best, a negligible
percentage of total revenue.
SEASONALITY
The sale of real estate in North and South Carolina is seasonal. The
Partnership has generally experienced slower than average lot sales in the
period from November to January, inclusive.
Although played year-round, depending upon the climate and weather, golf
is largely a warm weather sport. Accordingly, revenue at Fox Squirrel is
generally highest in the period from March to September, inclusive. Revenue is
generally lowest in the period from November to February, inclusive, when
extensive seeding and course repair work is usually performed.
DEPENDENCE UPON CUSTOMERS
The Partnership is not dependent in any respect upon one or a few
customers, the loss of any one of which might significantly affect the financial
results of the Partnership.
COMPETITION
The real estate markets in Brunswick County, North Carolina and Berkeley
County, South Carolina are extremely competitive. Prospective residential
property owners may buy from real estate developers, who generally sell lots
suitable for building but who may also sell improved properties, existing
homeowners looking to relocate, and others. Property values are dependent upon,
among other factors, proximity to and the nature and quality of recreational
facilities, retail shopping, commercial sites and schools, and the availability
of county water (as opposed to well water) and sewer service (as opposed to
septic systems).
Many real estate developments in the two markets in which the Partnership
operates provide recreational facilities, such as a golf course, lakes and/or
swimming pools, and tennis
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<PAGE> 8
courts. In many cases, depending upon the financial resources of the particular
developer, such facilities are more extensive and/or more varied than the
Partnership's facilities, and the golf courses are, in several instances, the
sites of professional championship tournaments. Lots associated with such
facilities generally command higher sales prices than lots owned by the
Partnership. Management believes that the Partnership can compete effectively
against other real estate developers and golf course operators, many of whom are
believed to have substantially greater resources than the Partnership,
principally on the basis of price and, depending upon the amount of cash
generated from lot sales, by making selective improvements to recreational
facilities, including Fox Squirrel.
LIQUID ASSETS AND RESERVES
As of December 31, 1998, the Partnership held $69,864 in cash. Current
liabilities as of this date totaled $1,633,202.
The Partnership Agreement obligates the General Partner to distribute
Distributable Cash (as such term is defined in the Partnership Agreement).
Distributable Cash excludes, among other items, reserves established for working
capital, contingent liabilities, taxes, debt service, repairs, replacements,
renewals, capital expenditures or other purposes consistent with the Partnership
Agreement. Such reserves are used solely for calculating Distributable Cash and
are not treated as deductions from income for accounting purposes. During the
first quarter of Fiscal 1994, a reserve of $100,000 was established to fund
certain capital expenditures, including, among others, construction of a new
maintenance shed at the golf course and re-roofing of the Fox Squirrel club
house. Also in 1994, the Partnership established a reserve of $20,000 to fund
the initial portion of a regional marketing campaign, one aspect of which
involves the construction of one or more model homes. In Fiscal 1995 a reserve
of $250,000 was established to fund primarily certain capital improvements at
Fox Squirrel. In Fiscal 1996, reserves totaling $200,000 were established to
fund, principally, certain capital improvements at Fox Squirrel and certain
capital projects within the development, including a multi-user septic system
installed on eight lots zoned for commercial use. In each of Fiscal 1997 and
1998, reserves totaling $200,000 were established for substantially the same
purposes.
See Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," for further discussion of factors affecting
liquidity.
ITEM 2. PROPERTIES
BOILING SPRING LAKES
Boiling Spring Lakes began as a 14,000-acre development which was
commenced by the Corporation in 1962. Part of the tract is now within the City
of Boiling Spring Lakes,
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<PAGE> 9
which has approximately eighteen hundred residents. The city is in Brunswick
County, 25 miles south of Wilmington, North Carolina, and 8 miles west of
Southport, placing the city in the northern portion of the coastal corridor
connecting Wilmington, North Carolina and Myrtle Beach, South Carolina.
The Registrant presently owns the following real estate: (1) 159.9 acres
comprising a surveyed 18-hole sprinklered golf course, club house and
maintenance building, together known as Fox Squirrel; (2) 129 building lots
located near the golf course which have been surveyed and platted and are
suitable for building; (3) 194 acres surrounding the golf course which could be
developed; (4) 3,225 surveyed and platted lots of which approximately 8% are
suitable for building, 6% are conditionally suitable for building and the
balance is unsuitable for building; (5) approximately 4,000 acres of wetlands
and woodlands which have no development potential; and (6) a sales office.
During 1988, the Partnership reduced the carrying value of the Boiling
Spring Lakes property as a result of an appraisal obtained in December 1988 (see
Note 3 of financial statements). During 1993, 1995 and 1998, the Partnership
received updated appraisals of the Boiling Spring Lakes property. Based upon the
updated appraisals, no additional reduction to the carrying value was made.
Management intends to emphasize the sale of individual lots at Boiling
Spring Lakes, concentrating first on lots situated on existing paved roads.
Depending upon the Partnership's financial resources, cost estimates, and
projected sales prices, among other things, Management may undertake the
development of additional sections of Boiling Spring Lakes.
During 1995, the Partnership undertook certain improvements to Fox
Squirrel, including paving of the 25,360 linear feet of cart paths. During 1996,
the Partnership undertook substantial remodeling of the kitchen and dining area
of the club house and made further improvements to the golf course. During 1997
and 1998, the Partnership made further improvements to the club house and golf
course and, in 1998, the Partnership acquired from the former manager of Fox
Squirrel certain fixtures in the club house. Depending upon the Partnership's
financial resources, revenues from Fox Squirrel, and cost estimates, among other
things, Management may undertake additional improvement projects at Fox Squirrel
during Fiscal 1999.
In December 1995, Management initiated a project involving the
construction of a house on a lot owned by the Partnership and the immediate
marketing of the house and lot for sale. In January 1996 the Partnership
obtained from a local bank a line of credit of $85,000 to finance the
construction of the house. The property was sold in June 1996 for approximately
$113,000 and the outstanding borrowing under the line of credit was repaid at
closing, resulting in a profit to the Partnership of approximately $19,400,
greater than would have been the case if the lot had been sold unimproved. The
project was continued in 1997 with a higher line of credit and the Partnership
sold two improved lots during the year; the first was sold for $115,000 and
generated a profit of approximately $20,000 after repayment
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<PAGE> 10
of outstanding borrowing under the line of credit, the second was sold for
$128,000 and generated a profit of approximately $17,100. Since construction of
the house had barely commenced at the time of the sale of the last mentioned
property, there was no outstanding borrowing under the line of credit at the
time of sale and, for financial reporting purposes, the Partnership's revenues
reflect only the net proceeds received by the Partnership upon the sale. In
Fiscal 1998, the Partnership sold one improved lot for $117,300, generating a
profit of approximately $13,700 after payment of construction-related debt and
other expenses. Management may undertake similar projects during Fiscal 1999.
In late 1996 the City of Boiling Spring Lakes granted its approval for the
construction of 23 patio homes on 13 contiguous lots owned by the Partnership.
Construction was delayed for nearly two years due to new state regulations,
promulgated after the city granted its approval but before construction on the
patio homes commenced, which required the Partnership to file storm water
drainage plans with respect to the patio homes project. The storm water drainage
plans were filed during 1997 and final approval was granted during 1998.
Management is hopeful that construction of the first patio home may commence
during the second or third quarter of Fiscal 1999. Management expects that, once
construction begins, the Partnership will have one or two patio homes under
construction at any given time, and that once a house is sold, construction will
begin immediately on an additional house.
PIMLICO PLANTATION
Following the exchange described in Item 1(c), "Narrative Description of
Business: Pimlico Plantation," the Registrant owns two lots, comprising an
aggregate of approximately 3/4 acre, at this location in Berkeley County, near
Charleston, South Carolina. Pimlico Plantation was developed by the Corporation
and its predecessors. The Registrant believes that the lots have limited value.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not currently a party to any material pending legal
proceedings. From time to time the Partnership has been and may become a party
to ordinary routine litigation incidental to its business. Management believes
that the potential liability to the Partnership from any of such proceedings is
immaterial.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of unit holders during Fiscal 1998.
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<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY MATTERS
As of December 31, 1998 there were 1,934 recorded holders of partnership
units, including 596 registered holders of an aggregate of 67,784 shares of
Corporation common stock which have yet to be exchanged for partnership units.
The total number of record holders is not substantially changed from December
31, 1997. The units are not registered on any exchange, and there is only a
limited over-the-counter market for the units. It is not anticipated that there
will ever be an active public market for the units.
It is the Partnership's experience that revenues are highly variable and
may not be sufficient in future years to cover expenses and necessary capital
expenditures and that, in the absence of enhanced prospects for the development
as a whole, a bulk sale of assets for cash is extremely difficult to achieve.
Management believes that the best use of the current cash balance and cash
surpluses, if any, generated in future fiscal years is to improve the overall
value of the Partnership's assets by (i) making certain improvements at Fox
Squirrel, thereby increasing the attractiveness of Fox Squirrel as a
recreational facility to prospective homeowners, (ii) undertaking certain
infrastructure and other improvements in the development, (iii) undertaking on a
limited scale home construction on lots owned by the Partnership to demonstrate
the viability of larger scale building programs, and (iv) paying down accrued
expenses. Management believes that this plan will, in future years, result in,
among other things, an increase in the number of lots sold, a higher average
sales price per lot, and higher operating income at Fox Squirrel and the
Partnership as a whole. There can be no assurance, however, that sufficient cash
will be generated from operations to successfully implement Management's plan.
Consistent with such plan and in view of the costs associated with a
distribution to all partners, Management believes it would be impractical and
imprudent to make a general distribution prior to the sale of a major asset, the
bulk sale of all or substantially all of the Partnership's assets, or such time
as the Boiling Spring Lakes development, as a whole, has been established to
operate at a level sufficient to consistently generate revenues in excess of
expenses and capital expenditures. However, from time to time in future periods,
in accordance with applicable Securities laws, the Partnership may utilize
excess cash by repurchasing partnership units, either in privately negotiated
transactions or through open market purchases, although there are currently no
plans to do so. Since the amount of excess cash available for such purpose
cannot be estimated at this time due to the highly variable nature of the
Partnership's cash flow, there can be no assurance as to the number of
partnership units which will actually be repurchased, if any such repurchases
will, in fact, occur, or the prices at which such repurchases, if any, will be
made. As of the date of this Form 10-K, no filings have been made with the
Securities and Exchange Commission with respect to any such planned repurchases.
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<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth has been derived from the historical
audited financial statements of the Partnership. The selected financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited financial
statements and related notes thereto.
<TABLE>
<CAPTION>
3 Mos Year
Year Ended December 31, Ended Ended
-------------------------------------------------------- Dec. 31, Sept. 30,
1998 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Property sales $ 435,046 $ 411,609 $ 463,051 $ 209,055 $ 27,075 $ 516,623
Country Club revenue 437,436 373,972 358,580 340,699 68,189 345,737
Other revenue 1,732 3,303 3,756 8,880 593 5,305
----------- ----------- ----------- ----------- ----------- -----------
Total revenue 874,214 788,884 825,387 558,634 95,857 867,665
Expenses:
Direct cost of property sold 148,013 113,611 40,201 95,992 13,900 184,450
Direct cost of Country Club revenue 17,880 -0- -0- -0- -0- -0-
SG&A of Country Club 454,339 339,766 350,454 299,177 81,458 301,562
SG&A 390,604 391,067 432,767 293,277 54,317 357,536
Depreciation 63,659 61,565 50,756 39,190 6,566 13,276
Interest 135,634 112,526 225,200 14,627 -0- 691
----------- ----------- ----------- ----------- ----------- -----------
Total expenses 1,210,129 1,018,535 1,099,378 742,263 156,241 857,515
----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) (335,915) (229,651) (273,991) (183,629) (60,384) 10,150
Other income, net -0- 694 13,547 43,685 15,381 98,700
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) $ (335,915) $ (228,957) $ (260,444) $ (139,944) $ (45,003) $ 108,850
=========== =========== =========== =========== =========== ===========
Income (loss) per unit $ (0.18) $ (0.13) $ (0.14) $ (0.08) $ 0.00 $ 0.06
</TABLE>
<TABLE>
<CAPTION>
At December 31, At
-------------------------------------------------------------------------- Sept. 30,
1998 1997 1996 1995 1994 1993
----------- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets $ 82,032 $ 148,131 $ 133,919 $ 73,860 $137,549 $178,294
Land held for sale and related
buildings and equipment, net 1,025,256 911,197 1,037,678 910,183 811,073 790,566
Other assets -0- -0- -0- 1,201 4,204 4,704
Total assets 1,107,288 1,059,328 1,171,597 985,244 952,826 973,564
Current liabilities 1,633,202 1,235,189 997,568 531,467 523,628 499,312
Long-term debt 18,570 32,708 153,641 172,945 8,422 8,473
Total liabilities 1,651,772 1,267,897 1,151,209 704,412 532,050 507,785
Partners' capital (deficit) (544,484) (208,569) 20,388 280,832 420,776 465,779
</TABLE>
The Partnership's fiscal year end was changed from September 30 to
December 31 beginning with 1995. For financial reporting purposes, a transition
quarter, covering the period from October 1, 1994 to December 31, 1994, was
employed. The change in fiscal year end reflects Management's desire to avoid
having to make certain deposits to the U.S. Internal Revenue Service (the "IRS")
required by Code Section 7519 and the regulations thereunder of
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<PAGE> 13
the Internal Revenue Code of 1986, as amended (the "Code"). The Code requires
that any limited partnership having a fiscal year end other than December 31 and
which generates income taxable to its partners during any fiscal year make such
a deposit in respect of such fiscal year. By changing its fiscal year end to
December 31, the Partnership was able to reclaim $9,481 held on deposit by the
IRS for income deferred through September 30, 1993. Furthermore, the Partnership
will not be required to make future deposits in the event that income taxable to
its partners is generated in the current or future years, although there can be
no assurance that the Partnership will, in fact, generate such income.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the audited
financial statements of the Partnership and the notes thereto which are attached
to this report.
The Partnership has continued to liquidate its assets through real estate
sales. Prior to 1993, Management concentrated its efforts on effecting a bulk
sale of the Partnership's real estate holdings to a single buyer. It is
Management's current belief, however, that in the absence of enhanced prospects
for the development as a whole, a bulk sale of assets for cash is extremely
difficult to achieve. In June 1993, Management began to place greater emphasis
on the sale of individual lots and pursued other means of generating revenue.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
For the 12 months ended December 31, 1998 and 1997, revenues from the sale
of real estate were $435,046 and $411,609, respectively. Management attributes
the increase in revenue principally to the recorded sales price for the improved
lot sold in 1998 being higher than that for the improved lot sold in 1997. The
number of unimproved lots sold in 1998 was 52, compared to 55 in 1997. The
decrease in lots sold was offset by a higher average sales price per lot, which
itself is due primarily to the relative mix of lots sold as to location and
asking price.
Revenue from Fox Squirrel for Fiscal 1998 and 1997 were $437,436 and
$373,972, respectively. The principal reason for the increase is the inclusion
in 1998's figure of revenue totaling $82,033 from the Pro Shop and dining
service at Fox Squirrel, which have been operated by the Partnership since
February 1998. Revenue from concessions and the dining service was $1,000 in
1997. Revenue from greens fees and cart rentals declined 12% due to lower number
of rounds played by nonmembers, while dues from members increased 7%.
Selling, general and administrative expenses for 1998, exclusive of those
relating to Fox Squirrel, were $390,604, compared to $391,067 in 1997, for a
change of less than 1%.
-12-
<PAGE> 14
Selling, general and administrative expenses at Fox Squirrel were $454,339
for 1998, compared to $339,766 for 1997. Management attributes the increase in
expenses principally to the Partnership's operation of the Pro Shop and Dining
Service at Fox Squirrel since February 1998. Maintenance-related expenditures
were 13% lower than in 1997 in part due to weather conditions being more
favorable in 1998 than the prior year, and in part to the recent replacement of
certain aged equipment which required frequent and expensive repairs. Insurance
expense increased substantially over 1997 due principally to the need for
liability insurance following the Partnership's assuming operation of the dining
service in 1998.
Direct cost of property sold in 1998 was $148,013, compared to $113,611 in
1997. Management attributes the increase to higher costs associated with houses
built for resale as to the relative mix of lots sold. Depreciation increased
modestly as a result of capital expenditures made in 1997. Interest expense for
1998 was $135,634 compared to $112,526 for 1997. Management attributes the
increase primarily to a higher average outstanding balance of indebtedness
during 1998 to the General Partner and its president and affiliates. The general
partner and its affiliates charge the Partnership interest on accrued but unpaid
expenses outstanding.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
For the 12 months ended December 31, 1997 and 1996, revenues from the sale
of real estate were $411,609 and $463,051, respectively. Results for 1996
include the sale of a 430-acre parcel for $85,000. Excluding the sale of such
parcel, revenue from real estate sales in 1997 and 1996 was $411,609 and
$378,051, respectively. Management attributes the increase in revenue to the
recognition in 1997 of the full sales price of one improved lot, containing a
house built by the Partnership, whereas no similar recognition occurred in 1996.
The number of unimproved lots sold in 1997 was 55, compared to 49 in 1996.
Management attributes the increase in lots sold to generally improved market
conditions in the region and to the relative mix of lots sold as to location and
asking price.
Revenues from Fox Squirrel for Fiscal 1997 and 1996 were $373,972 and
$358,580, respectively. Increased revenues from greens fees and cart rentals
more than offset declines in dues and other revenues. Revenue from concessions
and the dining service was $1,000 in 1997, compared to $9,040 in 1996. The
decline is due, in part, to the decision by Management to assist the dining
service in 1996 through a one-time imposition of a "food minimum" from members
totaling $9,040, whereas no such revenue was collected in 1997.
Selling, general and administrative expenses for 1997, exclusive of those
relating to Fox Squirrel, were $391,067, compared to $432,767 in 1996.
Management attributes the decrease, in part, to the payment in 1996 of incentive
bonuses in respect of 1996, whereas no such payments were made in 1997 in
respect of 1997. In addition, the Partnership incurred standard accounting and
administrative expenses in 1997 in respect of 1996, whereas in 1996 the
Partnership incurred additional accounting and administrative expenses relating
to the
-13-
<PAGE> 15
transition of the Partnership's fiscal year end from September 30 to December 31
effective 1995.
Selling, general and administrative expenses at Fox Squirrel were $339,766
for 1997, compared to $350,454 for 1996. Management attributes the decrease in
expenses principally to lower maintenance-related expenditures, which were
higher in 1996 than anticipated due to lower than required maintenance
expenditures in prior years. Expenses related to concessions and the dining
service declined to $2,040 in 1997 from $7,000 in 1996, reflecting the payment
of money to the dining service operator collected from the "food minimum" in
1996. Expenses in 1997 relating to equipment rental were higher than in 1996 due
to the replacement of certain aged equipment with leased equipment. Advertising
and telephone expenses were lower in 1997 than in 1996, reflecting targeted cuts
in expenditures in the face of lower than anticipated revenues.
Direct cost of land sold in 1997 was $113,611, compared to $40,201 in
1996. Management attributes the increase to the inclusion in 1997 of costs
associated with the sale in 1997 of the improved lot for $115,000, whereas no
similar expenses were recorded for 1996. Depreciation increased as a result of
capital expenditures made in 1996, especially with respect to the improvements
to the club house. Interest expense decreased in part to prepayments of
principal made during 1997 on the note payable due to the president of the
General Partner and in part to the amount of interest charged in each year by
the general partner and its affiliates on accrued but unpaid expenses
outstanding.
Other Income in 1997 was $694, derived from the sale of pine straw on lots
owned by the Partnership, and $13,547 in 1996, derived principally from the sale
of timber on unsold lots and unplatted woodlands owned by the Partnership. As
stated in previous annual reports, Management does not expect to realize
meaningful revenue in 1998 or future years from the sale of timber due to a
reduction in the number of trees suitable for cutting.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership requires cash primarily for the payment of overhead and
operating expenses and capital expenditures incurred in connection with real
estate sales and, since 1993, the operation of Fox Squirrel. Historically, the
Partnership has met its liquidity requirements by accruing general partners fees
and certain other fees and expenses payable to the General Partner and its
affiliates, selling certain non-real estate assets, and, from time to time, by
borrowing from local banks or the General Partner and its affiliates. Although
there can be no assurances, Management anticipates that existing cash balances,
cash flow generated from operations and borrowings will be sufficient to fund
operations for the next few fiscal years, by which time it is expected that the
Partnership will be generating sufficient cash flow from operations to begin
paying down accrued expenses. The Partnership may seek to increase the amount of
its credit facility, negotiate additional credit facilities, issue debt on such
terms and
-14-
<PAGE> 16
conditions as the General Partner deems prudent, or seek other forms of debt or
equity financing as the General Partner deems appropriate.
The Partnership finances construction of houses for sale on lots owned by
the Partnership with construction loans obtained through a line of credit
established with a local bank. From time to time, the bank will make payments to
the contractor for work performed, increasing the amount of the construction
loan and decreasing by the same amount the total available for future borrowing
under the line of credit. Borrowing under the line of credit in respect of any
house is repaid at closing of the sale. Under the terms of the line of credit,
if the house is unsold at the time of its completion, interest will accrue for
up to one year after the date of the first draw, after which time the
construction loan converts to a fixed-rate loan. At any given time, the
Partnership has had not more than one construction loan outstanding, with a
maximum balance, including accrued interest, not exceeding $110,000, and has
generally succeeded in selling the house and lot on which it stands prior to the
completion of construction. In March 1999, the Partnership borrowed $120,000
from a local financial institution to finance the purchase of real estate
intended for resale. Management expects that no additional bank financing will
be incurred until one or both properties are sold. In 1999 and subsequent years,
depending upon market conditions and other factors, the Partnership may have up
to two loans outstanding at any given time and the maximum amount of any loan is
not expected to exceed $120,000.
During 1998, the Partnership used $247,980 of cash in operating
activities, compared to $94,748 during 1997. The increase is primarily due to
the Partnership's operation of the Pro Shop and dining service at Fox Squirrel
beginning in February 1998.
Cash used in investing activities was $199,213 in 1998, compared to
$15,663 in 1997. The increase is attributable in part to assets acquired from
the former manager of Fox Squirrel in 1998 and to the construction during 1998
of one house for resale which remained unsold at December 31, 1998.
Cash provided by financing activities was $368,926, compared to $124,623
in 1997. The increase is attributable primarily to the timing of the
Partnership's drawings upon the line of credit relating to construction loans
and to higher accruals of expenses owed to the General Partner and its
affiliates.
IMPACT OF YEAR 2000
The Partnership has assessed the impact Year 2000 could have on its
operations. Management believes that Year 2000 will not have a material impact
upon the Partnership's information systems, business or ability to operate in a
well-controlled environment.
-15-
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14, "Exhibits, Financial Statement Schedules, and Reports on Form
8-K," for response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During 1998, the Partnership's auditors, Coopers & Lybrand L.L.P., merged
with Price Waterhouse & Co. and the combined entity became known as
PricewaterhouseCoopers LLP. There have been no changes in or disagreements
between the Partnership and PricewaterhouseCoopers LLP on accounting and
financial matters.
-16-
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF GENERAL PARTNER
<TABLE>
<CAPTION>
Period of Service as
Name Age General Partner Commenced
------------------------------- --- -------------------------
<S> <C> <C>
Grace Property Management, Inc. N/A May 15, 1980
</TABLE>
Grace Property Management, Inc. is a Delaware corporation engaged in the
business of real estate management. It is owed 50% by the Bank of Butterfield
Executor & Trustee Company, as trustee for John S. Grace, and 50% by the Estate
of Oliver R. Grace, Mr. Grace being a former director of Registrant's
predecessor.
INDEMNIFICATION OF EXECUTIVE OFFICERS
None
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Name Capacity General Partner's Fees
------------------------------- --------------- ----------------------
<S> <C> <C>
Grace Property Management, Inc. General Partner $ 150,000
</TABLE>
Except for a $25,000 payment in April 1990, the Partnership has not paid
the General Partner its general partner's fee since January 1986, although they
have been provided for in the accompanying financial statements. As of December
31, 1998, the fees accrued but not paid to Grace Property Management in respect
of General Partner's fees totaled $756,000. The Registrant has no on-going plan
or arrangement with respect to future remuneration to Grace Property Management
other than to accrue interest (at an annual rate of 10%, compounded quarterly)
on the unpaid balance due to Grace Property Management when cash flow is
insufficient to pay General Partner's fees. As of December 31, 1998, the
Registrant had a group life insurance plan in place covering all full-time
employees of the Partnership located in Boiling Spring Lakes. The Registrant has
no pension or profit sharing plan but does provide for incentive bonus
compensation to certain managerial employees for meeting or exceeding
predesignated budget targets. The Registrant has no options, warrants, or
appreciation rights outstanding. No Management person is indebted to the
Registrant.
-17-
<PAGE> 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998, the Partnership has 1,828,148 partnership units
issued and outstanding. Information with respect to the principal holders of
record known to the Partnership to beneficially own more than five (5%) percent
of the outstanding voting securities is set forth below.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class
-------------------------- ----------------------- -----
<S> <C> <C>
Estate of Oliver R. Grace 421,680 units are owned 23.1%
515 Madison Avenue by the Estate of Oliver R.
20th Floor Grace, Mr. Grace's widow
New York, NY 10022 and a company he formerly
controlled(1)
</TABLE>
The General Partner owns 25,100 partnership units, representing
approximately 1.4% of all units issued and outstanding.
In December 1995, following an unsolicited offer from a securities
broker-dealer to sell all of the units it owned to Mr. John S. Grace, the
president of the General Partner, an agreement was reached among Mr. Grace, the
Partnership, and such broker-dealer which provided for, among other things: (i)
a fifteen-year "standstill" by such broker-dealer; (ii) the purchase by Mr.
Grace from such broker-dealer of 22,160 units, representing all of the units
then held by such broker-dealer, for aggregate consideration of $5,540.00,
equivalent to $0.25 per unit; and (iii) the allocation of the consideration per
unit as being $0.10 for the standstill covenant and $0.15 for the purchase
price.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1995 the Partnership borrowed $200,000 from Mr. John S. Grace,
president of the General Partner, in the form of a promissory note. The note,
which fell due on June 1, 1998, bore interest at a rate equal to 6% over
12-month LIBOR (11.96875% for the period from January 1, 1998 to June 1, 1998
inclusive) and required quarterly interest payments. At June 1, 1998, $20,000 in
principal remained unpaid. Pursuant to the terms of the promissory note, the
interest rate on the unpaid balance increased to 9% over 12-month LIBOR
(14.0625% at December 31, 1998). During 1998, the Partnership paid $3,275.35 in
interest on such note and at various times during the year repaid $40,000 in
principal. At December
- -------------------
(1) The Estate of Oliver R. Grace beneficially owns 421,680 units
(including 39,950 units held in trusts of which the Estate of Oliver R. Grace is
the trustee). In addition, other members of the family beneficially own an
additional 218,665 units, which represents approximately 12.0% of the units
issued and outstanding. The Estate of Oliver R. Grace disclaims beneficial
ownership with respect to these additional units as well as the 39,950 units
held in certain trusts.
-18-
<PAGE> 20
31, 1998, $10,000 in principal and $351.56 in accrued interest remained unpaid.
During 1997, the Partnership paid $11,400 in interest on such note and at
various times throughout the year made pre-payments of principal totaling, in
aggregate, $60,000.
For fiscal years 1998, 1997 and 1996, the General Partners elected to
charge the Partnership for services and office space. These charges include
$15,000 in 1998, $10,000 in 1997 and $10,000 in 1996 for legal services and
$15,000 in each of 1998, 1997 and 1996 for rent on office space used by various
members of the Partnership's management. The General Partners fees were $150,000
for each of 1998, 1997 and 1996 (see Item 11, "Executive Compensation"). In
1998, the General Partner and its affiliates charged the Partnership interest
totaling $125,759, representing cumulative interest at an annual rate of 10%,
compounded quarterly, on the unpaid balances owed them by the Partnership. In
1997, the amount of such interest was $96,767. In 1996 the General Partner and
its affiliates charged the Partnership interest totaling $201,245, representing
cumulative interest at an annual rate of 10%, compounded quarterly, on the
unpaid balances owed them by the Partnership since 1993. Such interest included
$71,208 with respect to 1996, $51,292 with respect to 1995, $10,863 with respect
to the Transition Quarter, and $37,797 with respect to 1994. These charges have
been included in selling, general and administrative expenses.
Except for the preceding items, there were no transactions between
Management (or the immediate families of Management) and the Registrant during
the fiscal year ended December 31, 1998 or thereafter. Further, there were no
other related party transactions and there existed no indebtedness to the
Registrant from Management (or any member of the immediate family of
Management.)
-19-
<PAGE> 21
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Page
<S> <C>
The following financial information is contained within
Exhibit 1, "Audited Financial Statements:"
Report of Independent Accountants F-1
Balance Sheets as of December 31, 1998 and 1997 F-2
Statements of Operations for the years
ended December 31, 1998, 1997 and 1996 F-3
Statements of Partners' Capital/(Deficit) for the
years ended December 31, 1998, 1997 and 1996 F-4
Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6-13
Report of Independent Accountants on
Supplemental Schedules 38
Valuation and Qualifying Accounts 39
Real Estate and Accumulated Depreciation 40
</TABLE>
All other required supplemental financial schedules are either contained
within the notes to the financial statements or are not applicable.
REPORTS ON FORM 8-K
No current reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended December 31, 1998.
-20-
<PAGE> 22
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A complete listing of exhibits, including those incorporated by reference,
follows. All other exhibits or financial statement schedules are not applicable.
-21-
<PAGE> 23
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
<S> <C> <C>
3.1* The Limited Partnership Agreement of Reeves Telecom Associates
sets forth the rights of unit holders. It has been previously
filed as Exhibit B to Amendment No.2 to Registrant's
Registration Statement on Form S-14 dated March 28, 1980
(Registration No.2-66452).
16.1* Letter from KPMG Peat Marwick, L.L.P., the former independent
accountant of Registrant, regarding its concurrence with the
statements made by Registrant concerning the resignation or
dismissal as Registrant's principal accountant. Such letter
was filed as part of Form 8-K filed on May 8, 1997.
27.1** Financial Data Schedule.
99.1* The Robert C. Cantwell IV, MAI appraisals of the Boiling
Spring Lakes property dated 12/21/88, 7/17/84, and 2/23/82,
which were filed as a part of Form 10-K for September 30,
1988.
99.2* The Robert C. Cantwell IV, MAI appraisal of the Boiling Spring
Lakes property dated September 10, 1993, which appraisal was
filed as part of Form 10-K for September 30, 1993.
99.3* The Robert C. Cantwell IV, MAI appraisal of the Boiling Spring
Lakes property dated July 10, 1995, which was filed as Exhibit
3 to the Form 10-K for December 31, 1995.
99.4* The Robert C. Cantwell IV, MAI appraisal of the Boiling Spring
Lakes property dated September 1, 1998, which was filed as a
paper exhibit to the Form 10-Q for September 30, 1998 pursuant
to a continuing hardship exemption as provided in Rule 202 of
Regulation S-T.
</TABLE>
* Incorporated herein by reference.
** Included in the Partnership's electronic filing on EDGAR
-22-
<PAGE> 24
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.
REEVES TELECOM LIMITED PARTNERSHIP
Signatures Title Date
By: Grace Property
Management, Inc. General Partner March 31, 1999
By: /s/ JOHN S. GRACE
---------------------------
John S. Grace
President
-23-
<PAGE> 25
Reeves Telecom
Limited Partnership
Financial Statements
for the years ended
December 31, 1998, 1997, and 1996
<PAGE> 26
Reeves Telecom Limited Partnership
Index
Page(s)
Report of Independent Accountants 1
Financial Statements
Balance Sheets as of December 31, 1998 and 1997 2
Statements of Operations for the years ended December 31,
1998, 1997 and 1996 3
Statements of Partners' Capital/(Deficit) for the years ended
December 31, 1998, 1997, and 1996 4
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996 5
Notes to Financial Statements 6 - 13
<PAGE> 27
Report of Independent Accountants
January 15, 1999
The Partners
Reeves Telecom Limited Partnership
In our opinion, the accompanying balance sheets and the related statements of
operations, partners' capital/(deficit), and cash flows present fairly, in all
material respects, the financial position of Reeves Telecom Limited Partnership
(the "Partnership") at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Parthership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 12 to the
financial statements, the Partnership's recurring losses from operations and
liquidity position raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 12. The financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result
should the Partnership be unable to continue in existence.
/s/ PricewaterhouseCoopers LLP
<PAGE> 28
Reeves Telecom Limited Partnership
Balance Sheets
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Assets
Cash $ 69,864 $ 148,131
Prepaid and other current assets 12,168 --
----------- -----------
Total current assets 82,032 148,131
Land held for sale and related buildings and equipment, net 1,025,256 911,197
----------- -----------
$ 1,107,288 $ 1,059,328
=========== ===========
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable and accrued expenses $ 80,075 $ 65,126
Accrued expenses, affiliates 1,414,072 1,106,313
Current maturities of long-term debt 139,055 63,750
----------- -----------
Total current liabilities 1,633,202 1,235,189
----------- -----------
Long-term debt, less current maturities 18,570 32,708
Commitments and contingencies (see Notes 7 and 9)
Partners' deficit - issued and outstanding 1,828,148 units and 1,828,248
at December 31, 1998 and 1997, respectively (544,484) (208,569)
----------- -----------
$ 1,107,288 $ 1,059,328
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 29
Reeves Telecom Limited Partnership
Statements of Operations
For the years ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Property sales $ 435,046 $ 411,609 $ 463,051
Country club revenue 437,436 373,972 358,580
Interest income and finance charges 1,732 3,303 3,756
----------- ----------- -----------
874,214 788,884 825,387
----------- ----------- -----------
Expenses:
Direct costs of property sold 148,013 113,611 40,201
Direct costs of country club revenue 17,880 -- --
Selling, general and administrative expenses of
country club 454,339 339,766 350,454
Selling, general and administrative expenses 390,604 391,067 432,767
Depreciation 63,659 61,565 50,756
Interest 135,634 112,526 225,200
----------- ----------- -----------
1,210,129 1,018,535 1,099,378
----------- ----------- -----------
Operating loss (335,915) (229,651) (273,991)
Other income:
Timber sales -- 694 12,866
Gain on disposal of fixed assets -- -- 681
----------- ----------- -----------
-- 694 13,547
----------- ----------- -----------
Net loss $ (335,915) $ (228,957) $ (260,444)
=========== =========== ===========
Loss per partnership unit $ (.18) $ (.13) $ (.14)
=========== =========== ===========
Weighted average partnership units outstanding 1,828,245 1,828,248 1,828,248
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 30
Reeves Telecom Limited Partnership
Statements of Partners' Capital/(Deficit)
For the years ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Partners' capital/(deficit) at beginning of year $(208,569) $ 20,388 $ 280,832
Net loss (335,915) (228,957) (260,444)
========= ========= =========
Partners' capital/(deficit) at end of year $(544,484) $(208,569) $ 20,388
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 31
Reeves Telecom Limited Partnership
Statements of Cash Flows
For the years ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(335,915) $(228,957) $(260,444)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 63,659 61,565 50,756
Gain from disposal of fixed assets -- -- (681)
Change in assets and liabilities:
Prepaid and other assets (12,168) -- 1,201
Property held for sale, net 21,495 80,579 40,201
Accounts payable and accrued expenses 14,949 (7,935) 4,128
--------- --------- ---------
Net cash used in operating activities (247,980) (94,748) (164,839)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of land improvements, buildings and
equipment (199,213) (15,663) (217,771)
--------- --------- ---------
Net cash used in investing activities (199,213) (15,663) (217,771)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- -- 66,666
Repayment of long-term debt (50,833) (71,165) (76,223)
Borrowings under line of credit 229,273 515 167,650
Repayments of line of credit (117,273) (83,165) (85,000)
Increase in accrued expenses, affiliates 307,759 278,438 369,576
--------- --------- ---------
Net cash provided by financing activities 368,926 124,623 442,669
--------- --------- ---------
Net increase (decrease) in cash (78,267) 14,212 60,059
Cash at beginning of year 148,131 133,919 73,860
--------- --------- ---------
Cash at end of year $ 69,864 $ 148,131 $ 133,919
========= ========= =========
Supplemental information:
Interest paid $ 9,062 $ 17,009 $ 23,955
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 32
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Plan of Liquidation
On May 17, 1979 the stockholders of Reeves Telecom Corporation (the
"Corporation") approved a plan of liquidation (the "Plan") for the
Corporation and its subsidiaries. The plan, which was determined by the
Internal Revenue Service to qualify as a Section 337 liquidation,
authorized the Corporation's Board of Directors to sell the Corporation's
assets and distribute any remaining unsold assets to its stockholders
and/or a liquidation trust. On May 8, 1980, stockholders at a special
meeting approved an amendment to the Plan whereby assets not sold within
one year of the date the Plan was approved could, at the discretion of the
Board of Directors, be transferred from the Corporation to a South
Carolina limited partnership which would undertake to sell the remaining
assets on behalf of the stockholders. On May 15, 1980, the Corporation was
liquidated and all of its unsold assets and liabilities were transferred
to Reeves Telecom Associates, a South Carolina limited partnership (the
"Partnership"). Stockholders of the Corporation received one Partnership
unit in exchange for each share of common stock. The units are registered
under the Securities Act of 1933 but are not listed on any national
securities exchange. In January 1987, pursuant to a change in South
Carolina law, the Partnership's legal name was changed from Reeves Telecom
Associates to Reeves Telecom Limited Partnership.
Pursuant to the Plan, the Corporation sold all of its broadcasting assets
and substantially all of the land held for development and sale at one of
its two land development locations and distributed cash to its
stockholders of $.90 per share on February 29, 1980 and $2.30 per share on
May 15, 1980.
Remaining assets relate primarily to land held for sale, and cash,
generated primarily from the sale of timber, real estate and operation of
a golf club (Note 3).
The Partnership's Managing General Partner is Grace Property Management,
Inc.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared using the accrual
basis of accounting. The Partnership's assets have been written down, from
time to time, to reflect their fair values based upon appraisals.
Property Sales
Property sales represent individual building lots sold for cash and the
gross sales price of residential houses built by the Partnership for
resale. Land cost included in direct costs of property sold represents the
proportionate amount of the total project costs, after recorded valuation
allowances, based on the sales value of the lot to the total estimated
project sales value.
Land Held for Sale and Related Buildings and Equipment
Related buildings and equipment are stated at cost less accumulated
depreciation. Depreciation for financial reporting purposes is calculated
on the straight-line basis over the estimated useful lives of 8 to 31.5
years for buildings and 5 to 20 years for equipment and land improvements.
The Partnership assesses the realizability of the carrying value of its
land held for sale and related buildings and equipment whenever events or
changes in circumstance indicate that an impairment
6
<PAGE> 33
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
may have occurred in accordance with the provisions of Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Advertising Costs
Advertising costs of $30,042, $27,360 and $12,190 were expensed as
incurred during the years ended December 31, 1998, 1997 and 1996,
respectively.
3. Land Held for Sale and Related Buildings and Equipment
During September 1998, the Partnership obtained an appraisal of the
Boiling Spring Lakes property. Based upon the appraisal, the valuation
allowance established in previous years was considered adequate.
Management believes that based upon the 1998 sales activities and the golf
course operations, the valuation allowance continues to be adequate.
7
<PAGE> 34
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
A summary of land held for sale and related buildings and equipment at
December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Boiling Spring Lakes:
Land held for sale $ 2,215,178 $ 2,247,763
Other land and land improvements 404,373 392,612
Buildings 297,087 270,076
Equipment 323,303 284,876
Residential house held for sale 117,455 --
----------- -----------
3,357,396 3,195,327
----------- -----------
Pimlico Plantation lots 500 500
Less:
Accumulated depreciation (461,108) (398,007)
Valuation allowance (1,871,532) (1,886,623)
----------- -----------
$ 1,025,256 $ 911,197
=========== ===========
</TABLE>
4. Accrued Expenses, Affiliates
A summary of accrued expenses, affiliates at December 31, 1998 and 1997 is
as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
General partner fees $ 756,000 $ 606,000
Legal fees 118,728 101,728
Rent 78,904 63,904
Interest 423,772 298,013
Brokerage commission 30,000 30,000
Fees to a former general partner 6,668 6,668
---------- ----------
$1,414,072 $1,106,313
========== ==========
</TABLE>
General partners fees represents amounts owed to the General Partner.
Legal fees, rent and brokerage commission represent amounts owed to
certain affiliates of the General Partner. From time to time the General
Partner and its affiliates charge the Partnership interest on amounts owed
to them by the Partnership, which interest is accrued by the Partnership
as being owed to such entities. See Note 6 for additional information
regarding related party transactions.
8
<PAGE> 35
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. Long-Term Debt
Long-term debt at December 31, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Uncollateralized note payable, as defined below $ 10,000 $ 50,000
Borrowings outstanding under a revolving credit facility, as
defined below 112,000 --
8.57% note payable in monthly installments of $1,370,
including interest, maturing in February 2001, collateralized
by equipment with a net book value of $27,161 and $39,943
at December 31, 1998 and 1997, respectively 35,625 46,458
-------- --------
157,625 96,458
Less current maturities 139,055 63,750
-------- --------
$ 18,570 $ 32,708
======== ========
</TABLE>
On June 1, 1995, the Partnership issued a $200,000 note payable to John S.
Grace, an affiliate of the General Partner, with interest payable at the
12 month LIBOR rate (5.2% and 6.0% at December 31, 1998 and 1997,
respectively), plus 6%. The note matured on June 1, 1998. Subsequent to
June 1, 1998, the Partnership has been charged additional default interest
at a rate of 3%. The remaining principal balance at December 31, 1998 is
$10,000.
Periodically, the Partnership enters into non-revolving credit facilities
requiring interest only payments at the lenders prime rate plus .5% (8.25%
and 9.0% at December 31, 1998 and 1997, respectively). These agreements
are collateralized by building lots in Boiling Springs Lakes.
Principal maturities of long-term debt for the years subsequent to
December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $139,055
2000 17,137
2001 1,433
--------
$157,625
========
</TABLE>
9
<PAGE> 36
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
6. Related Party Transactions
The General Partners charged the Partnership for services and office space
for the years ended December 31, 1998, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
General Partner fees $150,000 $150,000 $150,000
Legal fees 17,000 10,000 10,000
Office space 15,000 15,000 15,000
Interest 125,759 96,769 201,245
-------- -------- --------
$307,759 $271,769 $376,245
======== ======== ========
</TABLE>
7. Litigation
In the past, litigation has been filed against the Partnership claiming
breach of contract because lots guaranteed in the sales contract as being
"high, dry and suitable for building" will not pass current county health
department requirements regarding the installation of septic tanks and
on-site sewage disposal systems. Management contends this language does
not constitute a guarantee of soil conditions for sewer purposes and that
even if it did, installation and use of septic tanks on these lots would
have been permitted under county regulations in effect prior to August
1976 and that it had no way of knowing that stricter regulations would
later be enacted. In the event litigation is filed which results in an
unfavorable ruling, possible remedies could include: refunding the
purchase price of the lots; building nitrification fields with fill dirt
that would allow installation of sewage disposal systems on the lots;
providing the litigants with lots that will pass current county health
department requirements; and paying monetary damages. If mandated, the
cost of such remedial action in the aggregate could be substantial. No
provision for this contingent liability has been made in the accompanying
financial statements; however, at December 31, 1998 no suits or claims are
pending against the Partnership related to this matter.
8. Income Taxes
Results of operations of the Partnership are taxable to the partners and
no recognition of Federal and state income tax is included in the
financial statements.
9. Leases
The Company leases certain office and golf course equipment under
operating leases. The minimum lease payments under operating leases for
the years subsequent to December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $40,229
2000 19,820
2001 9,720
2002 4,860
-------
$74,629
=======
</TABLE>
10
<PAGE> 37
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
Equipment rental and lease expense for the years ending December 31, 1998,
1997 and 1996 was $35,854, $31,984 and $28,145, respectively.
10. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments". The estimated fair value amounts have been
determined by the Partnership using the methods and assumptions described
below. However, considerable judgment is required to interpret market data
to develop estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Partnership could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to
estimate that value:
Long-Term Debt
The fair value of long term debt has been estimated by discounting the
future cash flows using the current rates offered for debt issues with
similar characteristics. The carrying amount of long-term debt
approximates fair value at December 31, 1998 and 1997.
11. Business Segment Data
The following disclosure is made in accordance with the requirements of
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This Statement
requires that public business enterprises report certain information about
operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods. It
also requires disclosure of certain information about the Company's
products and services, the geographic areas in which the Company operates
and its major customers. The adoption of this pronouncement has resulted
in a revision of the Company's operating segments footnote disclosures,
but did not have an impact on the financial statements.
The Partnership operates two business segments: property sales and a
country club. Revenues and direct cost are separately stated in the
financial statements. All revenues during the years ended December 31,
1998, 1997 and 1996 for both segments have been generated in the state of
North Carolina. Operating loss, net loss, depreciation, identifiable
assets and capital expenditures by business segment are summarized as
follows:
11
<PAGE> 38
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Operating loss:
Property sales $ (173,784) $ (150,944) $ (129,771)
Country Club (162,131) (78,707) (144,220)
----------- ----------- -----------
Total $ (335,915) $ (229,651) $ (273,991)
=========== =========== ===========
Net loss:
Property sales $ (173,784) $ (150,250) $ (116,224)
Country Club (162,131) (78,707) (144,220)
----------- ----------- -----------
Total $ (335,915) $ (228,957) $ (260,444)
=========== =========== ===========
Depreciation:
Property sales $ 3,262 $ 3,262 $ 9,132
Country Club 60,397 58,303 41,624
----------- ----------- -----------
Total $ 63,659 $ 61,565 $ 50,756
=========== =========== ===========
Identifiable assets:
Property sales $ 533,518 $ 491,818 $ 641,965
Country Club 573,770 567,510 529,632
----------- ----------- -----------
Total $ 1,107,288 $ 1,059,328 $ 1,171,597
=========== =========== ===========
Capital expenditures:
Property sales $ 73,557 $ -- $ 184,010
Country Club 125,656 15,663 33,761
----------- ----------- -----------
Total $ 199,213 $ 15,663 $ 217,771
=========== =========== ===========
</TABLE>
12. Liquidity and Going Concern Issues
Cash generated from Fox Squirrel Country Club and individual lot sales may
not be sufficient to meet future operating costs, debt service and other
cash requirements. Operating cash flows have been negative in each of the
years ended December 31, 1998, 1997 and 1996. Further, at December 31,
1998, the current liabilities of the Partnership exceeded its current
assets by $1,551,170. The partners' deficit at December 31, 1998 is
$544,484. No reasonable offer has been received for the assets of the
Partnership due principally to the fact that the majority of the land is
wetland and that most of the unsold plotted lots do not satisfy current
county health standards regarding the installation of septic tanks and
on-site sewage disposal systems. If the Partnership's cash flow is less
than management's expectations, capital programs presently planned may be
either postponed, scaled back, or eliminated, and certain operating
expenditures may be either deferred or, in the case of payments to
affiliates of the General Partner, accrued. Despite such contingency plans
by management, the above mentioned factors indicate that the Partnership
may be unable to continue in existence while attempting to complete the
sale and liquidation of the Partnership's remaining assets. The financial
statements have been prepared
12
<PAGE> 39
Reeves Telecom Limited Partnership
Notes to Financial Statements
- --------------------------------------------------------------------------------
assuming the Partnership will continue as a going concern. The
Partnership's recurring losses from operations and liquidity position
raise substantial doubt about the entity's ability to continue while
attempting to sell the remaining assets of the Partnership.
The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amounts
and classification of liabilities that might result should the Partnership
be unable to continue in existence.
13
<PAGE> 40
PricewaterhouseCoopers Letterhead
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTAL
SCHEDULES
January 15, 1999
The Partners
Reeves Telecom Limited Partnership
Our report on the financial statements of Reeves Telecom Limited Partnership is
included on page F-1 of this form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules listed in the index on page 20 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
<PAGE> 41
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Changes Balance at
Beginning Costs and Add At End
Description of Period Expenses Deductions (Deduct) of Period
----------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
For year ended Dec. 31, 1998
RE valuation allowance $1,886,624 $ -0- $15,090 $ -0- $1,871,534
For year ended Dec. 31, 1997
RE valuation allowance 1,902,644 -0- 16,020 -0- 1,886,624
For year ended Dec. 31, 1996
RE valuation allowance 1,902,644 -0- -0- -0- 1,902,644
</TABLE>
-39-
<PAGE> 42
REEVES TELECOM LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Capitalized Amounts
Initial Subsequent Carried
Encum- Cost to to at End Accumulated
Description brances Partnership Acquisition of Period Depreciation
----------- ------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Boiling Spring Lakes, NC
Building lots and land
Year ended 12/31/98
Beginning of period -0- 2,173,945 73,818 2,247,763 -0-
Improvements -0- -- 3,999 3,999 -0-
Cost of land sold -0- (36,584) -0- (36,584) -0-
---- ----------- ------- ---------- ----
End of period -0- 2,137,361 77,817 2,215,178 -0-
Pimlico Plantation, SC
Building lots and land
Year ended 12/31/98
Beginning of period -0- 500 -0- 500 -0-
Improvements -0- -0- -0- -0- -0-
Cost of land sold -0- -0- -0- -0- -0-
---- ----------- ------- ---------- ----
End of period -0- 500 -0- 500 -0-
TOTAL AT 12/31/98 $-0- $ 2,137,861 $77,817 $2,215,678 $-0-
==== =========== ======= ========== ====
</TABLE>
<TABLE>
<CAPTION>
Life
Upon
Which
Depreciation
in Latest
Income
Net Date of Statement is
Description Book Value Acquisition Computed
----------- ---------- ----------- --------
<S> <C> <C> <C>
Boiling Spring Lakes, NC
Building lots and land
Year ended 12/31/98
Beginning of period 2,247,763 May 1990 N/A
Improvements 3,999 April 1998 N/A
Cost of land sold (36,584) -- N/A
----------
End of period 2,215,178 -- N/A
Pimlico Plantation, SC
Building lots and land
Year ended 12/31/98
Beginning of period 500 May 1980 N/A
Improvements -0- May 1980 N/A
Cost of land sold -0- -- N/A
----------
End of period 500 -- N/A
==========
TOTAL AT 12/31/98 $2,215,678
</TABLE>
-40-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 69,864
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 82,032
<PP&E> 1,025,256
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,107,288
<CURRENT-LIABILITIES> 1,633,202
<BONDS> 18,570
0
0
<COMMON> (544,484)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,107,288
<SALES> 435,046
<TOTAL-REVENUES> 874,214
<CGS> 165,893
<TOTAL-COSTS> 1,074,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,634
<INCOME-PRETAX> (335,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (335,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (335,915)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
