<PAGE> 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 SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 33-1889
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MARKETPLACE INCOME PROPERTIES,
------------------------------
A NORTH CAROLINA LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
North Carolina 56-1493986
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(State of other jurisdiction of (I.R.S. Employer
or organization) Identification No.)
Interstate Tower
P.O. Box 1012
Charlotte, NC 28201-1012
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(Address of principal executive offices)
(Zip Code)
704/379-9164
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(Registrant's telephone number, including area code)
Not Applicable
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(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
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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.
5,000 limited partnership units outstanding as of October 9, 1995
Page 1 of 11 sequentially numbered pages
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MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
September 30,
1995 December 31,
(unaudited) 1994
----------- ------------
<S> <C> <C>
ASSETS
Rental Properties (at cost):
Land and improvements $ 3,873,911 $ 3,873,911
Buildings 21,813,831 20,456,387
Furniture and equipment 410,143 410,143
----------- -----------
26,097,885 24,740,441
Accumulated depreciation (5,918,561) (5,404,224)
----------- -----------
20,179,324 19,336,217
Cash and cash equivalents 623,038 1,258,117
Restricted Cash 162,152 64,553
Cash on deposit with lender 41,062 1,401,571
Accounts Receivable 18,557 118,036
Net deferred Loan and Acquisition Costs 232,848 194,964
Other 40,282 69,694
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$21,297,263 $22,443,152
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Debt $12,190,090 $15,705,327
Payables to general partners and affiliates 39,985 22,318
Other liabilities 571,479 262,708
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12,801,554 15,990,353
Minority interest 26,830 27,675
Partners' capital:
General partners 107,637 86,829
Limited partners 8,361,242 6,338,295
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8,468,879 6,425,124
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$21,297,263 $22,443,152
=========== ===========
</TABLE>
See attached notes to the consolidated financial statements
2
<PAGE> 3
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income: $ 635,370 $ 743,954 $1,922,982 $2,467,874
Rent 12,856 33,910 68,234 43,307
---------- ---------- ---------- ----------
Interest and other 648,226 777,864 1,991,216 2,511,181
Expenses:
Interest 325,205 360,178 899,169 1,113,702
Depreciation 171,710 174,612 514,336 561,557
Amortization 13,853 13,854 41,560 43,210
Operations and maintenance 300,470 207,380 758,472 618,047
Professional fees 1,838 8,154 28,399 39,013
Lease management fees 4,500 13,610 13,500 40,830
Administrative and Other 96,354 37,741 135,405 78,148
---------- ---------- ---------- ----------
913,930 815,529 2,390,841 2,494,507
---------- ---------- ---------- ----------
Income (Loss) before gain, extraordinary income
and minority interest (265,704) (37,665) (399,625) 16,674
Net gain on sale of Partnership assets 0 1,819,575 0 1,819,575
---------- ---------- ---------- ----------
Income (loss) before extraordinary income and
minority interest (265,704) 1,781,910 (399,625) 1,836,249
Extraordinary gain on extinquishment of debt 2,479,627 0 2,479,627 0
---------- ---------- ---------- ----------
Income after gain and before minority intere 2,213,923 1,781,910 2,080,002 1,836,249
Minority interest (716) (98) (845) 992
---------- ---------- ---------- ----------
Net income (loss) $2,214,639 $1,782,008 $2,080,847 $1,835,257
========== ========== ========== ==========
</TABLE>
See attached notes to the consolidated financial statements
3
<PAGE> 4
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
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<S> <C> <C> <C>
Balance, December 31, 1993 $68,401 $5,263,963 $5,332,364
Net income for the period 18,353 1,816,904 1,835,257
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Balance, September 30, 1994 $86,754 $7,080,867 $7,167,621
======= ========== ==========
Balance, December 31, 1994 $86,829 $6,338,295 $6,425,124
Net income for the period 20,808 2,060,039 2,080,847
Distributions 0 (37,092) (37,092)
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Balance, September 30, 1995 $107,637 $8,361,242 $8,468,879
======== ========== ==========
</TABLE>
See attached notes to the consolidated financial statements
4
<PAGE> 5
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(unaudited)
<TABLE>
<CAPTION>
Nine Nine
Months Months
Ended Ended
September 30, September 30,
1995 1994
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<S> <C> <C>
Net Income $2,080,847 $1,835,257
Adjustments to reconcile net income to net cash
provided by operations:
(Increase) Decrease in accounts receivable 99,479 (16,358)
Depreciation 514,336 561,557
Amortization 41,560 43,210
Minority Interest (845) 992
Decrease in restricted cash and deposits 1,262,910 0
Other 29,412 (280,979)
Increase in accrued liabilities 326,438 189,170
Increase in deferred loan costs (79,444) (980)
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Total adjustments 2,193,846 496,612
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Net cash provided by operating activities 4,274,693 2,331,869
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Cash flows from investing activities:
Improvements in rental properties (1,357,444) (17,895)
Disposition of P, P & E, net of accumulated depreciation
upon sale of Siler City 0 2,541,943
Disposition of land parcel at Amelia Plaza 0 19,810
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Net cash provided (used) by investing activities (1,357,444) 2,543,858
Cash flows from financing activities:
Repayments of debt (235,609) (400,143)
Extinquishment of debt upon Mall refinancing (2,479,627) 0
Proceeds from Mall refinancing 5,500,000 0
Repayment of debt upon Mall refinancing (6,300,000) 0
Retirement of debt upon sale of Siler City 0 (1,503,191)
Repayment of debt upon Amelia land parcel sale 0 (14,987)
Write off of deferred costs upon sale of Siler City 0 7,723
Distributions to Limited Partners (37,092) 0
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Net cash used by financing activities (3,552,328) (1,910,598)
Net increase (decrease) in cash and cash equivalents (635,079) 2,965,129
Cash and cash equivalents at beginning of period 1,258,117 272,119
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Cash and cash equivalents at end of period $ 623,038 $3,237,248
========== ==========
</TABLE>
See attached notes to the consolidated financial statements
5
<PAGE> 6
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated 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 consolidated 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 nine month period ended September 30, 1995. The consolidated 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 consolidated financial statements
should be read in conjunction with the Partnership's 1994 Annual Report filed
with the Securities and Exchange Commission on Form 10-K. The results of
operations for the nine month period ended September 30, 1995 are not
necessarily indicative of the results for a full year.
2. ORGANIZATION AND SUMMARY OF 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 October 9, 1995 was 774. ISC Realty is the sole general partner.
The consolidated financial statements include the accounts of Marketplace
Income Properties and its subsidiary, Marketplace Income Properties of Florida,
collectively referred to as "the Partnership". All significant intercompany
transactions have been eliminated in consolidation.
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.
6
<PAGE> 7
3. RELATED PARTY TRANSACTIONS
Amounts paid to the general partner for the reimbursement of expenses of
operating the Partnership were $37,500 for the nine months ended September 30,
1995 and 1994, respectively. For the nine months ended September 30, 1995, the
general partner earned $13,500 as a lease management fee for Town & Country and
$40,830 as a lease management fee for Town & Country and Meadowbrook Manor of
Siler City for the nine months ended September 30, 1994, based upon operating
income.
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PARTNERSHIP MATTERS
The Partnership was formed under the North Carolina Limited Partnership Act in
November 1985. The property investment portfolio consists of the Marketplace
Mall (the "Mall") in Winston-Salem, NC, Mt. Pilot Shopping Center ("Mt. Pilot")
in Pilot Mountain, NC, Amelia Plaza ("Amelia") in Fernandina Beach, FL and Town
& Country Convalescent Center ("Town & Country") in Tampa, FL, which is a
nursing home. Meadowbrook Manor of Siler City, NC was sold in June 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $623,038 at September 30, 1995, down from
$1,258,117 at December 31, 1994. The cash is being maintained to provide
additional tenant and exterior improvements at the Mall and for cash reserves
as required by the Partnership agreement. As previously reported in the second
quarter report, the grand opening of Hamricks at the Mall was in September and
several tenants have renewed their leases subsequent to the Hamricks opening.
The General Partner is optimistic that this positive leasing activity at the
Mall will continue.
On July 5, 1995 the Partnership paid off the State Mutual Life mortgage on the
Mall at the discounted amount of $6,300,000 as agreed in the December 1994
modification. The Partnership funded the payoff with a new $5,500,000 mortgage
on the Mall from First Union National Bank and from cash reserves. The First
Union loan provides for maximum borrowings of $5,800,000 and accrues interest
at LIBOR plus 2.15%. The Partnership entered into a swap agreement with First
Union to fix the interest rate at 8.35% on $4,750,000 of the loan. The loan
shall be repaid with interest only payments for the first three months.
Beginning November 1, 1995 the loan will be repaid in fixed monthly principal
payments of $17,521 plus interest on the outstanding balance. As noted above,
an additional $300,000 may be borrowed subject to certain leasing requirements.
In October 1995, an additional $200,000 of the $300,000 maximum additional
borrowings was borrowed on the note. The note has a maturity date of June 30,
1998.
7
<PAGE> 8
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1994
The Partnership had net income of $2,080,847 for the nine months ended
September 30, 1995 compared to net income of $1,835,257 for the same period of
1994. The increase in net income is attributable to the following variances in
income and expense components.
Rental income decreased by approximately $544,892. The decrease is primarily
comprised of a $173,000 decrease in rental income resulting from the new lease
on Town & Country, a $245,000 decrease in rent from Siler City due to the sale
of the facility in 1994, and a decrease of $122,000 in rental income and
expense reimbursements at the Mall as a result of decreased occupancy at the
Mall.
Interest income increased from $43,307 at September 30, 1994 to $68,234 for the
nine months ended September 30, 1995. The increase is primarily attributable
to increased interest earned of approximately $9,600 on the construction escrow
for Hamrick's and an increase of approximately $36,000 earned on cash reserves
maintained by the Partnership. These increases were offset by a decrease in
interest income of approximately $21,000 at Siler City which was earned as a
result of the sales transaction in 1994.
Interest expense for the nine months ended September 30, 1995 was $899,169
compared with $1,113,702 for the same period of 1994. The decrease of $214,533
in 1995 was due to a decrease of approximately $80,900 for the Siler City
mortgage subsequent to the sale in 1994, and a decrease of approximately
$144,000 in interest payments attributable to the restructuring of the Mall
mortgage and a decrease of $9,000 on the Amelia mortgage. These decreases were
offset by an increase of approximately $19,000 at Town & Country.
Depreciation expense decreased from $561,557 to $514,336 in 1995 due to the
sale of Siler City in 1994.
Operations and maintenance expense increased from $618,047 for the nine months
ended September 30, 1994 to $758,472 for the same period in 1995. The increase
of approximately $140,000 is attributable to an increase in common area
maintenance expense of $72,600, an increase of $35,000 in lease commissions,
and an increase in fees paid for a property tax appeal of $12,000, all offset
by a decrease of approximately $14,000 in advertising expense at the Mall. In
addition, an increase of $13,000 occurred in building service and maintenance
expense, as well as, an increase of $13,000 in insurance expense due to a
change in the accrual for 1995, and an increase in lease commission expense at
Amelia of $8,100 representing amortization of deferred lease commissions.
Professional fees decreased from $39,013 for the nine months ended September
30, 1994 to $28,399 as a result of a decrease of $14,000 in legal expense
incurred at the Mall. This decrease was offset by an increase of approximately
$5,000 in accounting and tax return costs due to an increase in fees as well as
a timing difference in fees paid as compared to 1994.
Lease management fees decreased from $40,830 for the nine months ended
September 30, 1994 to $13,500 for the nine months ended September 30, 1995 due
to the decreased rental income received from Town & Country as well as the
absence of income from Siler City in 1995 due to the sale in 1994.
8
<PAGE> 9
Administrative and other expenses increased from $78,148 for the nine months
ended September 30, 1994 to $135,408 for the nine months ended September 30,
1995. The remaining unamortized deferred loan costs for the Mall were written
off in the amount of $66,000 during August 1995. Sales and use tax decreased
approximately $6,000 for Town & Country and miscellaneous administrative costs
decreased approximately $3,000 at all properties.
THREE MONTHS ENDED SEPTEMBER 30, 1995 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1994
The Partnership reported net income of $2,214,639 for the three months ended
September 30, 1995 as compared to $1,782,008 for the same period ended 1994.
Rental income for the three months ended September 30, 1995 as compared to
September 30, 1994 decreased approximately $108,000. The decrease is the
result of the decrease in rental income of $52,000 from Town & Country and
$35,000 from Siler City, as well as, a decrease in rental income and expense
reimbursements of approximately $21,000 at the Mall.
The decrease in interest expense of $35,000 during the three months ended
September 30, 1995 as compared to the same period ended September 30, 1994 is
attributable to the restructured Mall mortgage which decreased interest expense
by approximately $23,000 and reduced debt service subsequent to the sale of
Siler City pertaining to interest payments of approximately $20,000. These
decreases were offset by an increase in interest expense for Town & Country of
approximately $9,000 as a result of an adjustment made to correct the interest
expense accrual.
Operations and maintenance expenses increased approximately $93,000 from the
three months ended September 30, 1994 to the three months ended September 30,
1995. The increase is primarily attributable to an increase of $35,000 in
lease commissions and $46,000 in common area maintenance and building service
expense at the Mall as well as costs incurred in conjunction with a property
tax appeal for the Mall of approximately $12,000.
Administrative and other expenses increased from $37,741 for the three months
ended September 30, 1994 to $96,354 for the same period in 1995. This increase
of $58,000 was the result of the write off expense incurred upon the write off
unamortized loan cost balance at the Mall during the third quarter 1995.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
9
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None
Item 4. Submissions of Matter to a vote of Securities Holders
None
Item 5. Other Information
In August, the Partnership entered into a contract with an
unaffiliated party to sell Town & Country Nursing Home at a price of
$3,935,000. The sale was scheduled to close by January 1996. Advocare of
Florida, the current lessee has a right of first refusal to purchase the
property at the same terms and conditions and exercised this option. However,
Advocare failed to meet certain requirements necessary to close the sale and
the contract was canceled. The Registrant intends to pursue the original party
for potential interest in entering into another sales contract on Town &
Country, however it reserves the right to rescind its cancellation of
Advocare's contract.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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
three months ended September 30, 1995.
10
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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: NOVEMBER 13, 1995
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11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARKETPLACE INCOME PROPERTIES FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 623,038
<SECURITIES> 0
<RECEIVABLES> 18,557
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,097,885
<DEPRECIATION> (5,918,561)
<TOTAL-ASSETS> 21,297,263
<CURRENT-LIABILITIES> 571,479
<BONDS> 12,190,090
<COMMON> 0
0
0
<OTHER-SE> 8,468,879
<TOTAL-LIABILITY-AND-EQUITY> 21,297,263
<SALES> 0
<TOTAL-REVENUES> 1,991,216
<CGS> 0
<TOTAL-COSTS> 758,472
<OTHER-EXPENSES> 733,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 899,169
<INCOME-PRETAX> 2,080,847
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,080,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,080,847
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
