<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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 33-1889
MARKETPLACE INCOME PROPERTIES, A NORTH CAROLINA LIMITED PARTNERSHIP
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1493986
-------------- -------------------
(State of other jurisdiction of (I.R.S. Employer
or organization) Identification No.)
Interstate Tower
P.O. Box 1012
Charlotte, NC 28201-1012
------------------------
(Address of principal executive offices)
(Zip Code)
704/379-9164
------------
(Registrant's telephone number, including area code)
(Former name, former address and fiscal year ended , if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
5,000 limited partnership units outstanding as of November 8, 1996
Page 1 of 10 sequentially numbered pages
<PAGE> 2
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(unaudited) 1995
------------ ------------
ASSETS
<S> <C> <C>
Rental Properties (at cost):
Land and improvements $ 3,483,340 $ 3,873,911
Buildings 18,026,664 22,016,181
Furniture and equipment 301,868 410,143
------------ ------------
21,811,872 26,300,235
Accumulated depreciation (5,515,726) (6,101,961)
------------ ------------
16,296,146 20,198,274
Cash and cash equivalents 537,424 522,598
Restricted Cash 130,569 80,482
Accounts Receivable 29,317 104,794
Net deferred Loan and Acquisition Costs 186,793 225,017
Other 83,165 87,568
------------ ------------
$ 17,263,414 $ 21,218,733
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Debt $ 9,092,085 $ 12,310,526
Payables to general partners and affiliates 48,307 60,391
Other liabilities 253,453 302,064
------------ ------------
9,393,845 12,672,981
Minority interest 0 26,501
Partners' capital:
General partners 101,645 108,141
Limited partners 7,767,924 8,411,110
------------ ------------
7,869,569 8,519,251
------------ ------------
$ 17,263,414 $ 21,218,733
============ ============
</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, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income: $ 681,365 $ 635,370 $ 2,065,931 $ 1,922,982
Rent 10,619 12,856 54,556 68,234
------------ ------------ ------------ ------------
Interest and other 691,984 648,226 2,120,487 1,991,216
Expenses:
Interest 204,543 325,205 763,600 899,169
Depreciation 123,440 171,710 426,493 514,336
Amortization 2,028 13,853 26,891 41,560
Operations and maintenance 219,040 300,470 589,135 758,472
Professional fees 1,826 1,838 24,775 28,399
Legal fees 9,700 1,501 152,554 6,029
Administrative and Other 42,454 99,353 113,597 142,876
------------ ------------ ------------ ------------
603,031 913,930 2,097,045 2,390,841
------------ ------------ ------------ ------------
Income (Loss) before gain, extraordinary income
and minority interest 88,953 (265,704) 23,442 (399,625)
Net gain on sale of Partnership assets 255,140 0 255,140 0
------------ ------------ ------------ ------------
Income (loss) before extraordinary income and
minority interest 344,093 (265,704) 278,582 (399,625)
Extraordinary gain on extinquishment of debt 58,532 2,479,627 58,532 2,479,627
------------ ------------ ------------ ------------
Income after gain and before minority interest 402,625 2,213,923 337,114 2,080,002
Minority interest 2,427 (716) 1,948 (845)
------------ ------------ ------------ ------------
Net income (loss) $ 400,198 $ 2,214,639 $ 335,166 $ 2,080,847
============ ============ ============ ============
</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, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
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)
----------- ----------- -----------
Balance, September 30, 1995 $ 107,637 $ 8,361,242 $ 8,468,879
=========== =========== ===========
Balance, December 31, 1995 $ 108,141 $ 8,411,110 $ 8,519,251
Net income for the period 3,352 331,814 335,166
Distributions (9,848) (975,000) (984,848)
----------- ----------- -----------
Balance, September 30, 1996 $ 101,645 $ 7,767,924 $ 7,869,569
=========== =========== ===========
</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, 1996 AND 1995
Increase (Decrease) in Cash and Cash Equivalents
(unaudited)
<TABLE>
<CAPTION>
Nine Nine
Months Months
Ended Ended
September 30, September 30,
1996 1995
------------- ------------
<S> <C> <C>
Net Income $ 335,166 $ 2,080,847
Adjustments to reconcile net income to net cash
provided by operations:
(Increase) Decrease in accounts receivable 75,477 99,479
Depreciation 426,493 514,336
Amortization 26,891 41,560
Minority Interest (26,501) (845)
(Increase) Decrese in restricted cash and deposits (50,087) 1,262,910
Other 4,403 29,412
(Decrease) Increase in accrued liabilities (60,695) 326,438
(Decrease) Increase in deferred loan costs 11,333 (79,444)
----------- -----------
Total adjustments 407,314 2,193,846
----------- -----------
Net cash provided by operating activities 742,480 4,274,693
----------- -----------
Cash flows from investing activities:
Improvements in rental properties 0 (1,357,444)
Disposition of P, P & E, net of accumulated depreciation
upon sale of Town & Country 3,475,635 0
----------- -----------
Net cash provided (used) by investing activities 3,475,635 (1,357,444)
Cash flows from financing activities:
Repayments of debt (291,606) (235,609)
Extinquishment of debt upon Mall refinancing (2,479,627)
Proceeds from Mall refinancing 5,500,000
Repayment of debt upon Mall refinancing (6,300,000)
Retirement of debt upon sale of Town & Country (2,926,835) 0
Distributions to General Partner (9,848) 0
Distributions to Limited Partners (975,000) (37,092)
----------- -----------
Net cash used by financing activities (4,203,289) (3,552,328)
Net increase (decrease) in cash and cash equivalents 14,826 (635,079)
Cash and cash equivalents at beginning of period 522,598 1,258,117
----------- -----------
Cash and cash equivalents at end of period $ 537,424 $ 623,038
=========== ===========
</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, 1996. 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 1995 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, 1996, 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
November 4, 1996, was 777. 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,
1996, and 1995, respectively. The general partner earned $28,100 as a lease
management fee (including accrued lease management fees of $18,000) for Town &
Country for the nine months ended September 30, 1996, and $13,500 for the nine
months ended September 30, 1995, based upon rental revenue. The general partner
also earned a fee of approximately $29,281 for guaranteeing the mortgage on the
Mall. This fee represents 2% of the amount of the balance guaranteed. Finally,
the general partner earned a 2% brokerage commission of $78,700 in conjunction
with the sale of Town & Country.
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, and Amelia Plaza ("Amelia") in Fernandina Beach, FL.
Meadowbrook Manor of Siler City, NC, was sold in June 1994. Town & Country
Convalescent Center ("Town & Country") in Tampa, FL, was sold in July 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $537,424 at September 30, 1996, up from
$522,598 at December 31, 1995. This balance is being maintained as a reserve for
capital improvements, debt repayments and other contingencies. Accounts
receivable decreased from $104,794 to $29,317 in the nine month period ended
September 30, 1996, due primarily to the collection of tenant pass-through
charges.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
The Partnership had a net profit of $335,166 for the nine months ended September
30, 1996, compared to a net profit of $2,080,847 for the same period in 1995.
The change in net profit is attributable to major capital transactions at the
Partnership. In July 1995, the Partnership recognized a $2,479,627 gain on the
extinguishment of debt in conjunction with the refinancing of Marketplace Mall.
In July 1996, the Partnership recognized a $255,140 gain on sale and a $58,532
gain on extinguishment of debt in conjunction with the sale of Town & Country.
Gross income increased approximately $129,271. The increase is the result of
higher rental income and expense reimbursements at Marketplace Mall due to
higher occupancy resulting from the Hamrick's expansion that occurred in 1995.
7
<PAGE> 8
Interest expense for the nine months ended September 30, 1996, was $763,300
compared with $899,169 for the same period of 1995. The decrease of $135,569 in
1996 is attributable to the restructuring of the Mall mortgage as well as a
higher percentage of the debt service payments allocated to principal.
Operations and maintenance expense decreased from $758,472 for the nine months
ended September 30, 1995, to $589,135 for the same period in 1996. The decrease
of approximately $169,000 is attributable to a decrease in common area
maintenance expense and property taxes at the Mall. The property taxes were
reduced upon appeal to the State Tax Commission. The general partner has
appealed the value determination and is seeking a further reduction.
Administrative and other expenses decreased from $142,876 for the nine months
ended September 30, 1995, to $113,597 for the nine months ended September 30,
1996. The lower amount in 1996 is attributed to lower lease commissions.
Legal expense was $152,554 for the nine months ended September 30, 1996, a
$146,000 increase over the same period in 1995. The increase stems from the
settlement of the litigation surrounding the sale of Town & Country.
THREE MONTHS ENDED SEPTEMBER 30, 1996, AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
The Partnership reported net income of $400,198 for the three months ended
September 30, 1996, as compared to net income of $2,214,639 for the same period
in 1995.
Rental income for the three months ended September 30, 1996, increased nearly
$46,000 to $681,365 as compared to the same three month period in 1995. The
increase is the result of the higher rental income and expense reimbursements at
the Mall as discussed above.
Operations and maintenance expenses decreased approximately $81,000 from the
three months ended September 30, 1996, to the three months ended September 30,
1995. The decrease is attributable to the property tax reduction as explained
above as well as a decrease in advertising and marketing expenses at the Mall.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submissions of Matter to a vote of Securities Holders
None
Item 5. Other Information
On July 11, 1996, the Partnership completed the sale of Town &
Country Nursing Home for $3,935,000, as agreed upon in the purchase and sale
agreement. The Partnership received approximately $1.0 million in net proceeds
which was distributed on August 16, 1996, to the limited partners at the rate of
$325 per unit. See proforma financial statements included at Exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EX-27 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
EX-99 PROFORMA FINANCIAL STATEMENTS
(b) Reports on Form 8-K No reports on Form 8-K were filed during
the nine months ended September 30, 1996.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARKETPLACE INCOME PROPERTIES
LIMITED PARTNERSHIP
-------------------
(REGISTRANT)
BY:/S/ J. CHRISTOPHER BOONE
------------------------
J. CHRISTOPHER BOONE
PRESIDENT
ISC REALTY CORPORATION
GENERAL PARTNER
DATE: November 14, 1996
-----------------
10
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 537,424
<SECURITIES> 0
<RECEIVABLES> 29,317
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 697,310
<PP&E> 21,811,872
<DEPRECIATION> 5,515,726
<TOTAL-ASSETS> 17,263,414
<CURRENT-LIABILITIES> 301,760
<BONDS> 9,092,085
0
0
<COMMON> 0
<OTHER-SE> 7,869,569
<TOTAL-LIABILITY-AND-EQUITY> 17,263,414
<SALES> 2,065,931
<TOTAL-REVENUES> 2,120,487
<CGS> 0
<TOTAL-COSTS> 1,333,445
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 763,600
<INCOME-PRETAX> 23,442
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335,166
<EPS-PRIMARY> 67.03
<EPS-DILUTED> 67.03
</TABLE>
<PAGE> 1
EXHIBIT 99
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Proforma
Adjustments
To Remove Pro Forma
12/31/95 Town & Country 12/31/95
------------ -------------- -----------
<S> <C> <C> <C>
ASSETS
Rental Properties (at cost):
Land and improvements $ 3,873,911 $ (360,918) $ 3,512,993
Buildings 22,016,181 (4,109,954) 17,906,227
Furniture and equipment 410,143 (108,275) 301,868
----------- ----------- -----------
26,300,235 (4,579,147) 21,721,088
Accumulated Depreciation (6,101,961) 955,939 (5,146,022)
----------- ----------- -----------
20,198,274 (3,623,208) 16,575,066
Cash and cash equivalents 522,598 0 522,598
Restricted Cash 80,482 (11,875) 68,607
Accounts Receivable 104,794 0 104,794
Net deferred Loan and Acquisition Costs 225,017 (19,537) 205,480
Other 87,568 0 87,568
----------- ----------- -----------
$21,218,733 $(3,654,620) $17,564,113
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Debt $12,310,526 $(2,939,925) $ 9,370,601
Payables to general partners and affiliates 60,391 0 60,391
Other liabilities 302,064 (46,226) 255,838
----------- ----------- -----------
12,672,981 (2,986,151) 9,686,830
Minority interest 26,501 (26,501) 0
Partners' capital:
General partners 108,140 (6,420) 101,720
Limited partners 8,411,110 (635,547) 7,775,563
----------- ----------- -----------
Total partners' capital 8,519,250 (641,967) 7,877,283
----------- ----------- -----------
$21,218,732 $(3,654,619) $17,564,113
=========== =========== ===========
</TABLE>
A-1
<PAGE> 2
EXHIBIT 99
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Proforma Pro Forma
Year Ended Adjustments Year Ended
December 31, To Remove December 31,
1995 Town & Country 1995
------------ -------------- ------------
<S> <C> <C> <C>
Income:
Rent $ 2,225,534 $ (361,174) $ 1,864,360
Interest and other 79,002 0 79,002
----------- ----------- -----------
Total Revenues 2,304,536 (361,174) 1,943,362
Expenses:
Interest 1,112,734 (329,731) 783,003
Depreciation 697,737 (113,577) 584,160
Amortization 55,413 (19,516) 35,897
Provision for doubtful accounts 11,727 0 11,727
Operations and maintenance 592,101 0 592,101
Administrative and Other 118,726 (14,564) 104,162
----------- ----------- -----------
Total operating expenses 2,588,438 (477,388) 2,111,050
----------- ----------- -----------
Income (Loss) before gain and minority interest (283,902) 116,214 (167,688)
Minority interest 1,174 (1,174) 0
Gain on sale of property 0 0 0
Extraordinary gain on extinguishment of long-term debt 2,413,950 0 2,413,950
----------- ----------- -----------
Net income $ 2,131,222 $ 115,040 $ 2,246,262
=========== =========== ===========
Net income allocated to general partners $ 21,312 $ 1,150 $ 22,462
=========== =========== ===========
Net income allocated to limited partners $ 2,109,910 $ 113,890 $ 2,223,800
=========== =========== ===========
Net income per limited partner unit $ 703.30 $ 37.96 $ 741.26
=========== =========== ===========
</TABLE>
A-2
<PAGE> 3
EXHIBIT 99
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Proforma Pro Forma
Nine Months Adjustments Nine Months
Ended To Remove Ended
9/30/96 Town & Country 9/30/96
------------ -------------- ------------
<S> <C> <C> <C>
Income:
Rent $ 2,065,931 $ (232,300) $ 1,833,631
Interest and other 54,556 0 54,556
----------- ----------- -----------
Total Revenues 2,120,487 (232,300) 1,888,187
Expenses:
Interest 763,600 (180,122) 583,478
Depreciation 426,493 (56,789) 369,704
Amortization 26,891 (9,758) 17,133
Operations and maintenance 589,135 (4,540) 584,595
Administrative and Other 290,926 (100,000) 190,926
----------- ----------- -----------
Total operating expenses 2,097,045 (351,209) 1,745,836
----------- ----------- -----------
Income (Loss) before gain and minority interest 23,442 118,909 142,351
Minority interest (1,948) 1,948 0
Gain on sale of property 255,140 (255,140) 0
Extraordinary gain on extinguishment of long-term debt 58,532 (58,532) 0
----------- ----------- -----------
Net income $ 335,166 $ (192,815) $ 142,351
=========== =========== ===========
Net income allocated to general partners $ 3,352 $ (1,928) $ 1,424
=========== =========== ===========
Net income allocated to limited partners $ 331,814 $ (190,887) $ 140,927
=========== =========== ===========
Net income per limited partner unit $ 110.60 $ (63.63) $ 46.98
=========== =========== ===========
</TABLE>
A-3
