<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 [Fee Required] for the fiscal year ended
December 31, 1997
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] 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 organization) (I.R.S. Employer Identification No.)
201 N. Tryon St.
Charlotte, North Carolina 28202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 379-9164
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: (Title of Class)
Units of Limited Partnership Interests
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant. The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing. (See definition of affiliate in Rule 405)
Indicate the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date
3,000 Limited Partnership units outstanding as of March 19, 1998
Documents Incorporated by Reference: See Item 14
Page 1 of 13 sequentially numbered pages
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PART I
ITEM 1 - BUSINESS
Marketplace Income Properties, A North Carolina Limited Partnership
(the "Registrant" or the "Partnership") is a North Carolina limited partnership
organized in 1985. Until September 16, 1992, the general partners of the
Partnership were ISC Realty Corporation ("ISCR" or the "General Partners"), a
North Carolina corporation and a wholly-owned subsidiary of Interstate/Johnson
Lane, Inc., and Benton Investment Company ("Benton"), a North Carolina
corporation. On September 16, 1992, Benton was removed as a general partner
after ISCR solicited proxies from the Limited Partners to vote for Benton's
removal and Benton's request for a preliminary injunction to prohibit its
removal was denied by the United States District Court for the Middle District
of North Carolina. As a result, ISCR became the managing general partner of the
Partnership. On January 11, 1993, ISCR and Benton closed a purchase agreement
whereby ISCR purchased Benton's entire general partner interest in the
Partnership effective January 1, 1993. Pursuant to this purchase transaction,
ISCR succeeded to all of Benton's rights and interests under the Partnership
Agreement, including Benton's interest in management fees, rights to
reimbursement of administrative expenses and its 0.5% interest in Partnership
distributions. None of the costs associated with these events and transactions,
including the cost of purchasing Benton's interest in the Partnership, were
charged to the Partnership.
The Registrant's principal investment objectives are to own, hold,
operate, lease, sell, and otherwise deal in commercial real estate properties
(the "Properties") which offer the potential for (1) preservation and protection
of capital invested in the Registrant, (2) cash distributions from operations of
the Properties, (3) long term appreciation in value of the Properties, and (4)
protection for investors against inflation. The Registrant currently owns the
Marketplace Mall & Theaters in Winston-Salem, North Carolina (the "Mall"). Mt.
Pilot Shopping Center in Pilot Mountain, North Carolina ("Mt. Pilot") was sold
in September 1997 and Amelia Plaza Shopping Center in Fernandina Beach, Florida
("Amelia") was sold in November 1997. Town & Country Convalescent Center in
Tampa, Florida (the "Tampa Project") was sold in July of 1996 and Country Forest
Manor in Siler City, North Carolina (the "Siler City Project") was sold in June
of 1994. See Item 2 for further discussion.
It is intended that the Registrant be self-liquidating and accordingly,
the net proceeds of any sale of any Property will be distributed to the
Investors.
The real estate business is highly competitive, and the Partnership
competes with numerous established companies, real estate investment trusts and
other limited partnerships, some of which have greater assets than the
Partnership, and broader experience than the General Partner. Some of the
competitive factors which the Partnership may encounter from time to time
include rising levels of vacancies due to changes in supply or demand of
competing properties in an area, such as excess supply resulting from
competitive overbuilding.
2
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ISCR or its affiliates currently serve as a general partner in 12
public and private partnerships which currently own various types of real
property. None of the prior partnerships sponsored by ISCR now contemplate the
acquisition of any additional properties due to all public funds being fully
invested. The General Partner and their affiliates are and will continue to be
engaged in the business of real estate investment, development and management
apart from their involvement in the Registrant.
ISCR intends to devote only such time to the business of the Registrant
as in its judgment is reasonably required. ISCR is engaged in other similar
activities which also require the time and attention of its management and
staff.
As of March 19, 1998, the Registrant did not directly employ any
persons in a full-time position. Certain employees of ISCR performed services
for the Registrant during 1997.
ITEM 2 - PROPERTIES
(a) The Marketplace Mall & Theaters
The Mall is a 177,600 square foot enclosed shopping mall with a
separate 20,576 square foot theater building on approximately 23 acres of land
in Winston-Salem, (Forsyth County) North Carolina. The Mall is currently
predominantly occupied by many small tenants between the range of 1,000 and
7,500 square feet in addition to the Hamricks space which is approximately
48,000 square feet. The separate theater building is occupied by Carmike Cinemas
under a long-term lease. As of March 19, 1998, the Mall was 91% occupied.
In April 1997, the Registrant satisfied the mortgage secured by the
Mall with a loan obtained through the CMBS group at First Union National Bank.
The new loan proceeds totalled $5.4 million at an interest rate of 8.875%. At
December 31, 1997, the outstanding principal balance of the loan was $5,359,624.
(b) Amelia Plaza Shopping Center
Amelia was sold to Edens & Avant Limited Partnership in November 1997
for approximately $4.6 million. The net proceeds were used to retire the
mortgage loan and for distribution to the limited partners.
(c) Mt. Pilot Shopping Center
Mt. Pilot was sold to Glenwood Mount Pilot LLC in September 1997 for
approximately $1.3 million. The net proceeds were distributed to the limited
partners.
3
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ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR REGISTRANT'S SECURITIES AND OTHER RELATED SECURITIES HOLDER
MATTERS
Transfer of the Registrant's Limited Partnership Units (the "Units") is
subject to certain restrictions contained in the Registrant's Limited
Partnership Agreement. There is no established market for the Units and it is
not anticipated that any will occur in the future. The Registrant is aware of no
significant resales of Units. As of March 19, 1998, 781 investors were recorded
owners of 3,000 units. In the most recent fiscal year, the Registrant
distributed $750 per unit to the Limited Partners.
ITEM 6 - SELECTED FINANCIAL DATA (AUDITED)
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Revenues $1,821,333 $ 2,226,544 $ 2,304,536 $ 2,691,315 $ 2,910,684
Net Income (Loss) 382,685 (2,632,500) 2,131,222 1,842,760 (64,670)
Cash Dist's to LPs 2,250,000 975,000 37,095 750,000 0
Cash Dist's / Unit 750 325 N/A 250 0
Total Assets 8,674,668 14,081,326 21,218,733 22,443,152 23,347,975
Long-Term Debt 5,359,624 8,996,987 12,310,526 15,705,327 17,704,926
Partners' Equity 3,011,860 4,901,902 8,519,251 6,425,124 5,332,364
</TABLE>
4
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
The Registrant generated $293,259 of cash flow from operations during
the year ended December 31, 1997. Cash payments during the year ended December
31, 1997, for improvements to rental properties amounted to $77,433. In
addition, $9,037,363 of principal payments were made on loans, including
$3,542,281 of debt retired in association with the sale of Amelia Plaza and
$5,454,706 in connection with the refinancing of the Mall mortgage. The
Registrar also incurred $5.4 million in debt on the Mall.
As of December 31, 1997, the Registrant held cash and cash equivalents
of $560,286. The Registrant feels that these funds should be used as a reserve
for the cost of operating and maintaining the properties. It is anticipated that
the Registrant's revenues from the operation of properties will be sufficient to
meet both the Registrant's operating and capital expenditures through 1998. In
addition, $77,620 was held in restricted cash accounts related to tenant
deposits, and property tax escrows.
Results of Operations
COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1997, TO FISCAL YEAR ENDED DECEMBER
31, 1996
For the year ended December 31, 1997, the Registrant reported net
income of $382,685 compared to a net loss of $2,632,500 for the year ended
December 31, 1996. The writedown of rental property of $3,414,000 taken in 1996
created the greatest change.
Rental income decreased from $2,166,913 to $1,779,079 for the year
ended December 31, 1997. The $375,000 decrease resulted from the sale of Amelia
Plaza and Mt. Pilot. Interest and other income decreased approximately $17,000,
or 29%, for the same reason.
Interest expense decreased from $952,311 in 1996 to $820,909 for the
1997 year. The repayment of the Amelia Plaza mortgage loan in 1997 contributed
to the decrease as well as the repayment of the Town & Country mortgage loan in
1996. However, the higher interest rate on the Mall mortgage offset some of this
decrease.
Operations and maintenance expense decreased from $407,912 in 1996 to
$285,604 in 1997. This decrease resulted largely from the property sales
occurring in 1996 and 1997. Administrative expense was $116,661 for the year
ended 1997, an $84,352 decrease (42%) compared to 1996. This total is comparable
to the 1995 total and similar to the 1996 amount when the additional legal
expense from that year are subtracted.
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Amortization expense increased to $94,710 in 1997 compared to $40,690
for the year ended December 31, 1996. The write-off of unamortized loan costs in
connection with the refinancing of the Mall mortgage caused the increase in this
expense.
COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1996, TO FISCAL YEAR ENDED
DECEMBER 31, 1995
For the year ended December 31, 1996, the Registrant reported a net
loss of $2,632,500 as compared to net income of $2,131,222 for the year ended
December 31, 1995. The most significant causes of this decrease were the
$3,414,000 write-down of rental property taken in 1996, and the $2,413,950
extraordinary gain recorded in 1995 as the result of the forgiveness of debt on
the Mall mortgage.
Rental income decreased from $2,225,534 for the year ended December 31,
1995, to $2,166,913 for the year ended December 31, 1996, a decline of
approximately $59,000. The primary reason for the decline was the loss of
approximately $132,000 in rental income from Town & Country due to the mid-year
sale of the property. Rental income at Amelia Plaza and Mt. Pilot Shopping
Center was basically flat from 1995 to 1996, however, rental income at the Mall
increased approximately $108,000 from 1995 to 1996, primarily due to Hamrick's
paying a full year's rent in 1996.
Interest and other income decreased approximately $19,000 during the
year ended December 31, 1996, as compared to 1995 due to less interest earned on
a lesser amount of cash reserves held during the year.
Interest expense decreased from $1,112,734 for the year ended December
31, 1995, to $952,311 for the year ended December 31, 1996, a change of
approximately $160,000. Approximately $150,000 of this change was due to the
sale of Town & Country in July of 1996 and the resulting retirement of the debt
on the property. The balance of the difference was due to lower interest paid on
the gradually reducing principal balances on the Amelia Plaza and Marketplace
Mall debt.
Depreciation decreased from $697,737 for the year ended December 31,
1995, to $0 for the year ended December 31, 1996. This decrease was due to the
Partnership's adopting Statement of Financial Accounting Standards No. 121 in
1996. This statement, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, requires the Partnership to record a
provision to write-down Partnership properties to fair market value and to cease
recording depreciation expense at the time the properties began to be marketed
for sale. As the properties began to be marketed for sale as of January 1, 1996,
the depreciation expense for 1996 under Standard 121 was $0.
Provision for doubtful accounts decreased approximately $11,000 during
1996 at the
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Mall due to a decrease in the write off of delinquent tenant receivables.
Operations and maintenance decreased approximately $195,000 during the
year ended December 31, 1996, as compared to the year ended December 31, 1995.
This decrease is primarily due to several reasons, all of which are related to
the Mall. Due to a successful appeal of the 1993 property tax value of the Mall,
property tax expense decreased by approximately $51,000 from 1995 to 1996. Also
from 1995 to 1996, marketing expenses decreased approximately $36,000, common
area maintenance decreased approximately $40,000, and leasing commissions
decreased approximately $60,000. The decreases in marketing expenses, common
area maintenance, and leasing commissions from 1995 to 1996 all are due to
extraordinary expenses associated with the Hamrick's opening in 1995.
Administrative expense increased from $118,726 for the year ended
December 31, 1995, to $201,013 for the year ended December 31, 1996, due to
increased legal fees associated with the settlement of the Town & Country sale
dispute as well as the property tax appeal at the Mall.
Write-down of rental property increased from $0 for the year ended
December 31, 1995, to $3,414,000 for the year ended December 31, 1996. This
write-down was due to the current marketing of the Partnership's properties for
sale and the General Partner's opinion that the net sale prices for Marketplace
Mall, Amelia Plaza Shopping Center, and Mt. Pilot Shopping Center will be less
than their respective net book values. Under Statement of Financial Accounting
Standards No. 121, this adjustment is shown as an operating expense.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this
report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no directors or executive officers. Information as
to the directors and executive officers of ISCR are as follows:
<TABLE>
<CAPTION>
Name Information about Directors and Executive Officers
---- --------------------------------------------------
<S> <C>
J. Christopher Boone Director and President of ISCR. He is 39 years old.
Edward C. Ruff Director of ISCR. He is 58 years old.
Robert B. McGuire Treasurer of ISCR. He is 50 years old.
Michael D. Hearn Director and Secretary of ISCR. He is 45 years old.
Lew F. Semones, Jr. Director of ISCR. He is 39 years old.
</TABLE>
7
<PAGE> 8
J. Christopher Boone, President of ISCR and a Managing Director of
Interstate/Johnson Lane Corporation ("I/JL"). Prior to joining I/JL in 1984, Mr.
Boone was a tax specialist for Coopers & Lybrand, Certified Public Accountants.
He received a Bachelor's Degree in Business Administration with an emphasis in
accounting from the University of North Carolina at Chapel Hill.
Edward C. Ruff is an Executive Managing Director and the Chief
Operating Officer of I/JL and also serves on its Board of Directors. Mr. Ruff
has been employed by I/JL since 1976. He is a graduate of the University of San
Francisco, with a bachelor's degree in accounting. He is a director of ISCR.
Robert B. McGuire is Treasurer of ISCR. In addition, he is Senior Vice
President and Treasurer for I/JL. Mr. McGuire received a B.A. in Business
Administration from Furman University and a Masters in Business Administration
from Emory University.
Michael D. Hearn has served as Secretary and General Counsel of I/JL
since 1985. He is a Senior Managing Director and a member of the Board of
Directors of I/JL. In May of 1992 he was elected a Director of ISCR. Mr. Hearn
received a Bachelor of Science degree in Business Administration and a Juris
Doctor from the University of North Carolina at Chapel Hill. He is Secretary of
ISCR and a Director of ISCR.
Lew F. Semones, Jr. is Senior Managing Director and Chief Financial
Officer of I/JL. He is also a director of I/JL. Mr. Semones is a graduate of
Lenoir Rhyne College, a Certified Public Accountant and a graduate of the
Securities Industry Institute at The Wharton School of The University of
Pennsylvania. He was elected as Director of ISCR in September, 1997.
ITEM 11 - EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1997, the Registrant paid no
compensation to the executive officers, directors or partners, of ISCR. See Item
13 "Certain Relationships and Related Transactions" for a discussion of amounts
paid or which may be paid to ISCR for the year ending December 31, 1997.
8
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 19, 1998, ISCR, the sole general partner, owns a 1%
interest in net profits and net losses and distributions of distributable cash
from operations and sale or refinancing proceeds of the Partnership as set forth
in the Partnership Agreement. As of March 19, 1998, the following officer of
ISCR owned the following number of LP units of the Registrant:
NUMBER OF UNITS PERCENT
NAME SUBSCRIBED FOR OF UNITS
---- --------------- --------
J. Christopher Boone 4 Less than 1%
ISCR is not aware of any beneficial owners of greater than five percent
(5%) of the Limited Partners' Units.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Compensation
ISCR is entitled to compensation, fees and distributions in connection
with the acquisition, operations and liquidation stages of the Partnership, all
as set forth in the Partnership Agreement. No payments in excess of $86,200 were
made to related parties during 1997. See Note 5 of the financial statements
attached for detailed disclosure of fees paid to ISCR during the year.
As the sole general partner of the Partnership, ISCR is entitled to the
following pursuant to the Partnership Agreement:
(1) A one percent (1%) interest in net profit and net loss of the
Partnership and a one percent (1%) interest in distributable cash flow
from operations of the Partnership after certain prior distributions to
Limited Partners.
(2) A Partnership Management Fee of 10% of the net cash flow for its
services in managing the partnership. ISCR has had the right to defer
any portion of this fee. Any amount deferred will bear interest at a
rate not to exceed 120% of the then applicable Federal Rate as
determined under Internal Revenue Code Section 1274 and regulations
promulgated thereunder.
(3) Initially a one percent (1%) interest in net cash proceeds resulting
from a sale or
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refinancing until such time as the investors have received a return
equal to the amount of their adjusted capital contribution plus a 10%
cumulative, annual, non-compounded return thereon, less all prior
distributions not a return of capital, then after such return ISCR will
be entitled to 15%. After certain adjustments to capital accounts, net
profit from a sale is allocated to the partners in the same proportion
as the distribution of net cash proceeds from such sale and net loss is
allocated 99% to the Limited Partners and one percent (1%) to ISCR.
(4) A Property and Lease Management Fee computed annually not to exceed 5%
of annual operating income of the Partnership for services in
monitoring each lessee's operation of each lease project. This fee
applied only to Town & Country Convalescent Center and Meadowbrook
Manor of Siler City. These properties were sold in July 1996, and June
1994, respectively.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) 1. and 2. The response to this portion of Item 14 is submitted
as a separate section of this report.
3. Exhibits.
27. Financial Data Schedule (for SEC use only)
10
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the 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
By: ISC Realty Corporation
General Partner
By: /s/ J. Christopher Boone
---------------------------------
J. Christopher Boone
President
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
/s/ J. Christopher Boone March 27, 1998
- -------------------------------- --------------
J. Christopher Boone Director and
President of
ISC Realty
Corporation
/s/ Edward C. Ruff March 27, 1998
- -------------------------------- --------------
Edward C. Ruff Director of
ISC Realty
Corporation
/s/ Michael D. Hearn March 27, 1998
- -------------------------------- --------------
Michael D. Hearn Director and
Secretary of
ISC Realty
Corporation
/s/ Lew F. Semones, Jr. March 27, 1998
- -------------------------------- --------------
Lew F. Semones, Jr. Director of
ISC Realty
Corporation
12
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Exhibit F
MARKETPLACE INCOME PROPERTIES
A NORTH CAROLINA LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
[Item 14(a) 1 and 2]
Pages
- -----
Report of Independent Public Accountants F-1
Financial Statements:
Balance sheets at December 31,
1997 and 1996 F-2
Statements of operations for the years ended
December 31, 1997, 1996, and 1995 F-3
Statements of partners' capital for the
years ended December 31, 1997, 1996, and 1995 F-4
Statements of cash flows for the years
ended December 31, 1997, 1996, and 1995 F-5
Notes to financial statements F-6-F-13
Financial Statement Schedules:
Schedule III - Real estate and accumulated depreciation
for the year ended December 31, 1997 F-14
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements and notes thereto.
13
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MARKETPLACE INCOME PROPERTIES
ANNUAL REPORT ON FORM 10-K
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997, 1996 AND 1995
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Marketplace Income Properties:
We have audited the accompanying consolidated balance sheets of Marketplace
Income Properties (a North Carolina Limited Partnership) and subsidiary as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' capital and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements and the schedule
referred to below are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 1 and 2, the general partner began efforts in 1996 to sell
the rental properties comprising the Partnership. The Partnership consummated
sales for two of the rental properties in 1997 and one property in 1996.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Marketplace Income
Properties and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to financial
statements and financial statement schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. The schedule has been subjected
to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states, in all material respects, the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
February 27, 1998.
F-1
<PAGE> 16
MARKETPLACE INCOME PROPERTIES
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
RENTAL PROPERTIES HELD FOR SALE (Notes 1 and 2) $ 7,708,447 $13,433,252
CASH AND CASH EQUIVALENTS 560,286 267,027
RESTRICTED CASH 77,620 67,662
RENTS RECEIVABLE 5,651 38,776
DEFERRED ASSETS, net (Note 1) 173,019 184,446
OTHER ASSETS 149,645 90,163
----------- -----------
$ 8,674,668 $14,081,326
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
MORTGAGE NOTES PAYABLE (Note 3) $ 5,359,624 $ 8,996,987
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 127,890 138,154
PAYABLES TO GENERAL PARTNER AND AFFILIATES (Note 5) 170,537 26,287
OTHER LIABILITIES 4,757 17,996
----------- -----------
Total liabilities 5,662,808 9,179,424
----------- -----------
PARTNERS' CAPITAL:
General partner 53,067 71,967
Limited partners 2,958,793 4,829,935
----------- -----------
Total partners' capital 3,011,860 4,901,902
----------- -----------
$ 8,674,668 $14,081,326
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-2
<PAGE> 17
MARKETPLACE INCOME PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- -----------
REVENUE:
<S> <C> <C> <C>
Rental income $1,779,079 $ 2,166,913 $ 2,225,534
Interest and other income 42,254 59,631 79,002
---------- ----------- -----------
Total revenue 1,821,333 2,226,544 2,304,536
---------- ----------- -----------
OPERATING EXPENSES:
Interest 820,909 952,311 1,112,734
Depreciation (Note 1) 0 0 697,737
Amortization 94,710 40,690 55,413
Operations and maintenance 285,604 407,912 603,828
Administrative 116,661 201,013 118,726
Write-down of rental property, net (Note 2) 120,764 3,414,000 0
---------- ----------- -----------
Total operating expenses 1,438,648 5,015,926 2,588,438
---------- ----------- -----------
OPERATING INCOME (LOSS) 382,685 (2,789,382) (283,902)
MINORITY INTEREST 0 0 1,174
GAIN ON SALE OF RENTAL PROPERTIES (Note 2) 0 98,351 0
---------- ----------- -----------
NET INCOME (LOSS) BEFORE EXTRAORDINARY GAIN ON EXTINGUISHMENT
OF LONG-TERM DEBT 382,685 (2,691,031) (282,728)
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF LONG-TERM DEBT (Note 3) 0 58,531 2,413,950
---------- ----------- -----------
NET INCOME (LOSS) $ 382,685 $(2,632,500) $ 2,131,222
========== =========== ===========
NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNER $ 3,827 $ (26,325) $ 21,312
========== =========== ===========
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $ 378,858 $(2,606,175) $ 2,109,910
========== =========== ===========
NET INCOME (LOSS) PER LIMITED PARTNER UNIT (Note 1) $ 126.29 $ (868.70) $ 703.30
========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE> 18
MARKETPLACE INCOME PROPERTIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1994 $ 86,829 $ 6,338,295 $ 6,425,124
Net income 21,312 2,109,910 2,131,222
Cash distributions 0 (37,095) (37,095)
--------- ----------- -----------
BALANCE, December 31, 1995 108,141 8,411,110 8,519,251
Net loss (26,325) (2,606,175) (2,632,500)
Cash distributions (9,849) (975,000) (984,849)
--------- ----------- -----------
BALANCE, December 31, 1996 71,967 4,829,935 4,901,902
Net income 3,827 378,858 382,685
Cash distributions (22,727) (2,250,000) (2,272,727)
--------- ----------- -----------
BALANCE, December 31, 1997 $ 53,067 $ 2,958,793 $ 3,011,860
========= =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<PAGE> 19
MARKETPLACE INCOME PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 382,685 $(2,632,500) $ 2,131,222
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Extraordinary gain on extinguishment of long-term debt 0 (58,531) (2,413,950)
Write-down of rental properties, net 120,764 3,414,000 0
Gain on sale of rental property 0 (98,351) 0
Depreciation and amortization 94,710 40,690 753,150
Minority interest 0 0 (1,174)
Decrease in rent receivable 33,125 66,018 13,242
Other, net 65,419 (169,284) 43,627
----------- ----------- -----------
Net cash provided by operating activities 696,703 562,042 526,117
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to rental properties (77,433) (272,184) (1,559,794)
Cash proceeds from sale of rental properties, net 5,737,133 3,694,428 0
----------- ----------- -----------
Net cash provided by (used in) investing
activities 5,659,700 3,422,244 (1,559,794)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes payable (9,037,363) (3,255,008) (915,174)
Proceeds from mortgage note 5,400,000 0 0
Decrease in cash on deposit with lender 0 0 1,401,571
Payment of loan closing costs (153,054) 0 (151,144)
Cash distributions paid to partners (2,272,727) (984,849) (37,095)
----------- ----------- -----------
Net cash provided by (used in) financing
activities (6,063,144) (4,239,857) 298,158
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 293,259 (255,571) (735,519)
CASH AND CASH EQUIVALENTS, beginning of year 267,027 522,598 1,258,117
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 560,286 $ 267,027 $ 522,598
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-5
<PAGE> 20
MARKETPLACE INCOME PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Marketplace Income Properties (a North Carolina Limited Partnership) (the
Partnership) was formed on November 27, 1985, under the North Carolina Uniform
Limited Partnership Act. The Partnership was formed for the purpose of
acquiring, owning, leasing and operating real property and improvements existing
thereon. ISC Realty Corporation (ISC) and Benton Investment Company (Benton)
were the general partners. Effective January 1, 1993, ISC purchased the general
partner interest of Benton. The Partnership will be terminated upon the
occurrence of certain events as defined in the limited partnership agreement
but, in any event, no later than December 31, 2016.
Limited partner units were sold at $5,000 per unit ($2,500 per one-half unit)
(3,000 units) for a total of $15,000,000.
Under the terms of the partnership agreement, net income (loss) of the
Partnership is allocated 99% to the limited partners and 1% to the general
partner. Distributions are to be made (99% to limited partners and 1% to the
general partner) semiannually, or more frequently at the discretion of the
general partner provided, however, that the Partnership generates distributable
cash flow as defined by the limited partnership agreement.
During 1996, the general partner began efforts to sell the rental properties
comprising the Partnership. The Partnership consummated the sale of two rental
properties in 1997 and one property in 1996. These sales and the related impact
on the accompanying financial statements are discussed in Note 2.
Upon the sale, refinance or disposition of the partnership property, the
partnership agreement specifies certain allocations of net proceeds and taxable
gain or loss from the transaction.
PRINCIPLES OF CONSOLIDATION
Prior to July 9, 1996, the consolidated financial statements of the Partnership
included the accounts of Marketplace Income Properties and its subsidiary,
Marketplace Income Properties of Florida, collectively referred to as the
Partnership. All significant intercompany transactions were eliminated in
consolidation. As discussed in Note 2, the Partnership sold its ownership
interest in Marketplace Income Properties of Florida effective July 9, 1996.
F-6
<PAGE> 21
2
RENTAL PROPERTIES
The Partnership historically has owned and operated several shopping centers and
nursing home properties. As discussed in Note 2, the Partnership sold its
ownership interest in its sole remaining nursing home property during 1996, and
in 1997, the Partnership consummated the sale of two of its remaining three
shopping centers.
During 1996, the Partnership adopted Statement of Financial Accounting Standards
(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 or disposed of
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. The adoption of SFAS No. 121 did not have an impact on the
Company's financial position or results of operations with respect to long-lived
assets held and used. Long-lived assets held for sale continue to be recorded at
the lower of carrying amount or fair value less estimated cost to sell.
The partnership recorded a write-down of the carrying amount of the properties
in 1996 of $3,414,000 to reflect the general partner's estimate of the
properties' fair value less estimated costs to sell. In management's opinion,
the recorded property amounts reflected on the accompanying consolidated balance
sheet for the year ended December 31, 1997, approximates fair value less
estimated costs to sell.
Effective January 1, 1996, depreciation on rental properties was discontinued in
connection with the Partnership's efforts to actively pursue a sale of the
properties. Prior to 1996, rental properties were carried at historical cost,
less accumulated depreciation as provided on a straight-line basis over the
economic useful lives of the properties, as follows:
Land improvements 10 years
Buildings and building improvements 35 to 40 years
Furniture and equipment 5 to 10 years
DEFERRED ASSETS
Deferred assets consist of deferred loan costs and deferred acquisition costs
incurred in connection with the purchase of rental properties. Deferred loan
costs are amortized over the terms of the respective loans. Deferred acquisition
costs are being amortized on a straight-line basis over a period of 40 years.
The Partnership wrote off $143,780 of unamortized deferred costs in 1997 in
connection with the sale of two of its rental properties and the
repayment/refinancing of certain debt in 1997.
SYNDICATION COSTS
Certain fees and expenses relating to the sale of limited partnership units paid
to affiliates of the general partner were charged against partners' equity.
F-7
<PAGE> 22
3
INCOME TAXES
Under current income tax laws, income or loss of partnerships is included in the
income tax returns of the partners. Accordingly, no provision has been made for
federal or state income taxes in the accompanying financial statements.
The tax returns of the Partnership are subject to examination by federal and
state taxing authorities. If such examinations occur and result in changes with
respect to the Partnership's qualification or in changes to partnership income
or loss, the tax liability of the partners would be changed accordingly.
NET INCOME PER LIMITED PARTNER UNIT
Net income per limited partner unit is calculated based on the weighted average
number of units outstanding during the period (3,000 in 1997, 1996 and 1995).
RESTRICTED CASH
Restricted cash consists of tenant security deposits and certain escrowed funds
at December 31, 1997 and 1996.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
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 the
value.
Cash, Cash Equivalents, Rents Receivable, Accounts Payable and Accrued
Expenses - The carrying amount approximates fair value because of the
short-term nature of these instruments.
Long-term Debt - In the general partner's opinion, the fair value of
the Partnership's long-term debt approximates its carrying value.
NEW ACCOUNTING PRONOUNCEMENT
During 1997 the Partnership adopted SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. The
adoption of the pronouncement did not have any impact on the Partnership's
computation of per unit data in the accompanying financial statements.
F-8
<PAGE> 23
4
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements. These
estimates also affect reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the current
year presentation.
2. RENTAL PROPERTIES SOLD AND HELD FOR SALE:
DESCRIPTION OF PROPERTIES
Marketplace Mall was acquired effective January 30, 1986. The property consists
of a 177,600 square foot enclosed shopping mall with an adjacent 20,576 square
foot cinema complex located in Winston-Salem, North Carolina. The purchase price
of $14,100,000, excluding closing costs, was partially funded by a $9,500,000
mortgage note payable.
Mount Pilot Shopping Center was acquired effective October 1, 1986. The property
consists of a 38,650 square foot shopping center located in Pilot Mountain,
North Carolina. The purchase price of $1,600,000, excluding closing costs, was
funded entirely from partners' capital.
Amelia Plaza Shopping Center was acquired effective November 30, 1987. The
property consists of a 91,952 square foot shopping center located in Fernandina
Beach, Florida. The purchase price of $5,550,000, excluding closing costs, was
partially funded by a $4,175,000 mortgage note payable.
SALE OF RENTAL PROPERTIES
In September 1997, the Partnership consummated the sale of Mount Pilot Shopping
Center for an adjusted purchase price of approximately $1,284,000, less certain
closing costs and commissions of $41,000. In October 1997, the Partnership
consummated the sale of Amelia Plaza Shopping Center for an adjusted purchase
price of approximately $4,629,000, less certain closing costs and commissions of
$135,509. As discussed in Note 3, net proceeds from the sale of the Amelia Plaza
Shopping Center were used to repay the related mortgage loan outstanding at the
date of sale.
In connection with the sale of the two properties in 1997, the Partnership
recorded adjustments to the carrying amounts of the respective properties to
reflect revised estimates of fair value less cost to sell. These adjustments
resulted in an additional net write-down of $120,764 in 1997 and, accordingly,
no gain or loss was recognized on the sale of these properties.
F-9
<PAGE> 24
5
Total combined revenues for the Mount Pilot and Amelia Plaza properties in 1997,
1996 and 1995 were $609,326, $780,309 and $780,397, respectively.
On August 1, 1987, the Partnership acquired a 99% interest in Marketplace Income
Properties of Florida (d/b/a Town and Country Convalescent Center). The property
is a 120-bed skilled and intermediate care nursing home located in Tampa,
Florida. The facility is operated by an unrelated third party under a triple net
lease. The purchase price of $4,930,000, excluding closing costs, was partially
funded by a $3,300,000 mortgage note payable. Effective July 9, 1996, the
Partnership sold its 99% interest in Marketplace Income Properties of Florida to
an unrelated third party for a purchase price of $3,935,000, less certain
closing costs. The sale resulted in a gain to the Partnership of $98,351 which
has been included in the accompanying consolidated statements of operations.
Town and Country Convalescent Center's total revenue was approximately $228,000
and $360,000, while total operating expenses were approximately $269,000 and
$477,000 during 1996 and 1995, respectively. Included in the closing costs for
the sale of Town and Country Convalescent Center is $100,000 paid in settlement
of a dispute to a potential purchaser of the facility.
3. MORTGAGE NOTES PAYABLE:
Mortgage notes payable consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Mortgage note payable, bearing interest at 8.875%, due April 1, 2007.
The note is payable in monthly installments of $44,855, plus
accrued interest. The note is secured by a deed of trust on
Marketplace Mall and by the assignment of leases and rents $5,359,624 $ 0
Mortgage note payable, bearing interest at 8.35%, due June 30, 1998.
The note is payable in monthly installments of $17,521, plus
accrued interest. The note is secured by a deed of trust on
Marketplace Mall and by the assignment of leases and rents 0 5,454,706
Mortgage note payable, bearing interest at 8.25%, due October 1, 1998.
Additional interest may result from a staged equity participation
with the lender. The note is payable in monthly installments of
principal and interest of $39,000 based on a 15-year amortization.
The note is secured by a deed of trust on Amelia Plaza Shopping
Center 0 3,542,281
---------- ----------
$5,359,624 $8,996,987
========== ==========
</TABLE>
F-10
<PAGE> 25
6
During 1997, the mortgage loan secured by Marketplace Mall was refinanced with
the proceeds of a $5,400,000 mortgage loan obtained from a new lender. As part
of the refinancing, the Partnership wrote off unamortized deferred loan costs of
$69,188 related to the previous mortgage note and has capitalized an additional
$153,054 of new loan costs incurred in connection with the refinancing.
The mortgage loan secured by Amelia Plaza Shopping center was repaid in 1997 in
connection with the sale of the property discussed in Note 2. In accordance with
the terms of the mortgage agreement, participation interest of approximately
$96,330 was paid to the lender as part of the mortgage repayment, which amount
is included in interest expense in the accompanying statement of operations for
the year ended December 31, 1997.
Pursuant to the sale of Town and Country Convalescent Center in 1996 (Note 2),
the lender agreed to accept a discounted amount in settlement of the related
mortgage note. The discounted prepayment resulted in a gain to the Partnership
of $58,531, which is presented as an extraordinary item in the accompanying
consolidated statement of operations for the year ended December 31, 1996.
During July 1995, two mortgage notes secured by deeds of trust on Marketplace
Mall were refinanced through another lender. The discounted prepayment resulted
in a gain, net of related deferred loan costs, to the Partnership of $2,413,950,
which is presented as an extraordinary item in the accompanying consolidated
statements of operations for the year ended December 31, 1995.
Future maturities of the Partnership's remaining mortgage note payable are as
follows:
1998 $ 65,207
1999 71,235
2000 77,821
2001 85,015
2002 92,875
Thereafter 4,967,471
----------
$5,359,624
==========
Cash paid for interest totaled $848,308, $977,902 and $1,151,956 for the years
ended December 31, 1997, 1996 and 1995, respectively.
4. LEASES:
The Partnership leases its rental properties under operating leases with initial
terms that expire from 1997 through 2007. The leases are primarily net leases
which require the lessee to pay substantially all operating, maintenance and
repairs, and insurance and taxes on the leased property. Related expenses have
been recorded net of such tenant reimbursements. The Partnership may receive
additional rental income if tenant sales are in excess of stipulated amounts.
Overage rents were $33,425, $11,266 and $31,834 for the years ended December 31,
1997, 1996 and 1995, respectively.
F-11
<PAGE> 26
7
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997, are as follows:
1998 $1,007,964
1999 730,896
2000 491,302
2001 442,259
2002 429,759
Thereafter 991,376
----------
$4,093,556
==========
Approximately 20% of the rental property is leased to one tenant under a lease
that expires in 2004. Approximately 16% of the rental property is leased to
another tenant under a lease that expires in 2005.
5. RELATED-PARTY TRANSACTIONS:
The Partnership incurs certain costs and expenses related to services provided
by its general partner and its affiliates. These costs and expenses were as
follows for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Sales commission $86,200 $78,700 $ 0
Overhead reimbursement charge 50,000 50,000 50,000
Lease commission 15,080 8,970 45,000
Loan guarantee fees 8,875 38,858 20,073
Lease management fees 0 10,100 18,000
======= ======= =======
</TABLE>
Sales commissions represent fees paid to an affiliate in connection with the
sale of the Partnership's rental properties in 1997 and 1996 (see Note 2). Loan
guarantee fees represent compensation paid to an affiliate of the general
partner related to its guaranty of a portion of the Partnership's mortgage loan
secured by Marketplace Mall. This guaranty was terminated in 1997 in connection
with the refinancing of the Marketplace Mall mortgage loan discussed in Note 3.
F-12
<PAGE> 27
8
6. RECONCILIATION OF FINANCIAL STATEMENT INCOME (LOSS) TO TAXABLE INCOME:
A reconciliation of financial statement and taxable income (loss) allocated to
the limited partners follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ----------- ----------
<S> <C> <C> <C>
Financial statement net income (loss) $382,685 $(2,632,500) $2,131,222
Add (deduct)-
Depreciation and amortization deducted for income tax
purposes 0 (827,991) (219,916)
Write-down of rental property 0 3,414,000 0
Minority interest in subsidiary 0 182,918 (127,230)
Tax gain in excess of book gain on sale of assets 0 337,300 0
Write-off of goodwill for tax, not book 0 (370,668) 0
Unearned rent income 0 (21,031) (10,180)
Bad-debt expense 0 36,275 0
Property taxes accrued 0 (4,136) (14,790)
Financial statement audit adjustments (122,991)
Write-off of deferred loan costs for book not tax 0 0 65,677
-------- ----------- ----------
Taxable income $259,694 $ 114,167 $1,824,783
======== =========== ==========
</TABLE>
F-13
<PAGE> 28
MARKETPLACE INCOME PROPERTIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COSTS CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION
LAND AND BUILDINGS AND IMPROVEMENTS, LAND AND
DESCRIPTION ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS NET CARRYING COSTS IMPROVEMENTS
<S> <C> <C> <C> <C> <C> <C>
Shopping mall and theater,
Winston-Salem, North Carolina $ 5,359,624 $2,483,199 $12,081,900 $(3,320,968) $ 0 $1,639,540
=========== ========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIFE ON WHICH
GROSS AMOUNT AT WHICH CARRIED AT DEPRECIATION
CLOSE OF PERIOD IN LATEST
BUILDINGS AND ACCUMULATED DATE OF DATE ACQUIRED INCOME STATEMENTS
DESCRIPTION IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION IS COMPUTED
<S> <C> <C> <C> <C> <C> <C>
Shopping mall and theater,
Winston-Salem, North Carolina $9,604,591 $11,244,131 $3,535,684 N/A 1/30/86 N/A
========== =========== ==========
</TABLE>
F-14
<PAGE> 29
Reconciliation of activity from December 31, 1994, through December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 3,873,911 $ 20,866,530 $ 24,740,441 $ 5,404,224
Additions 0 1,559,794 1,559,794 0
Depreciation 0 0 0 697,737
----------- ------------ ------------ -----------
Balance, December 31, 1995 3,873,911 22,426,324 26,300,235 6,101,961
Additions 0 272,184 272,184 0
Depreciation 0 0 0 0
Sale of rental property (360,918) (4,218,228) (4,579,146) (955,940)
Write-down of rental properties (509,000) (2,905,000) (3,414,000) 0
----------- ------------ ------------ -----------
Balance, December 31, 1996 3,003,993 15,575,280 18,579,273 5,146,021
Additions 0 77,433 77,433 0
Write-down, net, of rental properties 0 (120,764) (120,764) 0
Sale of rental properties (1,364,453) (5,927,358) (7,291,811) (1,610,337)
----------- ------------ ------------ -----------
Balance, December 31, 1997 $ 1,639,540 $ 9,604,591 $ 11,244,131 $ 3,535,684
=========== ============ ============ ===========
</TABLE>
Note: Aggregate cost for federal income tax purposes is $9,009,682 at
December 31, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARKETPLACE INCOME PROPERTIES FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 560,286
<SECURITIES> 0
<RECEIVABLES> 5,651
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 643,557
<PP&E> 11,244,131
<DEPRECIATION> 3,535,684
<TOTAL-ASSETS> 8,674,668
<CURRENT-LIABILITIES> 127,890
<BONDS> 5,359,624
0
0
<COMMON> 0
<OTHER-SE> 3,011,860
<TOTAL-LIABILITY-AND-EQUITY> 8,674,668
<SALES> 1,779,079
<TOTAL-REVENUES> 1,821,333
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 496,975
<LOSS-PROVISION> 120,764
<INTEREST-EXPENSE> 820,909
<INCOME-PRETAX> 382,685
<INCOME-TAX> 0
<INCOME-CONTINUING> 382,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382,685
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
