SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transaction period from __________ to __________
Commission File Number 0-15571
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
North Carolina 56-1494619
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 100, 4000 Blue Ridge Road
Raleigh, North Carolina 27612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (919) 781-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 5,900 Units of
Limited Partnership Interests.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the 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].
Market Value of 5,875 Units held by nonaffiliates as of March 24, 1998 was
$3,927,261 (based upon the offering price of $1,000 less the amount distributed
per Unit).
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
5,900 Units outstanding as of March 24, 1998
The total number of pages contained in this document is 32 pages.
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PART I
Item 1. Business.
Carolina Investment Partners, Limited Partnership (the "Registrant") is a
limited partnership organized in 1985 under the North Carolina Uniform Limited
Partnership Act. The Registrant was formed for the purpose of investing in
certain unimproved real properties located in Cary, North Carolina. The
Registrant acquired these properties, commonly known as the Martin Parcel and
the Wellington Parcel, in 1986. See "Properties." The Registrant has the option
to develop the Martin Parcel for office and institutional uses or hold it for
resale. Its only option for the Wellington Parcel is to hold it for resale. At
this time the Registrant is not developing the Martin Parcel and is attempting
to resell it. However, the Registrant will consider its options with respect to
development of the Martin Parcel and may formulate a plan for development of the
Martin Parcel. A portion of the Wellington Parcel has been sold.
Recent Developments
The Agreement with WCA as amended (See Item 2. "Properties"), required WCA
to purchase the Remaining Outparcels by January 30, 1998, which it did not do.
In February, 1998, WCA had the Remaining Outparcels subdivided such that there
were four (4) outparcels remaining to be sold. On March 3, 1998 outparcel 2A
closed, generating net sales proceeds of $210,126, interest of $25,930, and a
late closing penalty $22,766 to the Registrant. However, WCA did not close the
three (3) other Remaining Outparcels and sought further extensions of the
closing date from the Registrant. The Registrant's General Partner believed that
further extensions were not in the Registrant's best interest in light of WCA's
continued and repeated delays and terminated the remainder of the WCA contract.
WCA and the Registrant are currently negotiating terms under which WCA could
close the three other Remaining Outparcels. There can be no assurances that WCA
and the Registrant will be able to agree to terms under which WCA can close the
three other Remaining Outparcels.
Development of real property in the Research Triangle Area is highly
competitive. Factors which affect competition include price, financing terms,
economics, location, social and demographic conditions in the surrounding areas,
roads, sewers, utilities and other items of infrastructure, zoning and similar
governmental regulations which affect the cost of development and the uses of
the property. Many of these factors are beyond the control of the Registrant.
These competitive conditions may affect the Registrant's ability to locate
purchasers for, or develop, the properties at prices acceptable to the
Registrant. The Registrant believes, however, that the proximity of the
properties to the full access highway interchange and overpass which connects
the Cary Parkway and U.S. Highway 1 and 64 (the "Interchange") enhances their
marketability and minimizes the effects of competition. Competitive factors
relating to each property are discussed in greater detail under "Properties".
Item 2. Properties.
The Martin Parcel and the Wellington Parcel are located in the southern
portion of Cary, North Carolina, a rapidly expanding community to the immediate
southwest of Raleigh, North Carolina. Cary is part of a region in central North
Carolina known as the Research Triangle area which includes Raleigh, Durham,
Chapel Hill and the Research Triangle Park. Both properties are located near the
residential single family subdivisions known as Ridgepath, Wellington Park,
MacGregor Downs, Lochmere, Kildaire Farms, Wimbledon, and McDonald Woods. The
map below shows the locations of the Registrant's properties in Cary.
[MAP]
The Martin Parcel contains approximately 25.1 acres of unimproved land
which is divided into two tracts by the Cary Parkway. The tract lying to the
west of the Cary Parkway contains 15.76 acres of land, while the tract lying to
the east of the Cary Parkway contains 9.34 acres of land. The Martin Parcel is
located immediately to the north of the Interchange.
The Wellington Parcel consisted of approximately 16.3 acres of land located
approximately one-half mile south of the interchange and adjacent to the Cary
Parkway and Tryon Road. The Wellington Parcel is part of a 216-acre planned unit
development ("PUD") known as Wellington Park. On various dates in 1996, 1997 and
1998 a total of 13.5 acres of the Wellington Parcel were sold to Wellington
Center Associates, LLC ("WCA"), successor to Churchill & Banks, Ltd. ("The Sold
Property"). The remaining 2.8 acres (the "Remaining Outparcels"), were
previously under contract for sale to WCA but, due to WCA's delays in closing,
the contract was terminated by the Registrant on March 6, 1998 (see Item 1
"Business-Recent Developments"). Under the terms of the amended Agreement with
WCA, WCA did preliminary site grading and other construction preparation
activities to the Remaining Outparcels.
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Wellington Parcel were sold to Wellington Center Associates, LLC ("WCA"),
successor to Churchill & Banks, Ltd ("The Sold Property"). The remaining 2.8
acres (the "Remaining Outparcels"), were previously under contract for sale to
WCA but, due to WCA's delays in closing, the contract has been cancelled (see
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations"). Under the terms of the amended Agreement with WCA, WCA
developed the Remaining Outparcels as it developed the portion it has purchased.
Construction of the residential portions of the Wellington Park PUD began
in June of 1986. Five residential neighborhoods containing 250 lots have been
developed and sold. The primary infrastructure and recreation facilities are
complete. Additional residential units are under construction. A nursing home
has been built on a parcel of the PUD.
The Wellington Parcel is bordered to the south by Tryon Road, to the east
by Wellingborough Drive, to the north by Parkton Drive, and to the west by the
Cary Parkway. Tryon Road has been widened to a 100 foot right-of-way fronting on
the Wellington Parcel. The Cary Parkway was expanded to four lanes in 1992 and
various extensions of the Cary Parkway have lead to an increase in traffic at
the site.
The purchase contract between the original seller of the Wellington Parcel
(the "Wellington Seller") and the Registrant includes a put option which permits
the Registrant, at its option, to require the Wellington Seller to repurchase
the Wellington Parcel for $225,000 per acre on or after July 18, 1989. The
contract also provides that the Wellington Seller will share evenly with the
Registrant in any profits resulting from the sale of the Wellington Parcel.
However, this equity sharing arrangement was amended during 1990 to increase to
more than 87.5% the percentage of profits to be retained by the Registrant if
the Wellington Parcel is sold to a third party other than by exercise of the put
option by the Registrant. If the put option is exercised, the Registrant will
retain only 50% of the profit from sale of the Wellington Parcel. See Item 11
"Executive Compensation" for a more detailed discussion of the amount of
appreciation paid to the Wellington Seller upon sale of The Sold Property.
Upon the sale of the Wellington Parcel or the Martin Parcel, the General
Partner is entitled to a broker listing fee under some circumstances. See Item
11 "Executive Compensation." In addition to the broker listing fee, in the event
the parcel is sold by a broker unaffiliated with the General Partner, the
Registrant may pay the unaffiliated broker a 2.5% broker-reallowance fee.
Item 3. Legal Proceedings.
No material legal proceedings are pending against the Registrant or its
properties.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote by the limited partners of the
Registrant during the fourth quarter of 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
(a) The Registrant has no common stock. There is no established public
trading market for the Units.
(b) The Registrant had 985 Limited Partners holding 5,900 Units as of March
24, 1998. The number of Limited Partners was determined by the Partnership's
records
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maintained by the General Partner. An affiliate of the General Partner owns 25
of these 5,900 units.
(c) Despite the termination of the contract by the Registrant, (see Item
1 "Business-Recent Developments") the Registrant is currently considering offers
from WCA to purchase the Remaining Outparcels. These sales, if agreed upon and
closed, will provide the Registrant with additional funds, of which the
Registrant expects to retain approximately $100,000 for future operating needs,
and distribute the remainder to the partners in accordance with the Partnership
Agreement.
Until the Limited Partners have received distributions of cash from the
Registrant of an aggregate amount equal to 100% of the Capital Contributions of
the Limited Partners, plus an additional return equivalent to 10% per annum
simple interest on their "Unreturned Capital Contributions", the Limited
Partners will receive at least 99% of all distributions of cash, which will be
distributed and allocated among them in the ratio which the number of Units
owned by each of them bears to the total number of Units outstanding.
Thereafter, the Registrant's distributions will be allocated 90% to the Limited
Partners and 10% to the General Partner. "Unreturned Capital Contribution" means
the Capital Contribution of a Limited Partner less any distributions of cash
made by the Registrant to such Limited Partner.
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Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Gain on Sale of Land $541,269 $1,382,081 $-0- $-0- $-0-
Other Income 87,420 12,174 39,158 2,776 2,570
Expenses 57,557 58,040 41,455 35,529 40,735
Net Income (Loss) 571,132 1,336,215 (2,297) (32,753) (38,165)
Net Income (Loss)
per limited
partnership unit:
From gain on sale
of land 90.82 231.91 -0- -0- -0-
From other
operations 5.01 (7.78) (.39) (5.55) (6.47)
----------- ----------- ----------- ----------- -----------
Total per unit 95.83 224.13 (.39) (5.55) (6.47)
Distribution per unit -0- 331.53 -0- -0- -0-
Selected Balances:
Cash and Short-Term
Investments 1,002,868 205,524 33,338 4,065 56,607
Land held for
Investment 3,850,572 4,001,280 4,822,183 4,822,183 4,822,183
Total Assets 4,858,132 4,206,804 4,855,624 4,826,351 4,878,893
Long term obligations -0- -0- -0- -0- -0-
General Partner's
equity 5,711 -0- -0- -0- -0-
Limited Partners'
equity 4,750,383 4,184,962 4,818,568 4,820,865 4,853,618
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Registrant's operations resulted in a net income of $571,132 during
1997, compared to net income of $1,336,215 during 1996 and a net loss of $2,297
in 1995. The primary differences between 1997 in comparison to 1996 and 1995
were:
1997 vs. 1996
o A gain of $541,269 in 1997 from the sale of approximately 2.0 acres of
the Registrant's Wellington Parcel (see discussion below) compared to
a gain of $1,382,081 in 1996 from the sale of the Main Site at
Wellington (10.9 acres).
o Interest of $50,608 in 1997 received by the Registrant due to the
deferral of the property closing from September, 1996. There was no
similar income in 1996.
o Interest earnings in 1997 of $11,711 from certificates of deposit
purchased with proceeds from property sales. In 1996 proceeds from the
property sale were distributed within two months after the property
closing; therefore, there were no certificates of deposit in 1996.
o $20,629 in non-refundable extension fees received by the Registrant
in 1997 for extensions of the Closing Date on the Wellington Parcel
contract compared to $11,300 in non-refundable deposits received in
1996 for extensions on the Wellington Parcel contract.
o Property taxes for 1997 are approximately $10,000 lower than 1996 due
to the sale of property (see discussion below).
o Expenses in 1997 include a $3,300 adjustment in accounting fees for
the 1996 audit and tax returns. These fees were higher due to
additional audit and tax procedures required in relation to the 1996
land sale and distribution.
o Expenses in 1997 in comparison to 1996 increased approximately $5,400
for additional accounting and administrative services provided by
related parties of the Registrant's General Partner. These additional
services included (1) assistance with closing on the sales of
property, (2) follow-up procedures performed when checks from the
November, 1996 distribution were not received by some limited partners
and had to be replaced, and (3) preparation of the Registrant's annual
Form 10-K and financial statements.
1997 vs. 1995
o A gain of $541,269 in 1997, from the sale of approximately 2.0 acres
of the Registrant's Wellington Parcel (see discussion below). There
were no land sales in 1995.
o Interest of $50,608 in 1997 received by the Registrant due to the
deferral of the property closing from September, 1996. There was no
similar income in 1995.
o Interest earnings in 1997 of $11,711 from certificates of deposit
purchased with proceeds from property sales. There were no property
sales or certificates of deposit in 1995.
o $20,629 in non-refundable extension fees received by the Registrant in
1997 for extensions of the Closing Date on the Wellington Parcel
contract. During 1995 the registrant received $2,000 in forfeited
earnest money deposits.
o In 1995 the Registrant had timber removed from one of its properties
resulting in income of $35,664. There were no timber sales in 1997.
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o In 1997 property taxes were paid on lower acreage than 1995 due to the
sales of property. However, these reductions were more than offset by
increases in the property tax value of the Wellington property.
Therefore, property taxes for 1997 are approximately $3,600 higher
than 1995.
o Expenses in 1997 include a $3,300 adjustment in accounting fees for
the 1996 audit and tax returns. These fees were higher due to
additional audit and tax procedures required in relation to the 1996
land sale and distribution.
o Expenses in 1997 in comparison to 1995 increased approximately $8,600
for additional accounting and administrative services provided by
related parties of the Registrant's General Partner. These additional
services included (1) assistance with closing on the sales of
property, (2) follow-up procedures performed when checks from the
November, 1996 distribution were not received by some limited partners
and had to be replaced, and (3) preparation of the Registrant's annual
Form 10-K and financial statements.
The Registrant, Churchill & Banks, Ltd. ("Churchill & Banks") (predecessor
to WCA), and ADA Corporation of North Carolina ("ADA"), which is affiliated with
the General Partner, executed an agreement (the "Agreement") for Churchill &
Banks to purchase certain tracts of real property owned by the Registrant (the
Wellington Parcel) and ADA. The Agreement was amended on various dates in 1995
and 1996, and in September 1997. In addition to other matters, the amendments to
the Agreement provided for 10.96 acres (the "Main Site"), of which 10.91 acres
were owned by the Registrant, to close in September 1996 and closing on the
remaining 6.21 acres, consisting of four outparcels (the "Outparcels"), of which
5.40 acres is owned by the Registrant, to occur by March 10, 1997, with an
additional 6 month extension possible on the Outparcels. The September 1997
amendment extended closing on the Remaining Outparcels to January 30, 1998. The
purchase price for the land is $5.25 per net square foot, which yields a sales
price to the Registrant and ADA of $3,927,750.
On May 5, 1997, August 26, 1997, and November 17, 1997 the Registrant sold
.82 acres, .79 acres, and .39 acres, respectively, of the Wellington Parcel to
WCA under the terms of the amended Agreement for gross sales prices of $250,917,
$243,359 and $255,429, respectively, or an aggregate of $691,977. The
Registrant's net sale proceeds with respect to these sales were as follows:
May 5, 1997 August 26, 1997 November 17, 1997
Sale Sale Sale
Gross sales price $250,917 $243,359 $255,429
Commissions and broker re-
allowance fee
(18,819) (18,252) (19,157)
Deed stamps (502) (487) (511)
--------- --------- ---------
Net sales proceeds $231,596 $224,620 $235,761
========= ========= =========
Additionally, the Registrant received interest of $11,054, $16,958, and
$22,596, respectively, from WCA at the closings under the terms of the
Agreement.
Under the terms of the contract through which the Registrant purchased the
Wellington Parcel none of the profit from these sales was due to the Wellington
Seller (see Item 2. "Properties"). The Registrant's Partnership Agreement calls
for the General Partner to be
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allocated, at a minimum, 1% of any gain from the sale of property. To the extent
the General Partner is allocated gain, it also receives a distribution.
Accordingly, the General Partner's share of the 1997 gain is $5,413 (net sales
proceeds of $691,977 less the Registrant's basis in the property sold, $150,708,
equals a gain of $541,269; 1% of which is $5,413).
The Registrant's proceeds from the 1997 sales have been invested in
certificates of deposit and a money market account.
As of March 24, 1998, the Registrant has $1,230,796 in cash and short-term
investments, which is sufficient to meet its needs during the next year. The
Registrant expects to retain approximately $300,000 of its current funds for
future operating needs and distribute the remainder to the partners in April or
May 1998 in accordance with the Partnership Agreement.
The Registrant maintains its excess funds in certificates of deposit and a
money market account at Triangle Bank. The General Partner believes these
certificates and the account are an appropriate investment of the Registrant's
funds. Until its properties are sold, placed into development and/or refinanced,
the Registrant anticipates deficits from operations and administrative expenses.
Cautionary Statement Identifying Important Factors That Could Cause the
Registrant's Actual Results to Differ From Those Projected in Forward Looking
Statements.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this document, and any document
incorporated by reference herein, are
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advised that this document and documents incorporated by reference into this
document contain both statements of historical facts and forward looking
statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
indicated by the forward looking statements. Examples of forward looking
statements include, but are not limited to (i) projections of revenues, income
or loss, earnings or loss per share, capital expenditures, dividends, capital
structure and other financial items, (ii) statements of the plans and objectives
of the Registrant or its management, including the introduction of new products,
or estimates or predictions of actions by customers, suppliers, competitors or
regulatory authorities, (iii) statements of future economic performance, and
(iv) statements of assumptions underlying other statements and statements about
the Registrant or its business.
This document and any documents incorporated by reference herein also identify
important factors which could cause actual results to differ materially from
those indicated by the forward looking statements. These risks and uncertainties
include uncertainties about whether real estate sales under contract will close,
the ability of the Registrant to sell its other real estate assets, the price of
real estate sales, environmental and similar liabilities, future operating
expenses and the adequacy of capital resources to meet future operating
expenses, which are described herein and/or in documents incorporated by
reference herein.
The cautionary statements made pursuant to the Private Securities Litigation
Reform Act of 1995 above and elsewhere by the Registrant should not be construed
as exhaustive or as any admission regarding the adequacy of disclosures made by
the Registrant prior to the effective date of such Act. Forward looking
statements are beyond the ability of the Registrant to control and in many cases
the Registrant cannot predict what factors would cause actual results to differ
materially from those indicated by the forward looking statements.
Item 8. Financial Statements and Supplementary Data.
Registrant's financial statements are included elsewhere herein. See "List
of Financial Statements."
Item 9. Changes in and Disagreements with Accountant 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. The Registrant is
managed, and its investment decisions are made, by the general partners of the
General Partner. The General Partner is Walsmith Associates Two, a North
Carolina general partnership. Except as expressly provided in the Partnership
Agreement, the General Partner has the power to do any and all things necessary
or incident to the conduct of the Registrant's business. The general partners of
the General Partner are:
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<TABLE>
<CAPTION>
---------------------------------------------------------------------
Business Experience During
Past Five Years, Family
Relationships and Directorships
NAME AGE in Public Companies
- ---- --- ---------------------------------------------------------------------
<S> <C> <C>
Donald F. Walston 56 President since 1982, and founder of Howard Perry & Walston Realty,
Inc., a residential real estate brokerage company located in the
Research Triangle area of North Carolina.
Alton L. Smith, III 49 Mr. Smith is a principal owner, and Executive Vice President of
Howard Perry & Walston Realty, Inc. Mr. Smith is also an officer and
director of Trademark Properties, Inc. Mr. Smith is the brother of
C. Stephen Smith
C. Stephen Smith 48 Mr. Smith is an independent commercial real estate broker. Mr. Smith
is the brother of Alton L. Smith, III
</TABLE>
To the knowledge of the Registrant, no person is the beneficial owner of
more than 590 units, 10% of the outstanding Units.
Wellington Park Associates, a North Carolina general partnership, is
required to repurchase the Wellington parcel if the Registrant exercises its put
option (See "Properties"). The three general partners of the General Partner of
the Registrant, are all general partners of Wellington Park Associates.
Accordingly, a conflict of interest exists between the general partners of the
General Partner and the Registrant with respect to the put option. For that
reason, the put option may only be exercised with the prior approval of the
limited partners of the Registrant who own at least seventy-five (75%) percent
of the outstanding Units of the Registrant.
Item 11. Executive Compensation.
The Agreement of Limited Partnership of the Registrant (the "Partnership
Agreement") governs the amount of compensation payable to Walsmith Associates,
Two, the General Partner of the Registrant.
Each year any portion of the properties of the Registrant remain
undeveloped, the Registrant pays the General Partner an annual $3,000 management
fee. This fee was paid to the General Partner by the Registrant during 1997.
If any portion of the Registrant's properties are developed by the
Registrant, the Registrant will pay the General Partner a 3% development fee
based upon he cost of improvements, net of land. No amounts were paid to the
General Partner as a development fee during the year ended December 31, 1997.
The Registrant may also pay personnel engaged by or on its behalf to
coordinate or supervise development, construction and operational activities,
including partners and employees of its General Partner. During the year ended
December 31, 1997, the Registrant paid affiliates of the General Partner $11,247
for record keeping, securities law filings and other administrative services.
The Partnership Agreement calls for the General Partner to be allocated a
minimum of 1% of the gain from the sale of property. The General Partner
receives cash to the extent it is allocated income. The General Partner has been
allocated $5,712 of net income for 1997 and, when a distribution is made, will
receive this amount. (See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations.")
Upon the sale of the Martin Parcel and the Wellington Parcel, the General
Partner will be paid a broker listing fee of up to five (5%) percent of the
sales price if the sale is to a party unaffiliated with the General Partner. If
the property is sold by a broker unaffiliated with the General Partner, the
Registrant may also pay the unaffiliated broker a two and one-half (2 1/2%)
percent broker-reallowance fee. The Registrant paid broker listing fees of
$18,743 (2 1/2 % of $749,705) to the General Partner during the year ended
December 31, 1997. Additionally, broker listing fees of $14,994 (2% of $749,705)
were paid to an affiliate of the General Partner during the year ended December
31, 1997.
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No other amounts were paid for services during the year ended December 31,
1997 to the General Partner or any of its partners or employees.
If the Registrant operates developed projects, the General Partner will
receive standard leasing commissions and standard property management fees. No
amounts were paid during the year ended December 31, 1997.
The General Partner receives cash to the extent it is allocated income.
Pursuant to the Partnership Agreement, the General Partner is allocated 1% of
each material item of Partnership income, gain, loss, deduction, or credit.
Otherwise all distributions are to the limited partners until such time as these
distributions equal their original capital contributions plus an additional
return of 10% per annum simple interest on their outstanding capital
contribution (original contributions as reduced by any prior distributions).
Thereafter, Partnership distributions will be allocated 10% to the General
Partner and 90% to the limited partners.
Under the terms of a put option as amended on February 1, 1990, the
Registrant is required to pay to Wellington Park Associates (the "Wellington
Seller"), an affiliate of the General Partner, a portion of the appreciation on
any sale of the Wellington Parcel, including a sale pursuant to the Registrant's
exercise of the put option. The Wellington Seller will receive fifty (50%)
percent of the appreciation (which is the amount by which the gross sales price
exceeds $1,223,175, the original cost to the Registrant of the Wellington
Parcel) if the put option is exercised. Upon sale of the Wellington Parcel to an
unaffiliated third party other than by exercise of the put option, the amount
payable to the Wellington Seller will equal fifty (50%) percent of the
appreciation reduced by the sum of the following: (a) for each year from March
6, 1990 to the sale date (with partial years prorated according to the number of
days prior to closing of such sale), ten (10%) percent of the amount by which
(i) the gross proceeds from sale of the Wellington Parcel, exceed (ii) fifty
(50%) percent of the appreciation (the "Interest Factor"); plus (b) seventy-five
(75%) percent of the amount the Wellington Seller will receive upon sale of the
Wellington Parcel remaining after subtracting the Interest Factor.
The Interest Factor could result in reduction of the amount to be received
by the Wellington Seller to zero, but cannot result in the Wellington Seller
owing any payment to the Registrant. In relation to the Wellington Parcel sales
in 1997, the Interest Factor exceeded the Wellington Seller's share of
appreciation. Therefore, the Registrant did not pay any amounts to the
Wellington Seller during the year ended December 31, 1997.
Information about comparative five-year return on investment in the
Registrant compared to market indexes has not been included herein because there
is no public market in Units of the Registrant. The limited partnership
agreement of the Registrant places substantial restrictions on transfer of Units
of the Registrant. Accordingly, the Registrant believes comparisons to indexes
of publicly traded securities would not be meaningful disclosure for investors.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) As of March 24, 1998, no person was known by the Registrant to
beneficially own more than 5% of the Units. The table set forth below indicates
the ownership of units by certain general partners of the General Partner as of
March 24, 1998:
<TABLE>
<CAPTION>
Amount and
Title Name & Address Nature Percent of Class
----- -------------- ------ ----------------
<S> <C> <C> <C>
Limited Partnership Alton L. Smith III 25 units (1) *
Unit 4000 Blue Ridge Road, Suite 100
Raleigh, NC 27612
</TABLE>
* Indicates less than 1%.
(1) Held in trust for Mr. Smith's children. Mr. Smith serves as trustee of the
trust.
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(b) As a limited partnership, the Registrant has no officers and directors,
although Alton L. Smith, III, a general partner of the General Partner, serves
the Registrant in the role of its principal financial "officer". The General
Partner has contributed $1,000 to the Registrant's capital account; however,
this contribution is not treated as the equivalent of a Unit of limited
partnership interest. The General Partner's contribution constitutes less than
1% of the total capital contributed to the Registrant. Messrs. Walston, Smith
and Smith are general partners of the General Partner. Alton L. Smith III
beneficially owns 25 units through a trust, for which he serves as trustee.
Neither Mr. Walston nor Mr. C. Stephen Smith beneficially owns any units of the
Registrant.
Item 13. Certain Relationships and Related Transactions.
See Item 11 "Executive Compensation."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) List of Financial Statements: See "List of Financial Statements."
(2) List of Financial Statement Schedules: All schedules are omitted
as they are not applicable or the required information is shown
in the financial statements or the notes thereto.
(3) Exhibit Index. All exhibits are incorporated by reference.
(b) No Current Report on Form 8-K was filed during the quarter ended
December 31, 1997.
(c) The following exhibits have been filed by the Registrant with the
Securities and Exchange Commission under the Securities Exchange Act of 1934
(File Number 0-15571) and are incorporated herein by reference:
Exhibit No. 3.1 Amended Agreement of Limited Partnership of the
Registrant (incorporated by reference to Exhibit
4.1 to the Registrant's Annual Report filed on Form
10-K for the year ended December 31, 1986).
Exhibit No. 10.1 Purchase Agreement between Registrant and Walsmith
Associates regarding the Martin
Parcel (incorporated by reference
to Exhibit 10.1 to the Registrant's
Annual Report filed on Form 10-K
for the year ended December 31,
1986).
Exhibit No. 10.2 Offer to Purchase and Contract for the
12
<PAGE>
Sale and Purchase of Real Estate, dated as of
January 24, 1986, between Wellington Park
Associates and the Registrant (incorporated by
reference to Exhibit 6A to the Registrant's
Quarterly Report filed on Form 10-Q for the period
ended June 30, 1989).
Exhibit No. 10.3 Agreement between the North Carolina Department of
Transportation and Walsmith
Associates (incorporated by
reference to Exhibit 10.3 to the
Registrant's Annual Report on Form
10-K for the year ended December
31, 1986).
Exhibit No. 10.4 Assignment and Assumption Agreement between the
Registrant and Walsmith Associates (incorporated by
reference to Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1986).
Exhibit No. 10.5 Amendment to Offer to Purchase and Contract for the
Sale and Purchase of Real Estate, dated as of
February 1, 1990, between Wellington Park
Associates and the Registrant (incorporated by
reference to Exhibit 10.6 to the Registrant's
Annual Report filed on Form 10-K for the period
ended December 31, 1989).
Exhibit No. 10.6 Agreement for the Purchase and Sale of Real Estate,
dated as of April 20, 1995, between Churchill &
Banks, Ltd., ADA Corporation of North Carolina, and
the Registrant (incorporated by reference to
Exhibit C to the Registrant's Current Report filed
on Form 8-K, dated April 20, 1995 ).
Exhibit No. 10.7 First Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of August 9,
1995, between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit C to the
Registrant's Current Report filed on Form 8-K,
dated August 9, 1995).
Exhibit No. 10.8 Second Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of April 19,
1996, between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 28.5 to the
Registrant's Quarterly Report filed on Form 10-Q
for the period ended March 31, 1996).
13
<PAGE>
Exhibit No. 10.9 Third Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of September 10,
1996, between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report filed on Form 8-K,
dated September 25, 1996).
Exhibit No. 10.10 Fourth Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of September __,
1996, between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report filed on Form 8-K,
dated September 25, 1996).
Exhibit No. 10.11 Fifth Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of September 27,
1996, between Wellington Center Associates, LLC,
ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit
10.3 to the Registrant's Current Report filed on
Form 8-K, dated September 25, 1996).
Exhibit No. 10.12 Sixth Amendment to the Agreement for the Purchase
and Sale of Real Estate, dated as of September 12,
1997, between Wellington Center Associates, LLC,
ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit
10.12 to the Registrant's Quarterly Report filed on
Form 10-Q for the period ended September 30, 1997).
Exhibit No. 27 Financial Data Schedule
(d) All financial statement schedules are omitted because they are not
applicable or the required information is shown in the financial statements
attached hereto or notes thereto.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March _____, 1998.
CAROLINA INVESTMENT PARTNERS
By: WALSMITH ASSOCIATES TWO,
General Partner
By: /s/ Alton L. Smith, III
---------------------------
Alton L. Smith, III
General Partner and
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/Donald F. Walston General Partner of Walsmith March 30, 1998
- ------------------------- Associates Two, general
partner of the Registrant
/s/Alton, L. Smith, III
- ------------------------- General Partner of Walsmith March 30, 1998
Associates Two, general
partner of the Registrant
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report or proxy statement has been or will be sent to the Limited
Partners of the Registrant.
15
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEMS 8 AND 14(a)(1)
FINANCIAL STATEMENTS
LIST OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
RALEIGH, NORTH CAROLINA
16
<PAGE>
Form 10-K--Items, 8, 14(a)(1) and (2) and (d)
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
December 31, 1997
LIST OF FINANCIAL STATEMENTS
The following financial statements of Carolina Investment Partners, Limited
Partnership are included in Item 8:
Independent Auditors Report F-1
Balance Sheets--December 31, 1997 and 1996 F-2
Statements of Operations--Years Ended
December 31, 1997, 1996 and 1995 F-3
Statements of Changes in Partners' Equity--Years Ended
December 31, 1997, 1996, and 1995 F-4
Statements of Cash Flows--Years Ended December 31, 1997,
1996, and 1995 F-5
Notes to Financial Statements F-6
Schedules to the financial statements for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
inapplicable or the required information is included in the financial statements
or the notes thereto.
17
<PAGE>
[LOGO] LYNCH & HOWARD, P.A.
CERTIFIED PUBLIC ACCOUNTANTS AICPA SEC Practice Section
Raleigh, North Carolina AICPA Private Companies Practice Section
================================================================================
INDEPENDENT AUDITOR'S REPORT
To the Partners
Carolina Investment Partners Limited Partnership
Raleigh, North Carolina
We have audited the accompanying balance sheets of Carolina Investment Partners
Limited Partnership as of December 31, 1997 and December 31, 1996, and the
related statements of operations, changes in partners' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carolina Investment Partners
Limited Partnership as of December 31, 1997 and December 31, 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ Lynch & Howard, P.A.
February 10, 1998
F-1
<PAGE>
Exhibit A
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
BALANCE SHEETS
ASSETS
December 31
------------------------
1997 1996
---------- ----------
ASSETS:
Cash $ 7,553 $ 194,254
Short-term investments 995,315 11,270
Land held for investment (Note 5) 3,850,572 4,001,280
Accounts receivable - related party 4,692 0
---------- ----------
$4,858,132 $4,206,804
========== ==========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable - trade $ 29,755 $ 13,898
Accounts payable - related party 72,283 7,944
---------- ----------
Total Liabilities $ 102,038 $ 21,842
---------- ----------
PARTNERS' EQUITY:
General Partner's equity $ 5,711 $ 0
Limited partners' equity; 5,900 units
authorized, issued and outstanding 4,750,383 4,184,962
---------- ----------
Total Partners' Equity $4,756,094 $4,184,962
---------- ----------
$4,858,132 $4,206,804
========== ==========
The Notes to Financial Statements are an integral part of this statement.
F-2
<PAGE>
Exhibit B
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Gain on sale of land - net of related party $ 541,269 $ 1,382,081 $ 0
commissions paid of $33,737 in 1997
and $107,460 in 1996 (Note 6)
Sales of timber - net 0 0 35,664
Interest and other income 87,420 12,174 3,494
----------- ----------- -----------
Total Revenues $ 628,689 $ 1,394,255 $ 39,158
----------- ----------- -----------
OPERATING EXPENSES:
General and administrative expenses $ 43,310 $ 49,219 $ 35,784
Related party expenses 14,247 8,821 5,671
----------- ----------- -----------
Total Operating Expenses $ 57,557 $ 58,040 $ 41,455
----------- ----------- -----------
NET INCOME (LOSS) $ 571,132 $ 1,336,215 $ (2,297)
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS) (Note 2):
To General Partner:
From gain on sale of land $ 5,413 $ 13,821 $ 0
From operations 298 0 0
----------- ----------- -----------
Total to General Partner $ 5,711 $ 13,821 $ 0
----------- ----------- -----------
To Limited partners:
From gain on sale of land $ 535,856 $ 1,368,260 $ 0
From operations 29,565 (45,866) (2,297)
----------- ----------- -----------
Total to Limited Partners $ 565,421 $ 1,322,394 $ (2,297)
----------- ----------- -----------
$ 571,132 $ 1,336,215 $ (2,297)
=========== =========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT:
(Based on 5,900 weighted average limited
partnership units outstanding during each year)
From gain on sale of land $ 90.82 $ 231.91 $ 0.00
From other operations 5.01 (7.78) (0.39)
----------- ----------- -----------
$ 95.83 $ 224.13 $ (0.39)
=========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-3
<PAGE>
Exhibit C
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
<TABLE>
<CAPTION>
Limited General Limited
Partnership Partner's Partners'
Units Equity Equity Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 5,900 $ -- $ 4,820,865 $ 4,820,865
Net loss for 1995 -- -- (2,297) (2,297)
----------- ----------- ----------- -----------
Balance at December 31, 1995 5,900 $ -- $ 4,818,568 $ 4,818,568
Net income for 1996 -- 13,821 1,322,394 1,336,215
Distributions for 1996:
General Partner -- (13,821) -- (13,821)
Limited partners ($331.53 per unit) -- -- (1,956,000) (1,956,000)
----------- ----------- ----------- -----------
Balance at December 31, 1996 5,900 $ -- $ 4,184,962 $ 4,184,962
Net income for 1997 -- 5,711 565,421 571,132
----------- ----------- ----------- -----------
Balance at December 31, 1997 5,900 $ 5,711 $ 4,750,383 $ 4,756,094
=========== =========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-4
20
<PAGE>
Exhibit D
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 571,132 $ 1,336,215 $ (2,297)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Changes in operating assets and liabilities:
Land held for investment 150,708 820,903 0
Accounts receivable - related party (4,692) 103 0
Accounts payable - trade 15,857 (6,050) 14,597
Accounts payable - related party 64,339 6,900 909
----------- ----------- -----------
Net Cash Provided By Operating Activities $ 797,344 $ 2,158,071 $ 13,209
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from note payable - related party $ 0 $ 0 $ 55,000
Repayment of note payable - related party 0 (16,064) (38,936)
Distribution to General Partner 0 (13,821) 0
Distribution to limited partners 0 (1,956,000) 0
----------- ----------- -----------
Net Cash Provided By (Used In)
Financing Activities $ 0 $(1,985,885) $ 16,064
----------- ----------- -----------
NET INCREASE IN CASH $ 797,344 $ 172,186 $ 29,273
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR 205,524 33,338 4,065
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 1,002,868 $ 205,524 $ 33,338
=========== =========== ===========
</TABLE>
F-5
<PAGE>
Exhibit D
Page 2
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flows Information:
Cash paid during the year for interest $ 0 $ 1,127 $ 1,805
=========== =========== ===========
Cash and cash equivalents:
Cash $ 7,553 $ 194,254 $ 542
Short-term investments 995,315 11,270 32,796
----------- ----------- -----------
$ 1,002,868 $ 205,524 $ 33,338
=========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
F-5.1
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(1) ORGANIZATION AND NATURE OF OPERATIONS
Carolina Investment Partners Limited Partnership (the "Partnership") was
organized in 1985 to invest in real property which it will sell or lease
undeveloped or develop into office or commercial projects. Walsmith
Associates Two, a North Carolina General Partnership, is the general
partner ("General Partner"). The Partnership has invested in two parcels of
real estate located in Cary, North Carolina.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
For the purposes of reporting cash flows, the Partnership considers cash
equivalents to be cash on hand, cash in banks, and all highly liquid debt
instruments with a maturity of less than three months.
Land Held for Investment
Land held for investment is stated at contract cost plus highway
interchange construction costs and capitalized appraisal, survey, and
closing costs and adjusted for impairments as required by Financial
Accounting Standards Board Statement No. 121. Management compares the cost
of land held to sales of similar property to determine the potential for
impairment. There are no material differences between the book and federal
tax cost basis of the property.
Income Taxes
No provision has been made for income taxes since income or loss is
includable in the partners' returns as they report to tax authorities in
their respective capacities as partners.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Concentrations of Credit Risk
The Partnership maintains cash deposits in banks in excess of the federally
insured amounts.
Allocation of Net Income or Net Loss
Pursuant to the Partnership Agreement, the General Partner is allocated 1%
of each material item of Partnership income, gain, loss, deduction or
credit. The limited partners receive 99% of each material item of
Partnership income, gain, loss, deduction or credit until their original
capital contributions plus interest have been distributed (see Cash
Distribution Policy below). Thereafter, the net income is allocated 10% to
the General Partner and 90% to the limited partners.
Net loss is allocated 10% to the General Partner and 90% to the limited
partners. The Partnership Agreement provides that no partner's capital
account balance shall be less than zero. Thus, no loss from operations was
allocated to the General Partner for the years ended December 31, 1996 or
1995. For purposes of the allocation, net income or net loss is the amount
recognized by the Partnership for federal income tax purposes, excluding
gains or losses from the disposition of land. For the years ended December
31, 1997, 1996 and 1995 there were no material differences between net
income (loss) as reported for financial statement and federal income tax
purposes.
Cash Distribution Policy
The General Partner receives cash to the extent it is allocated income.
Otherwise, all distributions are to the limited partners until such time as
these distributions equal 100% of their original capital contributions plus
an additional return of 10% per annum simple interest on their outstanding
capital contribution (original contributions as reduced by any prior
distributions). Thereafter, Partnership distributions will be allocated 10%
to the General Partner and 90% to the limited partners.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with the
1997 presentation. Such reclassifications had no effect on net income or
partners' equity as previously reported.
Page 2
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Short-Term Investments
Short-term investments consisted of certificates of deposit and money
market funds.
(3) RELATED PARTY TRANSACTIONS
The Partnership Agreement allows the General Partner to receive a broker
listing fee of 5% of the sales price for all properties sold by the
Partnership to unaffiliated buyers. An affiliate of the General Partner
received a broker listing fee of $14,994 in 1997 and $47,760 in 1996 and
the General Partner received a broker listing fee of $18,743 in 1997 and
$59,700 in 1996 (See Note 6).
The Partnership Agreement allows the Partnership to pay the General Partner
a $3,000 annual management fee while the properties are in an undeveloped
state. In addition, affiliates of the General Partner performed Partnership
accounting, SEC reporting, administrative services and engineering
consulting totaling $11,247, $5,821 and $2,671 during 1997, 1996 and 1995,
respectively. Amounts payable to related parties at December 31, 1997 and
1996 were $72,283 and $ 7,944, respectively.
(4) NOTE PAYABLE - RELATED PARTY
On February 2, 1995 the General Partner made a loan to the Partnership of
$55,000. The purpose of this loan was to fund the current operating
expenses of the Partnership. The note was payable upon the sale of
Partnership properties or other sources of funds that become available but
was to be paid in full no later than June 1, 1996. As of June 1, 1996 the
Partnership had not closed on the pending land sale; therefore, the General
Partner made another loan to the Partnership of $16,064, the balance of the
first loan. This loan was paid off on September 30, 1996 (See Note 6). Both
notes accrued interest at prime plus one percent and the interest was
payable quarterly. Interest expense for the years ended December 31, 1997,
1996 and 1995 was $0, $1,127 and $1,805, respectively.
Page 3
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(5) LAND HELD FOR INVESTMENT AND RELATED COMMITMENTS
Martin Parcel
In June 1986, the Partnership purchased for approximately $3,080,200 an
undeveloped 26.7 acre parcel of land in Cary, North Carolina, known as the
Martin Parcel, from an affiliate of the General Partner.
Wellington Parcel
In July 1986, the Partnership purchased for $1,223,175 an undeveloped 16.3
acre parcel of land in Cary, North Carolina, known as the Wellington
Parcel, from an affiliate of the General Partner. The purchase contract
provides that the Partnership will share evenly with the affiliate in any
profits resulting from the sale of the Wellington Parcel. The Partnership
may, at its option, require the affiliate to repurchase the Wellington
Parcel for $225,000 per acre (the "Put Option"). A 75% vote of the limited
partners is required for this Put Option to be exercised.
At a meeting of the limited partners held in March 1990, fewer than 75% of
the partners voted to exercise the Put Option discussed above. A new
agreement was entered into called the Put Option Agreement Amendment. Under
the terms of the Put Option Agreement Amendment, the Partnership will
retain a greater percentage of the property appreciation upon sale of the
Wellington Parcel to an unaffiliated third party than would be retained if
the Put Option were exercised. If the limited partners elect to exercise
the Put Option at a later date, the Put Option Agreement Amendment will be
void.
The Partnership sold approximately 2.0 and 10.9 acres of the Wellington
Parcel during 1997 and 1996, respectively (See Note 6).
The remaining 3.4 acres of the Wellington Parcel were under contract to
close on or before January 30, 1998, in conjunction with sale of the above
12.9 acres. As of February 10, 1998 the properties had not closed.
Page 4
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(6) GAIN ON SALE OF LAND
Year 1997
During 1997 the Partnership sold approximately 2 acres of the Wellington
Parcel to an unrelated party. The total sales price for the property, a
portion of which was owned by an affiliate of the General Partner, was
$930,284. This sales price was allocated among the Partnership and the
affiliate based upon acreage sold by each, with $749,705 to the Partnership
and $180,579 to the affiliate. The Partnership's proceeds were as follows:
<TABLE>
<CAPTION>
5/5/97 8/26/97 11/17/97 Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross sales price $ 250,917 $ 243,359 $ 255,429 $ 749,705
Commissions (7,528) (7,301) (7,662) (22,491)
Commissions - related party (11,291) (10,951) (11,495) (33,737)
Deed stamps (502) (487) (511) (1,500)
--------- --------- --------- ---------
Net sale proceeds $ 231,596 $ 224,620 $ 235,761 $ 691,977
========= ========= ========= =========
</TABLE>
The Partnership agreement calls for the General Partner to be allocated a
minimum of 1% of any gain from the sale of property. To the extent the
General Partner is allocated gain, it also receives a distribution.
Accordingly, the General Partner's share of the gain is $5,413 (net sale
proceeds of $691,977 less the Registrant's basis in the property sold of
$150,707 equals a gain of $541,270; 1% of this amount is $5,413).
Page 5
<PAGE>
CAROLINA INVESTMENT PARTNERS
LIMITED PARTNERSHIP
Raleigh, North Carolina
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(6) GAIN ON SALE OF LAND - Continued
Year 1996
In September 1996 the Partnership sold approximately 10.9 acres of the
Wellington Parcel to a third party. The total sales price for the property,
a portion of which was owned by an affiliate of the General Partner, was
$2,400,000. This sales price was allocated among the Partnership and the
affiliate based upon acreage sold by each, with $2,388,000 to the
Partnership and $12,000 to the affiliate. The Partnership's proceeds were
utilized as follows:
Gross sales price $ 2,388,000
Commissions (71,640)
Commissions - related party (107,460)
Deed stamps and attorney fees (5,916)
-----------
Net sales proceeds $ 2,202,984
Wellington Parcel property taxes (16,511)
Repayment of note payable and accrued
interest to General Partner (16,819)
Funds reserved for future operating needs (199,833)
-----------
Funds distributed to partners $ 1,969,821
===========
The Partnership Agreement calls for the General Partner to be allocated a
minimum of 1% of any gain from the sale of property. To the extent the
General Partner is allocated gain, it also receives a distribution.
Accordingly, the General Partner's share of the gain is $13,821 (net sales
proceeds of $2,202,984 less the Registrant's basis in the property sold of
$820,903 equals a gain of $1,382,081; 1% of this amount is $13,821).
On November 4, 1996 the Registrant distributed a total of $1,969,821, with
$1,956,000 going to the limited partners ($331.53 per unit) and $13,821 to
the General Partner.
Page 6
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Amended Agreement of Limited
Partnership of the Registrant
(incorporated by reference to
Exhibit 4.1 to the Registrant's
Annual Report filed on Form 10-K for
the year ended December 31, 1986).
10.1 Purchase Agreement between
Registrant and Walsmith Associates
regarding the Martin Parcel
(incorporated by reference to
Exhibit 10.1to the Registrant's
Annual Report filed on Form 10-K for
the year ended December 31, 1986).
10.2 Offer to Purchase and Contract for
the Sale and Purchase of Real
Estate, dated as of January 24,
1986, between Wellington Park
Associates and the Registrant
(incorporated by reference to
Exhibit 6A to the Registrant's
Quarterly Report filed on Form 10-Q
for the period ended June 30, 1989).
10.3 Agreement between the North Carolina
Department of Transportation and
Walsmith Associates (incorporated by
reference to Exhibit 10.3 to the
Registrant's Annual Report on Form
10-K for the year ended December 31,
1986).
10.4 Assignment and Assumption Agreement
between the Registrant and Walsmith
Associates (incorporated by
reference to Exhibit 10.4 to the
Registrant's Annual Report on Form
10-K for the year ended December 31,
1986).
10.5 Amendment to Offer to Purchase and
Contract for the Sale and Purchase
of Real Estate, dated as of February
1, 1990, between Wellington Park
Associates and the Registrant
(incorporated by reference to
Exhibit 10.6 to the Registrant's
Annual Report filed on Form 10-K for
the period ended December 31, 1989).
10.6 Agreement for the Purchase and
18
<PAGE>
Sale of Real Estate, dated as of April
20, 1995, between Churchill & Banks,
Ltd., ADA Corporation of North
Carolina, and the Registrant
(incorporated by reference to
Exhibit C to the Registrant's
Current Report filed on Form 8-K,
dated April 20, 1995 ).
10.7 First Amendment to the Agreement for
the Purchase and Sale of Real
Estate, dated as of August 9, 1995,
between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and
the Registrant (incorporated by
reference to Exhibit C to the
Registrant's Current Report filed on
Form 8-K, dated August 9, 1995).
10.8 Second Amendment to the Agreement
for the Purchase and Sale of Real
Estate, dated as of April 19, 1997,
between Churchill & Banks, Ltd., ADA
Corporation of North Carolina, and
the Registrant (incorporated by
reference to Exhibit 28.5 to the
Registrant's Quarterly Report filed
on Form 10-Q for the period ended
March 31, 1997).
10.9 Third Amendment to the Agreement for
the Purchase and Sale of Real
Estate, dated as of September 10,
1997, between Churchill & Banks,
Ltd., ADA Corporation of North
Carolina, and the Registrant
(incorporated by reference to
Exhibit 10.1 to the Registrant's
Current Report filed on Form 8-K,
dated September 25, 1997).
10.10 Fourth Amendment to the Agreement
for the Purchase and Sale of Real
Estate, dated as of September __,
1997, between Churchill & Banks,
Ltd., ADA Corporation of North
Carolina, and the Registrant
(incorporated by reference to
Exhibit 10.2 to the Registrant's
Current Report filed on Form 8-K,
dated September 25, 1997).
10.11 Fifth Amendment to the Agreement for
the Purchase and Sale of Real
Estate, dated as of September 27,
1997, between Wellington Center
Associates, LLC, ADA Corporation of
North Carolina, and the
19
<PAGE>
Registrant (incorporated by reference to
Exhibit 10.3 to the Registrant's
Current Report filed on Form 8-K,
dated September 25, 1997).
10.12 Sixth Amendment to the Agreement for the
Purchase and Sale of Real Estate, dated as
of September 12, 1997, between Wellington
Center Associates, LLC, ADA Corporation of
North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.12
to the Registrant's Quarterly Report filed
on Form 10-Q for the period ended September
30, 1997).
27 Financial Data Schedule
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,002,868
<SECURITIES> 0
<RECEIVABLES> 4,692
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,850,572
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,858,132
<CURRENT-LIABILITIES> 102,038
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,756,094
<TOTAL-LIABILITY-AND-EQUITY> 4,858,132
<SALES> 541,269
<TOTAL-REVENUES> 628,689
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 57,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 571,132
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
