<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark one)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the fiscal year ended December 31, 1999 or
[ ] 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 33-22420-A
INTERSTATE LAND INVESTORS I LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
North Carolina 56-1610635
(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: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
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.)
Not applicable as all securities are non-voting.
Indicate the number of shares outstanding of each of the issuers' classes of
common stock as of the latest practicable date
5,100 limited partnership units as of March 17, 2000
Documents Incorporated by Reference: See Item 14
Page 1 of 13 sequentially numbered pages
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PART I
ITEM 1 - BUSINESS
Interstate Land Investors I (the "Registrant" or the "Partnership") is
a North Carolina limited partnership organized as of May 18, 1988 to acquire for
investment, hold on an unencumbered basis and dispose of an approximately
96.74-acre tract of land located in York County, South Carolina (the
"Property"). Until January 1, 1992, the General Partners of the Registrant were
Performance Investments, Inc., a North Carolina corporation ("PII"), William
Garith Allen ("Allen") and ISC Realty Corporation, a North Carolina corporation
("ISCR"). Allen is the President, a director and a 50% shareholder of PII. PII
filed bankruptcy in 1992 under Chapter 11 of the Bankruptcy Code. ISCR is a
North Carolina corporation wholly owned by Wachovia Securities Inc ("WSI").
Effective January 1, 1992, ISCR and Allen assumed the role of co-managing
general partners and PII converted to a limited partner. In 1998, Allen resigned
as partner and his partnership interest was assigned to ISC Realty Corporation.
The Registrant offered (the "Offering") 5,100 units of Class A Limited
Partnership Interests (the "Units") at $1,000 per Unit pursuant to a
Registration Statement effective September 7, 1988, filed under the Securities
Act of 1933, as amended (the "Act"). On September 30, 1988, the Offering was
terminated (the "Closing") with aggregate net proceeds from the Offering
totaling $5,096,360. After deduction for selling commissions and organization
and offering expenses of $624,400, net proceeds of $4,471,960 were available to
the Registrant for the acquisition of the Property. In addition to these
proceeds, the General Partners and their affiliates contributed amounts totaling
$200.
The Property was purchased by the Registrant on September 30, 1988 for
$4,200,000. Interstate Development Associates ("IDA"), a North Carolina general
partnership composed of Allen and his father, William G. Allen, Jr., had
purchased the Property on September 29, 1987. IDA acquired the Property for a
gross purchase price of $3,325,000 plus closing costs of $172,719 or a total of
$3,497,719. In addition, IDA incurred carrying costs aggregating approximately
$1,086,486, making its total investment in the Property approximately
$4,584,205. IDA's excess costs in the Property $384,205 will be returned to IDA
as part of subordinated return of $1,050,000 payable out of the net proceeds of
the future sale of the Property, assuming sufficient proceeds, after the
investors receive a return of their invested capital plus a 14% noncompounded
annual return. The Registrant does not anticipate the acquisition of any
additional properties.
The Registrant's principal investment objectives are to: (1) preserve
and protect capital invested in the Registrant, (2) provide a relatively
low-risk real estate investment through debt-free ownership of the Property, (3)
provide long-term appreciation in the value of the Property, and (4) provide
protection for investors against inflation. The Registrant intends to accomplish
its objectives through holding the Property and subsequently disposing of it at
an appropriate time.
The disposition of the Property by the Registrant may result in
substantial fees to the General Partners and their affiliates. Reference is made
to Item 13 herein for a description of certain transactions between the
Registrant and the General Partners and their affiliates.
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No mortgage indebtedness was incurred in connection with the
acquisition of the Property.
The Registrant plans to hold the property for future appreciation. It
is not contemplated that the Registrant will undertake construction of
substantial improvements on the Property.
Upon the sale of all or a portion of the Property by the Registrant,
the proceeds of the sale will be distributed to the investors. The General
Partners currently intend to dispose of the Property purchased within ten to
fifteen years of the purchase. However, the investors had a one-time right to
direct the Registrant to dispose of the Property upon the fifth anniversary of
the Closing of the Offering for a price not less than $7,185,000 ("Put Price")
reduced by the net proceeds to the Registrant from the sale of other parcels
within the Property by the Registrant. The limited partners voted to direct the
General Partners to sell the property at the Put Price as more fully explained
in Item 4.
The Registrant in seeking to secure purchasers for its Property will be
competing with many other real estate investment partnerships as well as
individuals, insurance companies, banks and other entities engaged in real
estate investment activities including, perhaps, certain affiliates of the
General Partners.
The General Partners or their affiliates currently serve as general
partners in over 10 public and private partnerships which currently own various
types of real property. None of the prior partnerships sponsored by the General
Partners or their affiliates now contemplate the acquisition of any additional
properties of the type purchased by the Registrant. However, the General
Partners or their affiliates may sponsor additional public or private
partnerships in the future. In addition, the General Partners 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.
Interstate Land Investors II Limited Partnership ("Interstate II"), a
North Carolina limited partnership organized as of July 27, 1989, whose General
Partners are the same as the Registrant's, acquired two tracts of land located
immediately to the south of and adjoining the Property. The first tract is an
approximately 76.74 acre tract fronting on Interstate 77. The second tract
located south of the Property and northeast to the 76.74 acre tract is
approximately 20 acres. Also, Interstate II had an option to purchase an
approximately 91.64 acre tract located immediately south of and adjacent to the
two tracts previously purchased by that partnership. That 91.64 tract was
subdivided into four subtracts and Interstate II acquired two of the four
subtracts in November, 1990. It is anticipated that Interstate II will hold all
of its tracts as one investment property. The property acquired by Interstate II
should be deemed to be in direct competition with the Property. In addition, the
close proximity of these competing parcels may give rise to conflicts of
interest between Allen and ISCR as General Partners and the Registrant and
Interstate II. In addition, conflicts of interest may arise in connection with
the business of each General Partner in other partnerships, private and public,
of which the General Partners are affiliated at such time as the Registrant
attempts to sell or otherwise dispose of the Property owned by the Registrant.
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The General Partners will devote only so much of their time to the
business of the Registrant as in their judgment and experience is reasonably
required. The General Partners are engaged in other activities which also
require their time and attention.
As of March 17, 2000, the Registrant did not directly employ any
persons in a full-time position. Certain employees of the General Partners and
affiliates performed services for the Registrant during the year.
ITEM 2 - PROPERTY
The Property is located 11 miles south of the Central Business District
of Charlotte, North Carolina along the I-77 corridor and approximately 8.6 miles
north of Rock Hill, South Carolina. While the Property is located in
northeastern York County, South Carolina, the Property is considered a part of
the Charlotte MSA.
The Property has approximately 4,188 feet of frontage along the eastern
side of I-77 and 840 feet of frontage along U.S. Highway 21. The Property is an
irregularly shaped parcel containing approximately 96.74 acres. The primary
access to the Property will be U.S. Highway 21. It intersects with Carowinds
Boulevard, approximately 5,100 feet north of the Property. Carowinds Boulevard
in turn intersects with I-77 approximately 1,700 feet north of the Property.
The topography of the Property consists of generally rolling terrain.
The Property is level to the street grade of U.S. Highway 21 and is level to the
street grade of I-77 along the western boundary of the Property. The Property is
not located within any floodplain areas and drainage appears to be adequate. The
Property is approximately 95% wooded, covered with vegetation indigenous to the
Piedmont section of the Carolinas. The soil is generally of a clay-type and is
capable of supporting conventional spread footings, which would be used in
development of the Property.
Utilities that are or will be available to the Property include water,
sewer, gas, electricity and telephone. Sanitary sewage disposal and water was
originally available through North County Service Company, a private utility
company. A sewage treatment plant serving the Property was to be located west of
the Property. This facility was approved by York County to serve the immediate
area in and around the subject Property and is subject to the regulations of
York County. Performance Consultants, Inc. ("PCI"), an affiliate of PII and
Allen, has entered into an Agreement with North County Service Company dated
January 9, 1987, under which North County Service Company has agreed to expand
its waste treatment facility in order to treat waste from the Property and
certain other properties owned by affiliates of PII and Allen. In return, the
Registrant will be obligated to reimburse PCI or to pay a fee directly to North
County Service Company. The fees to be charged by North County Service Company
will be absorbed and paid by the ultimate purchasers and developers of the
Property. The proposed utilities appear to be of sufficient capacity to serve
the site for future development. The Registrant believes that this facility was
conveyed to York County and that future services may be provided through either
the County or the local municipality.
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There is a 10-foot wide American Telephone & Telegraph Company buried
toll line easement that traverses the Property. However, it is not anticipated
that this easement will inhibit the potential development of the Property or
adversely affect its market value.
The Property is currently zoned for agricultural use, by York County,
South Carolina, however, if a sale of the property occurred zoning would revert
to UDD (urban development district). The purpose of the UDD zoning designation
is to permit maximum flexibility in response to market demands in specific areas
of York County and to minimize land use conflicts in such areas. The permitted
uses in UDD districts range from residential to business development, including
industrial developments. For business and industrial development, there are no
minimum lot area requirements for UDD-zoned areas. There are various building
setback requirements in a UDD depending upon the type of development. None of
the setback requirements under the zoning classification are deemed onerous.
There is no open space ratio requirement for business or industrial use.
On December 21, 1999, the Partnership entered into a contract with
Crescent Resources, the real estate arm of Duke Energy Corporation, to sell the
entire tract of unimproved land for approximately $3,740,000, which equates to
an average per acre price of $38,660. The potential purchaser deposited earnest
money with a title agency. Under the terms of the contract, the potential
purchaser had until March 31, 2000, to complete their due diligence, making the
earliest possible closing date April 20, 2000. However, on March 17, 2000,
Crescent Resources notified the Registrant of its desire to cancel the contract.
Crosland Commercial continues to list the property for sale.
During the fourth quarter of 1999, the Partnership recorded a non-cash
charge of approximately $660,000, or approximately $130 per limited partnership
unit, to write-down its unimproved land to its estimated realizable value.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In December 1999, an official ballot was sent to the Limited Partners
requesting that they vote their "Approval" or "Disapproval" for the proposed
sale of the property. Results of this ballot indicated 61.7% in favor of the
proposed sale.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS
Transfer of the Units is subject to certain restrictions contained in
the Limited Partnership Agreement. There is no established market for the Units
and it is not anticipated that any will
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occur in the future. The Registrant is aware of no significant resale of Units
since the Initial Closing on September 30, 1988. As of March 17, 2000, 524
persons were record owners of 5,100 Units.
The Registrant in each year allocates to the investors and the General
Partners any net profit prior to a sale of the Property. Such allocations to the
investors are credited against their preferred return due to them on their
invested capital. Net losses for each year are also allocated to the investors
and the General Partners in accordance with their respective capital accounts.
The Registrant does not intend to make any distributions of available cash
before the sale of all or a portion of the Property. During 1998, $306,000 was
distributed to the limited partners from the proceeds of the legal settlement
with W. G. Allen.
ITEM 6 - SELECTED FINANCIAL DATA (AUDITED)
SELECTED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest and Other
Income $ 5,536 $505,387 $ 146 $ 60 $ 60
Expenses 24,754 29,949 26,734 27,280 27,280
Property write-down 661,551 0 0 0 0
--------- -------- -------- -------- --------
Net Gain (Loss) ($680,769) $475,438 (26,588) (27,220) (27,220)
========= ======== ======== ======== ========
Net Gain (Loss) Allocated
to Class A limited
Partners (680,684) 475,438 (26,584) (27,216) (27,216)
========= ======== ======== ======== ========
Net Gain (Loss) Per Class A
limited partnership
Unit (133.47) 93.22 (5.16) (5.28) (5.28)
========= ======== ======== ======== ========
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Assets $3,728,615 $4,407,721 $4,263,565 $4,262,844 $4,264,021
Total Liabilities 128,912 114,709 139,989 112,682 86,639
---------- ---------- ---------- ---------- ----------
Partner's Capital $3,599,703 $4,292,962 $4,123,574 $4,150,162 $4,177,382
========== ========== ========== ========== ==========
</TABLE>
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Registrant had cash on hand of $127,556.
Until the Registrant disposes of the Property, its only sources of additional
capital are loans and the interest earned on its short-term investments. The
Registrant's ability to maintain cash adequate to meet its needs will be
dependent upon the availability of financing and successful operations of its
real estate investment. In accordance with the Partnership Agreement, the
General Partners are required to advance any additional funds needed for
operations. ISCR is entitled to accrue interest on any loans provided to the
Partnership at the rate of prime plus two percent.
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1999 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1998
The Registrant reported a net loss in the amount of ($680,769) for the
year ended December 31, 1999, as compared to net income of $475,438 for the year
ended December 31, 1998. A loss from property write-down in the amount of
$661,551 was recorded in 1999 to write-down the property to its estimated
realizable value.
Interest expense decreased $691 as a result of the General Partner loan
being paid in full in July 1998. Professional fees decreased $849 during 1999
due to decreased legal expenses. General and administrative expense decreased
$2,982 as there were no environmental and market value studies performed as in
the prior year.
COMPARISON OF THE FISCAL YEAR ENDED DECEMBER 31, 1998 TO THE FISCAL YEAR ENDED
DECEMBER 31, 1997
The Registrant reported a net income in the amount of $475,438 for the
year ended December 31, 1998, as compared to a net loss of ($26,588) for the
year ended December 31, 1997.
Interest expense decreased $1,253 due to a lower average loan balance
payable to the general partner and the repayment of the note payable in 1998.
Professional fees increased $1,823 during 1998 due to increased legal expenses
in relation to the settlement of the lawsuit against Allen. General and
administrative expense increased $2,640 to $15,450 as a result of separate
studies performed to evaluate the current market value and environmental
conditions of the property.
The Year 2000 Issue
The Registrant determined that the potential consequences of year 2000
will not have a material effect on business, results of operations, or financial
condition. This conclusion was
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reached after researching computer programs and third party vendors that are
currently used to manage this limited partnership. The Registrant is not solely
reliant upon outside systems or vendors for record keeping. Information is on
file in our offices which states that existing computer software is Y2K
compliant and that the third party vendor currently utilized was Y2K compliant
by June 30, 1999. The computer hardware and peripherals located in the
Registrant's offices are also Y2K ready. If necessary, the Registrant can revert
to manual methods for bookkeeping, check writing, preparation of financial
statements and investor correspondence. Hard copies of essential information are
available and will continue to be available well into the year 2000.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included as a separate section to this
report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements concerning the December 31, 1999, financial
statements.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no directors or executive officers. PII, the former
managing general partner, filed for relief from creditors under Chapter 11 of
the Bankruptcy Code during 1992. Effective January 1, 1992, the general partner
interest of PII was converted to that of a Class A Limited Partner retaining the
same interest in the Partnership's net profit, losses and distributions as it
had as a general partner subject to the same priority of the other Class A
Limited Partners.
Information as to ISCR, one of the current Co-Managing General
Partners, is as follows:
Information About Directors
Name and Executive Officers
---- ---------------------------
J. Christopher Boone Director and President of ISCR. He is 41 years old.
Robert B. McGuire Treasurer of ISCR. He is 52 years old.
Michael D. Hearn Director and Secretary of ISCR. He is 47 years old.
Lewis F. Semones, Jr. Director of ISCR. He is 41 years old.
J. Christopher Boone is a Managing Director of Wachovia Securities,
Inc. ("WSI"), an affiliate of ISCR and President of ISCR. Prior to joining the
Selling Agent in 1984, Mr. Boone was a tax specialist for Coopers & Lybrand. He
received a bachelor's degree in business
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administration with an emphasis in accounting from the University of North
Carolina at Chapel Hill.
Robert B. McGuire is Treasurer of ISC Realty Corporation. In addition,
he is Senior Vice President and Treasurer of WSI. 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 WSI
since 1985. He is a Senior Managing Director and a member of the Board of
Directors of WSI. 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. In May of 1992 he was elected a Director
of ISCR.
Lewis F. Semones, Jr. is Senior Managing Director and Chief Financial
Officer of WSI. He is also a director of WSI. 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 a director of ISCR in September, 1997.
Each officer and director holds office until his death, resignation,
retirement, removal, disqualification or his successor is elected and qualified.
Effective April 1, 1999, ISC Realty Corporation's parent,
Interstate/Johnson Lane, Inc., merged into Wachovia Corporation. Personnel and
offices continue to operate as usual.
ITEM 11 - EXECUTIVE COMPENSATION
No remuneration was paid or accrued for the account of any partner,
officer or director of the General Partner during the Partnership fiscal year
ended December 31, 1999.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial
Partner Type Name & Address Ownership Class
------------ -------------- ---------- -----
<S> <C> <C> <C>
Subordinated limited Interstate Development $100 100%
Partner Associates (IDA)
General Partner ISC Realty Corporation 100 100%
Class A Limited ISC Realty Corporation 100,000 2.0%
Class A Limited Performance Investments, Inc. (PII) 100 <0.1%
</TABLE>
As of March 17, 2000, no persons known to the Registrant have
beneficial ownership of more than 5% of the Units.
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As of March 18, 2000, none of the individual directors and officers of
the General Partners had subscribed for Units.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, there were no payments made to related parties in excess
of $60,000.
During the period ended December 31, 1999, ISCR earned $10,500 for
monitoring the operations of the Registrant on behalf of the investors and
performing certain administrative functions. However, the payment of such
administrative fee is deferred until sale of the Property and return to the
investors of their invested capital plus the preferred return. The deferred
portion of this fee may accrue interest at the prime rate plus 1%.
During 1999, the Partnership accrued interest at the rate of prime plus
2% on the outstanding balance of borrowing made against a note made by ISCR to
the Partnership. This amount will not be paid until the property is sold or the
Partnership is liquidated.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Financial Statements and Schedules. See Index to Financial
Statements included in Appendix A to this Form 10-K. Schedules are omitted
because they are not applicable, not required or because the requested
information is included in the Financial Statements or notes thereto.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
27 Financial Data Schedule (for SEC use only).
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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.
INTERSTATE LAND INVESTORS I
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 Section 13 or 15(d) 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 22, 2000
- ------------------------ --------------
J. Christopher Boone Director and
President of
ISC Realty
Corporation
/S/Michael D. Hearn March 22, 2000
- ------------------- --------------
Michael D. Hearn Director and
Secretary of
ISC Realty
Corporation
/S/Lewis F. Semones, Jr. March 22, 2000
- ------------------------ --------------
Lewis F. Semones. Jr. Director of
ISC Realty
Corporation
12
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INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
<PAGE> 14
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..........................1
BALANCE SHEETS..............................................................2
STATEMENTS OF OPERATIONS....................................................3
STATEMENT OF PARTNERS' CAPITAL..............................................4
STATEMENTS OF CASH FLOWS....................................................5
NOTES TO FINANCIAL STATEMENTS...............................................6
- i -
<PAGE> 15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
Interstate Land Investors I, Limited Partnership
Charlotte, North Carolina
We have audited the balance sheets of Interstate Land Investors
I, Limited Partnership (a North Carolina limited partnership), as of December
31, 1999 and 1998 and the related statements of operations, partners' capital
and cash flows for each of the three years in the period ended December 31,
1999. 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 the managing general partner, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 2, the general partner has entered into a
contract to sell all unimproved land held for appreciation. This sale, if
consummated, will occur in the second or third quarter of the year 2000.
Subsequent to the sale, if consummated, the Partnership will liquidate. During
the fourth quarter of 1999, the Partnership recorded a non-cash charge related
to the write-down of its rental property held for sale to its estimated
realizable value.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Interstate
Land Investors I, Limited Partnership (a North Carolina limited partnership), as
of December 31, 1999 and 1998 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
Charlotte, North Carolina
January 19, 2000
<PAGE> 16
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31,
- --------------------------------------------------------------------------------
1999 1998
---------- ----------
ASSETS
Unimproved land held for appreciation $3,600,000 $4,261,551
Cash and cash equivalents 127,556 145,111
Accounts receivable - related party 1,059 1,059
---------- ----------
$3,728,615 $4,407,721
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Administrative fees payable - related party $ 118,125 $ 107,625
Interest payable - related party 7,775 7,084
Distribution payable to limited partners 3,012 --
---------- ----------
128,912 114,709
---------- ----------
PARTNERS' CAPITAL
Class A limited partners' interest (authorized,
issued and outstanding 5,100 units) 3,599,739 4,292,962
Subordinated limited partner's interest 81 98
General partners' capital deficiency (117) (48)
---------- ----------
3,599,703 4,293,012
---------- ----------
$3,728,615 $4,407,721
========== ==========
See Notes to Financial Statements.
- 2 -
<PAGE> 17
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
INCOME
Interest $ 5,536 $ 5,387 $ 146
--------- --------- --------
OPERATING EXPENSES
Professional fees 11,471 12,320 10,497
Property tax 124 123 118
Interest expense 691 2,056 3,309
General and administrative 12,468 15,450 12,810
Write-down of land held for appreciation
(Notes 1 and 2) 661,551 -- --
--------- --------- --------
686,305 29,949 26,734
--------- --------- --------
Loss from operations (680,769) (24,562) (26,588)
SETTLEMENT FROM LAWSUIT - NOTE 5 -- 500,000 --
--------- --------- --------
Net income (loss) $(680,769) $ 475,438 $(26,588)
========= ========= ========
NET INCOME (LOSS) ALLOCATED TO
Class A limited partners $(680,684) $ 475,378 $(26,584)
Subordinated limited partner (17) 12 (1)
General partners (68) 48 (3)
--------- --------- --------
$(680,769) $ 475,438 $(26,588)
========= ========= ========
Weighted average Class A limited
partnership units outstanding 5,100 5,100 5,100
========= ========= ========
Net income (loss) per weighted average Class A
limited partnership unit $ (133.47) $ 93.22 $ (5.21)
========= ========= ========
Loss from operations per weighted average Class A
limited partnership unit $ (133.47) $ (4.82) $ (5.21)
========= ========= ========
</TABLE>
See Notes to Financial Statements.
- 3 -
<PAGE> 18
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SUBORDINATED
CLASS A LIMITED PARTNERS -------------------
------------------------- LIMITED GENERAL
UNITS AMOUNT PARTNER PARTNERS TOTAL
------- ------------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Partners' capital (deficiency) --
January 1, 1997 5,100 $ 4,150,168 $ 87 $ (93) $ 4,150,162
Net loss, year ended
December 31, 1997 -- (26,584) (1) (3) (26,588)
----- ----------- ---- ----- -----------
Partners' capital (deficiency) --
December 31, 1997 5,100 4,123,584 86 (96) 4,123,574
Net income, year ended
December 31, 1998 -- 475,378 12 48 475,438
Distributions to partners -- (306,000) -- -- (306,000)
----- ----------- ---- ----- -----------
Partners' capital (deficiency) --
December 31, 1998 5,100 4,292,962 98 (48) 4,293,012
Net loss, year ended
December 31, 1999 -- (680,684) (17) (68) (680,769)
Distribution to partners -- (12,539) -- (1) (12,540)
----- ----------- ---- ----- -----------
Partners' capital (deficiency) --
December 31, 1999 5,100 $ 3,599,739 $ 81 $(117) $ 3,599,703
===== =========== ==== ===== ===========
</TABLE>
See Notes to Financial Statements.
- 4 -
<PAGE> 19
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> 1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(680,769) $ 475,438 $(26,588)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Write-down of land held for appreciation 661,551 -- --
Increase in accrued liabilities - related party 11,191 11,855 13,809
--------- --------- --------
Net cash provided by (used for) operating
activities (8,027) 487,293 (12,779)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in line-of-credit payable -
related party -- (37,137) 13,500
Distributions to partners (9,528) (306,000) --
--------- --------- --------
Net cash provided (used) for financing
activities (9,528) (343,137) 13,500
--------- --------- --------
Net increase (decrease) in cash and cash
equivalents (17,555) 144,156 721
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 145,111 955 234
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 127,556 $ 145,111 $ 955
========= ========= ========
SUPPLEMENTAL SCHEDULE FOR NONCASH
FINANCING ACTIVITIES:
Liability for partner distribution paid after year-end $ 3,012 $ -- $ --
========= ========= ========
</TABLE>
See Notes to Financial Statements.
- 5 -
<PAGE> 20
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Interstate Land Investors I Limited Partnership (the Partnership) is a
North Carolina limited partnership formed May 18, 1988, to acquire for
investment, hold for appreciation and ultimately dispose, without
substantial improvement, approximately 97 acres of undeveloped land in
York County, South Carolina. The Partnership shall continue its
existence without interruption subject to the terms and conditions set
forth in the partnership agreement and the provisions of the Revised
Uniform Limited Partnership Act of the State of North Carolina.
Until January 1, 1992, the managing general partner was Performance
Investments, Inc. (PII), which is 100% owned by Mr. William Garith
Allen and a family member. Mr. Allen and ISC Realty Corporation (ISCR)
are also general partners in the Partnership and effective January 1,
1992, assumed the role of co-managing general partners. In November
1991, PII consented to the conversion of its interest to that of a
Class A limited partner, to become effective January 1, 1992. PII,
however, retains the same interest in the Partnership's net profit,
losses and distributions as it had as a general partner subject to the
same priority of the other Class A limited partners. Interstate
Development Associates (IDA) is holder of the subordinated limited
partner interest, which may be assigned by IDA to any of its affiliates
at any time. Mr. Allen is a 50% general partner in IDA. During 1998,
Mr. Allen resigned as partner and his partnership interest was assigned
to ISC Realty Corporation due to settlement of a lawsuit (see Note 5).
The general partners are solely responsible for the day-to-day
management and operation of the property. ISCR is responsible for
certain administrative functions of the Partnership and is entitled to
an annual administrative fee of up to $10,500. Payment of such
administrative fee is deferred until the sale of the property and the
return of the Class A limited partners' invested capital plus their
preferred return, as defined. Any such deferred fee will accrue
interest at the prime rate plus 1%. However, because of the uncertainty
as to the ultimate collection of this interest, ISCR has elected not to
accrue such interest in the Partnership's financial statements.
CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Partnership
considers all highly liquid investments having original maturities of
three months or less to be cash equivalents. At December 31, 1999, 1998
and 1997, the Partnership's cash consisted of monies deposited through
Wachovia Securities, Inc. (a related company to ISCR) in a money market
fund.
UNIMPROVED LAND HELD FOR APPRECIATION
The costs of acquiring land, including related closing and
predevelopment costs, are capitalized and will be allocated to cost of
sales as sales of the property occur. In the fourth quarter of 1999,
the Partnership recorded a write-down of the carrying amount of their
property of approximately $660,000 to reflect the general partner's
estimate of the property's estimated realizable value.
During 1999, the Partnership entered into a contract to sell its
primary asset, unimproved land.
- 6 -
<PAGE> 21
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
ORGANIZATIONAL AND SYNDICATION COSTS
Various expenses and fees paid in connection with organizing the
Partnership (including an organizational fee of $150,000 paid to ISCR)
have been capitalized and amortized using the straight-line method over
a 60-month period. These costs have been fully amortized in prior
years. Other fees and expenses (including sales commissions of $346,360
paid to Interstate/Johnson Lane Corporation, a related company to ISCR)
related to the sale of limited partnership interests in the Partnership
have been classified as syndication costs and charged directly against
partners' capital.
INCOME TAXES
Items of income or loss of the Partnership are included in the income
tax returns of the partners. Accordingly, the Partnership makes no
provision for federal and state income taxes.
NET LOSS PER CLASS A LIMITED PARTNERSHIP UNIT
Net loss per weighted average Class A limited partnership unit is
calculated based on the loss allocated to such partners without giving
consideration to the conversion of PII's general partner interest (see
Note 1).
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 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.
NOTE 2 - UNIMPROVED LAND HELD FOR APPRECIATION
PROVISION FOR WRITE-DOWN OF UNIMPROVED LAND
The general partner periodically reviews the recorded value of its
long-lived assets to determine if the future cash flows to be derived
from these assets will be sufficient to recover the recorded asset
values. During the fourth quarter of 1999, the Partnership recorded a
non-cash charge of approximately $660,000, or approximately $130 per
limited partnership unit, to write-down its unimproved land to its
estimated realizable value.
POTENTIAL SALE
During the fourth quarter of 1999, the Partnership entered into a
contract to sell the Partnership's primary asset, unimproved land, for
approximately $3,740,000. The potential purchaser has deposited earnest
money with a title agency. Under the terms of the contract, the
purchaser has until March 31, 2000 to complete their due diligence,
which makes the earliest possible closing date April 20, 2000. After
that date, the potential purchaser may either cancel the contract or
extend the closing period for four additional thirty (30) day periods
by paying additional earnest money for each thirty (30) day extension
period.
- 7 -
<PAGE> 22
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - ALLOCATIONS AND DISTRIBUTIONS OF NET PROFITS AND LOSSES
Under the terms of the partnership agreement, net profit and
distributions of available cash in each year prior to a sale of the
property will be allocated 99% to the Class A limited partners and 1%
to the general partners. Net losses shall be allocated among the
partners in accordance with their respective capital accounts. Special
allocations are provided for any gains or losses arising from the sale
of the property and for the related cash distributions. In no event
shall the portion of any item of partnership income, gain, loss,
deduction or credit allocated to the original general partners be less
than 1%. IDA, as the subordinated limited partner, may be entitled to
certain distributions from the sale of the property assuming sufficient
proceeds exist after the return of the Class A limited partners'
invested capital plus their preferred return, as defined, and after
payment to the general partners of any deferred fees plus interest
owed. IDA's subordinated return is $1,050,000. Additionally, as
subordinated limited partner, IDA may, under certain circumstances, as
defined, receive an additional distribution arising from the sale of
the property equal to 5% of the net sale proceeds after deducting the
distributions described above to the Class A limited partners, general
partners and subordinated limited partner.
In September 1992, upon the approval of the holders of 67% of the Class
A limited partner interests and upon meeting certain conditions in the
partnership agreement, these partners exercised their one-time right to
direct the general partners to sell the property at a price no less
than $7,185,000. In accordance with this vote, the property was to be
sold by September 1993, or at that time Mr. Allen (see Note 1) became
obligated to purchase the property at the stipulated price. Because the
required date of purchase expired, the Partnership investigated the
legal remedies available that would best benefit the Partnership in
1993. In 1996 ISC Realty Corporation initiated a civil action against
Mr. Allen and in 1998 the civil action was settled (see Note 5). As
part of this settlement, Mr. Allen's general partnership interest was
assigned to ISC Realty Corporation.
NOTE 4 - RELATED PARTIES AND RELATED PARTY TRANSACTIONS
In 1988 the Partnership purchased the property from IDA for $4,200,000.
An acquisition fee of $50,000 was paid to PII for services in
connection with the acquisition of the property. These costs, as well
as legal and other acquisition expenses, are included in land on the
accompanying balance sheets.
ISCR purchased 100 units of Class A limited partner interests at the
full offering price ($1,000 a unit). These units are included in Class
A limited partners' interest on the balance sheets. Also, employees of
the general partners and affiliates purchased 104 units of Class A
limited partner interests at a total discount of $3,640.
The Partnership incurred expenses of $10,500 in 1999, 1998 and 1997,
for services rendered by ISCR in connection with certain administrative
functions of the Partnership. Since payment of these fees is deferred
as described in Note 1, the fees are included as accrued administrative
fees in the accompanying balance sheets, and as a general and
administrative expense in the accompanying statements of operations.
See Note 1 for fees paid to ISCR and its affiliates in connection with
organizing the Partnership and the subsequent sale of limited
partnership interests.
The Partnership has the same general partners as, and owns land
adjacent to, Interstate Land Investors II Limited Partnership
(Interstate II). The property owned by Interstate II is in direct
competition with the Partnership's property. No financial statement
transactions have occurred between these partnerships.
- 8 -
<PAGE> 23
INTERSTATE LAND INVESTORS I,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - SETTLEMENT FROM LAWSUIT
During 1998 the Partnership settled the claim against its former
general partner in exchange for an assignment to a third party, a
$500,000 cash payment, and relinquishment of his interest in the
Partnership. A mutual release was signed in conjunction with this
settlement.
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENT NET INCOME (LOSS) TO TAXABLE
INCOME (LOSS)
A reconciliation of financial statement net income (loss) and taxable
income (loss) is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Financial statement net income (loss) $(680,769) $475,438 $(26,583)
Plus: Temporary non-deductible expenses
to related party 11,191 11,855 13,803
Plus: Write-down of land held for appreciation 661,551 -- --
--------- -------- --------
Taxable income (loss) $ (8,027) $487,293 $(12,780)
========= ======== ========
</TABLE>
NOTE 7 - POTENTIAL LIQUIDATION OF PARTNERSHIP
Should the sale of the unimproved land held for appreciation (see Note
2) be consummated, the Partnership will be liquidated during the year
ended December 31, 2000.
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERSTATE LAND INVESTORS I L.P. FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 127,556
<SECURITIES> 0
<RECEIVABLES> 1,059
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,600,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,726,615
<CURRENT-LIABILITIES> 7,775
<BONDS> 118,125
0
0
<COMMON> 0
<OTHER-SE> 3,599,703
<TOTAL-LIABILITY-AND-EQUITY> 3,728,615
<SALES> 0
<TOTAL-REVENUES> 5,536
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,063
<LOSS-PROVISION> 661,151
<INTEREST-EXPENSE> 691
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (680,769)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
