10-Q 1 g77783e10vq.txt MARKETPLACE INCOME PROPERTIES FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 33-1889 ------- MARKETPLACE INCOME PROPERTIES, A NORTH CAROLINA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) North Carolina 56-1493986 -------------- --------------- (State of other jurisdiction of (I.R.S. Employer or organization) Identification No.) Three Wachovia Center, 6th Floor 401 S. Tryon St., Charlotte, NC 28288-1164 ------------------------ (Address of principal executive offices) (Zip Code) 704/383-3179 ------------ (Registrant's telephone number, including area code) IJL Financial Center, P.O. Box 1012, Charlotte, NC 28201-1012 (Former name, former address and fiscal year ended , if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 3,000 limited partnership units outstanding as of August 9, 2002 Page 1 of 10 sequentially numbered pages MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP BALANCE SHEETS JUNE 30, 2002 AND DECEMBER 31, 2001 June 30, 2002 December 31, (unaudited) 2001 --------------- -------------- ASSETS Rental Properties (at cost): Land and improvements $1,639,540 $1,639,540 Buildings 6,810,439 6,803,003 Furniture and equipment 293,141 293,141 --------------- -------------- 8,743,120 8,735,684 Accumulated depreciation (4,785,684) (4,735,684) --------------- -------------- 3,957,436 4,000,000 Cash and cash equivalents 62,308 141,406 Restricted Cash 122,512 28,162 Accounts Receivable (17,250) 26,650 Other 1,800 0 --------------- -------------- $4,126,806 $4,196,218 =============== ============== LIABILITIES AND PARTNERS' CAPITAL Debt $5,057,814 $5,100,422 Other liabilities 195,900 124,620 --------------- -------------- 5,253,714 5,225,042 Partners' capital: General partners 19,930 20,911 Limited partners (1,146,839) (1,049,735) --------------- -------------- $4,126,806 $4,196,218 =============== ============== The accompanying notes are an integral part of the financial statements. 2 A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (unaudited)

The accompanying notes are an integral part of the financial statements. 3 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF PARTNERS CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (unaudited) General Limited Partners Partners Total --------------- --------------- ------------- Balance, December 31, 2000 $32,578 $480,321 $512,899 Net income for the period 422 41,809 42,231 Distributions 0 (375,000) (375,000) --------------- --------------- ------------- Balance, June 30, 2001 $33,000 $147,130 $180,130 =============== =============== ============= Balance, December 31, 2001 $20,911 ($1,049,735) ($1,028,824) Net loss for the period (981) (97,104) (98,085) --------------- --------------- ------------- Balance, June 30, 2002 $19,930 ($1,146,839) ($1,126,909) =============== =============== ============= The accompanying notes are an integral part of the financial statements. 4 MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (unaudited)

The accompanying notes are an integral part of the financial statements. 5 MARKETPLACE INCOME PROPERTIES, A NORTH CAROLINA LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS The financial statements of Marketplace Income Properties, A North Carolina Limited Partnership (the "Partnership") included herein have been prepared for submission to the Securities and Exchange Commission on Form 10-Q. The financial statements were prepared by the general partner without audit, and include all adjustments which are, in the opinion of the general partner, necessary for a fair presentation of the results of operations for the six month period ended June 30, 2002. The financial statements were prepared in accordance with generally accepted accounting principles, however, certain information and note disclosures normally included have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements should be read in conjunction with the Partnership's 2001 Annual Report filed with the Securities and Exchange Commission on Form 10-K. The results of operations for the six month period ended June 30, 2002 are not necessarily indicative of the results for a full year. 1. PARTNERSHIP MATTERS AND SIGNIFICANT ACCOUNTING POLICIES On November 27, 1985, the Partnership was formed under the North Carolina Uniform Limited Partnership Act. The Partnership acquired property on January 30, 1986, and will continue until December 31, 2015, unless sooner terminated under the provisions of the Partnership Agreement. The Partnership has issued 3,000 limited partner units at $5,000 per unit. The total number of investors at August 9, 2002, was 788. ISC Realty Corporation is the sole general partner. Distributions and Allocations of Income and Losses - Profits, gains and losses of the Partnership are allocated between general and limited partners, as provided in the Partnership Agreement. The net cash flow from operations in each year is to be distributed 99% to limited partners and 1% to the general partner. Certain items in the financial statements for prior periods have been reclassified to conform to the format presented for these statements. 2. RELATED PARTY TRANSACTIONS The amount earned by the general partner for the reimbursement of expenses of operating the Partnership was $12,000 for the six months ended June 30, 2002 and 2001. PART 1. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PARTNERSHIP MATTERS The property investment portfolio consists of the Marketplace Mall in Winston-Salem, NC. Mt. Pilot Shopping Center in Pilot Mountain, NC, and Amelia Plaza in Fernandina Beach, FL, were sold in 1997. Meadowbrook Manor in Siler City, NC, was sold in June 1994. Town & Country Convalescent Center in Tampa, FL, was sold in July 1996. 6 In 1998, during its annual planning and budgeting process, the general partner determined that primarily due to increased competition, a decline in future expected operating income resulted in anticipated future cash flows below the carrying value of the property. Accordingly, the general partner adjusted the carrying value of the property to its estimated realizable value resulting in a non-cash impairment loss of $1,756,000. The general partner determined that additional write-downs of approximately $420,000 during 1999, $450,000 in 2000 and $1,200,000 in 2001 were necessary to adjust the carrying value of the property to its estimated realizable value. The new accounting pronouncement FASB 144 requires that the property be classified as "to be held and used" and requires depreciation over the useful life of the building. This depreciation entry will be $25,000 per quarter. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $62,308 at June 30, 2002. The Registrant will hold these funds as reserves for the cost of operating, repairing and maintaining the property. A cash distribution of $375,000, or $125.00 per limited partner unit, was paid to the limited partners in February 2001. Carmike Theatres, located in a separate building beside the main Mall property, filed for bankruptcy in 2000 and has closed more than 41 theatres nationwide, including the location at Marketplace Mall. The general partner filed the maximum claim for future rents that is allowed under the bankruptcy code. Carmike Theatres has until August 30, 2002 to file claim objections. Cash distributions, if any, from the bankruptcy proceedings are planned for November 2002. Our property manager is actively seeking other replacement tenants. The loss of Carmike Theatres will substantially reduce the net cash flow of the Partnership. This reduction is estimated to be approximately $283,000 per year. Based on current operating cash flow, excluding the rent from Carmike, the Partnership is expected to incur an operating cash deficit of approximately $75,000 per year. In April 2001, the general partner ceased payment of deferred maintenance reserves. In August 2001, request for permission to suspend future payments was denied by the mortgage lender and the Partnership is currently in technical default. We are attempting to negotiate a reduction in the debt service with the first mortgage lender, however, there are no assurances that negotiations will be successful. The Partnership continues to be underfunded in deferred maintenance and repair reserves, property tax and insurance escrows as part of the monthly debt service. The Partnership is current on all other debt service. RESULTS OF OPERATIONS The Partnership reported net loss of $98,085 for the six months ended June 30, 2002, compared to income of $42,232 for the six months ended June 30, 2001. Rental income decreased from $559,448 for the six months ended June 30, 2001, to $490,167 for the six months ended June 30, 2002. This decrease is from increased vacancy resulting in lower base rental income and lower tenant sales that reduced receipts of percentage rent. Interest and other income decreased from $10,388 for the six months ended June 30, 2001, to $5,749 for the same period in 2002. This decrease reflects less interest earned on lower cash reserves. Interest expense for the six months ended June 30, 2002, was $226,524 compared with $229,987 for the same period of 2001. Operations and maintenance expense increased to $258,763 for the six months ended June 30, 2002, from $253,007 for the same period in 2001. This increase reflects higher operating and repair costs for the Mall. Professional fees increased to $22,074 for the six months ended June 30, 2002, up from $13,895 for the same 2001 period due to additonal tax review, preparation and filing costs. Depreciation expense of $25,000 per quarter continues with this second quarter per accounting rule FASB 144. Administrative and other expenses increased from $30,080 for the six months ended June 30, 7 2001 to $36,293 for the same period in 2002. This increase is due to bad debt expense taken in the current six month period. All other expenses were in line with 2001 expenses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS CarmikeTheatres has until August 30, 2002 to file bankruptcy debtor claim objections. Cash settlement distributions, if any, are planned for November 2002. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSIONS OF MATTER TO A VOTE OF SECURITIES HOLDERS None ITEM 5. OTHER INFORMATION We continue to market the Marketplace Mall in Winston-Salem, NC and our goal remains to sell the mall and liquidate the Partnership. The loss of Carmike Theatres will seriously impact our ability to sell the property at an amount in excess of the debt. Should we not be able to sell the property for an amount in excess of the debt, the only proceeds to distribute to the limited partners would be the cash on hand held by the Partnership. In February 2001, a cash distribution was paid to the limited partners of $375,000 or $125 per limited partnership unit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EX-99.1 Certification by Officer (b) Reports on Form 8-K No reports on Form 8-K were required to be filed during the six months ended June 30, 2002. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARKETPLACE INCOME PROPERTIES A NORTH CAROLINA LIMITED PARTNERSHIP (REGISTRANT) BY: /S/J. CHRISTOPHER BOONE ----------------------- J. CHRISTOPHER BOONE ISC REALTY CORPORATION, GENERAL PARTNER AND PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT DATE: AUGUST 9, 2002 9

MARKETPLACE INCOME PROPERTIES LIMITED PARTNERSHIP 10-Q