UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2011~~2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ~~EXCHANGE ACT OF 1934~~

EXCHANGE ACT OF 1934

For the transition period from ________________________ to _______________________

Commission file number: 000-09305

REEVES TELECOM LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

South Carolina		57-0700063
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Grace Property Management, Inc.

55 Brookville Road, Glen Head, New York 11545

(Address of principal executive offices, ZIP code)

Registrant’s telephone number, including area code:

(516) 686-2201

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered pursuant to Section 12(g) of the Act: ~~Partnership Units (Title of class)~~

Partnership Units

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.

Yes ¨ No x

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 ¨~~

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x (Do not check if a smaller reporting company)

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The aggregate market value of the registrant’s limited partnership units held by non-affiliates computed by reference to the price at which the limited partnership units were last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $~~481~~616,~~058~~931.

On ~~March~~January 1931, ~~2012~~2013, registrant had outstanding 1,811,062 partnership units.

The following documents are incorporated by reference into this Annual Report on Form 10-K:

NONE.

TABLE OF CONTENTS
		Page
PART I		1
Special Note on Forward-Looking Statements		1
Item 1.	Business	2
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	47
Item 2.	Properties	47
Item 3.	Legal Proceedings	49
Item 4.	Mine Safety Disclosures	49
PART II		50
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	50
Item 6.	Selected Financial Data	52
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	63
PART III		64
Item 10.	Directors, Executive Officers, and Corporate Governance	64
Item 11.	Executive Compensation	65
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
Item 13.	Certain Relationships and Related Transactions, and Director Independence	68
Item 14.	Principal Accountant Fees and Services	70
PART IV		72
Item 15.	Exhibits and Financial Statement Schedules	72
SIGNATURES		74

TABLE OF CONTENTS

		Page
PART I		1
Special Note on Forward-Looking Statements		1
Item 1.	Business	2
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	49
Item 2.	Properties	49
Item 3.	Legal Proceedings	51
Item 4.	Mine Safety Disclosures	51

PART II		52
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	52
Item 6.	Selected Financial Data	54
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 8.	Financial Statements and Supplementary Data	64
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	66

PART III		67
Item 10.	Directors, Executive Officers, and Corporate Governance	67
Item 11.	Executive Compensation	68
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
Item 13.	Certain Relationships and Related Transactions, and Director Independence	72
Item 14.	Principal Accountant Fees and Services	73

PART IV		75
Item 15.	Exhibits and Financial Statement Schedules	75

SIGNATURES		77

[THIS PAGE LEFT BLANK INTENTIONALLY]

PART I

Special Note on Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Annual Report on Form 10-K may not occur. Generally, these statements relate to our business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, financing plans, projected or anticipated benefits from acquisitions that we may make, or projections involving anticipated revenues, earnings or other aspects of our operating results or financial position, and the outcome of any contingencies. Any such forward-looking statements are based upon current expectations, estimates and projections of management. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in those laws and include this statement for purposes of complying with these safe harbor provisions. These forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, achievements, or events, and may contain forward-looking words or phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “project,” “should,” “strategies,” “will,” “will be,” “will continue,” “will likely result,” and similar terms and their negatives that convey uncertainty of future events or outcomes. These statements represent our (including the General Partner’s) beliefs, expectations, intentions, and plans, and, as such, are not guarantees of future outcomes or future performance, and are subject to risks and uncertainties that are beyond our control and could cause our actual results to differ materially from those reflected in the forward-looking statements. The forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements regarding economic conditions; interest rates; real estate market conditions; competition in the real estate market; government regulation of the real estate industry (including but not limited to environmental matters, and endangered and protected species); taxes; terms, conditions, and availability of financing to us or others; terms, conditions, and availability of insurance to us or others; occurrence and/or effects of hurricanes and other natural disasters, and related costs; rules and regulations relating to governance or taxation of limited partnerships; accounting principles, interpretations, and practices; our business and sales strategies, plans and programs; restrictions on development related to endangered species (including but not limited to the Red-cockaded Woodpecker); installation of water and sewer systems in Boiling Spring Lakes and related costs and assessments; unimproved roads, road improvements, dam repairs and related costs; our liquidity and capital resources (including but not limited to potential financing); our capital expenditures and projects (including but not limited to road improvements); and our potential legal exposure (including but not limited with respect to environmental matters, buyers of our property, and third parties). We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond our control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors that could cause actual results to differ materially from those set forth or implied by any forward-looking statement include, but are not limited to, the risks and uncertainties discussed in “Item 1A. Risk Factors,” of this Annual Report on Form 10-K, as well as other risks and uncertainties discussed in our other reports filed with the Securities and Exchange Commission (“SEC”). Copies of these filings are available at the SEC’s Internet website at http: //www.sec.gov.

Page 1

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Item 1. Business

As used herein, the terms “we”, “us” and “our” refer to Reeves Telecom Limited Partnership, a South Carolina limited partnership, and the terms “our general partner” and “General Partner” refer to Grace Property Management, Inc., a Delaware corporation, and/or its successors or additional general partners, as the context requires.

General

We are a South Carolina limited partnership that is engaged in owning, developing, selling, leasing, or otherwise dealing in real estate in North Carolina. Our principal asset is our undeveloped land in Boiling Spring Lakes, comprising approximately ~~816~~817 acres. As of December 31, ~~2011~~2012, we owned the following undeveloped land:

• Approximately 354 acres, divided into 1,~~073~~071 platted individual lots, both recorded and unrecorded, intended for residential use.

•

Approximately 244 acres intended for residential use.

•

Approximately 219 acres intended for commercial use.

Our business is primarily the sale of the individual lots, concentrating on those lots situated on existing paved roads and rocked roads. From time to time, we may add to our inventory of individual lots situated on paved roads and rocked roads by paving or rocking roads that are currently unpaved or not rocked.

Page 2

Background; Development of Business

On May 17, 1979, the stockholders of Reeves Telecom Corporation (the “Corporation”) approved a plan of liquidation (the “Plan”) for the Corporation and its subsidiaries. The Plan, which was determined by the Internal Revenue Service to qualify as a Section 337 liquidation, authorized the Corporation’s Board of Directors to sell the Corporation’s assets and distribute any remaining unsold assets to its stockholders and/or a liquidation trust. On May 8, 1980, stockholders at a special meeting approved an amendment to the Plan whereby assets not sold within one year of the date the Plan was approved could be transferred, at the discretion of the Board of Directors, from the Corporation to a South Carolina limited partnership which would undertake to sell the remaining assets on behalf of the stockholders. Pursuant to the Plan, the Corporation sold all of its broadcasting assets ~~and~~ and substantially all of the land held for development and sale at one of its two land development locations and distributed to ~~its~~ its stockholders cash of $0.90 per share on February 29, 1980 and $2.30 per share on May 14, 1980. On May 15, 1980, the Corporation was liquidated and all of its unsold assets and liabilities were transferred to Reeves Telecom Associates, a South Carolina limited partnership (“us”, “we”, or the “Partnership”). Stockholders of the Corporation received one partnership unit in exchange for each share of common stock. The units are not listed on any national securities exchange. In ~~January~~ January 1987, pursuant to a change in South Carolina law, the Partnership’s legal name was changed from Reeves Telecom Associates to Reeves Telecom Limited Partnership.

We succeeded to the ownership of real estate situated within two developments, Boiling Spring Lakes in North Carolina, and Pimlico Plantation in South Carolina. Substantially all of the real estate in Pimlico Plantation had been sold by 1990, and, since then, our principal assets have been our real estate in Boiling Spring Lakes and a golf course and country club located within that development. See “Item 2. Properties.”

From our inception to mid-1993, we had limited financial resources. We, therefore, focused on holding down costs until we could sell all or substantially all of our assets in a bulk sale. Local real estate brokers were relied upon to generate individual lot sales, and the golf course and country club were leased to a third party operator. Under this arrangement, lot sales were slow and, generally, operating ~~expenses~~ expenses significantly exceeded revenue from such sales.

Beginning in June 1993, we focused on the sale of individual lots on an all-cash basis through our sales office in Boiling Spring Lakes. At that time, we also became increasingly involved in the management and operation of the golf course and country club.

During 2000, we sold approximately 5,127 acres of land, or approximately 80% of the total acreage then owned by us in Boiling Spring Lakes, to The ~~Nature~~ Nature Conservancy. The sale generated gross proceeds of $2,400,000.

During 2001, we sold the assets of the golf course and country club for total consideration of $862,500, consisting of a combination of cash and a ~~note~~ note receivable. The buyer of the assets made a substantial prepayment of principal on the note receivable in June 2003 and paid ~~the~~ the remaining balance on the note receivable in June 2008.

We sold our remaining real estate in Pimlico Plantation in 2003.

~~See~~Page our audited financial statements and the summary information set forth in Table 6, “Selected Income Statement Data,” and Table 7, “Selected Balance Sheet Data,” for financial information on our business.3

~~Page~~General 3Partner

~~Description~~Since we are a limited partnership, we have no officers or directors. Grace Property Management, Inc., our General Partner, performs functions generally performed by officers and directors. Grace Property Management, Inc. is a Delaware corporation engaged in the business of ~~Business~~real estate management, and has served as our general partner since May 15, 1980.Pursuant to our Limited Partnership Agreement, our general partner is responsible for the management of our business. Our general partner is Grace Property Management, Inc. (the “General Partner”).

■See ~~Real~~our ~~Estate~~audited ~~Sales~~financial statements and the summary information set forth in Table 6, “Selected Income Statement Data,” and Table 7, “Selected Balance Sheet Data,” for financial information on our business.

~~Boiling~~Proposed ~~Spring~~Reverse ~~Lakes began~~Unit in 1962 as a 14,000-acre development. Most of the land has been sold and that which remains lies within the City of Boiling Spring Lakes, in Brunswick County, North Carolina. Revenue from real estate sales and the type of property sold for each of the last five fiscal years ended December 31, 2011 are shown on Table 1, below.Split

~~TABLE~~On 1:February 19, ~~REVENUE~~2013, ~~FROM~~we ~~REAL~~filed ~~ESTATE~~preliminary ~~SALES~~proxy soliciting material and a Schedule 13E-3 with the SEC. These documents disclosed that the Partnership will hold a special meeting of the Partners to seek approval of amendments to the Limited Partnership Agreement to effect a reverse unit split and certain other matters. The reverse unit split, if approved by the Partners, will result in 101 old units being exchanged for one new unit. Each holder of less than 101 units will receive $0.81 in cash for each old unit and will therefore cease to be a unit holder. It is expected that after the reverse unit split, there will be approximately 378 holders of units, which will allow the Partnership to seek to terminate the registration of the units and its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Upon termination of registration of the units under the Exchange Act, the Partnership will no longer be required to file annual and periodic reports with the SEC. After the reverse unit split, no fractional new units will be issued to the remaining unit holders, but such unit holders will be entitled to receive $.81 for each old unit not exchanged for a whole new unit.

~~AND~~Additional ~~TYPE~~Information OFand ~~PROPERTY~~Where ~~SOLD~~to Find It

	Year Ended December 31,
	2011		2010		2009		2008		2007
Revenue
Individual lots:
Unimproved	$	66,678	$	—	$	17,904	$	—	$	449,890
Improved		—		—		—		—		—
Commercial land		—		—		—		—		29,940
Other land		—		—		—		—		19,925
Total revenue	$	66,678	$	—	$	17,904	$	—	$	499,755
Type of Property Sold
Individual lots:
Unimproved		10		0		1		0		14
Improved		0		0		0		0		0
Commercial land (acres)		0.00		0.00		0.00		0.00		0.13
Other land (acres)		0.00		0.00		0.00		0.00		1.42

UNITHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND SCHEDULE 13E-3 AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE REVERSE UNIT SPLIT. You will be able to obtain a free copy of the proxy statement and Schedule 13E-3, as well as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and all amendments to those reports, as well as other filings containing information about us, at the SEC’s Internet site (http://www.sec.gov). Copies of the proxy statement and Schedule 13E-3 and the other reports and filings, also can be obtained by directing a request to our General Partner, Grace Property Management, Inc., at 55 Brookville Road, Glen Head, NY 11545, (516) 686-2221.

AsPage ~~used in Table 1 and throughout this Annual Report on Form 10-K, the following terms have the definitions indicated, unless the context requires otherwise:~~4

“commercial land”:	Land zoned or otherwise intended by us for commercial use.
“improved individual lot”:	An individual lot on which the construction of a house has been started, even if at the time of sale construction of the house was not completed.
“individual lot”:	A platted residential lot (a platted residential lot owned by us typically comprises approximately 1/3-acre, although some lots are less than 1/4-acre and some comprise up to 5 acres).
“other land”:	All land, other than commercial land, that has not been platted into individual lots.
“unimproved individual lot”:	An individual lot on which construction of a house has not yet been started.

Participants in Solicitation

~~Page~~Grace 4Property Management, Inc. and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the unitholders in connection with the reverse unit split. Information about Grace Property Management, Inc. and its directors and executive officers is set forth in this Form 10-K

~~The~~Description ~~City~~ of ~~Boiling Spring Lakes at present has no central sewer system. As a result, homes and most commercial buildings within the development use septic tanks.~~Business

~~Since~~■ ~~the~~Real ~~1970’s, health~~Estate standards in Brunswick County have become increasingly stringent regarding septic tanks and on-site sewage disposal. We estimate that 70% to 75% of all of the property in Boiling Spring Lakes that would have complied with applicable regulations in the 1970’s does not meet present health standards. Of our current land holdings, we estimate that 87% of our individual lots and 38% of our total land do not meet present health standards. This has had a detrimental effect on our real estate operations by substantially reducing the number of our individual lots, the amount of our commercial land, and the amount of our other land on which an on-site septic system may be installed. In limited cases, the problem can be cured by the use of drains, or by the scraping away of hard pan and adding fill dirt. In most cases, however, the only solution to the inability to install an on-site septic system on a specific parcel of land, whether residential or commercial, is to install a multi-user septic system, or a sewer system, to which a house or commercial building built on that specific parcel may be connected.Sales

~~In May 2010, the City of~~ Boiling Spring Lakes began ~~transferred~~in ~~ownership~~1962 ofas ~~the~~a ~~municipal~~14,000-acre ~~water~~development. ~~system~~Most toof ~~Brunswick~~the ~~County~~land inhas ~~exchange~~been ~~for~~sold ~~the~~and ~~County’s construction~~that ofwhich aremains ~~wastewater~~lies ~~collection system~~ within athe ~~portion~~City of Boiling Spring Lakes ~~and~~(the an“City”), ~~associated~~in ~~sewer treatment and transmission system.~~ Brunswick County’s ~~plans for~~ (the ~~first~~“County”), ~~phase~~North ofCarolina. ~~municipal~~Revenue ~~sewer~~from ~~service~~real ~~involve~~estate sales ~~sewer~~and ~~lines for~~ the ~~business~~type ~~district that runs along a stretch~~ of ~~State~~property ~~Road~~sold ~~87,~~for ~~the~~each ~~main road into and out~~ of the ~~development.~~last ~~The Partnership~~five ~~believes~~fiscal ~~that~~years ~~the~~ended ~~first~~December ~~phase~~31, ~~will be started in~~ 2012 ~~and~~are beshown ~~completed~~on byTable ~~the~~1, ~~end of 2014~~below.

~~Additional~~TABLE ~~phases~~1: ~~of the~~REVENUE ~~County’s~~FROM ~~sewer~~REAL ~~system,~~ESTATE planned for after 2012, would extend sewer lines to residential areas of the development. Depending upon our financial resources, the market for real estate in and around Boiling Spring Lakes, and economic conditions generally, among other factors, we may consider arranging with the County to run sewer lines to certain residential areas, at our cost, before such areas would otherwise be served according to the County’s plans. We may, in addition and/or alternatively, consider installing separate, small multi-user systems such as that we installed in 1997 on certain commercial land we then held for sale. A private contractor may install a sewer system to serve land that he owns, and land owned by others, including us, may be able to connect to such system if built; however, to date no such private sewer system has been built in the development and obstacles would have to be overcome for any such system to be built in the future. Notwithstanding any current plans to install a sewer system in Boiling Spring Lakes, there can be no assurance that Brunswick County, the City of Boiling Spring Lakes, we, a private contractor, or another public or private entity will install a sewer system in Boiling Spring Lakes or, if such a system is installed, that we will be able to tie some or all of our land into any such system at a reasonable cost, if at all.SALES

~~See~~AND ~~“Item~~TYPE ~~1A. Risk~~OF ~~Factors~~PROPERTY ~~– Most of our real estate lacks municipal water service” and “Item 1A. Risk Factors – Most of our real estate lacks public sewer service.”~~SOLD

Page 5

	Year Ended December 31,
	2012		2011		2010		2009		2008
Revenue
Individual lots:
Unimproved	$	12,817	$	66,678	$	—	$	17,904	$	—
Improved		—		—		—		—		—
Commercial land		—		—		—		—		—
Other land		—		—		—		—		—
Total revenue	$	12,817	$	66,678	$	—	$	17,904	$	—
Type of Property Sold
Individual lots:
Unimproved		2		10		0		1		0
Improved		0		0		0		0		0
Commercial land (acres)		0.00		0.00		0.00		0.00		0.00
Other land (acres)		0.00		0.00		0.00		0.00		0.00

■As ~~Other~~used ~~Revenue~~in Table 1 and throughout this Annual Report on Form 10-K, the following terms have the definitions indicated, unless the context requires otherwise:

In“commercial ~~addition~~land”: toLand ~~income from~~zoned ~~real~~or ~~estate~~otherwise ~~sales,~~intended weby ~~generate~~us ~~revenue~~for ~~from~~commercial ~~other sources~~use. ~~The~~“improved ~~amount~~individual oflot”: ~~revenue~~An ~~from~~individual ~~sources~~lot ~~other~~on ~~than~~which ~~real~~the ~~estate~~construction ~~sales during~~of ~~the~~a ~~last~~house ~~five~~has ~~fiscal~~been ~~years~~started, ~~ended~~even ~~December~~if ~~31,~~at ~~2011~~the istime ~~shown~~of onsale ~~Table~~construction 2,of ~~below~~the house was not completed.

~~TABLE~~Page ~~2: REVENUE FROM SOURCES OTHER THAN REAL ESTATE SALES~~5

		Year Ended December 31,
“individual lot”:	A platted residential lot (a platted residential lot owned by us typically comprises approximately 1/3-acre, although some lots are less than 1/4-acre and some comprise up to 5 acres).
		2011		2010		2009		2008		2007
“other land”:	All land, other than commercial land, that has not been platted into individual lots.
Interest income		$	4,516	$	14,923	$	33,270	$	96,047	$	181,790
“unimproved individual lot”:	An individual lot on which construction of a house has not yet been started.
Other revenue [a]
Timber and straw sales			150		—		—		—		—
Miscellaneous income			1,433		2,673		97		25,764		4,234
Total other revenue			1,583		2,673		97		25,764		4,234
Total interest income and other revenue		$	6,099	$	17,596	$	33,367	$	121,811	$	186,024

~~Notes:~~The City of Boiling Spring Lakes at present has no central sewer system. As a result, homes and most commercial buildings within the development use septic tanks.

[Since the 1970’s, health standards in Brunswick County have become increasingly stringent regarding septic tanks and on-site sewage disposal. We estimate that 70% to 75% of all of the property in Boiling Spring Lakes that would have complied with applicable regulations in the 1970’s does not meet present health standards. Of our current land holdings, we estimate that 87% of our individual lots and 38% of our total land do not meet present health standards. This has had a] ~~Reported~~detrimental ~~under~~effect ~~“Revenues”~~on our real estate operations by substantially reducing the number of our individual lots, the amount of our commercial land, and the amount of our other land on which an on-site septic system may be installed. In limited cases, the ~~Statements~~problem can be cured by the use of ~~Operations~~drains, or by the scraping away of hard pan and adding fill dirt. In most cases, however, the only solution to the inability to install an on-site septic system on a specific parcel of land, whether residential or commercial, is to install a multi-user septic system, or a sewer system, to which a house or commercial building built on that specific parcel may be connected.

■In ~~Seasonality~~May 2010, the City of Boiling Spring Lakes transferred ownership of the municipal water system to Brunswick County in exchange for the County’s construction of a wastewater collection system within a portion of Boiling Spring Lakes and an associated sewer treatment and transmission system. See “Most of our real estate lacks public sewer service” under Item 1A, “Risk Factors,” for a discussion of the first phase of municipal sewer service involving sewer lines for the commercial land that we own that runs along a stretch of State Road 87, the main road into and out of the development, and its effect on the financial condition of the Partnership.

~~The~~Additional ~~sale~~phases of the County’s sewer system, planned for after 2012, would extend sewer lines to residential areas of the development. Depending upon our financial resources, the market for real estate in ~~North~~and ~~Carolina~~around isBoiling ~~seasonal~~Spring Lakes, and economic conditions generally, among other factors, we may consider arranging with the County to run sewer lines to certain residential areas, at our cost, before such areas would otherwise be served according to the County’s plans. We ~~generally~~may, ~~experience~~in ~~slower~~addition ~~than~~and/or ~~average~~alternatively, consider ~~lot~~installing ~~sales~~separate, small multi-user systems such as that we installed in 1997 on certain commercial land we then held for sale. A private contractor may install a sewer system to serve land that he owns, and land owned by others, including us, may be able to connect to such system if built; however, to date no such private sewer system has been built in the ~~period~~development and ~~from~~obstacles ~~November~~would have to ~~January~~be overcome for any such system to be built in the future. Notwithstanding any current plans to install a sewer system in Boiling Spring Lakes, ~~inclusive~~there can be no assurance that Brunswick County, the City of Boiling Spring Lakes, we, a private contractor, or another public or private entity will install a sewer system in Boiling Spring Lakes or, if such a system is installed, that we will be able to tie some or all of our land into any such system at a reasonable cost, if at all.

■Page ~~Marketing and Advertising~~6

~~Our~~See ~~marketing~~“Item ~~and advertising~~1A. ~~plan~~Risk ~~emphasizes~~Factors ~~the~~– ~~print~~Most ~~media~~of toour ~~promote~~real ~~the~~estate ~~sale~~lacks ofmunicipal ~~our~~water ~~land~~service” and, ~~when~~“Item ~~available~~1A. ~~for~~Risk ~~sale,~~Factors ~~improved~~– ~~individual~~Most of ~~lots~~our real estate lacks public sewer service.”

■ ~~Patents,~~Other ~~Trademarks, Licenses, Franchises, and Concessions Held~~Revenue

~~Other~~In ~~than~~addition ato income from real estate ~~brokerage~~ ~~license~~sales, ~~issued~~we bygenerate ~~the~~revenue ~~State~~from ofother ~~North~~sources. ~~Carolina~~The ~~Real~~amount ~~Estate~~of ~~Commission~~revenue tofrom ~~our~~sources ~~General~~other ~~Manager,~~than ~~who acts as our~~ real estate sales during ~~person,~~the ~~our~~last ~~business~~five isfiscal ~~not~~years ~~dependant~~ended inDecember ~~any~~31, ~~material~~2012 ~~respect~~is shown on ~~any~~Table ~~patent~~2, ~~trademark, license, franchise, or concession~~below.

■TABLE ~~Dependence~~2: ~~Upon~~REVENUE ~~Customers~~FROM SOURCES OTHER THAN REAL ESTATE SALES

From time to time, we sell tracts of land or blocks of lots to developers or others who may comprise, in a particular year, a significant percentage of our revenue from land sales. Generally, however, we are not dependent in any respect upon one or a few customers, the loss of any one of which might significantly affect our financial results.

	Year Ended December 31,
	2012		2011		2010		2009		2008

Interest income	$	689	$	4,516	$	14,923	$	33,270	$	96,047
Other revenue [a]
Timber and straw sales		0		150		—		—		—
Miscellaneous income		7,769		1,433		2,673		97		25,764
Total other revenue		7,769		1,583		2,673		97		25,764
Total interest income and other revenue	$	8,458	$	6,099	$	17,596	$	33,367	$	121,811

~~Page 6~~Notes:

■[a] ~~Competition~~Reported under “Revenues” on the Statements of Operations.

~~Our~~■ potential customers include local residents as well as retirees and others looking to relocate to or near the stretch of beachfront communities known as the “Grand Strand.” The Grand Strand runs from Cape Fear, North Carolina to Georgetown, South Carolina and encompasses Myrtle Beach, Carolina Beach, Kure Beach, and Wrightsville Beach, among other beachfront communities. The real estate market within that region is extremely competitive. We compete against other real estate developers, real estate brokers, property owners acting without brokers, and others. We believe that other real estate developers have bought some of our land in past years and that other developers may buy land from us in the future, and that such developers may compete with us for land sales or sale of improved property within the City of Boiling Spring Lakes.Seasonality

~~Property~~The ~~values~~sale ~~are~~of real estate ~~dependent~~in ~~upon,~~North ~~among~~Carolina ~~other~~is ~~factors,~~seasonal. We generally experience slower than average lot sales in the ~~following:~~period from November to January, inclusive.

•■ ~~Proximity~~Marketing ~~to beaches, golf courses~~ and ~~other recreational facilities.~~Advertising

•Our ~~Proximity~~marketing and advertising plan emphasizes the print media to ~~places~~promote the sale of ~~employment~~our land and, when available for sale, improved individual lots.

•■ ~~Proximity~~Patents, toTrademarks, ~~and~~Licenses, ~~the~~Franchises, ~~nature~~ and ~~quality~~Concessions ~~of retail shopping.~~Held

•Other ~~Proximity~~than toa ~~and~~real estate ~~the~~brokerage ~~nature~~license ~~and~~issued ~~quality~~by the State of ~~schools~~North Carolina Real Estate Commission to our General Manager, who acts as our real estate sales person, our business is not dependant in any material respect on any patent, trademark, license, franchise, or concession.

•Page ~~The availability of municipal water (as opposed to well water) and sewer service (as opposed to septic systems).~~7

~~Many~~■ ~~real~~Dependence ~~estate~~Upon developments and communities in Brunswick County provide recreational facilities, such as a golf course, lakes and/or swimming pools, and tennis courts. We own no recreational facilities but some are available in the City of Boiling Spring Lakes. In many cases, depending upon the financial resources of the particular developer or community, such facilities are more extensive and/or more varied than the facilities in Boiling Spring Lakes. Lots associated with such recreational facilities generally command higher sales prices than lots owned by us.Customers

~~Some~~From ~~real~~time ~~estate~~to ~~developers~~time, inwe ~~Brunswick~~sell ~~County~~tracts ~~provide some form~~ of ~~seller~~land ~~financing~~or toblocks ~~buyers. The terms~~ of ~~such~~lots ~~financing may be more favorable~~ to ~~buyers than~~developers ~~are~~or ~~generally~~others ~~available~~who ~~from~~may ~~financial~~comprise, ~~institutions.~~in Wea ~~typically~~particular ~~sell our property for cash~~year, ~~and~~a ~~buyers~~significant ~~who require financing~~percentage toof ~~complete~~our ~~their~~revenue ~~purchase typically obtain financing~~ from ~~financial~~land ~~institutions~~sales. OnGenerally, ~~occasion~~however, we ~~fail~~are tonot ~~complete~~dependent ~~the~~in ~~sale~~any ~~of a~~respect ~~property~~upon ~~due~~one toor ~~the~~a ~~inability~~few ofcustomers, the ~~potential~~loss of ~~buyer~~any toone ~~obtain~~of ~~financing.~~which Wemight ~~may~~significantly ~~decide~~affect toour ~~offer~~financial ~~seller financing in the future on a limited basis~~results.

We■ believe that we can compete effectively against other real estate developers, many of whom are believed to have substantially greater resources than we have, and other sellers of real estate principally on the basis of price.Competition

■Our ~~Recent~~potential customers ~~Real~~include ~~Estate~~local ~~Market~~residents ~~Conditions~~as well as retirees and others looking to relocate to or near the stretch of beachfront communities known as the “Grand Strand.” The Grand Strand runs from Cape Fear, North Carolina to Georgetown, South Carolina and encompasses Myrtle Beach, Carolina Beach, Kure Beach, and Wrightsville Beach, among other beachfront communities. The real estate market within that region is extremely competitive. We compete against other real estate developers, real estate brokers, property owners acting without brokers, and others. We believe that other real estate developers have bought some of our land in past years and that other developers may buy land from us in the future, and that such developers may compete with us for land sales or sale of improved property within the City of Boiling Spring Lakes.

WeProperty ~~believe~~values ~~that local~~are ~~financial~~dependent ~~institutions have maintained tight credit requirements~~upon, ~~due,~~among inother ~~part~~factors, ~~to concerns that~~ the prices of residential and commercial real estate may continue to decline during 2012 and, perhaps, even into 2013. We believe that these restrictive lending practices by area banks have contributed, in part, to a sluggish local real estate market.following:

~~Page~~• 7Proximity to beaches, golf courses and other recreational facilities.

~~The~~• ~~market~~Proximity ~~for undeveloped land within the City has continued~~ to beplaces ~~adversely affected by efforts, commenced in April 2006, by the U.S. Fish and Wildlife Service (“Fish and Wildlife”) to protect the habitat~~ of ~~the endangered Red-cockaded Woodpecker (Picoides borealis)~~employment. We believe that certain restrictions that went into effect in 2006 on building in the City, including our property, within proximity to known or suspected nesting or foraging areas of the Red-cockaded Woodpecker have had the effect of reducing our real estate sales since 2006, and will likely have the effect of reducing our real estate sales in the future from what might otherwise have been realized in the absence of such restrictions. In 2007, we began a program to study tree density in known foraging areas to determine the potential for coexistence where sufficient tree density exists, that is, where houses can be built on land now owned by us while retaining a sufficiently vibrant foraging area for the woodpeckers. Work on this program was paused during 2010 while we reviewed the progress and the program costs, and we may resume the program in 2012. We believe that this program may reduce the amount of the Property that is subject to restrictions on development because of the Red-cockaded Woodpecker, although there can be no assurance that any such reduction will occur or, if it occurs, that such reduction will have a material affect on our business.

~~Residential~~• Proximity to and the nature and quality of retail shopping.

~~During~~• ~~2011,~~Proximity ~~the~~to ~~real estate market in Brunswick County remained sluggish~~ and ~~uneven, as evidenced by~~ the ~~data~~nature inand ~~Table~~quality 3,of ~~below~~schools.

TABLE 3: EXISTING HOME SALES
BRUNSWICK COUNTY REGION MLS 2007 - 2011
Year Ended	Existing		Average
December 31,	Home Sales		Sales Price
2011		1,631		238,945
2010		1,520		245,394
2009		2,007		251,806
2008		1,786		264,287
2007		1,325		327,984
Source: North Carolina Association of Realtors, Inc.
The Brunswick County Region MLS includes all of Bladen, Brunswick, and Columbus Counties in North Carolina, and portions of New Hanover County, North Carolina, and Horry County, South Carolina.

•

The availability of municipal water (as opposed to well water) and sewer service (as opposed to septic systems).

AsMany ~~shown~~real estate developments and communities in ~~Table~~Brunswick 3County provide recreational facilities, such as a golf course, lakes and/or swimming pools, and tennis courts. We own no recreational facilities but some are available in the ~~number~~City of ~~existing~~Boiling ~~home~~Spring ~~sales~~Lakes. ~~saw~~In amany ~~slight~~cases, ~~improvement~~depending upon inthe ~~2011~~financial ~~over~~resources ~~2010~~of the particular developer or community, ~~yet~~such ~~remained~~facilities ~~well~~are ~~below~~more ~~2009~~extensive and/or ~~2008,~~more ~~while~~varied ~~the~~than ~~average~~the ~~sales~~facilities ~~price~~in ofBoiling ~~existing~~Spring ~~homes~~Lakes. ~~fell~~Lots ~~for~~associated ~~the~~with ~~fourth~~such ~~straight~~recreational ~~year~~facilities ~~from~~generally ~~2007~~command higher sales prices than lots owned by us.

~~Page~~Some 8real estate developers in Brunswick County provide some form of seller financing to buyers. The terms of such financing may be more favorable to buyers than are generally available from financial institutions. We typically sell our property for cash, and buyers who require financing to complete their purchase typically obtain financing from financial institutions. On occasion, we fail to complete the sale of a property due to the inability of the potential buyer to obtain financing. We may decide to offer seller financing in the future on a limited basis.

ItPage is unclear at this time when the real estate market in Brunswick County and, more particularly, for our land will see any significant improvement. The local real estate market continues to see short sales, that is, sales of houses at prices less than the amount of debt on the property, as well as foreclosures, both of which have the effect of increasing the supply of homes for sale and thereby reducing the selling prices of such homes. Until the market for existing homes improves significantly, the market for buildable lots, such as those we sell, will continue to be sluggish, at best. During 2010, we reduced our asking price on most residential lots by 40% to come into line with the prices asked by other sellers of lots in the City and the surrounding area. In February 2011, we reduced our asking prices further, for a total reduction in our asking prices of 60%. There remains a large inventory of lots available for sale in the City and the surrounding area, and relatively few transactions are being completed. Notwithstanding the recent reductions in our asking prices and our continuing efforts to market our land, we expect to see no significant improvement in real estate sales until the number of short sales and foreclosures in the local market moderates, economic conditions improve, and financial institutions loosen credit requirements.8

Apart from general economic conditions, the real estate market in the City and the surrounding area continues to be adversely affected by efforts, beginning in April 2006, by Fish and Wildlife to protect the habitat of the endangered Red-cockaded Woodpecker. We believe that we ~~certain~~can ~~restrictions~~compete ~~that~~effectively ~~went~~against ~~into~~other ~~effect~~real inestate ~~2006~~developers, onmany ~~new~~of ~~construction~~whom inare ~~the~~believed ~~City within proximity~~ to ~~known~~have orsubstantially ~~suspected~~greater ~~nesting~~resources orthan ~~foraging~~we ~~areas of the Red-cockaded Woodpecker~~ have, ~~contributed~~and toother ~~our~~sellers ~~lack~~ of, ~~or very limited,~~ real estate ~~sales~~principally inon ~~recent years,~~the ~~and~~basis ~~will~~of ~~continue to have such effect~~price.

~~See~~■ ~~“Item 1A.~~Recent ~~Risk~~Real ~~Factors”~~Estate ~~below,~~Market ~~for a discussion on numerous risk factors associated with our real estate business.~~Conditions

~~Commercial~~We believe that local financial institutions have maintained tight credit requirements, due, in part, to concerns that the prices of residential and commercial real estate may continue to decline during 2013 and, perhaps, even into 2014. We believe that these restrictive lending practices by area banks have contributed, in part, to a sluggish local real estate market.

~~Historically,~~The ~~our~~market ~~sales~~for undeveloped ofland ~~commercial~~within ~~land~~the ~~have~~City ~~been~~has ~~sporadic~~continued to be adversely affected by efforts, commenced in April 2006, by the U.S. Fish and weWildlife Service ~~have~~(“Fish ~~not~~and ~~sold~~Wildlife”) ~~any~~to ~~commercial~~protect ~~land~~the ~~since~~habitat of the ~~second~~endangered ~~quarter~~Red-cockaded ofWoodpecker ~~2007~~(Picoides borealis). We ~~Commercial~~believe ~~development~~ that certain restrictions that went into effect in 2006 on building in the City, ~~has~~including ~~largely~~our ~~been~~property, ~~concentrated~~within ~~along~~proximity to aknown ~~stretch~~or suspected nesting or foraging areas of ~~State~~the ~~Road~~Red-cockaded ~~87,~~Woodpecker have had the ~~main~~effect ~~road~~of ~~into~~reducing our real estate sales since 2006, and ~~out~~will oflikely have the ~~City.~~effect ~~The~~of ~~local~~reducing ~~commercial~~ our real estate ~~market~~sales ~~has~~in ~~traditionally~~the ~~not~~future from what might otherwise have been ~~very~~realized ~~strong~~in the absence of such restrictions. In 2007, ~~due~~we began a program to study tree density in known foraging areas to determine the ~~City’s~~potential ~~relatively~~for ~~small~~coexistence ~~population~~where sufficient tree density exists, that is, where houses can be built on land now owned by us while retaining a sufficiently vibrant foraging area for the ~~lack~~woodpeckers. ofWork ~~sewer~~on this program was paused during 2010 while ~~service~~we reviewed the progress and the program costs, and we may or may not resume the ~~availability~~program in 2013. We believe that this program may reduce the amount of ~~shopping~~the ~~and~~Property ~~services~~that inis ~~nearby~~subject ~~towns~~to restrictions on development because of the Red-cockaded Woodpecker, ~~especially~~although there ~~Southport~~can be no assurance that any such reduction will occur or, ~~and~~if ~~large~~it ~~regional~~occurs, ~~shopping~~that ~~centers in~~such ~~and~~reduction ~~close~~will tohave ~~Wilmington~~a material affect on our business.

■Page ~~Government Regulation; Environmental Laws and Regulations; Endangered and Protected Species~~9

The real estate industry is subject to extensive and complex regulations. We must comply with various federal, state and local laws, ordinances, rules, and regulations regarding zoning and construction; population density; availability and installation of utility services such as water, electricity, gas, and waste disposal; the preservation of the natural terrain; and other related matters. We rely upon our employees, the General Partner, and various legal and other advisors for the expertise necessary to comply with all applicable regulations.Residential

~~Page~~During 92012, the real estate market in Brunswick County remained sluggish and uneven, as evidenced by the data in Table 3, below.

We are subject to the Interstate Land Sales Full Disclosure Act (“ILSA”), which governs the sale or lease of subdivided property through the use of interstate commerce. Pursuant to ILSA, we registered our property with the Office of Interstate Land Sales Registration of the U.S. Department of Housing and Urban Development. Should our registration be suspended or terminated for any reason, we would be restricted to selling not more than 12 lots during any 12 consecutive months until such time as the suspension is lifted or a new registration goes into effect. In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in 2010, the newly formed U.S. Consumer Financial Protection Bureau became the federal agency responsible for enforcing ILSA compliance effective as of July 21, 2011.

TABLE 3: EXISTING HOME SALES
BRUNSWICK COUNTY REGION 2008 - 2012

Year Ended		Existing		Average
December 31,		Home Sales		Sales Price
	2012		n/a		229,405	*
	2011		1,631		238,945
	2010		1,552		240,334
	2009		2,007		251,806
	2008		1,786		264,287

We* ~~are~~For ~~subject to various federal~~2012, ~~state,~~data ~~and~~for ~~local~~average ~~laws,~~sales ~~ordinances,~~price ~~and~~is ~~regulations~~for ~~regarding environmental matters. In addition~~November, ~~we are subject to laws and regulations relating to the use of wetlands, over which the Army Corps of Engineers has jurisdiction~~2012. Portions of Boiling Spring Lakes and the surrounding area are known or believed to be the habitat of various species of flora and fauna which have been identified as endangered or protected species. Development of our land is subject to various laws and regulations intended to limit disturbance of endangered and protected species.

■Source: ~~Employees~~North Carolina Association of Realtors, Inc.

~~We employ two full-time employees in our sales office in Boiling Spring Lakes, North Carolina.~~ The ~~General~~Brunswick ~~Partner~~County ~~has~~Region noincludes ~~full-time employees. The President of the General Partner devotes a portion of his time to our management and affairs. Such person~~Bladen, ~~however,~~Brunswick ~~has other responsibilities~~ and Columbus ~~he will devote only as much of his time to our business as the General Partner~~Counties, inNorth ~~its judgment and experience, determines is reasonably required~~Carolina.

■As ~~Liquid~~shown in Table ~~Assets~~3, ~~and~~the ~~Reserves~~average ~~for~~sales ~~Calculating~~price ~~Distributable~~of ~~Cash~~existing homes continued to fall through November, 2012.

AsIt is unclear at this time when the real estate market in Brunswick County and, more particularly, for our land will see any significant improvement. The local real estate market continues to see short sales, that is, sales of ~~December~~houses 31at prices less than the amount of debt on the property, as well as foreclosures, both of which have the effect of increasing the supply of homes for sale and thereby reducing ~~2011~~the selling prices of such homes. Until the market for existing homes improves significantly, the market for buildable lots, such as those we ~~held~~sell, $1will continue to be sluggish,~~935~~ at best. During 2010,~~978~~ we reduced our asking price on most residential lots by 40% to come into line with the prices asked by other sellers of lots in ~~cash~~the City and the surrounding area. ~~Accounts~~In ~~payable~~February 2011, we reduced our asking prices further, for a total reduction in our asking prices of 60%. There remains a large inventory of lots available for sale in the City and ~~accrued~~the ~~expenses~~surrounding area, ~~including~~and ~~accrued~~relatively ~~expenses~~few ~~owed~~transactions are being completed. Notwithstanding the recent reductions in our asking prices and our continuing efforts to ~~affiliates~~market our land, aswe ofexpect ~~such~~to see no significant improvement ~~date~~in ~~totaled~~real ~~$246~~estate sales until the number of short sales and foreclosures in the local market moderates,~~708~~ economic conditions improve, and financial institutions loosen credit requirements.

~~Our~~Apart ~~partnership~~from ~~agreement~~general ~~obligates~~economic conditions, the ~~General~~real ~~Partner~~estate tomarket ~~distribute~~in ~~Distributable~~the ~~Cash~~City ~~(as~~and ~~such~~the ~~term~~surrounding isarea ~~defined~~continues into ~~the~~be ~~partnership~~adversely ~~agreement).~~affected ~~Distributable Cash~~by ~~excludes~~efforts, beginning ~~among~~in ~~other~~April ~~items~~2006, ~~reserves~~by ~~established~~Fish ~~for~~and ~~working~~Wildlife ~~capital,~~to ~~contingent~~protect ~~liabilities,~~the ~~taxes,~~habitat ~~debt~~of ~~service,~~the ~~repairs, replacements,~~endangered ~~renewals,~~Red-cockaded ~~capital~~Woodpecker. ~~expenditures,~~We orbelieve ~~other~~that certain ~~purposes~~restrictions asthat ~~established~~went byinto ~~the~~effect ~~General~~in ~~Partner~~2006 ~~consistent~~on ~~with~~new ~~the~~construction ~~partnership agreement.~~in ~~Such~~the ~~reserves~~City ~~are~~within ~~used~~proximity ~~solely~~to ~~for~~known ~~calculating~~or ~~Distributable~~suspected ~~Cash~~nesting or ~~and~~foraging ~~are~~areas ~~not~~of ~~treated~~the asRed-cockaded ~~deductions~~Woodpecker ~~from~~have ~~income~~contributed ~~for~~to ~~accounting purposes.~~our Alack ~~summary~~ of, ~~reserves~~or ~~established~~very inlimited, ~~each~~real ofestate ~~the~~sales ~~last~~in ~~ten fiscal~~ recent years, isand ~~set~~will ~~forth~~continue into ~~Table~~have 4,such ~~below~~effect.

Page 10

~~TABLE~~See 4:“Item 1A. ~~RESERVES~~Risk ~~FOR~~Factors” ~~CALCULATING~~below, ~~DISTRIBUTABLE~~for ~~CASH~~a discussion on numerous risk factors associated with our real estate business.

		Beginning				Ending
Year		Balance		Additions		Balance		Purpose Additional Reserve was Established
	2002	$	1,325,000	$	100,000	$	1,425,000	Repairs to the dam, road repairs and improvements.
	2003		1,425,000		250,000		1,675,000	Road repair and improvements, future extension of sewer system to our land, possible multi-user septic system.
	2004		1,675,000		1,200,000		2,875,000	Road repair and improvements, future extension of sewer system to our land, possible multi-user septic system.
	2005		2,875,000		3,050,000		5,925,000	Surrveying, road repair and improvements, future extension of sewer system to our land, possible development of commercial land.
	2006		5,925,000		—		5,925,000
	2007		5,925,000		100,000		6,025,000	Road repairs and improvements.
	2008		6,025,000		—		6,025,000
	2009		6,025,000		100,000		6,125,000	Water assessments.
	2010		6,125,000		2,350,000		8,475,000	Sewer system along Route 87 corridor, net of $50,000 adjustment to 2009 addition for water assessments.
	2011		8,475,000		—		8,475,000

Commercial

~~Notes:~~Historically, our sales of commercial land have been sporadic, and we have not sold any commercial land since the second quarter of 2007. Commercial development in the City has largely been concentrated along a stretch of State Road 87, the main road into and out of the City. The local commercial real estate market has traditionally not been very strong, due to the City’s relatively small population, the lack of sewer service, and the availability of shopping and services in nearby towns, especially Southport, and large regional shopping centers in and close to Wilmington.

~~These~~■ ~~reserves~~Government ~~are~~Regulation; ~~used~~Environmental ~~solely~~Laws ~~for~~and ~~calculating~~Regulations; ~~Distributable Cash~~Endangered and ~~are~~Protected ~~not treated as deductions from income for accounting purposes.~~Species

AsThe areal ~~result~~estate ~~of losses~~industry ~~incurred~~is insubject ~~prior~~to ~~years~~extensive and ~~the~~complex ~~reserves~~regulations. ~~for~~We ~~calculating~~must ~~Distributable~~comply ~~Cash~~with ~~set~~various ~~forth~~federal, instate ~~Table~~and 4local laws, ~~there~~ordinances, ~~has~~rules, and ~~been~~regulations noregarding ~~Distributable Cash~~zoning and construction; population density; availability and installation of utility services such as water, ~~therefore~~electricity, nogas, ~~distributions~~and waste disposal; the preservation of ~~Distributable~~the ~~Cash~~natural ~~have~~terrain; ~~been~~and ~~made~~other ~~since~~related matters. We rely upon our ~~inception~~employees, the General Partner, and various legal and other advisors for the expertise necessary to comply with all applicable regulations.

We ~~cannot~~are ~~estimate~~subject to ~~with~~the ~~any~~Interstate ~~certainty~~Land Sales Full Disclosure Act (“ILSA”), which governs the ~~cost~~sale or lease of ~~installing~~subdivided ~~sewer~~property ~~lines~~through the use of interstate commerce. Pursuant to ~~all~~ILSA, ofwe registered our ~~land~~property with the Office of Interstate Land Sales Registration of the U.S. AsDepartment of ~~December~~Housing ~~31,~~and ~~2011~~Urban Development. Should our registration be suspended or terminated for any reason, we would ~~have~~be ~~established~~restricted ~~reserves~~to selling not more than 12 lots during any 12 consecutive months until such time as the suspension is lifted ~~for~~or ~~calculating~~a ~~Distributable~~new ~~Cash~~registration ~~totaling~~goes ~~$5,575,000~~into ~~for~~effect. ~~that~~In ~~purpose;~~accordance ~~however~~with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in 2010, the ~~actual~~newly ~~cost~~formed ofU.S. ~~installing~~Consumer ~~sewer~~Financial ~~lines~~Protection toBureau became the federal ~~all~~agency ofresponsible ~~our~~for ~~land~~enforcing ~~may~~ILSA becompliance ~~more~~effective oras ~~less~~of ~~than~~July ~~that~~21, ~~amount~~2011.

■We ~~Available~~are subject to ~~Information~~various federal, state, and local laws, ordinances, and regulations regarding environmental matters. In addition, we are subject to laws and regulations relating to the use of wetlands, over which the Army Corps of Engineers has jurisdiction. Portions of Boiling Spring Lakes and the surrounding area are known or believed to be the habitat of various species of flora and fauna which have been identified as endangered or protected species. Development of our land is subject to various laws and regulations intended to limit disturbance of endangered and protected species.

WePage electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports with the Securities and Exchange Commission (the “SEC”). These filings may be read without charge and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The SEC’s website address is http://www.sec.gov.11

~~Item~~■ ~~1A. Risk Factors~~Employees

~~Our~~We ~~business~~employ ~~faces~~one full-time ~~numerous~~employee ~~risks~~in ~~and~~our ~~uncertainties,~~sales ~~including,~~office ~~among~~in ~~others,~~Boiling ~~those~~Spring ~~described~~Lakes, ~~below~~North Carolina. IfThe ~~any~~functions ofpreviously ~~the~~performed ~~following~~by ~~risks~~a ~~and~~second ~~uncertainties~~employee, ~~develops~~who ~~into~~employment anterminated ~~actual~~in ~~event~~2012, ~~our~~are ~~business,~~being ~~financial~~performed ~~condition,~~by ~~and/or~~an ~~results~~affiliate of ~~operations~~the ~~could~~General ~~be materially and adversely affected~~Partner. InThe ~~addition,~~General anPartner ~~investment~~has inno ~~our~~full-time employees. ~~units~~The ~~involves~~President ~~numerous~~of ~~risks~~the ~~and~~General ~~uncertainties,~~Partner ~~including~~devotes ~~those~~a ~~described~~portion ~~below.~~of ~~These risks~~his ~~and~~time ~~uncertainties~~to ~~are not the only ones that we or~~ our ~~unitholders~~management ~~may~~and ~~face~~affairs. ~~Additional~~Such ~~risks~~person ~~and~~has ~~uncertainties~~other responsibilities ofand ~~which we~~will ~~are~~devote ~~unaware,~~only oras ~~that~~much wetime ~~currently~~to ~~deem~~our ~~immaterial,~~business ~~also~~as ~~may~~the ~~become~~General ~~important~~Partner, ~~factors~~in ~~that~~its ~~affect~~judgment usand orexperience, ~~our~~determines is ~~unitholders~~reasonably required.

~~Page~~■ 11Liquid Assets and Reserves for Calculating Distributable Cash

■As ~~Risks~~of December 31, ~~Relating~~2012, we held $1,288,909 in cash. Accounts payable and accrued expenses, including accrued expenses owed to ~~Real~~affiliates, ~~Estate~~as ~~Generally~~of such date totaled $3,033.

WeOur ~~are~~partnership ~~subject~~agreement obligates the General Partner to ~~risks~~distribute ~~associated~~Distributable Cash (as such term is defined in the partnership agreement). Distributable Cash excludes, among other items, reserves established for working capital, contingent liabilities, taxes, debt service, repairs, replacements, renewals, capital expenditures, or other purposes as established by the General Partner consistent with ~~investments~~the partnership agreement. Such reserves are used solely for calculating Distributable Cash and are not treated as deductions from income for accounting purposes. A summary of reserves established in ~~real~~each ~~estate~~of the last ten fiscal years is set forth in Table 4, below.

~~Our~~TABLE ~~revenues,~~4: ~~financial performance,~~RESERVES ~~and~~FOR ~~the~~CALCULATING ~~value of our real estate may decline due to factors that adversely affect real estate generally and those~~DISTRIBUTABLE ~~that are specific to our property. Factors that may adversely affect real estate generally include, among others, the following:~~CASH

• Increases in interest rates.

	Beginning					Ending
Year	Balance		Additions			Balance		Purpose Additional Reserve was Established

2002	$	1,325,000	$	100,000		$	1,425,000	Repairs to the dam, road repairs and improvements.
2003		1,425,000		250,000			1,675,000	Road repair and improvements, future extension of sewer system to our land, possible multi-user septic system.
2004		1,675,000		1,200,000			2,875,000	Road repair and improvements, future extension of sewer system to our land, possible multi-user septic system.
2005		2,875,000		3,050,000			5,925,000	Surrveying, road repair and improvements, future extension of sewer system to our land, possible development of commercial land.
2006		5,925,000		—			5,925,000
2007		5,925,000		100,000			6,025,000	Road repairs and improvements.
2008		6,025,000		—			6,025,000
2009		6,025,000		100,000			6,125,000	Water assessments.
2010		6,125,000		2,350,000			8,475,000	Sewer system along Route 87 corridor, net of $50,000 adjustment to 2009 addition for water assessments.
2011		8,475,000		—			8,475,000
2012		8,475,000		(1,410,000	)		7,065,000	Adjustment for updated estimate of cost of sewer system along Route 87 corridor ($1,360,00) and refund of water assessments ($50,000)

~~• A general tightening of the availability of credit.~~Note:

•These Areserves ~~decline~~are inused ~~the~~solely ~~level~~for ofcalculating ~~employment~~Distributable Cash and are not treated as deductions from income for accounting purposes.

•Page ~~A decline in economic conditions.~~12

•As Aa ~~decline~~result of losses incurred in ~~consumer~~prior ~~confidence~~years and the reserves for calculating Distributable Cash set forth in Table 4, there has been no Distributable Cash and, therefore, no distributions of Distributable Cash have been made since our inception.

•Item 1A. ARisk ~~decline in consumer income.~~Factors

•Our Anbusiness ~~adverse~~faces numerous ~~change~~risks and uncertainties, including, among others, those described below. If any of the following risks and uncertainties develops into an actual event, our business, financial condition, and/or results of operations could be materially and adversely affected. In addition, an investment in ~~demographics~~our units involves numerous risks and uncertainties, including those described below. These risks and uncertainties are not the only ones that we or our unitholders may face. Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, also may become important factors that affect us or our unitholders.

•■ AnRisks ~~increase~~Relating into ~~competition~~Our ~~for customers.~~Business

•We ~~The~~have ~~adoption~~operated onat ~~the~~a ~~national,~~loss ~~state,~~in ~~or local level of more restrictive laws and governmental regulations, including more restrictive zoning, land use or environmental regulations, and increased real estate taxes~~recent years.

~~Additional~~We ~~factors~~have operated at ~~that~~a ~~may~~loss ~~adversely~~and ~~affect~~experienced negative operating cash flow each year beginning with 2007. A substantial portion of our negative cash flow is due to the carrying costs, primarily property ~~specifically~~taxes, ~~include~~of our land. Since 2007, ~~among~~we ~~others~~have funded our operations primarily through our cash balances and cash reserves. Our financial performance in the near future continues to be challenged by the weakness in the real estate market in and around Boiling Spring Lakes. For these reasons, we expect to continue to generate negative operating cash flow and to operate at a loss until we see a recovery in the ~~following:~~local real restate market. We cannot predict when such a recovery will occur, and, accordingly, we cannot predict when, if at all, we will begin generating positive operating cash flow or our financial conditions will begin to improve.

•We Amay ~~decline~~not inhave ~~the~~sufficient ~~economic~~cash to ~~conditions~~fund in our ~~primary market~~operations.

•Because ~~Adverse~~we ~~changes~~have operated at a loss in recent years, we have had to fund our operations primarily through our cash balances and cash reserves. Unless sales of lots increases significantly in the ~~perceptions~~near future, which we deem unlikely to happen for a variety of ~~prospective~~reasons ~~purchasers~~described in this Item 1A, we are likely to deplete all of our cash balances and cash reserves in the ~~attractiveness~~next two to three years and thereafter we may no longer be able to fund our operations. At December 31, 2012, our cash and cash equivalents were $1,289,000, down from $1,936,000 at December 31, 2011. While $244,000 was used to reduce accounts payable and accrued expenses, the Partnership’s selling, general and administrative expenses in 2012 were $514,900. While such expenses increased in 2012 due to expenses related to the reverse unit split (see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation-Year Ended December 31, 2012 Compared to Year Ended December 31, 2011-Selling, General and Administrative Expenses”), we estimate that the annual run rate of such in expenses in 2013 and thereafter, assuming the reverse stock split is approved and that we are no longer required to file reports with the SEC, is $388,000. In addition, commencing in 2014, we expect to have an annual expenditure of approximately $133,000 due the sewer assessment described under “Most of our real estate lacks public sewer service” below. At that rate, without any significant increase of sales of lots, which we believe to be unlikely, or the bulk sale of our property, we believe we will have utilized all of our cash reserves by the end of 2014 or the first half of 2015.

•Page ~~An increase in supply of, or a decrease in demand for, houses and/or homesites in our primary market.~~13

•We ~~Opposition~~are ~~from~~undertaking ~~local~~the ~~community~~bulk orsale of ~~political~~our ~~groups~~property, ~~with~~although ~~respect~~there can be no assurance that we will be able to ~~development~~sell orour ~~construction~~property atbefore ~~one~~we orrun ~~more~~out ~~particular~~of ~~sites~~cash to fund our operations.

•In late ~~Increased~~2012, ~~efforts~~we initiated the process of attempting a bulk sale of our property by ~~government~~engaging toa ~~protect~~real ~~endangered~~estate agent. There can be no assurance if and/ when our property will be sold or ~~protected~~that ~~species~~it will be sold prior to the utilization of all of our cash reserves by the end of 2014 or the first half of 2015. The sale price of our property, ~~such~~if assold, is likely to be negatively impacted by the ~~Red-cockaded~~expected ~~Woodpecker~~sewer assessment. If sold, ~~through~~there ~~laws~~can ~~and/or~~be ~~regulations~~no assurance that ~~limit~~the ornet ~~prohibit~~proceeds ~~development~~received orwould be ~~construction~~sufficient atto ~~one~~pay all of our obligations or ~~more~~that ~~particular~~there ~~sites~~would be sufficient proceeds to make a distribution to unit holders after paying all of our obligations.

~~Page~~We 12may not be able to conduct successful operations in the future.

•The Aresults ~~change~~of inour operations ~~existing~~will ~~comprehensive~~depend ~~zoning~~upon, ~~plans~~among orother ~~zoning~~things, ~~regulations~~our ~~that~~ability ~~impose~~to ~~additional~~market ~~restrictions~~our onreal ~~use~~estate. Our operations may not generate income sufficient to meet operating expenses or ~~requirements~~may ~~with~~generate ~~respect~~income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain our ~~property~~business. Our operations may be affected by many factors, some known by us, some unknown, and some of which are beyond our control. Any of these problems, or a combination thereof, could have a materially adverse effect on our viability as an entity and might cause the investment of our unitholders to be impaired or lost.

•We ~~Our~~may ~~inability~~be tounable ~~provide adequate management and maintenance or~~ to obtain ~~adequate insurance~~financing.

•As Anof ~~increase~~December 31, 2012, our total consolidated debt was zero. There can be no assurance that the amounts available from internally generated funds, cash on hand, and sale of assets will be sufficient to fund our anticipated operations and meet existing and future liabilities. We may be required to seek additional capital in the form of a loan from a bank or other lender. No assurance can be given that such financing will be available or, if available, will be on terms favorable to us. If we are not successful in obtaining sufficient capital to fund the implementation of our ~~operating~~business ~~costs~~strategy and for other expenditures, we might be required to sell property for far less than its market value.

•Page ~~New development of a competitor’s property close to our property.~~14

~~Adverse~~Most ~~changes in any~~ of ~~these conditions generally, or in~~ our ~~primary market, could decrease demand and pricing for our~~ real estate orlacks ~~result in~~public ~~customer~~sewer ~~cancellations of pending contracts, which could adversely affect the amount of land we can sell or reduce the prices we can charge for our real estate~~service.

~~Should~~The lack weof public sewer service has been a major inhibiting factor in our efforts to sell and/or develop land in Boiling Spring Lakes. ~~undertake~~Prior to 2004, virtually all residents in the development ~~activities~~were forced to rely upon individual septic systems. Brunswick County has plans for an area-wide sewer system for Boiling Spring Lakes. The County began installation of the first phase of the sewer system in 2012 to service the commercial corridor along Highway 87, and we ~~would~~believe that the first phase will be ~~exposed~~completed in 2013. However, there is no certainty that subsequent expansion of the sewer system will occur or that we may connect any or some of our land to ~~risks~~such ~~associated~~expansion ~~with~~of ~~real~~the ~~estate~~sewer ~~development~~system. A private contractor may elect to install a sewer system to serve a portion of Boiling Spring Lakes where he is looking to develop commercial and/or residential land that he owns; however, there is no certainty that any such private sewer system will be installed or, if installed, that our land may connect to such private sewer system.

~~Real~~A ~~estate~~significant ~~development~~portion ~~activities~~of ~~entail~~the ~~risks~~cost of sewer lines to our land must be borne by us or by subsequent purchasers of the land. We own property along Highway 87 where construction of the sewer system has begun. The County has estimated that ~~include~~the cost of this portion of the project will be approximately $3,000,000. ~~among~~This ~~others~~cost will then be assessed against property owners along the portion of Highway 87 along which the sewer lines are being built. While the County has stared that it has not yet determined the method by which the costs will be assessed to property owners, we believe that the ~~following:~~most likely method will result in an assessment of approximately $1,040,000 against our property. The County has stated that the assessment, which will be made after completion of the project, which we believe will be in the third quarter of 2013, may be paid in a lump at a 5% discount or over 10 years at an interest rate of 2.84%. We believe that we will choose to pay over the 10-year period.

•We expect ~~Construction~~to ~~delays~~capitalize orany such assessment paid by us, including the above assessment, by adding the amount of the assessments to the cost ~~overruns~~basis of our land held for sale. When we sell land affected by sewer lines, the direct cost of land sold will reflect the capitalized costs. We will likely achieve a higher sales price for land with sewer service than for land without such service, but the direct cost of such land sold will also be higher than for a lot which ~~may~~does ~~increase~~not ~~project~~reflect ~~development~~such capitalized costs. If we sell any land subject or likely to be subject to a sewer assessment prior to us being assessed or prior to our paying such assessment in full, of which there can be no assurance, the selling price would likely be reduced by the anticipated amount of such assessment.

•We cannot Anestimate ~~increase~~with inany ~~commodity~~certainty the amount of the assessment for the work along Highway 87 that is currently underway or ~~materials~~any future ~~costs~~any assessments for sewer lines, nor can we predict with any certainty when any such assessments may be made or, once made, become due. If we are liable for any such assessment, it may have a material adverse affect on our results of operations and financial condition. See “We may not have sufficient cash to fund our operations” for further information about the possible effect of the potential assessment for the project currently under construction.

•Page ~~An inability to obtain all required zoning approvals, governmental permits, and authorizations.~~15

•Most Anof ~~inability~~our toreal ~~secure~~estate ~~buyers~~lacks ~~and/or~~municipal water ~~tenants~~service.

•Most Anof ~~inability~~our land lacks municipal water service. The City of Boiling Spring Lakes began to ~~secure~~phase ~~sufficient~~in ~~financing~~municipal onwater ~~favorable~~service ~~terms~~to certain portions of the development in 2004 and, ~~including~~in 2009, began work on an ~~inability~~expansion of the municipal water system. That expansion was completed in January 2011. The cost of the expansion is to ~~refinance~~be borne by owners of land directly passed by new water mains by the payment of an assessment per lot of $500 plus a tap fee equal to $860, for a lot containing an existing dwelling, or $1,800, for new construction. ~~loans~~Our total assessment relating to this expansion was determined to be $49,500 based upon a formula that allows adjoining lots to be aggregated into a group and counted as one lot for assessment purposes. Should we sell some, but not all of the lots that were aggregated into a group, an additional assessment may have to be paid by us with respect to such lots at the time the sale of such lots is closed. We capitalized $49,500 of assessments in 2009 by increasing the cost basis of land affected. In May 2010, the City of Boiling Spring Lakes transferred ownership of the municipal water system to Brunswick County.

•Further Anexpansions of ~~inability~~water service will depend upon, among other factors, the ability to ~~complete~~control acosts ~~development~~of ~~project~~laying onpipelines ~~schedule~~and the demand for such water service. There is no certainty that any further expansion of water service will occur or, onif ~~budget~~it occurs, that our land may connect to such further expansion of the water service. A significant portion of the cost of any further expansion of water distribution to our land must be borne by us or by subsequent purchasers of the land. We expect to capitalize any such assessment paid by us by adding the amount of the assessments to the cost basis of our land held for sale. When we sell land affected by water lines, the direct cost of land sold will reflect the capitalized costs. We will likely achieve a higher sales price for land with water service than for land without such service, but the direct cost of such land sold will also be higher than for a lot which does not reflect such capitalized costs.

•We ~~Compliance~~cannot estimate with ~~building~~any ~~codes~~certainty ~~and~~the ~~other~~amount ~~local~~of ~~regulations~~any future assessments for further expansions of the water system, nor can we predict with any certainty when any such future assessments may be made or, once made, become due. If we are liable for any such assessment, it may have a material adverse affect on our results of operations and financial condition.

•We ~~Lower~~are ~~sale~~subject ~~prices,~~to ~~occupancy~~laws ~~rates,~~and orregulations relating ~~lease~~to ~~rates~~endangered ~~than~~or weprotected ~~anticipated~~species.

~~These~~Real ~~factors~~estate ~~are largely~~development ~~beyond~~is ~~our~~subject ~~control~~to various laws and regulations intended to limit disturbance of endangered and protected species. AtPortions of Boiling Spring Lakes and the ~~present~~surrounding ~~time,~~area weare known or believed to be the habitat of various species of flora and fauna which have been noidentified ~~plans~~as endangered or protected species. We may be subject to ~~engage~~common inlaw ~~development~~claims ~~activities~~by third parties based on damages and costs resulting from the presence of endangered or protected species on or near land owned by us.

~~The~~Page ~~real estate business is competitive.~~ 16

The ~~real~~Red-cockaded ~~estate business~~Woodpecker is ~~highly~~one ~~competitive.~~of Weseveral ~~compete~~species ~~with~~of aflora ~~large~~and ~~number~~fauna ofon ~~companies~~the ~~and~~endangered ~~individuals,~~species ~~many~~list ofthat ~~whom~~inhabit or are believed to ~~have~~inhabit ~~substantially~~portions of ~~greater~~Boiling ~~financial~~Spring Lakes and ~~other~~the ~~resources~~surrounding ~~than~~area. weFish ~~have.~~and ~~Some~~Wildlife ofnotified ~~our~~the ~~competitors~~City ~~are~~of ~~active~~Boiling inSpring ~~markets~~Lakes in ~~other~~February ~~regions~~2006 orof that ~~throughout~~agency’s concern about the rapid development within the City’s borders and the loss of mature long-leaf pines that the ~~entire~~endangered ~~United~~woodpecker ~~States.~~prefers, ~~Some~~and of ~~our~~the ~~competitors~~possibility ~~may~~that the City could be ~~willing~~liable for violating federal laws intended to ~~sell~~protect ~~their~~the ~~property~~endangered atwoodpecker ~~prices~~if ~~significantly~~the ~~lower~~City ~~than~~issued ~~our prices~~building permits for ~~similar~~lots ~~property~~with nests. ~~Our~~Under ~~ability~~such tofederal ~~weather~~laws, ~~downturns~~(a) inbuilding and ~~the~~tree ~~local~~cutting ~~real~~within ~~estate~~200 ~~market~~feet orof ~~respond~~a nest tree are restricted without a federal permit, and (b) to ~~changing~~provide ~~trends~~a inforaging area for the ~~real~~woodpeckers, ~~estate~~development ~~business~~is ~~may~~restricted beand ~~substantially~~cutting ~~less~~of ~~than~~long-leaf ~~some~~pine trees with a diameter of 10 inches or ~~many~~more is prohibited within a ½-mile radius around each nest site. City ordinances are somewhat more restrictive and prohibit certain cutting of ~~our~~long-leaf ~~competitors~~pine trees with a diameter of 8 inches or more.

~~Page~~We 13believe that not more than approximately 200 acres, or approximately 24%, of our land currently may be affected by restrictions relating to the Red-cockaded Woodpecker. That land is comprised of approximately 400 individual undeveloped lots, approximately 70 acres of unplatted, undeveloped land intended for residential use, and approximately 10 acres of undeveloped land intended for commercial use. Most of that approximately 200 acres does not meet, or is believed by us not to meet, current health codes for installing septic systems and, therefore, is not suitable for building until a tie-in to a sewer system becomes available. As land in Boiling Spring Lakes is developed, however, the remaining undeveloped land within the City must be able to support the habitat of the Red-cockaded Woodpecker; therefore, if land owned by others is developed more quickly than land currently owned by us, then the remaining undeveloped land owned by us that is not currently affected by restrictions may become affected. Since mature long-leaf pines are typically located on land that meets current health codes for installing septic systems, it is possible than an increasing percentage of our land that is currently suitable for septic systems will become subject to restrictions on development. This could adversely affect our property sales, revenues, and results of operations.

~~The~~From ~~real~~time ~~estate~~to ~~industry~~time iswe ~~cyclical~~may have balances at banks in excess of FDIC-insured limits.

~~The~~We ~~sale~~typically ~~and~~hold ~~development~~our ofcash ~~real~~primarily ~~estate~~in ischecking ~~cyclical~~ and ~~highly~~money ~~sensitive~~market toaccounts, ~~changes~~and in ~~general~~certificates ~~and~~of ~~local~~deposit. ~~economic~~Certificates ~~conditions,~~of deposit ~~such~~include asthose ~~employment~~held ~~levels~~at ~~and~~our ~~job~~principal ~~growth~~bank, ~~consumer~~on ~~confidence~~account ~~and~~under ~~income,~~the ~~availability~~Certificate of ~~financing~~Deposit ~~for~~Account ~~home~~Registry ~~builders~~Service (“CDARS”) program, and ~~homebuyers, interest~~brokered ~~rate~~certificates ~~levels,~~of ~~and~~deposit ~~housing~~arranged ~~demand~~through a securities broker-dealer. ~~The~~Our principal ~~real~~bank, ~~estate~~and ~~industry~~each ~~can~~bank ~~experience~~where ~~downturns~~we ~~based~~hold ~~on consumer~~a ~~perceptions~~certificate of ~~real~~deposit, ~~estate~~is ~~markets~~insured ~~and~~by ~~other~~the ~~cyclical~~Federal ~~factors~~Deposit Insurance Corporation (“FDIC”). The FDIC, ~~which~~an ~~factors~~independent ~~may~~agency ~~work~~of inthe ~~conjunction~~United ~~with~~States orgovernment, beinsures ~~wholly~~deposits ~~unrelated~~(including, but not limited to, ~~general~~certificates ~~economic~~of deposit) up to $250,000 per depositor, per bank, subject to certain conditions. In ~~Sales~~addition, ofeffective ~~undeveloped~~from ~~land~~December ~~are~~31, ~~also~~2010 ~~affected~~through byDecember 31, 2012, the ~~supply~~FDIC ofinsured ~~alternatives~~all todeposits ~~new~~in noninterest bearing ~~homes~~transaction accounts, such as ~~rental~~checking ~~property~~accounts, ~~and~~without ~~existing~~limitation ~~homes,~~as ~~including~~to ~~foreclosed~~amount; ~~homes.~~although ~~Furthermore~~the Partnership took advantage of this unlimited insurance during 2012, ~~our~~this ~~business~~program has expired and the Partnership has reduced its holdings at any one bank to be within isthe ~~affected~~FDIC-insured byamounts. ~~seasonal~~We ~~fluctuations~~may inalso ~~customers~~hold ~~interested~~cash in ~~purchasing~~one ~~real~~or ~~estate~~more cash sweep programs, ~~with~~which involve the ~~spring~~allocation ~~and~~of ~~summer~~cash in ~~months~~money ~~traditionally being~~market accounts among several participating banks up to the ~~most~~FDIC-insured ~~active~~limits. ~~time~~It is the intent of ~~year~~the ~~for~~CDARS ~~customer~~program, ~~traffic~~the brokered certificates of deposit, and ~~sales.~~the Ascash asweep ~~consequence,~~programs to limit our ~~real~~exposure ~~estate~~in any ~~operations~~bank ~~are~~to ~~cyclical~~FDIC insurance limits; however, ~~which could~~there ~~cause~~can ~~our~~be ~~revenues~~no ~~and~~assurance ~~earnings~~that tothe ~~fluctuate~~balance ~~significantly~~held ~~from~~at ~~quarter~~any tobank ~~quarter~~through ~~and~~any ~~from~~such ~~year~~program toor ~~year,~~product ~~and~~will tonot ~~differ~~exceed ~~materially~~the ~~from~~FDIC ~~the~~insurance ~~expectations~~limit. ofIn ~~our~~the ~~management~~event ~~and~~that ~~investors.~~any ~~Should~~bank where we behold ~~unable~~funds (including tothrough ~~manage~~a ~~effectively our~~certificate of deposit or cash ~~flows~~sweep ~~from~~program) ~~operations~~becomes insolvent, ~~our~~we ~~ability~~may tolose ~~service~~some or all of any ~~future~~excess ~~debt~~over FDIC-insured ~~and~~limits that we hold at that bank. From time to ~~meet~~time ~~working~~in ~~capital~~the ~~requirements~~future, ~~could~~we bemay ~~adversely~~have cash balances at our principal bank ~~affected~~in excess of FDIC-insured amounts.

~~Real~~Page ~~estate assets are illiquid.~~17

~~Real estate~~From ~~generally~~time ~~cannot~~to ~~be sold quickly. We experience great volatility in the sale of our land~~time, ~~especially our commercial land and tracts. Often,~~ we ~~record no sales of commercial land and tracts in a fiscal year. It~~ may ~~not~~have ~~be possible for us to sell property~~balances onin ~~favorable terms when it is to~~ our ~~economic~~brokerage ~~advantage~~account toin doexcess ~~so. The illiquidity~~ of ~~real~~SIPC-insured ~~estate~~limits ~~investments~~(although ~~generally~~right ~~may impair~~now ~~our~~we ~~ability~~do tonot ~~respond~~face ~~promptly~~this ~~to changing circumstances~~problem).

~~The~~We ~~real~~hold cash, and ~~estate~~may ~~industry~~from ~~has~~time ~~experienced~~to time purchase and hold money market funds, U.S. Treasury securities, and brokered certificates of deposit and participate in cash sweep programs through a ~~prolonged~~brokerage account at a securities broker-dealer insured by the Securities Investor Protection Corporation (“SIPC”). The SIPC, a non-profit corporation set up and ~~severe~~funded ~~downturn~~by the brokerage industry, insures investors’ accounts up to $500,000 per investor, subject to certain conditions, in the event that ~~may~~a ~~continue~~member brokerage firm goes bankrupt, and cash and securities are missing from customer accounts. At December 31, 2012, we held in ~~some~~the ~~portions~~brokerage ofaccount cash and money market funds totaling $250,813, less than the ~~country~~SIPC-insured ~~for~~amounts, analthough ~~indefinite~~from time to time in the future, we ~~period~~may ~~and~~have ~~adversely~~cash ~~affect~~balances in our ~~business~~brokerage ~~and~~account ~~results~~in excess of ~~operations~~SIPC-insured amounts. .

~~The National~~We ~~Bureau~~face ofrisks ~~Economic~~associated ~~Research, an independent group of economists charged~~ with ~~identifying the beginning and end of recessions~~short-term inliquid ~~the United States, concluded that the Great Recession, the longest and deepest downturn for the U~~investments.S. economy since the Great Depression, started in December 2007 and ended in June 2009. The difficulties faced by the real estate industry started before December 2007, however, continue into 2012, and may extend into and beyond 2013. Since 2006, our market and the U.S. real estate industry as a whole have experienced a significant and sustained decrease in demand for new homes and an oversupply of new and existing homes available for sale compared to prior years. High levels of unemployment, reduced consumer spending, and significantly tighter lending standards for borrowers continue to adversely affect the domestic housing market. Home foreclosures and forced sales by homeowners under distressed economic conditions have contributed to the high levels of inventories of homes and homesites available for sale. The collapse of demand for real estate and high levels of inventories have caused prices for residential real estate to significantly decline compared to prior years.

~~Page~~From 14time to time we may have significant cash balances invested in short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. These investments may include money market funds and/or direct obligations issued by the U.S. Treasury. Investments in these funds and securities are not insured against loss of principal. Under certain circumstances we may be required to redeem all or part of our investment in money market funds, and our right to redeem some or all of our investment may be delayed or suspended. In addition, there is no guarantee that our investments in these funds will be redeemable at par value. Under certain circumstances we may be required to sell all or part of our investment in U.S. Treasury securities prior to maturity at less than par value. A significant decline in the value of our investment or a significant delay or suspension of our right to redeem may have a material adverse effect on our results of operations or financial condition.

~~These adverse~~Our ~~market conditions have negatively affected our residential and commercial real estate~~ business. ~~Our~~is ~~revenues~~subject ~~from~~to ~~the sale~~complex ofcorporate ~~real~~governance, ~~estate~~public ~~are drastically lower than before 2008~~disclosure, ~~which~~and ~~has~~accounting ~~had~~requirements anthat ~~adverse~~have ~~affect~~increased onboth our ~~financial~~costs ~~condition~~ and ~~results~~the risk of ~~operations~~ noncompliance.

~~While~~Because we are required ~~some~~to ~~sections~~file ofperiodic and other reports with the ~~country~~SEC, ~~saw~~we ~~some~~are ~~improvement~~subject into numerous rules and regulations of federal, state, and other entities charged with the ~~real~~protection ~~estate~~of ~~market~~investors. inThese ~~2011~~entities, weincluding dobut not ~~know~~limited ifto ~~such~~the ~~improvement~~Financial ~~will~~Accounting ~~spread~~Standards toBoard, ~~other~~the ~~sections~~Public ofCompany ~~the~~Accounting ~~country~~Oversight Board, ifand atthe ~~all~~SEC, orhave ~~when~~implemented ~~real~~requirements, ~~estate~~standards, ~~markets~~and ~~will~~regulations, including ~~return~~expanded todisclosures and more ~~normal~~complex ~~conditions~~accounting rules, and continue developing additional requirements. Our ~~business will~~efforts ~~continue~~to comply with these regulations have resulted in, and are likely to ~~suffer~~continue ~~until~~resulting ~~market~~in, ~~conditions~~increased ~~improve~~general and administrative expenses and diversion of management time and attention from operating activities to compliance activities.

~~Increasing interest~~Page rates could cause defaults for those who financed the purchase of their houses with adjustable rate and other interest rate-sensitive financing products, which could increase the number of homes available for resale. 18

~~Prior~~Because new and modified tolaws, ~~2006~~regulations, ~~many~~and ~~home~~standards ~~buyers~~are ~~financed~~subject ~~their~~to ~~purchases~~varying ~~using~~interpretations, ~~financing~~in ~~products~~many ~~that~~cases ~~have~~due ~~adjustable~~to ~~rates,~~their ~~interest~~lack ~~only~~of ~~mortgages~~specificity, their orapplication ~~other~~in ~~mortgages,~~practice ~~including~~may ~~sub-prime~~evolve ~~mortgages,~~over ~~that~~time ~~have,~~as atnew ~~least~~guidance ~~during~~is ~~initial~~provided ~~years,~~by ~~monthly~~regulatory ~~payments~~and ~~that~~governing ~~are~~bodies. ~~significantly lower~~This ~~than~~evolution ~~those~~may result ~~required~~in bycontinuing ~~conventional~~uncertainty ~~fixed-rate~~regarding ~~mortgages.~~related Asfinancial ~~monthly~~disclosures ~~mortgage~~and ~~payments~~compliance ~~increase for these non-conventional mortgages~~matters, ~~either~~and asadditional acosts ~~result~~necessitated by ofongoing ~~increasing~~revisions ~~adjustable~~to ~~rates~~our ordisclosures asand agovernance ~~result~~practices. ofChanges ~~principal~~in ~~payments~~these ~~coming~~laws, ~~due~~regulations, ~~some~~and ofstandards ~~these~~can ~~home~~be difficult ~~buyers~~to ~~may~~predict ~~default~~and oncan ~~their~~materially ~~payments~~affect ~~and~~how ~~have~~we ~~their~~record ~~homes~~and ~~foreclosed,~~report ~~which~~our ~~would~~financial ~~increase~~condition ~~the~~and ~~inventory~~results of ~~homes available for resale~~operations. ~~Foreclosure~~In ~~sales~~some ~~and~~cases, we ~~other~~could ~~distress~~be ~~sales~~required ~~result~~to inapply ~~declines~~a new or ~~the~~revised ~~acceleration~~standard ofretroactively, ~~declines~~resulting in ~~market~~the ~~prices~~restatement ~~for~~of ~~homes below~~prior ~~what~~period ~~would otherwise occur~~financial statements. ~~This~~In ~~has~~addition, ~~happened~~the ~~across~~preparation ~~the~~of ~~country~~financial statements in ~~recent~~conformity ~~years,~~with ~~and~~accounting ~~may~~principles ~~continue.~~generally Inaccepted anin the ~~environment~~United States of ~~declining~~ ~~prices,~~America ~~many~~(“GAAP”) ~~home~~requires ~~buyers~~management ~~may~~to ~~delay~~make ~~purchases~~significant ofestimates ~~homes~~that inaffect ~~anticipation~~the offinancial statements. ~~lower~~Due ~~prices~~to in the ~~future.~~inherent Atnature ~~the~~of ~~same~~these ~~time~~estimates, as ~~lenders~~no ~~perceive~~assurance ~~deterioration~~can inbe ~~credit~~given ~~quality~~that ~~among~~we ~~home~~will ~~buyers,~~not ~~lenders~~be ~~increase~~required ~~the~~to ~~qualifications~~recognize significant, ~~needed~~unexpected ~~for~~income ~~mortgages~~ or ~~adjust~~losses ~~lending~~due ~~terms~~ to ~~address~~actual ~~increased~~results ~~credit~~varying ~~risk.~~materially ~~All~~from ofmanagement’s ~~such~~estimates. ~~actions~~Additional information ~~have~~regarding ~~a negative affect on~~ our ~~business~~critical byaccounting ~~making it~~policies ~~more~~can ~~difficult~~be ~~for~~found ~~certain~~in ofthe ~~our~~section ~~potential~~captioned ~~customers~~“Critical toAccounting ~~resell~~Policies” in ~~their~~Item 7 ~~existing~~of ~~homes~~this ~~and/or~~Annual ~~obtain~~Report ~~financing~~on ~~for~~Form ~~new homes~~10-K.

~~Changes that~~We ~~adversely~~experience ~~affect~~fluctuations ~~liquidity~~and variability in ~~the~~our ~~secondary~~operating ~~mortgage~~results ~~market~~and, ~~could~~as ~~adversely~~a ~~affect~~result, our ~~business~~historical performance may not be a meaningful indicator of future results.

~~The Federal~~We ~~National~~historically ~~Mortgage~~have experienced, ~~Association (“Fannie Mae”)~~ and ~~the~~expect ~~Federal~~to ~~Home~~continue ~~Loan~~to ~~Mortgage~~experience, ~~Corporation~~variability ~~(“Freddie Mac”)~~in ~~are~~sales ~~government-sponsored~~of ~~enterprises~~real ~~that~~estate ~~provide~~and ~~significant~~results ~~liquidity~~of tooperations ~~the~~on ~~secondary~~both ~~mortgage~~an ~~market, principally~~annual byand ~~purchasing~~a ~~mortgages~~quarterly ~~from financial institutions that lend money to home buyers~~basis. ~~Freddie~~As ~~Mac~~a ~~also~~result ~~provides~~of ~~guarantees~~such ~~on mortgages~~variability, ~~which~~ ~~allows~~our ~~borrowers~~historical toperformance ~~obtain~~may ~~financing when they would~~ not ~~otherwise~~ be ~~able~~a tomeaningful doindicator soof future results. ~~Since~~Factors ~~September~~that ~~2008,~~contribute ~~Fannie~~to ~~Mae~~this ~~and Freddie~~variability ~~Mac~~include: ~~have~~(i) ~~both~~the ~~been~~timing inof ~~conservatorship,~~land ~~operating~~sales; ~~under~~(ii) ~~the~~conditions ~~direction~~ of the ~~Federal~~real ~~Housing~~estate market ~~Finance~~where ~~Agency.~~we ~~This~~operate ~~status allows~~and ~~both~~of ~~entities~~the togeneral ~~continue~~economy; to(iii) ~~operate~~the ~~despite~~cyclical ~~recent~~nature ~~huge~~of ~~losses,~~the ~~using~~real ~~funding~~estate ~~from~~industry; ~~the~~(iv) ~~U.S.~~changes ~~Treasury~~in toprevailing interest ~~subsidize~~rates; ~~their operations.~~(v) ~~Either~~changes orin ~~both~~environmental ~~entities~~and ~~may~~government ~~reduce~~regulations; orand ~~alter~~(vi) the ~~scope~~availability of ~~their~~mortgage ~~activities~~or ~~to reduce future losses~~construction financing. ~~In addition~~Historically, ~~changes in~~a ~~federal~~significant ~~laws~~percentage ~~and~~of ~~regulations~~our ~~could~~real ~~have~~estate ~~the~~purchase ~~effect~~contracts ofare ~~curtailing~~entered ~~the~~into ~~activities~~in ofthe ~~Fannie~~spring ~~Mae~~ and ~~Freddie Mac~~summer months. ~~Any~~As ~~curtailment of~~a ~~the~~result ~~activities~~ of ~~Fannie~~these ~~Mae~~combined ~~and Freddie Mac~~factors, orwe ~~either~~historically ofhave ~~them,~~experienced ~~could~~uneven ~~increase~~quarterly ~~mortgage~~results, ~~interest~~with ~~rates~~lower revenues and ~~increase~~operating ~~the~~income ~~effective cost~~generally ofduring ~~homes, which could reduce~~ the ~~demand~~first ~~for our real estate~~ and ~~adversely~~fourth ~~affect~~quarters ~~our business and results~~ of ~~operations~~the year.

~~Page~~Changes 15in accounting principles, interpretations and practices may affect our reported revenues, earnings and results of operations.

~~New~~Generally accepted accounting principles and the accompanying standards, implementation guidelines, interpretations and practices for certain aspects of our business are complex and ~~requirements~~may ~~regarding~~involve ~~consumer~~subjective ~~loans~~judgments, ~~that~~estimates ~~adversely~~and assumptions, such as revenue recognition, inventory valuations and income taxes. Changes in interpretations could significantly affect ~~liquidity~~our reported revenues, earnings and operating results, and could add significant volatility to those measures without a comparable underlying change in ~~the~~cash ~~secondary~~flows ~~mortgage~~from ~~market~~operations. The imposition of new accounting standards (e.g., International Financial Reporting Standards) could ~~adversely~~result ~~affect~~in increased expenses as we may be required to modify our ~~business~~current practices and systems in order to comply with such standards.

InPage 2010, the Dodd-Frank Act was signed into law and established several new standards and requirements (including risk retention obligations) relating to the origination, securitizing and servicing of, and consumer disclosures for, residential consumer mortgage loans. In addition, the Dodd-Frank Act requires bank and securities market regulators to issue new regulations regarding financial institutions generally, and many of these regulations have yet to be written. There is no way to know the extent of these yet-to-be-written regulations and their affect on financial institutions generally, or on consumer loans, including, but not limited to, residential consumer mortgage loans. In addition, United States and international banking regulators have proposed or enacted higher capital standards and requirements for financial institutions. These standards and requirements, as and when implemented, are expected to further reduce the availability of loans to borrowers and/or increase the costs to borrowers to obtain such loans. Federal regulators and legislators are also discussing steps that may significantly reduce the ability or authority of the Federal Housing Administration (“FHA”), Fannie Mae and Freddie Mac to purchase or insure residential consumer mortgage loans. In the last few years, the FHA, Fannie Mae and Freddie Mac have purchased or insured substantially all new residential consumer mortgage loans originated by lenders and other mortgage banking services providers. Since 2010, investors in residential consumer mortgage-backed securities, as well as the FHA, Fannie Mae and Freddie Mac, have increasingly demanded that lenders and other mortgage banking services providers, brokers and other institutions, or their agents, repurchase the loans underlying the securities based on alleged breaches of underwriting standards or of representations and warranties made in connection with transferring the loans. To the extent that these “put-back” demands are successful, such demands could cause lenders and other mortgage banking services providers and brokers to further curtail their residential consumer mortgage loan origination activities due to reduced liquidity. Concerns about the soundness of the residential consumer mortgage lending and mortgage finance industries have also been heightened due to allegedly widespread errors by lenders and other mortgage banking services providers or brokers, or their agents, in the processing of residential consumer mortgage loan foreclosures and sales of foreclosed homes, leading to voluntary or involuntary delays and higher costs to finalize foreclosures and foreclosed home sales, and greater court and regulatory scrutiny. In February 2012, governmental authorities and five of the country’s largest banks agreed to a settlement of litigation that would provide relief to perhaps as many as several million current and former homeowners affected by these processing errors; nevertheless, it is not clear how many and to what extent this settlement will assist borrowers who are delinquent and facing foreclosure.19

~~Page~~Our 16failure to file timely reports or any material inaccuracies in our reports may subject us to regulatory or shareholder litigation, which may materially and adversely affect our business.

■Our ~~Risks~~failure to file ~~Relating~~our reports in a timely manner or any material inaccuracies in our reports may subject us to ~~Our~~regulatory ~~Business~~or shareholder litigation, which may divert the attention of our management and force us to expend resources to defend against such claims. Any litigation may have a material and adverse effect on our business and future results of operations.

WeThere ~~have~~may ~~operated~~be atdeficiencies awith ~~loss~~our internal incontrols ~~recent~~that require improvements, and we will be exposed to potential risks from legislation requiring companies to ~~years~~evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

WeWhile ~~operated~~we atbelieve ~~a loss~~that ~~and~~we ~~experienced~~currently ~~negative~~have ~~operating~~adequate ~~cash~~internal ~~flow~~control ~~each~~procedures ~~year~~in ~~beginning~~place, ~~with~~we ~~2007.~~are Astill ~~substantial~~exposed ~~portion~~to ofpotential ~~our~~risks ~~negative~~from ~~cash~~legislation ~~flow is~~requiring ~~due~~companies to ~~the~~evaluate ~~carrying~~controls ~~costs,~~under ~~primarily~~Section 404(a) ~~property~~of ~~taxes,~~the ofSarbanes-Oxley ~~our~~Act ~~land~~of 2002. Under ~~Since~~the ~~2007,~~supervision weand ~~have~~with the ~~funded~~participation of our ~~operations~~management, ~~primarily~~we ~~through~~have evaluated our ~~cash~~ ~~balances~~internal ~~and~~controls ~~cash~~system ~~reserves.~~in ~~Our~~order ~~financial~~to ~~performance~~allow inmanagement ~~the~~to ~~near~~report ~~future~~on our ~~continues~~internal tocontrols, beas ~~challenged~~required by ~~the~~Section 404(a) ~~weakness~~of inthat ~~the real~~Act. We ~~estate~~have ~~market~~performed inthe system and ~~around~~process ~~Boiling~~evaluation and ~~Spring~~testing ~~Lakes.~~which ~~For~~we ~~these~~believe ~~reasons,~~is werequired ~~expect~~in toan ~~continue~~effort to ~~generate~~comply ~~negative~~with ~~operating cash~~the ~~flow~~management ~~and~~certification torequirements ~~operate~~of atSection 404(a). As a ~~loss~~result, ~~until~~ we ~~see~~have aincurred ~~recovery~~and will in the ~~local~~future ~~real~~incur ~~restate~~additional ~~market~~expenses and a diversion of management’s time. If we Weare ~~cannot~~not ~~predict~~able ~~when~~to ~~such~~meet athe ~~recovery will~~requirements ~~occur,~~of ~~and,~~Section 404(a) ~~accordingly,~~in wea ~~cannot~~timely ~~predict~~manner ~~when,~~or ifwith atadequate ~~all~~compliance, we ~~will~~might ~~begin~~be ~~generating~~subject to ~~positive~~sanctions ~~operating~~or ~~cash~~investigation ~~flow~~by orregulatory ~~our~~authorities, ~~financial conditions~~such ~~will~~as ~~begin~~the ~~to improve~~SEC.

AFailure ~~new~~to ~~recession~~maintain effective internal incontrol ~~the~~over ~~national~~financial ~~economy,~~reporting orcould have a ~~deterioration~~material inadverse ~~national~~effect oron ~~regional~~our ~~economic conditions~~business, ~~especially~~our inoperating ~~North~~results ~~Carolina,~~and ~~could~~the ~~continue to~~value ~~adversely affect~~ of our ~~business~~units.

~~The~~Maintaining effective ~~last~~internal ~~recession~~control over financial reporting is necessary for us to produce reliable financial reports and is important in ~~the~~helping to Uprevent financial fraud.S. ~~technically~~If ~~ended~~we inare ~~June~~unable ~~2009;~~to ~~however~~maintain adequate internal control over financial reporting, ~~major~~our ~~portions~~business operating results and financial condition could be harmed. On an annual basis, we will furnish an assessment by our management on the design and operating effectiveness of our internal control over financial reporting with our Annual Report on Form 10-K. During the ~~country~~course of the documentation and ~~North~~testing ~~Carolina~~necessary ~~have~~to ~~continued~~make our annual assessment, we may identify significant deficiencies or material weaknesses that we may be unable to ~~see~~remediate ~~high~~before ~~unemployment~~the ~~and~~requisite ~~reduced~~deadline ~~consumer~~for ~~spending~~that report. AIf ~~new~~our ~~recession~~management ~~will~~were to conclude in its reports that our internal control over financial reporting was not effective, this could have a material adverse effect on our ~~business,~~ability ~~results of~~to ~~operations,~~process and report financial ~~condition.~~information Ifand ~~economic~~the ~~conditions~~value ~~were~~of ~~to deteriorate,~~ our ~~financial~~partnership ~~condition~~units could ~~worsen~~decline significantly.

WePage ~~may not be able to conduct successful operations in the future.~~20

~~The~~Errors ~~results~~in ofestimates ~~our operations~~and ~~will depend upon, among other things, our ability to market our real estate. Our operations may not generate income~~judgments ~~sufficient~~that toaffect ~~meet~~decisions ~~operating~~about ~~expenses~~how orwe ~~may~~operate ~~generate income~~ and ~~capital~~on ~~appreciation, if any, at rates lower than those anticipated or necessary to sustain~~ our ~~business.~~reported ~~Our~~amounts ~~operations~~of ~~may be affected by many factors~~assets, ~~some known by us~~liabilities, ~~some~~revenues ~~unknown,~~ and ~~some of~~expenses ~~which are beyond our control. Any of these problems, or a combination thereof,~~ could have a ~~materially~~material ~~adverse~~impact ~~effect~~ on ~~our viability as an entity and might cause the investment of our unitholders to be impaired or lost~~us.

WeIn the ordinary course of business, we must make estimates and judgments that affect decisions about how we operate and the reported amounts of assets, liabilities, revenues and expenses. These estimates include, but are ~~subject~~not limited to, those related to: recognition of income and expenses; impairment of assets; estimates of sales levels and sales prices; capitalization of costs to ~~risks~~our ~~associated~~inventory of real estate held for sale; and cost of complying with ~~changes~~government inregulations. ~~interest~~We ~~rates~~base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, we evaluate and adjust our estimates based upon the information then currently available. Actual results may differ from these estimates, assumptions and conditions.

~~The real~~Information ~~estate~~technology ~~business~~failures ~~is particularly sensitive to changes in interest rates. Generally, demand for real estate decreases when interest rates are high or increasing,~~ and ~~demand~~data ~~for~~security ~~real estate increases when interest rates are low or decreasing. An increase in interest~~breaches ~~rates~~ could ~~reduce~~harm the demand for land that we sell or may in the future seek to develop. Any such reduction in demand could adversely affect the amount of land we can sell or reduce the prices we can charge for real estate, either of which could result in a decrease in our ~~revenues and earnings~~business.

~~Page~~We 17use information technology, digital communications and other computer resources to carry out important operational activities and to maintain our business records. Many of these resources are maintained on our behalf by third-party service providers. Although we and our service providers employ what we believe are adequate security and other preventative and corrective measures, our ability to conduct our business may be impaired if these resources are compromised, degraded, damaged, or fail, whether due to a virus or other harmful circumstance, intentional penetration, or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption failure or error, telecommunications system failure, service provider error or failure, or otherwise. A significant and extended disruption in the functioning of these resources could damage our reputation and cause us to lose customers, sales and revenue, result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information (including information about our customers and business partners), and require us to incur significant expense to address and remediate or otherwise resolve these kinds of issues. The release of confidential information may also lead to litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include penalties or fines, could have a material and adverse effect on our financial statements. In addition, the costs of maintaining adequate protection against such threats, depending on their evolution, pervasiveness and frequency and/or government-mandated standards or obligations regarding protective efforts, could be material to our financial statements in a particular period or over various periods.

~~Many buyers~~■ ofRisks ~~our~~Relating real estate finance their purchases through construction loans or mortgages obtained from local banks or other financial institutions. Increases in interest rates or decreases in availability of construction or mortgage financing could reduce the market for real estate. Potential purchasers may be less willing or able to ~~pay~~Investments the increased monthly costs or to obtain financing that exposes them to interest rate changes. Lenders may further increase the qualifications needed for construction loans and mortgages or adjust their terms to address any increased credit risk as a result of current and future changes in ~~lending~~Real practices arising from subprime financing practices of certain lenders. Even if potential customers do not need financing, changes in interest rates and mortgage availability could make it harder for them to sell their current homes to potential buyers who need financing. These factors could adversely affect the sales or pricing of our land.Estate

We invest much of our cash in an interest-bearing money market account at a local financial institution and/or in U.S. Treasury securities and/or certificates of deposit having a maturity of one year or less that are ~~held to maturity and we may invest cash . We have exposure to changes~~ insubject interest rates in that: (a) at the time any such Treasury security or certificate of deposit matures, if the interest rate is lower for newly purchased Treasury securities or certificates of deposit than that on the maturing security, future interest income will decrease due to ~~the~~risks ~~lower~~associated ~~interest rate, and (b) interest rates paid on money market balances fluctuate~~ with ~~changes~~investments in ~~market interest~~real ~~rates, therefore, interest earned on balances held in a money market account will decrease if market interest rates decrease~~estate.

WeOur ~~currently have no long-term debt; however~~revenues, ~~if we were to incur debt in the future, we would have exposure to changes in market interest rates. If~~financial ~~we were to incur fixed rate debt~~performance, weand ~~would have exposure to changes in market interest rates at~~ the ~~time~~value ~~such~~of ~~debt~~our ~~matures~~real inestate ~~that a market interest rate higher than that on the maturing debt: (a)~~ may ~~lower~~decline ~~the amount of proceeds secured from a refinancing, and (b) will decrease cash flow from future operations~~ due to ~~the~~factors ~~higher~~that ~~interest~~adversely ~~rate.~~affect Ifreal weestate ~~were~~generally toand ~~incur floating rate debt,~~those wethat ~~would~~are ~~also~~specific ~~have exposure~~ to ~~changes~~our inproperty. ~~market~~Factors ~~interest~~that ~~rates~~may inadversely ~~that~~affect ~~with~~real ~~increases~~estate ingenerally ~~market~~include, ~~interest~~among ~~rates~~others, ~~interest~~the ~~costs on such debt would increase and cash flow from future operations would decrease while such floating rate debt is outstanding.~~following:

WePage ~~may be unable to obtain financing.~~21

As• ofIncreases December 31, 2011, our total consolidated debt was zero. There can be no assurance that the amounts available from internally generated funds, cash on hand, and sale of assets will be sufficient to fund our anticipated operations and meet existing and future liabilities. We may be required to seek additional capital in ~~the~~interest ~~form of a loan from a bank or other lender~~rates. Should we undertake any development activities, our business and earnings would also be substantially dependent upon our ability to obtain financing for those activities. No assurance can be given that such financing will be available or, if available, will be on terms favorable to us. If we are not successful in obtaining sufficient capital to fund the implementation of our business strategy and for other expenditures, we might be required to sell property for far less than their market value.

~~Page~~• 18A general tightening of the availability of credit.

~~Our~~• ~~customers~~A ~~may~~decline bein ~~unable~~the tolevel ~~obtain financing~~of employment.

~~Many purchasers~~• ofA ~~our~~decline real estate may need to obtain mortgage loans to finance the purchase of land from us and/or the construction costs of homes to be built on land purchased from us. In the last couple of years, many mortgage lenders and investors in ~~mortgage loans~~economic ~~have experienced severe financial difficulties arising from losses incurred on sub-prime and other loans originated before the downturn in the real estate market~~conditions. Banking operations remain unsettled and the future of certain financial institutions remains uncertain. Due to these problems, the supply of mortgage products has been constrained, and the eligibility requirements for borrowers have been significantly tightened. These problems in the mortgage lending industry could adversely affect potential purchasers of our real estate, thus having a negative effect on demand for our real estate.

We• ~~are~~A ~~vulnerable~~decline toin ~~concentration risks~~consumer ~~because our operations are currently exclusive to a Brunswick County, North Carolina submarket~~confidence.

~~Our~~• real estate activities are entirely located in the City of Boiling Spring Lakes, in Brunswick County, North Carolina. Because of our geographic concentration, our operations are more vulnerable to local economic downturns and adverse project-specific risks than those of larger, more diversified real estate companies. The performance of the Brunswick County economy greatly affects our sales and, consequently the underlying values of our property. The Brunswick County economy is heavily influenced by conditions and employment in the defense industry, recreation, and in government. A ~~downturn~~decline in ~~the~~consumer ~~defense or recreation industry may have a particularly strong adverse affect on our sales and, consequently, the underlying values of our property~~income. ~~A decrease in the size of government or in government-supported projects, through budget cuts or otherwise, could adversely affect the economy in our market.~~

~~The~~• ~~economic~~An ~~growth of~~adverse ~~Southeastern~~change ~~North Carolina is an important factor~~ in ~~creating demand for our real estate~~demographics. One fundamental factor in the economic growth of that region is the need for state and local governments, in combination with the private sector, to plan and complete significant infrastructure improvements in the region, such as new roads, new medical facilities, and schools. The future economic growth of the region and our financial results may be adversely affected if its infrastructure is not improved. There can be no assurance that new improvements will occur or that existing projects will be completed.

~~Page~~• 19An increase in competition for customers.

~~One significant~~• ~~infrastructure~~The ~~improvement~~adoption ~~that~~on ~~has been proposed for Southeastern North Carolina is~~ the ~~North Carolina International Terminal. NC International Terminal~~national, ~~a marine cargo facility intended to be capable of handling 1.5 million containers annually~~state, is ~~planned~~or tolocal ~~handle~~level ~~some~~ of ~~the~~more ~~very~~restrictive ~~large~~laws ~~container~~ and ~~cargo~~governmental ~~ships that are expected to sail to the East Coast of the United States from Asia upon the opening~~regulations, ~~estimated~~including ~~for~~more ~~2014,~~restrictive ~~of the widened Panama Canal. Currently~~zoning, that canal’s two lanes of locks can handle ships no larger than 965 feet long and 106 feet wide. With the new third set of locks, the canal will be able to handle ships that are 25% longer and 50% wider, and are capable of carrying two to tree times the cargo, of the current maximum-sized ships. The proposed site for NC International Terminal is a 600-acre undeveloped industrial site near Southport, North Carolina and approximately eight miles from Boiling Spring Lakes. The land ~~has~~use ~~been~~or acquired but construction of the site infrastructure and the supporting road and rail links has not yet commenced. The North Carolina State Ports Authority originally projected a 2017 opening date; however, environmental ~~and other approvals have yet to be obtained~~regulations, and ~~significant~~increased ~~opposition~~real toestate ~~the project from community organizations and others led the North Carolina legislature in 2010 to halt further funding for the project’s planning and development~~taxes. Legal challenges to the cargo facility remain outstanding or are contemplated, and there is no assurance that these lawsuits or any future legal challenges to the new cargo facility will be successfully resolved, or that the North Carolina legislature will fund future planning and development. Also, there is no assurance that the construction of the cargo facility will not encounter other difficulties, such as financing issues, construction difficulties, or cost overruns, that may delay or prevent the completion of the new cargo port. We believe that the construction and completion of NC International Terminal would be greatly beneficial to the overall economic development of Southeastern North Carolina and to our business prospects; however, if the new cargo facility is not completed, the effect on our business prospects is unclear. Even if NC International Terminal were to be built, there is no assurance that additional shipping traffic will utilize the facility, since other East Coast ports, notably Charleston, SC, Savannah, GA, and New Orleans, LA, have plans to expand marine cargo capacity.

~~Attracting~~Additional ~~new employers~~factors that ~~can~~may ~~create~~adversely ~~new~~affect ~~jobs~~our isproperty aspecifically ~~key factor in the economic growth of Southeastern North Carolina. In order to improve the economy of the region~~include, ~~state~~among ~~and local governments~~others, ~~along with~~ the private sector, must seek to attract employers capable of employing large numbers of new employees. State governments, particularly in the Southeast United States, and local governments within North Carolina compete intensely for such new jobs. There can be no assurance that efforts to attract new employers to locate facilities in Southeastern North Carolina will be successful.following:

~~Changes in~~• ~~the~~A ~~demographics~~decline ~~affecting projected population growth~~ in ~~Southeastern~~the ~~North~~economic ~~Carolina,~~conditions ~~including a decrease~~ in ~~the migration of Baby Boomers, could adversely affect~~ our ~~business~~primary market.

~~Our business~~• ~~prospects~~Adverse ~~depend~~changes in ~~part~~the ~~upon~~perceptions ~~strong~~of ~~in-migration~~prospective ~~population~~purchasers ~~growth~~of ~~in Southeastern North Carolina. We believe that Baby Boomers seeking retirement or vacation homes in or close to~~ the ~~Grand~~attractiveness ~~Strand and other parts~~ of ~~coastal North Carolina will remain important target customers for~~ our real estate ~~in the future~~. Southeastern North Carolina’s population growth could be negatively affected in the future by factors such as adverse economic conditions, the occurrence of hurricanes, and the high cost of real estate, insurance and property taxes. Furthermore, those persons considering moving to the Grand Strand or other parts of coastal North Carolina may not view Boiling Spring Lakes as an attractive place to live or own a second home, and may choose to live in another region of the state. In addition, as an alternative to North Carolina, other states, such as Florida, Georgia, South Carolina, and Tennessee, remain or are increasingly becoming retirement destinations and are attracting retiring Baby Boomers and the workforce population who may have otherwise considered moving to Southeastern North Carolina.

~~Page~~• 20An increase in supply of, or a decrease in demand for, houses and/or homesites in our primary market.

~~Our~~• ~~business~~Opposition ~~may~~from belocal ~~adversely~~community ~~affected by~~or ~~changes~~political ingroups ~~income~~with ~~tax~~respect ~~laws~~to development or construction at one or more particular sites.

~~Changes~~• inIncreased ~~federal income~~efforts ~~tax~~by ~~laws~~government ~~may affect demand for real estate. Various proposals have been publicly discussed~~ to ~~limit~~protect orendangered ~~eliminate mortgage interest deductions~~ and ~~to limit~~ /or ~~eliminate~~protected ~~the~~species, ~~exclusion of gain from the sale of a principal residence. Enactment of~~ such ~~proposals may~~as ~~have an adverse effect on~~ the ~~homebuilding~~Red-cockaded ~~industry~~Woodpecker, inthrough ~~general~~laws and,/or inregulations ~~turn, on businesses, such as ours,~~ that ~~sell~~limit ~~undeveloped real~~or ~~estate.~~prohibit Wedevelopment ~~cannot~~or ~~make~~construction aat ~~meaningful~~one ~~prediction~~or asmore ~~to whether any such proposals will be enacted and, if enacted, the~~ particular ~~form~~ ~~such laws would take~~sites.

We• ~~are subject~~A tochange ~~risks~~in ~~associated~~existing ~~with~~comprehensive ~~changes~~zoning inplans ~~property~~or ~~taxes~~zoning ~~and~~regulations ~~government~~that ~~fees~~impose additional restrictions on use or requirements with respect to our property.

~~Increases~~• inOur ~~real~~inability ~~estate taxes and other local government fees, such as fees imposed on developers~~ to ~~fund schools, local fire departments, open space, road improvements and/or~~ provide ~~low~~adequate ~~and~~management ~~moderate income housing, could increase our costs~~ and ~~have~~maintenance anor ~~adverse effect on our operations and earnings. Increases in local real estate taxes could also adversely affect potential customers who may consider those costs in determining whether~~ to ~~reside~~obtain inadequate ~~Boiling Spring Lakes or elsewhere~~insurance.

We• ~~may~~An beincrease ~~unable~~in toour ~~obtain~~operating ~~insurance at a reasonable cost or we may suffer damage to uninsured property~~costs.

We• ~~may~~New ~~experience~~development economic harm if any damage to our real estate is not covered by insurance. We carry comprehensive liability and fire insurance coverage on our property. We believe all our property is adequately insured; however, we cannot guarantee that the limits of ~~our current policies will be sufficient in the event of~~ a ~~catastrophe~~competitor’s ~~to our~~ property~~. We may~~ ~~suffer~~close ~~losses~~to ~~that are not covered under~~ our insurance policies. For example, losses resulting from war or from environmental liabilities generally are not covered by insurance. If an uninsured loss or a loss in excess of insured limits should occur, we could lose capital invested in a property~~, as well as any future revenue from the sale of such property~~. ~~We would nevertheless remain obligated on any mortgage indebtedness or other obligations, if any, related to the property.~~

~~Due~~Adverse inchanges ~~large part to~~in ~~the~~any ~~terrorist activities~~ of ~~September~~these ~~11,~~conditions ~~2001~~generally, ~~insurance~~or ~~companies re-examined many aspects of their business and took certain actions~~ in ~~the~~our ~~wake~~primary ~~of these terrorist activities~~market, ~~including~~could ~~increasing~~decrease ~~premiums,~~demand ~~mandating higher self-insured retentions~~ and ~~deductibles,~~ ~~reducing~~pricing ~~limits,~~for ~~restricting~~our ~~coverages,~~real ~~imposing~~estate ~~exclusions~~or ~~(such~~result ~~as sabotage and terrorism), and refusing to underwrite~~in ~~certain~~customer ~~risks~~cancellations ~~and classes~~ of ~~business.~~pending ~~Significantly increased premiums~~contracts, ~~mandated~~which ~~exclusions, or changes in limits, coverages, terms, and conditions~~ could adversely affect ~~our~~the ~~ability~~amount toof ~~obtain~~land ~~appropriate~~we ~~insurance~~can ~~coverages.~~sell ~~However,~~or atreduce ~~this time~~ the ~~only~~prices ~~impact~~we oncan ~~our~~charge ~~business~~for ~~has~~our ~~been~~real ~~an increase in insurance premiums~~estate.

Page 2122

~~Increases in~~Our ~~property~~real ~~insurance~~estate ~~premiums~~business ~~and~~is ~~decreases in the availability of homeowner property insurance in the coastal regions of North Carolina could reduce customer demand for our property~~competitive.

~~Homeowner~~The real estate business ~~property~~is ~~insurance~~highly ~~companies~~competitive. ~~doing~~We ~~business~~compete inwith ~~the~~a ~~portions~~large number of ~~the~~companies ~~southeastern~~and ~~United~~individuals, ~~States~~many ~~that~~of whom are ~~most~~believed ~~subject~~ to ~~occasional~~have substantially ~~hurricanes~~greater ~~have~~financial ~~reacted~~and toother ~~recent~~resources ~~hurricanes~~than bywe ~~significantly~~have. ~~increasing~~Some ~~premiums,~~of ~~requiring~~our ~~higher~~competitors ~~deductibles,~~are ~~reducing~~active ~~limits, restricting~~in ~~coverages,~~markets ~~imposing~~in ~~exclusions,~~other ~~refusing~~regions toor ~~insure~~throughout the ~~certain~~entire ~~property~~United ~~owners,~~States. ~~and~~Some inof ~~some~~our ~~instances,~~competitors ~~ceasing~~may ~~insurance operations~~be inwilling ~~particular~~to ~~states.~~sell Ittheir isproperty ~~uncertain~~at ~~what~~prices ~~effect~~significantly ~~these~~lower ~~actions~~than ~~will~~our prices ~~have~~for onsimilar property. ~~insurance~~Our ~~availability~~ability ~~and~~to ~~rates~~ weather downturns in the ~~coastal~~local ~~regions~~real ofestate ~~North~~market ~~Carolina.~~or ~~This~~respond ~~trend~~to ofchanging ~~decreasing~~trends ~~availability~~in the ofreal ~~insurance~~estate ~~and~~business ~~rising~~may ~~insurance~~be ~~rates~~substantially ~~could~~less ~~continue if~~than ~~there~~some ~~are~~or ~~severe~~many ~~hurricanes~~of inour ~~the future~~competitors.

~~The increasing~~Our ~~costs~~real ofestate ~~property~~industry ~~insurance~~is premiums in the coastal regions of North Carolina, as well as the decrease in private property insurers, could (1) deter potential customers from purchasing a home or homesite in Boiling Spring Lakes, or (2) make Southeastern North Carolina less attractive to new employers that can create high quality jobs needed to spur growth in the region, either of which could have a material adverse effect on our financial condition and results of operationscyclical.

The sale ~~occurrence~~and development of real estate is cyclical and highly sensitive to changes in general and local economic conditions, such as employment levels and job growth, consumer confidence and income, availability of ~~hurricanes~~financing for home builders and homebuyers, interest rate levels, and housing demand. The real estate industry can experience downturns based on consumer perceptions of real estate markets and other ~~natural~~cyclical ~~disasters~~factors, which factors may work in ~~Southeastern~~conjunction ~~North~~with ~~Carolina~~or be wholly unrelated to general economic conditions. Sales of undeveloped land are also affected by the supply of alternatives to new homes, such as rental property and existing homes, including foreclosed homes. Furthermore, our business is affected by seasonal fluctuations in customers interested in purchasing real estate, with the spring and summer months traditionally being the most active time of year for customer traffic and sales. As a consequence, our real estate operations are cyclical, which could ~~adversely~~cause ~~affect~~our revenues and earnings to fluctuate significantly from quarter to quarter and from year to year, and to differ materially from the expectations of our ~~business~~management and investors. Should we be unable to manage effectively our cash flows from operations, our ability to service any future debt and to meet working capital requirements could be adversely affected.

~~Because of~~Our its location on the Atlantic Ocean, Southeastern North Carolina is particularly susceptible to the occurrence of hurricanes. Depending on where any particular hurricane makes landfall, our property could experience significant, if not catastrophic, damage. Such damage could materially delay sales in or could lessen demand for real estate inassets ~~affected~~are ~~coastal communities~~illiquid. Importantly, regardless of actual damage to a development, the occurrence of hurricanes in North Carolina and the Southeastern United States could negatively affect demand for our real estate because of consumer perceptions of hurricane risks. In addition to hurricanes, the occurrence of other natural disasters in North Carolina, such as tornadoes, floods, fires, unusually heavy or prolonged rain, and droughts, could have a material adverse effect on our ability to sell our property. In the past, our operations have been affected by such occurrences through lower real estate sales and higher operating and capital costs associated with clean-up and repairs in the aftermath of such occurrences. The occurrence of natural disasters could also have a long-term negative effect on the attractiveness of Southeastern North Carolina as a location for seasonal and/or primary residences.

~~The~~Real estate ~~occurrence~~generally cannot be sold quickly. We experience great volatility in the sale of our land, especially our commercial land and tracts. In the past five years, we have had no sales of ~~drought~~commercial land and tracts and very few sales of individual lots, including none in ~~Southeastern~~two ~~North~~of ~~Carolina~~the ~~could~~past ~~adversely~~five ~~affect~~years. It may not be possible for us to sell property on favorable terms when it is to our ~~business~~economic advantage to do so. The illiquidity of real estate investments generally may impair our ability to respond promptly to changing circumstances. This is especially true in the case of the proposed bulk sale of our property. See “We are undertaking the bulk sale of our property, although there can be no assurance that we will be able to sell our property before we run out of cash to fund our operations.”

~~Due~~Page to drought or near-drought conditions for much of 2007 in Southeastern North Carolina, nearly all of the lakes within the City of Boiling Spring Lakes had a water level that was substantially below normal. These conditions resulted in a lowering of the water table, and one or more sink holes developed in the bed of Boiling Spring Lake, the largest lake in the community, which resulted in a further lowering of the water level of that lake. A series of remedial measures taken by the City solved the issue of the sink holes; however, the lack of normal rainfall prevented the lakes, including Boiling Spring Lake, from returning to approximately normal levels for some time. A return of protracted drought or near-drought conditions in Southeastern North Carolina could result in a reoccurrence of substantially lower water levels, including in Boiling Spring Lake, and the reoccurrence of one or more sink holes. The occurrence of such eventualities could have a material adverse effect on our ability to sell our property.23

~~Page~~The 22real estate industry has experienced a prolonged and severe downturn that may continue in some portions of the country for an indefinite period and adversely affect our business and results of operations.

~~Increases~~The National Bureau of Economic Research, an independent group of economists charged with identifying the beginning and end of recessions in the United States, concluded that the Great Recession, the longest and deepest downturn for the U.S. economy since the Great Depression, started in December 2007 and ended in June 2009. The difficulties faced by the real estate ~~property~~industry ~~taxes~~started ~~could~~before December ~~reduce~~2007, ~~customer~~however, continued into 2012, and may extend into and beyond 2013. Since 2006, our market and the U.S. real estate industry as a whole have experienced a significant and sustained decrease in demand for new homes and ~~homesites~~an inoversupply ~~our~~of new and existing homes available for sale compared to prior years. High levels of unemployment, reduced consumer spending, and significantly tighter lending standards for borrowers continue to adversely affect the domestic housing market. Home foreclosures and forced sales by homeowners under distressed economic conditions have contributed to the high levels of inventories of homes and homesites available for sale. The collapse of demand for real estate and high levels of inventories have caused prices for residential real estate to significantly decline compared to prior years.

~~Brunswick~~These ~~County~~adverse ~~experienced~~market ~~significant~~conditions ~~increases~~have innegatively ~~property~~affected ~~values~~our ~~during~~residential ~~the~~and ~~record-setting~~commercial real estate ~~activity in the first half of the last decade~~business. AsOur arevenues ~~result,~~from ~~many local governments have been, and may continue, aggressively re-assessing~~ the sale ~~value~~ of ~~homes and~~ real estate ~~for~~are ~~property~~drastically ~~tax~~lower ~~purposes.~~than ~~These~~before ~~larger~~2008, ~~assessments~~which ~~increase~~has ~~the~~had ~~total~~an ~~real~~adverse ~~estate~~affect ~~property~~on ~~taxes~~our ~~due~~financial ~~from~~condition ~~property owners~~and ~~annually. Because~~ results of ~~decreased revenues from other sources due to economic factors, many local governments have also increased their property tax rates~~operations.

~~The~~While some ~~current~~sections ~~costs~~ of ~~real~~ ~~estate~~the ~~property~~country ~~taxes~~saw insome ~~Brunswick~~improvement ~~County, and future increases~~ in ~~property~~the ~~taxes,~~real ~~could~~estate ~~(1) deter~~market ~~potential customers from purchasing a lot or home~~ in ~~Boiling Spring Lakes~~2012, orwe ~~(2) make~~do ~~Brunswick~~not ~~County~~know ~~less~~if ~~attractive~~such toimprovement ~~new~~will ~~employers that~~spread ~~can~~to ~~create~~other ~~high-quality~~sections ~~jobs~~of ~~needed~~the tocountry, ~~spur~~if ~~growth~~at inall, ~~the~~or ~~region,~~when ~~either~~real ofestate ~~which~~markets ~~could~~will ~~have~~return ato ~~material~~more ~~adverse~~normal ~~effect~~conditions. onOur ~~our~~business ~~financial~~will ~~condition~~continue ~~and~~to ~~results~~suffer ofuntil ~~operations~~market conditions improve.

WeIncreasing interest ~~are~~rates ~~subject~~could tocause ~~numerous~~defaults ~~laws~~for those who financed the purchase of their houses with adjustable rate and other interest ~~regulations~~rate-sensitive ~~regarding~~financing products, which could increase the ~~sale~~number of ~~real~~homes ~~estate~~available for resale.

~~The~~Prior to ~~real~~2006, ~~estate~~many ~~industry is~~home ~~governed~~buyers byfinanced ~~various~~their ~~federal,~~purchases ~~state~~using financing products that have adjustable rates, ~~and~~interest ~~local~~only ~~laws~~mortgages, or ~~and~~other ~~regulations~~mortgages, including ~~the~~sub-prime ~~Fair~~mortgages, ~~Housing~~that ~~Act~~have, ~~the~~at ~~Real~~least ~~Estate~~during ~~Settlement Procedures~~initial ~~Act~~years, ~~state~~monthly ~~and~~payments ~~local~~that ~~real~~are ~~estate~~significantly lower ~~broker~~than ~~licensing~~those ~~laws~~required by conventional fixed-rate mortgages. As monthly mortgage payments increase for these non-conventional mortgages, ~~federal~~either ~~and~~as ~~state~~a ~~laws~~result ~~prohibiting~~of ~~unfair~~increasing ~~and~~adjustable ~~deceptive~~rates ~~acts~~or as a result of principal payments coming due, some of these home buyers may default on their payments and ~~practices~~have their homes foreclosed, ~~and~~which ~~federal~~would increase the inventory of homes available for resale. Foreclosure sales and ~~state~~other ~~advertising~~distress ~~laws~~sales result in declines or the acceleration of declines in market prices for homes below what would otherwise occur. ~~Failure~~This tohas ~~comply~~happened ~~with~~across ~~these~~the ~~requirements~~country in recent years, and may ~~result~~continue. inIn an environment of declining prices, ~~among~~many ~~other~~home ~~things~~buyers may delay purchases of homes in anticipation of lower prices in the future. At the same time, ~~revocation~~as oflenders ~~required~~perceive ~~licenses~~deterioration in credit quality among home buyers, ~~indemnification~~lenders ~~liability~~increase the qualifications needed for mortgages or adjust lending terms to ~~contract~~address ~~counterparties,~~increased ~~administrative~~credit ~~enforcement~~risk. All of such actions, ~~and~~have a negative affect on our business by making ~~civil~~it more difficult for certain of our potential customers to resell their existing homes and/or ~~criminal~~obtain ~~liability~~financing for new homes.

~~Our~~Page ~~property is subject to numerous laws and regulations regarding real estate.~~24

~~At December 31, 2011,~~Changes wethat ~~owned,~~adversely ~~among~~affect ~~other~~liquidity ~~land, approximately 244 acres of undeveloped, unplatted land intended for residential use, and approximately 219 additional acres of undeveloped, unplatted land intended for commercial use. Changes~~ in ~~zoning~~the orsecondary ~~other~~mortgage ~~regulations~~market ~~may~~could ~~prevent us from subdividing all or a substantial portion of such acreage, which, in turn, may~~ adversely affect our ~~ability to generate revenue from real estate sales and/or our ability to effect a bulk sale of all or substantially all of our assets~~business.

~~Page~~The Federal 23National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are government-sponsored enterprises that provide significant liquidity to the secondary mortgage market, principally by purchasing mortgages from financial institutions that lend money to home buyers. Freddie Mac also provides guarantees on mortgages, which allows borrowers to obtain financing when they would not otherwise be able to do so. Since September 2008, Fannie Mae and Freddie Mac have both been in conservatorship, operating under the direction of the Federal Housing Finance Agency. This status allows both entities to continue to operate despite recent huge losses, using funding from the U.S. Treasury to subsidize their operations. Either or both entities may reduce or alter the scope of their activities to reduce future losses. In addition, changes in federal laws and regulations could have the effect of curtailing the activities of Fannie Mae and Freddie Mac. Any curtailment of the activities of Fannie Mae and Freddie Mac, or either of them, could increase mortgage interest rates and increase the effective cost of homes, which could reduce the demand for our real estate and adversely affect our business and results of operations.

~~Potential~~New ~~purchasers~~standards ofand ~~land~~requirements ~~from~~regarding usconsumer ~~may~~loans ~~be subject to periodic delays or may be precluded entirely from construction on such land due to building moratoriums or “slow-growth” or “no-growth” initiatives~~ that ~~could~~adversely beaffect ~~implemented~~liquidity in the ~~future.~~secondary Amortgage ~~purchaser~~market of land from us who has received land use and building entitlements or approvals may still require a variety of other governmental approvals and permits during the construction process. The possibility of such actions could adversely affect ~~our ability to generate revenue~~ ~~from real estate sales and/or~~ our ~~ability to effect a bulk sale of all or substantially all of our assets~~business.

WeIn 2010, the Dodd-Frank Act was signed into law and established several new standards and requirements (including risk retention obligations) relating to the origination, securitizing and servicing of, and consumer disclosures for, residential consumer mortgage loans. In addition, the Dodd-Frank Act requires bank and securities market regulators to issue new regulations regarding financial institutions generally, and many of these regulations have yet to be written. There is no way to know the extent of these yet-to-be-written regulations and their affect on financial institutions generally, or on consumer loans, including, but not limited to, residential consumer mortgage loans. In addition, United States and international banking regulators have proposed or enacted higher capital standards and requirements for financial institutions. These standards and requirements, as and when implemented, are ~~subject~~expected to further reduce the availability of loans to borrowers and/or increase the costs to borrowers to obtain such loans. Federal regulators and legislators are also discussing steps that may significantly reduce the ability or authority of the Federal Housing Administration (“FHA”), Fannie Mae and Freddie Mac to purchase or insure residential consumer mortgage loans. In the last few years, the FHA, Fannie Mae and Freddie Mac have purchased or insured substantially all new residential consumer mortgage loans originated by lenders and other mortgage banking services providers. Since 2010, investors in residential consumer mortgage-backed securities, as well as the FHA, Fannie Mae and Freddie Mac, have increasingly demanded that lenders and other mortgage banking services providers, brokers and other institutions, or their agents, repurchase the loans underlying the securities based on alleged breaches of underwriting standards or of representations and warranties made in connection with transferring the loans. To the extent that these “put-back” demands are successful, such demands could cause lenders and other mortgage banking services providers and brokers to further curtail their residential consumer mortgage loan origination activities due to reduced liquidity. Concerns about the soundness of the residential consumer mortgage lending and mortgage finance industries have also been heightened due to allegedly widespread errors by lenders and other mortgage banking services providers or brokers, or their agents, in the processing of residential consumer mortgage loan foreclosures and sales of foreclosed homes, leading to voluntary or involuntary delays and higher costs to finalize foreclosures and foreclosed home sales, and greater court and regulatory scrutiny. In February 2012, governmental authorities and five of the country’s largest banks agreed to a settlement of litigation that would provide relief to perhaps as many ~~laws~~as several million current and ~~regulations~~former homeowners affected by these processing errors; nevertheless, it is not clear how ~~regarding~~many ~~environmental~~and ~~matters~~to what extent this settlement will assist borrowers who are delinquent and facing foreclosure.

WePage are subject to various federal, state and local laws, ordinances and regulations regarding environmental matters. Under these laws, we may be required to investigate and clean up hazardous or toxic substances or petroleum product releases on land currently or formerly owned by us, and may be held liable to a governmental entity or to third parties for property damage and the cost of investigation, removal and decontamination incurred by such parties. The penalty may be imposed whether or not we were aware of, or responsible for, the hazardous or toxic substances, and the liability under such laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The costs of investigation, removal and decontamination of such substances could be substantial. If such substances are found on land currently owned by us, or there is a failure to properly remove or decontaminate the area, the property could be difficult to sell, rent, or develop. Some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with such contamination. We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site.25

WeA ~~are~~new ~~subject~~recession in tothe ~~laws~~national ~~and~~economy, ~~regulations relating~~or toa ~~endangered~~deterioration in national or ~~protected~~regional ~~species~~economic conditions, especially in North Carolina, could continue to adversely affect our business.

~~Real estate development~~The islast ~~subject~~recession toin ~~various~~the ~~laws~~U.S. ~~and~~technically ~~regulations~~ended ~~intended~~in toJune ~~limit~~2009; ~~disturbance~~however, ofmajor ~~endangered~~portions ~~and protected species. Portions~~ of ~~Boiling Spring~~the ~~Lakes~~country and ~~the~~North ~~surrounding~~Carolina ~~area~~have ~~are known or believed~~ continued to besee ~~the~~high ~~habitat~~unemployment ~~of various species of flora~~ and ~~fauna~~reduced ~~which~~consumer ~~have been identified as endangered or protected species~~spending. WeA ~~may~~new berecession ~~subject~~will tohave ~~common~~a ~~law~~material ~~claims~~adverse byeffect ~~third~~on ~~parties~~our ~~based~~business, onresults of ~~damages~~operations, and ~~costs~~ ~~resulting~~financial ~~from~~condition. ~~the~~If ~~presence~~economic ofconditions ~~endangered~~were orto ~~protected~~deteriorate, ~~species~~our onfinancial orcondition ~~near~~could ~~land owned by us~~worsen.

~~The~~We ~~Red-cockaded Woodpecker is one of several species of flora and fauna on the endangered species list that inhabit or~~ are ~~believed to inhabit portions of~~ ~~Boiling~~subject Spring Lakes and the surrounding area. Fish and Wildlife notified the City of Boiling Spring Lakes in February 2006 of that agency’s concern about the rapid development within the City’s borders and the loss of mature long-leaf pines that the endangered woodpecker prefers, and of the possibility that the City could be liable for violating federal laws intended to ~~protect~~risks ~~the~~associated ~~endangered woodpecker if the City issued building permits for lots~~ with ~~nests.~~changes ~~Under~~in ~~such~~interest federal laws, (a) building and tree cutting within 200 feet of a nest tree are restricted without a federal permit, and (b) to provide a foraging area for the woodpeckers, development is restricted and cutting of long-leaf pine trees with a diameter of 10 inches or more is prohibited within a ½-mile radius around each nest siterates. ~~City ordinances are somewhat more restrictive and prohibit certain cutting of long-leaf pine trees with a diameter of 8 inches or more.~~

~~Page~~The real 24estate business is particularly sensitive to changes in interest rates. Generally, demand for real estate decreases when interest rates are high or increasing, and demand for real estate increases when interest rates are low or decreasing. An increase in interest rates could reduce the demand for land that we sell or may in the future seek to develop. Any such reduction in demand could adversely affect the amount of land we can sell or reduce the prices we can charge for real estate, either of which could result in a decrease in our revenues and earnings.

~~We believe that not~~Many ~~more~~buyers ~~than~~of ~~approximately~~our ~~200~~real ~~acres,~~estate orfinance ~~approximately~~their ~~24%,~~purchases ofthrough ~~our~~construction ~~land~~loans ~~currently~~or ~~may~~mortgages beobtained ~~affected~~from bylocal ~~restrictions~~banks ~~relating~~or toother ~~the~~financial ~~Red-cockaded Woodpecker~~institutions. ~~That~~Increases ~~land~~in isinterest ~~comprised~~rates ofor ~~approximately~~decreases ~~400~~in ~~individual~~availability ~~undeveloped~~of ~~lots,~~construction ~~approximately~~or 70mortgage ~~acres~~financing ofcould ~~unplatted,~~reduce ~~undeveloped~~the ~~land~~market ~~intended~~ for ~~residential~~real ~~use, and approximately 10 acres of undeveloped land intended for commercial use~~estate. ~~Most of~~Potential ~~that~~purchasers ~~approximately~~may ~~200~~be ~~acres~~less ~~does~~willing ~~not meet,~~ or isable ~~believed by us not~~ to ~~meet,~~pay ~~current~~the ~~health~~increased ~~codes~~monthly ~~for~~costs ~~installing~~or ~~septic~~to ~~systems~~obtain financing ~~and,~~that ~~therefore,~~exposes isthem ~~not suitable for building until a tie-in~~ to ainterest ~~sewer~~rate ~~system becomes available~~changes. AsLenders ~~land~~may infurther ~~Boiling~~increase ~~Spring Lakes is developed, however,~~ the ~~remaining~~qualifications ~~undeveloped~~needed ~~land~~for ~~within~~construction ~~the~~loans ~~City~~and mortgages ~~must~~or beadjust ~~able~~their terms to ~~support~~address ~~the~~any ~~habitat~~increased ofcredit ~~the~~risk ~~Red-cockaded~~as ~~Woodpecker; therefore,~~a ifresult ~~land~~of ~~owned~~current byand ~~others~~future ischanges ~~developed~~in ~~more~~lending ~~quickly~~practices arising ~~than~~from ~~land~~subprime ~~currently~~financing ~~owned~~practices byof ~~us,~~certain ~~then~~lenders. ~~the~~Even ~~remaining~~if ~~undeveloped~~potential ~~land owned~~customers bydo ~~us that is~~ not ~~currently~~need ~~affected~~financing, bychanges ~~restrictions~~in ~~may become affected. Since mature long-leaf pines are typically located~~interest onrates ~~land~~and ~~that~~mortgage ~~meets~~availability ~~current~~could ~~health~~make ~~codes for installing septic systems,~~ it isharder ~~possible~~for ~~than~~them anto ~~increasing~~sell ~~percentage~~their ofcurrent ~~our~~homes ~~land that~~to ispotential ~~currently~~buyers ~~suitable~~who ~~for~~need ~~septic systems will become subject to restrictions on development~~financing. These ~~This~~factors could adversely affect ~~our property~~the sales, ~~revenues,~~or ~~and~~pricing ~~results~~ of ~~operations~~our land.

AnPage ~~accident at nearby facilities could adversely affect our business.~~26

~~Military~~We ~~Ocean~~invest ~~Terminal~~much of ~~Sunny~~our ~~Point~~cash ~~is among the largest military terminals~~ in ~~the~~an ~~world~~interest-bearing ~~and~~money ~~serves~~market asaccount at a ~~transfer~~local ~~point~~financial ~~between~~institution ~~rail, trucks,~~ and/or ~~ships for~~in ~~the import and export of weapons, ammunition, explosives, and military equipment for the United States Army~~U.S. ~~The~~Treasury ~~military~~securities ~~terminal~~and/or iscertificates ~~approximately ten miles from Boiling Spring Lakes. Progress Energy’s Brunswick Nuclear Plant, consisting~~ of ~~two~~deposit ~~units generating~~having a ~~total~~maturity of ~~approximately~~one ~~1,875~~year ~~megawatts~~or ofless ~~electrical~~that ~~energy,~~are isheld ~~situated~~to onmaturity aand ~~1,200-acre~~we ~~site~~may ~~approximately~~invest ~~ten~~cash. ~~miles from~~We ~~Boiling~~have ~~Spring~~exposure to ~~Lakes.~~changes ~~The~~in ~~nuclear~~interest ~~plant~~rates isin ~~serviced~~that: by (a) 2½at ~~mile long intake canal, which brings water to~~ the ~~plant for~~time ~~cooling~~any ~~the~~such ~~nuclear~~Treasury ~~reactors,~~security ~~and~~or acertificate 5½of ~~mile~~deposit ~~long discharge canal~~matures, ~~which~~if ~~directs~~ the ~~heated water about ½ mile~~interest ~~out~~rate ~~into~~is ~~the~~lower ~~Atlantic~~for ~~Ocean.~~newly Apurchased ~~terrorist~~Treasury securities or ~~other~~certificates ~~attack~~of ~~against~~deposit ~~either~~than ~~the~~that ~~military~~on ~~terminal or~~ the ~~nuclear~~maturing ~~plant~~security, orfuture ~~a significant~~interest ~~accident~~income atwill ~~either~~decrease ~~facility,~~due ~~or significant damage~~ to the ~~transportation~~lower ~~links~~interest torate, ~~either~~and ~~facility~~(b) orinterest torates apaid ~~canal~~on ~~serving~~money ~~the~~market ~~nuclear plant,~~balances ~~could~~fluctuate ~~result~~with changes in amarket ~~decrease~~interest ~~in the desirability of our property among potential buyers of real estate~~rates, ~~which~~therefore, ininterest ~~turn,~~earned ~~could have an adverse affect~~ on ~~our~~balances ~~land~~held ~~sales and,~~ in ~~turn,~~ a ~~material~~money ~~adverse~~market ~~effect~~account onwill ~~our~~decrease ~~financial~~if ~~condition~~market interest ~~and~~rates ~~results of operations~~decrease.

~~Terrorist~~We ~~attacks~~currently ~~and~~have no ~~threatened~~long-term ordebt; ~~actual~~however, ~~war~~if we were to incur debt in the future, we would have exposure to changes in market interest rates. If we were to incur fixed rate debt, we would have exposure to changes in market interest rates at the time such debt matures in that a market interest rate higher than that on the maturing debt: (a) may ~~adversely~~lower the amount of proceeds secured from a refinancing, ~~affect~~and ~~our~~(b) ~~business~~will decrease cash flow from future operations due to the higher interest rate. If we were to incur floating rate debt, we would also have exposure to changes in market interest rates in that with increases in market interest rates, interest costs on such debt would increase and cash flow from future operations would decrease while such floating rate debt is outstanding.

~~Terrorist attacks~~Our orcustomers ~~threats, whether within the United States or abroad, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions~~ may ~~cause~~be ~~prospective~~unable ~~buyers~~ to ~~postpone or cancel real estate transactions.~~obtain Any widespread pattern of such postponements or cancellations could adversely affect real estate markets generally, and our market in particular, which could reduce the demand for our real estate and adversely affect our business and results of operationsfinancing.

~~Page~~Many purchasers 25of our real estate may need to obtain mortgage loans to finance the purchase of land from us and/or the construction costs of homes to be built on land purchased from us. In the last couple of years, many mortgage lenders and investors in mortgage loans have experienced severe financial difficulties arising from losses incurred on sub-prime and other loans originated before the downturn in the real estate market. Banking operations remain unsettled and the future of certain financial institutions remains uncertain. Due to these problems, the supply of mortgage products has been constrained, and the eligibility requirements for borrowers have been significantly tightened. These problems in the mortgage lending industry could adversely affect potential purchasers of our real estate, thus having a negative effect on demand for our real estate.

~~Litigation~~We ~~resulting~~are ~~from~~vulnerable ~~disputes~~to concentration ~~with~~risks because our ~~customers~~operations ~~may~~are ~~result~~currently inexclusive ~~substantial~~to ~~costs,~~a ~~liabilities~~Brunswick County, ~~and~~North ~~loss~~Carolina ~~of revenues~~submarket.

~~From~~Our ~~time~~real estate activities are entirely located in the City of Boiling Spring Lakes, in Brunswick County, North Carolina. Because of our geographic concentration, our operations are more vulnerable to ~~time~~local weeconomic downturns and adverse project-specific risks than those of larger, more diversified ~~have~~real ~~disputes~~estate ~~with~~companies. ~~purchasers~~The performance of the Brunswick County economy greatly affects our sales and, consequently the underlying values of our property. ~~Disputes~~The ~~may~~Brunswick ~~occur~~County economy is heavily influenced by conditions and employment in the ~~future~~defense industry, recreation, and wein ~~may~~government. ~~not~~A bedownturn ~~able~~in tothe ~~resolve~~defense ~~those~~or ~~disputes~~recreation industry may have a particularly strong adverse affect on our sales and, consequently, the underlying values of our property. A decrease in athe ~~satisfactory~~size ~~manner~~of government or in government-supported projects, through budget cuts or otherwise, could adversely affect the economy in our market.

~~The~~Page ~~appraised value of our land may vary significantly from previous appraisals and from the realizable value upon a sale.~~27

~~From~~The ~~time~~economic ~~to time,~~growth ~~typically~~of ~~every~~Southeastern ~~two~~North ~~years,~~Carolina weis ~~obtain~~ an ~~appraisal~~important offactor ~~our real estate assets located~~ in ~~the~~creating ~~City~~demand offor ~~Boiling~~our ~~Spring~~real ~~Lakes~~estate. ~~See~~One ~~“Item 2.~~fundamental ~~Properties~~factor –in ~~Appraisal~~the economic growth of ~~Real~~that ~~Estate~~region ~~Assets.” Each appraisal~~ is ~~based upon, among other factors, recent sales of real estate and~~ the ~~then-current~~need ~~market conditions~~ for ~~real~~state ~~estate generally, as well as in North Carolina, Brunswick County,~~ and ~~Boiling~~ ~~Spring~~local ~~Lakes~~governments, in ~~particular.~~combination ~~The~~with ~~appraised value of~~ the ~~assets~~private ~~set~~sector, ~~forth~~to inplan ~~one~~and ~~appraisal report may vary significantly~~complete ~~from~~significant ~~the~~infrastructure ~~appraised~~improvements ~~value set forth~~ in ~~any~~the ~~previous~~region, orsuch ~~future~~as ~~appraisal~~new ~~report for one or more reasons~~roads, ~~including,~~new ~~among~~medical ~~others~~facilities, a ~~change in market conditions~~ and ~~a change in the assets being appraised~~schools. ~~There~~The isfuture ~~no guarantee that we could obtain the appraised~~economic ~~value~~growth ~~upon a sale~~ of the ~~appraised~~region ~~assets,~~ and, inour ~~the~~financial ~~event~~results ofmay abe ~~sale~~adversely ofaffected ~~the~~if ~~appraised~~its ~~assets,~~infrastructure ~~the~~is ~~actual~~not ~~sale~~improved. ~~price~~There ~~could~~can be no ~~higher~~assurance orthat ~~lower~~new ~~than~~improvements ~~the~~will ~~appraised~~occur ~~value~~or ~~set~~that ~~forth~~existing inprojects ~~any~~will ~~appraisal~~be ~~report~~completed.

IfOne significant infrastructure improvement that has been proposed for Southeastern North Carolina is the ~~market~~North Carolina International ~~value~~Terminal. NC International Terminal, a marine cargo facility intended to be capable of ~~our~~handling ~~real~~1.5 ~~estate~~million ~~were~~containers annually, is planned to ~~drop~~handle ~~below~~some ~~its~~of ~~book~~the ~~value~~very large container and cargo ships that are expected to sail to the East Coast of the United States from Asia upon the opening, weestimated ~~would~~for 2014, of the widened Panama Canal. Currently, that canal’s two lanes of locks can handle ships no larger than 965 feet long and 106 feet wide. With the new third set of locks, the canal will be ~~required~~able to handle ships that are 25% longer and 50% wider, and are capable of carrying two to ~~write~~tree times the cargo, of the current maximum-~~down~~sized ships. The proposed site for NC International Terminal is a 600-acre undeveloped industrial site near Southport, North Carolina and approximately eight miles from Boiling Spring Lakes. The land has been acquired but construction of the ~~book~~site ~~value~~infrastructure and the supporting road and rail links has not yet commenced. The North Carolina State Ports Authority originally projected a 2017 opening date; however, environmental and other approvals have yet to be obtained, and significant opposition to the project from community organizations and others led the North Carolina legislature in 2010 to halt further funding for the project’s planning and development. Legal challenges to the cargo facility remain outstanding or are contemplated, and there is no assurance that these lawsuits or any future legal challenges to the new cargo facility will be successfully resolved, or that the North Carolina legislature will fund future planning and development. Also, there is no assurance that the construction of ~~our~~the ~~real~~cargo facility ~~estate~~will not encounter other difficulties, such as financing issues, construction difficulties, or cost overruns, that may ~~which~~delay or prevent the completion of the new cargo port. We believe that the construction and completion of NC International Terminal would ~~have~~be angreatly ~~adverse~~beneficial ~~affect~~to the overall economic development of Southeastern North Carolina and to our business prospects; however, if the new cargo facility is not completed, the effect on our ~~balance~~business ~~sheet~~prospects is unclear. Even if NC International Terminal were to be built, there is no assurance that additional shipping traffic will utilize the facility, since other East Coast ports, notably Charleston, SC, Savannah, GA, and ~~our~~New ~~earnings~~Orleans, LA, have plans to expand marine cargo capacity.

~~Most~~Attracting new employers ofthat ~~our~~can ~~property~~create ~~was~~new ~~acquired~~jobs byis ~~our~~a ~~predecessor~~key ~~corporation~~factor in the ~~1960’s.~~economic ~~During~~growth ~~the 1980’s, following tightened requirements on the installation~~ of ~~septic~~Southeastern ~~systems,~~North weCarolina. ~~established~~In aorder ~~valuation~~to ~~allowance~~improve ~~that effectively reduced~~ the ~~book value~~ economy of ~~much~~the ~~of our~~region, ~~property~~state toand ~~reflect~~local ~~lower~~governments, ~~market~~along ~~values.~~with ~~Adverse~~the ~~market~~private ~~conditions~~sector, inmust ~~certain~~seek ~~circumstances,~~to ~~may~~attract ~~require~~employers uscapable toof ~~further reduce~~employing ~~the~~large ~~book~~numbers ~~value~~ of ~~our~~new ~~property~~employees. inState ~~what~~governments, isparticularly ~~often~~in ~~referred~~the toSoutheast asUnited aStates, ~~“write-down”~~and orlocal ~~“impairment.”~~governments Awithin ~~write-down~~North ofCarolina ~~our~~compete ~~property~~intensely ~~would~~for ~~decrease~~such ~~the~~new ~~value~~jobs. ofThere ~~the~~can ~~asset~~be onno ~~our~~assurance ~~balance~~that ~~sheet~~efforts ~~and~~to ~~would~~attract ~~reduce~~new ~~our~~employers ~~earnings~~to ~~for~~locate ~~the~~facilities in ~~period~~Southeastern inNorth ~~which the~~Carolina ~~write-down~~will isbe ~~recorded~~successful.

~~Most~~Page ~~of our real estate lacks municipal water service.~~ 28

~~Most of our land lacks~~Changes ~~municipal water service. The City of Boiling Spring Lakes began to phase~~ in ~~municipal water service to certain portions of~~ the ~~development~~demographics inaffecting ~~2004~~projected ~~and,~~population ingrowth ~~2009, began work on an expansion of the municipal water system. That expansion was completed~~ in ~~January~~Southeastern ~~2011. The~~North ~~cost of the expansion is to be borne by owners of land directly passed by new water mains by the payment of an assessment per lot of $500 plus a tap fee equal to $860~~Carolina, ~~for~~including a ~~lot~~decrease ~~containing~~in an existing dwelling, or $1,800, for new construction. Our total assessment relating to this expansion was determined to be $49,500 based upon a formula that allows adjoining lots to be aggregated into a group and counted as one lot for assessment purposes. Should we sell some, but not all of the ~~lots that were aggregated into a group, an additional assessment may have to be paid by us with respect~~migration ~~to such lots at the time the sale~~ of ~~such~~Baby ~~lots is closed. We capitalized $49~~Boomers,~~500~~ ofcould ~~assessments~~adversely inaffect ~~2009~~our ~~by increasing the cost basis of land affected~~business. ~~In May 2010, the City of Boiling Spring Lakes transferred ownership of the municipal water system to Brunswick County.~~

~~Page~~Our business 26prospects depend in part upon strong in-migration population growth in Southeastern North Carolina. We believe that Baby Boomers seeking retirement or vacation homes in or close to the Grand Strand and other parts of coastal North Carolina will remain important target customers for our real estate in the future. Southeastern North Carolina’s population growth could be negatively affected in the future by factors such as adverse economic conditions, the occurrence of hurricanes, and the high cost of real estate, insurance and property taxes. Furthermore, those persons considering moving to the Grand Strand or other parts of coastal North Carolina may not view Boiling Spring Lakes as an attractive place to live or own a second home, and may choose to live in another region of the state. In addition, as an alternative to North Carolina, other states, such as Florida, Georgia, South Carolina, and Tennessee, remain or are increasingly becoming retirement destinations and are attracting retiring Baby Boomers and the workforce population who may have otherwise considered moving to Southeastern North Carolina.

~~Further~~Our ~~expansions of~~business water service will depend upon, among other factors, the ability to control costs of laying pipelines and the demand for such water service. There is no certainty that any further expansion of water service will occur or, if it occurs, that our land may ~~connect~~ ~~to such further expansion of the water service. A significant portion of the cost of any further expansion of water distribution to our land must~~ be ~~borne~~adversely ~~by us or by subsequent purchasers of the land. We expect to capitalize any such assessment paid by us~~affected by ~~adding~~changes ~~the~~in ~~amount~~income oftax ~~the assessments to the cost basis of our land held for sale~~laws. When we sell land affected by water lines, the direct cost of land sold will reflect the capitalized costs. We will likely achieve a higher sales price for land with water service than for land without such service, but the direct cost of such land sold will also be higher than for a lot which does not reflect such capitalized costs.

WeChanges ~~cannot~~in ~~estimate~~federal ~~with~~income ~~any~~tax ~~certainty~~laws ~~the~~may ~~amount~~affect ofdemand ~~any~~for ~~future~~real ~~assessments~~estate. ~~for~~Various ~~further~~proposals ~~expansions~~have ofbeen publicly discussed to limit or eliminate mortgage interest deductions and to limit or eliminate the ~~water~~exclusion ~~system,~~of ~~nor~~gain ~~can~~from wethe ~~predict~~sale ~~with~~of ~~any certainty~~a ~~when~~principal ~~any~~residence. ~~such~~Enactment ~~future~~of ~~assessments~~such proposals may behave ~~made~~an ~~or,~~adverse ~~once~~effect ~~made,~~on ~~become~~the ~~due.~~homebuilding Ifindustry wein ~~are~~general ~~liable~~and, ~~for~~in ~~any~~turn, on businesses, such ~~assessment~~as ours, itthat sell ~~may~~undeveloped ~~have~~real estate. We cannot make a ~~material~~meaningful ~~adverse~~prediction ~~affect~~as onto ~~our~~whether ~~results~~any ofsuch ~~operations~~proposals will be enacted and, ~~financial~~if ~~condition~~enacted, the particular form such laws would take.

~~Most~~We ofare subject ~~our~~to ~~real~~risks ~~estate~~associated ~~lacks~~with ~~public sewer~~changes ~~service.~~in property taxes and government fees.

~~The lack~~Increases ~~of public sewer service has been a major inhibiting factor~~ in ~~our~~real estate ~~efforts~~taxes ~~to sell~~ and~~/or~~ ~~develop~~other ~~land~~local ingovernment ~~Boiling Spring Lakes. Prior to 2004~~fees, ~~virtually~~such ~~all~~as ~~residents~~fees inimposed ~~the~~on ~~development~~developers ~~were forced~~ to ~~rely~~fund ~~upon~~schools, ~~individual~~local ~~septic~~fire ~~systems.~~departments, ~~Brunswick County~~open ~~has~~space, ~~plans~~road ~~for~~improvements anand/or ~~area-wide~~provide ~~sewer~~low ~~system~~and ~~for~~moderate ~~Boiling~~income ~~Spring~~housing, ~~Lakes.~~could Weincrease ~~expect~~our ~~that~~costs ~~the~~and ~~County~~have ~~will~~an ~~begin~~adverse ~~installation~~effect ~~of the first~~on ~~phase~~our inoperations ~~2012 to service the City’s commercial corridor along Highway 87,~~ and ~~that~~earnings. ~~the first~~Increases ~~phase will be completed~~ in ~~2013;~~local ~~however,~~real ~~there~~estate istaxes nocould ~~certainty~~also ~~that~~adversely ~~the~~affect ~~first~~potential ~~phase~~customers ofwho ~~the sewer system will be installed as planned or at all, or that, if installed, that subsequent expansion of the sewer system will occur or that we~~ may ~~connect any~~consider orthose ~~some~~costs ofin ~~our~~determining ~~land~~whether to ~~such~~reside ~~expansion~~in ~~of the sewer system. A private contractor may elect to install a sewer system to serve a portion of~~ Boiling Spring Lakes ~~where he is looking to develop commercial and/~~or ~~residential land that he owns; however, there is no certainty that any such private sewer system will be installed or, if installed, that our land may connect to such private sewer system~~elsewhere.

~~A significant~~Page portion of the cost of sewer lines to our land must be borne by us or by subsequent purchasers of the land. We expect to capitalize any such assessment paid by us by adding the amount of the assessments to the cost basis of our land held for sale. When we sell land affected by sewer lines, the direct cost of land sold will reflect the capitalized costs. We will likely achieve a higher sales price for land with sewer service than for land without such service, but the direct cost of such land sold will also be higher than for a lot which does not reflect such capitalized costs. If we sell any land subject or likely to be subject to a sewer assessment prior to us being assessed, of which there can be no assurance, the selling price would likely be reduced by the anticipated amount of such assessment.29

~~Page~~We 27may be unable to obtain insurance at a reasonable cost or we may suffer damage to uninsured property.

We ~~cannot~~may ~~estimate~~experience ~~with~~economic harm if any ~~certainty~~damage ~~the~~to ~~amount~~our ofreal ~~any~~estate ~~assessments~~is ~~for~~not ~~sewer~~covered ~~lines,~~by ~~nor~~insurance. We ~~can~~carry comprehensive liability and fire insurance coverage on our property. We believe all our property is adequately insured; however, we ~~predict~~cannot ~~with~~guarantee ~~any~~that ~~certainty~~the ~~when~~limits ~~any~~of ~~such~~our ~~future~~current ~~assessments~~policies will be sufficient in the event of a catastrophe to our property. We may besuffer ~~made~~losses ~~or,~~that ~~once~~are ~~made~~not covered under our insurance policies. For example, ~~become~~losses resulting ~~due~~from war or from environmental liabilities generally are not covered by insurance. If wean ~~are~~uninsured ~~liable~~loss ~~for~~or ~~any~~a loss ~~such~~in ~~assessment~~excess of insured limits should occur, itwe ~~may~~could ~~have~~lose capital invested in a ~~material~~property, ~~adverse~~as ~~affect~~well onas ~~our~~any ~~results~~future revenue from the sale of ~~operations~~such ~~and~~property. We ~~financial~~would ~~condition~~nevertheless remain obligated on any mortgage indebtedness or other obligations, if any, related to the property.

~~Our~~Due in large part to the terrorist activities of September 11, 2001, insurance companies re-examined many aspects of their business and took certain ~~may~~actions bein the wake of these terrorist activities, including increasing premiums, mandating higher self-insured retentions and deductibles, reducing limits, restricting coverages, imposing exclusions (such as sabotage and terrorism), and refusing to underwrite certain risks and classes of business. Significantly increased premiums, mandated exclusions, or changes in limits, coverages, terms, and conditions could adversely ~~affected~~affect byour ~~damage~~ability to ~~dams~~obtain appropriate insurance coverages. However, at this time the only impact on our business has been an increase in insurance premiums.

~~We are responsible~~Increases ~~for the maintenance and repair of a dam designed to retain water~~ in ~~one~~property ofinsurance ~~the~~premiums ~~lakes within the City of Boiling Spring Lakes. The dam was breeched~~ and ~~partially~~decreases ~~washed out following a severe storm~~ in ~~1996. We have spent approximately $185,000 since 2001 to repair~~ the ~~dam.~~availability ~~We had intended to deed the dam to the City~~ of ~~Boiling~~homeowner ~~Spring~~property ~~Lakes~~insurance ~~after~~in the ~~repairs~~coastal ~~were~~regions ~~completed, and the City indicated that it would accept the title after completion~~ of ~~the work; however, from time to time, the City has requested certain~~North ~~additional~~Carolina work be completed on the dam prior to transfer of title. At this time we contemplate no additional work but until such time as the title is transferred, there can be no assurance that the City will not require us to undertake and complete additional work on the dam, or decide not to accept title, notwithstanding additional work on the dam. The occurrence of a hurricane, flood, or unusually heavy or prolonged rain could ~~result~~reduce incustomer ~~damage~~demand ~~to the dam. In such an eventuality before the transfer of title to the dam, we would be responsible~~ for ~~the repair costs, which could be substantial, and until such repair is completed,~~ our ~~ability to develop and sell~~ property ~~or realize income from projects could be materially adversely affected~~.

~~The City of Boiling~~Homeowner ~~Spring~~property ~~Lakes~~insurance ~~has~~companies ~~many~~doing ~~lakes~~business ~~and~~in ~~ponds,~~the ~~some~~portions of ~~which~~the ~~were~~southeastern ~~created~~United orStates ~~enhanced~~that byare ~~using~~most ~~earthen~~subject ~~dams~~ to ~~raise the water level behind~~occasional ~~the~~hurricanes ~~dams.~~have Wereacted ~~own and maintain only one of those dams; all of the other dams are,~~ to ~~our~~recent ~~knowledge,~~hurricanes ~~owned and maintained~~ by ~~either the~~significantly ~~City~~increasing ofpremiums, ~~Boiling~~requiring ~~Spring~~higher ~~Lakes or the owner of The Lakes Country Club. From time to time~~deductibles, areducing ~~dam owned by others may need repair~~limits, ~~for~~restricting ~~example~~coverages, asimposing ~~a result of a “wash out” of a portion of a dam following a hurricane~~exclusions, ~~flood,~~refusing orto ~~period~~insure ofcertain ~~unusually heavy~~property ~~or prolonged rain~~owners, and itin ~~may~~some ~~become~~instances, ~~necessary~~ceasing ~~for the owner of such dam to lower the water level behind the dam for an extended~~insurance ~~period~~operations ofin ~~time~~particular states. ~~During~~It ~~such~~is ~~time,~~uncertain wewhat ~~may~~effect bethese ~~unable~~actions towill ~~sell~~have ~~land~~on ~~near~~property ~~the~~insurance ~~lake~~availability orand ~~pond~~rates in ~~with reduced water levels, or~~ the ~~price~~coastal ~~that we~~regions ~~could~~of ~~realize~~North ~~upon~~Carolina. aThis ~~sale~~trend of ~~such~~decreasing ~~land~~availability ~~may~~of beinsurance ~~substantially~~and ~~less~~rising ~~than~~insurance ~~would~~rates becould continue ~~the case~~ if ~~the~~there ~~water~~are ~~level~~severe ~~was~~hurricanes ~~not~~in ~~reduced~~the future.

WeThe increasing ~~may~~costs ~~face~~of ~~significant~~property ~~costs~~insurance ~~associated~~premiums in the coastal regions of North Carolina, as well as the decrease in private property ~~with~~insurers, ~~building~~could (1) deter potential customers from purchasing a home or homesite in Boiling Spring Lakes, or (2) make Southeastern North Carolina less attractive to new employers that can create high quality jobs needed to spur growth in the region, either of which could have a material adverse effect on our financial condition and ~~maintaining~~results ~~roads~~of operations.

WePage are responsible for maintaining certain roads, most of which are unpaved, and certain road rights-of-way within the City of Boiling Spring Lakes. We may complete some or all of the roads, or a portion of some or all of the roads, but we are under no contractual obligation to do so. It may be difficult or impossible for us to sell lots located on uncompleted roads or on roads that are not rocked or paved with asphalt, and the sales price of a lot situated on an uncompleted road or a road that is neither rocked nor paved with asphalt would likely be substantially less than what we might otherwise obtain. We have not set aside any money or entered into any bond, escrow, or trust agreement to assure completion of the roads, or to fund the rocking or paving of roads with asphalt.30

~~Page~~The 28occurrence of hurricanes and other natural disasters in Southeastern North Carolina could adversely affect our business.

~~The~~Because of ~~costs~~its tolocation ~~complete a~~on ~~road~~the Atlantic Ocean, ~~and~~Southeastern toNorth ~~rock~~Carolina oris ~~pave~~particularly asusceptible ~~road~~to ~~with~~the ~~asphalt,~~occurrence ~~are~~of ~~capitalized~~hurricanes. Depending ~~and~~on ~~added~~where toany ~~the~~particular ~~cost~~hurricane ~~basis~~makes oflandfall, our ~~land~~property ~~held~~could ~~for~~experience ~~sale.~~significant, ~~When~~if wenot catastrophic, damage. ~~sell~~Such ~~land~~damage ~~situated~~could onmaterially adelay ~~completed~~sales ~~road,~~in or acould ~~road~~lessen ~~that~~demand ~~has~~for ~~been~~real ~~rocked~~estate orin ~~paved~~affected ~~with~~coastal ~~asphalt~~communities. Importantly, regardless ~~the~~of ~~direct~~actual ~~cost~~damage to a development, the occurrence of ~~land~~hurricanes ~~sold~~in ~~will reflect~~North Carolina and the ~~capitalized~~Southeastern ~~costs~~United States could negatively affect demand for our real estate because of consumer perceptions of hurricane risks. AsIn aaddition ~~result~~to hurricanes, the weoccurrence ~~will~~of ~~likely~~other ~~achieve~~natural adisasters ~~higher~~in ~~sales~~North ~~price~~Carolina, ~~for~~such ~~land~~as ~~situated~~tornadoes, onfloods, afires, ~~completed~~unusually ~~road~~heavy or prolonged rain, orand droughts, could have a ~~road~~material ~~that~~adverse ~~has~~effect on our ability to sell our property. In the past, our operations have been affected ~~rocked~~by orsuch ~~paved~~occurrences through lower real estate sales and higher operating and capital costs associated with ~~asphalt,~~clean-up ~~but~~and repairs in the ~~direct~~aftermath ~~cost~~ of such ~~land~~occurrences. ~~sold~~The ~~will~~occurrence ~~also~~of benatural ~~higher~~disasters ~~than~~could ~~for~~also have a ~~lot~~long-term negative effect ~~which~~on ~~does~~the ~~not~~attractiveness ~~reflect~~of ~~such~~Southeastern ~~capitalized~~North ~~costs~~Carolina as a location for seasonal and/or primary residences.

The ~~City of Boiling~~occurrence Spring Lakes will not assume any road that is not paved with asphalt, and the City need not assume any paved road. Accordingly, unless and until we complete a road, have it paved with asphalt, and the road has been assumed by the City, we will be responsible for maintaining such road and the right-of~~-way.~~ ~~Since~~drought ~~2001, we have spent approximately $193,000 for rocking and paving roads. Otherwise,~~ in ~~recent~~Southeastern ~~years,~~North weCarolina ~~have~~could not spent significant amounts toward building or maintaining roads and rights-of-way, and the cost to maintain them may increase substantially. Our failure to provide proper maintenance of the roads and rights-of-way which have not been assumed by the City may subject us to substantially greater risk of litigation from persons adversely ~~affected~~affect ~~by such~~our ~~failure~~business.

~~During~~Due ~~the~~to ~~1960’s,~~drought or wenear-drought ~~sold~~conditions afor ~~number~~much of ~~five-~~2007 ~~and~~in ~~ten-acre~~Southeastern ~~timber~~North ~~tracts. In some cases~~Carolina, wenearly ~~provided~~all anof ~~easement~~the ~~across~~lakes ~~our~~within ~~land to~~ the ~~buyer~~City of ~~such~~Boiling Spring aLakes ~~tract~~had ~~for~~a ~~access~~water tolevel ~~and~~that ~~egress~~was ~~from~~substantially ~~the~~below ~~tract,~~normal. ~~and~~These ~~the~~conditions ~~buyer~~resulted ~~was~~in ~~responsible for building~~ a ~~road~~lowering ~~across~~of ~~such~~the ~~easement.~~water Intable, ~~cases~~and one ~~where~~or ~~the~~more ~~purchase~~sink ~~contract~~holes ~~was~~developed ~~silent~~in on the ~~issue,~~bed ~~local~~of ~~laws~~Boiling ~~required~~Spring ~~only~~Lake, ~~that~~the welargest ~~provide~~lake in the ~~buyer~~community, ~~with~~which ~~access~~resulted toin ~~and~~a ~~egress~~further ~~from~~lowering aof ~~tract~~the ~~but~~water itlevel ~~was~~of ~~not~~that ~~clear~~lake. ~~who~~A ~~was~~series ~~responsible~~of ~~for~~remedial ~~building~~measures ataken ~~road~~by tothe ~~and~~City ~~from~~solved the ~~tract.~~issue Weof ~~maintain~~the ~~that~~sink ~~our only obligation~~holes; inhowever, ~~such~~the ~~cases~~lack isof ~~and~~normal ~~has~~rainfall ~~been~~prevented tothe ~~provide~~lakes, anincluding ~~easement~~Boiling ~~for~~Spring ~~access~~Lake, ~~to and egress~~ from ~~the~~returning ~~tract,~~to ~~and~~approximately ifnormal levels atfor some ~~subsequent~~ time. ~~the buyer~~A ~~wanted~~return aof ~~road~~protracted ~~across~~drought ~~such~~or annear-drought ~~easement,~~conditions wein ~~were~~Southeastern ~~not~~North ~~obligated~~Carolina tocould ~~build~~result ~~it. We have not been involved~~ in ~~any litigation involving~~ a ~~dispute~~reoccurrence ~~over~~of ~~whose~~substantially ~~responsibility~~lower itwater islevels, toincluding ~~build a road~~ in ~~such~~Boiling aSpring ~~case.~~Lake, Ifand ~~such~~the ~~litigation~~reoccurrence ~~were~~of toone beor ~~initiated,~~more ~~we believe that~~sink weholes. ~~would~~The ~~prevail~~occurrence ~~but that the cost~~ of ~~defending~~such ~~the~~eventualities ~~case~~ could behave a material, ~~and~~adverse ~~should~~effect weon ~~not~~our ~~prevail,~~ability ~~the~~to ~~cost~~sell ofour ~~building any such road could be material~~property.

WeIncreases in ~~may~~real ~~incur~~estate ~~costs~~property intaxes ~~connection with~~could ~~the~~reduce ~~removal~~customer ofdemand anfor ~~underground~~homes ~~storage~~and ~~tank~~homesites in ~~2000.~~our market.

~~In 2000, we removed~~Brunswick anCounty ~~underground~~experienced ~~storage~~significant ~~tank~~increases ~~located adjacent to the club house building of Fox Squirrel Country Club. We owned that golf club until we sold it to a third party~~ in ~~2001,~~property ~~and~~values ~~the~~during ~~club was subsequently renamed The Lakes Country Club. Soil samples taken shortly after~~ the ~~removal~~record-setting ~~showed~~real aestate ~~certain~~activity ~~amount~~in ~~of contamination of soil and indications that diesel fuel may have leaked into~~ the ~~subsurface groundwater.~~first Wehalf ~~undertook remediation by removing approximately 15 tons~~ of ~~contaminated soil and adding fill to the affected area.~~ ~~Test wells were placed near~~ the ~~former~~last site of the underground storage tank to measure the level of subsurface groundwater contamination, and the test results were submitted to the North Carolina Department of Environment and Natural Resources (“NCDENR”)decade. ~~Initial~~ ~~test~~As ~~results~~a ~~showed levels of groundwater contamination to be just above the standards. From time to time during 2002 and 2003~~result, ~~additional~~many ~~tests~~local ~~were~~governments ~~performed~~have ~~on subsurface groundwater samples~~been, and ~~the~~may ~~test results were submitted to NCDENR. With one exception~~continue, ~~all~~aggressively ofre-assessing the ~~additional~~value ~~test results showed that the concentration~~ of ~~hydrocarbon compounds in the subsurface groundwater~~homes were either below detection limits or were substantially below standards; the one exception was the testing in May 2003, which showed that “C11-C22 aromatic concentration is non-compliant.” As requested by NCDENR, we continued to monitor and ~~sample~~ ~~the~~real ~~groundwater~~estate ~~and~~for toproperty ~~submit~~tax ~~the test results to NCDENR periodically~~purposes. ~~The~~These ~~written~~larger ~~test~~assessments ~~results~~increase ~~of sampling of subsurface groundwater taken in February 2004, showing that~~ the ~~concentration~~total ofreal ~~hydrocarbon~~estate ~~compounds~~property intaxes ~~the~~due ~~subsurface~~from ~~groundwater were~~property ~~either~~owners ~~below detection limits or were substantially below standards, were submitted to NCDENR~~annually. OnBecause ~~May 4, 2004, NCDENR issued a Notice~~ of Nodecreased ~~Further~~revenues Action, stating that NCDENR determined that we need not continue the monitoring and sampling of groundwater. Such determination shall apply unless NCDENR makes a later determination that the concentration of hydrocarbon compounds that resulted from ~~the~~other ~~release~~sources ofdue ~~diesel~~to ~~fuel~~economic ~~from~~factors, ~~the~~many ~~now~~local ~~removed~~governments ~~underground~~have ~~storage~~also ~~tank once again poses an unacceptable risk or a potentially~~increased ~~unacceptable~~their ~~risk~~property totax ~~human health or the environment~~rates.

~~Page~~The 29current costs of real estate property taxes in Brunswick County, and future increases in property taxes, could (1) deter potential customers from purchasing a lot or home in Boiling Spring Lakes, or (2) make Brunswick County less attractive to new employers that can create high-quality jobs needed to spur growth in the region, either of which could have a material adverse effect on our financial condition and results of operations.

WePage believe that we will not be incurring any further costs associated with release of diesel fuel from the now removed underground storage tank. If, however, NCDENR should request that we conduct additional monitoring and testing or to conduct additional remediation, we believe that the cost of any such additional monitoring and testing or remediation is not likely to be material.31

InWe ~~connection~~are ~~with the~~subject ~~sale of the assets of Fox Squirrel Country Club, we entered into an indemnification agreement with WW-Golf, the buyer of the assets. Pursuant~~ to ~~such~~numerous ~~indemnification agreement, as amended, our liability related to testing and remediation involving the~~laws ~~underground storage tank terminated on June 17, 2005. However, should NCDENR require additional testing~~ and~~/or~~ ~~remediation,~~regulations ~~and should~~regarding ~~WW-Golf be unable to bear~~ the ~~entire~~sale ~~cost~~ of ~~such~~real ~~testing and/or remediation, it is possible that we will be required to bear some or all of such costs~~estate.

~~Should~~The wereal ~~acquire~~estate ~~additional~~industry is ~~real~~governed by various federal, state, and local laws and regulations, including the Fair Housing Act, the Real Estate Settlement Procedures Act, state and local real estate broker licensing laws, wefederal ~~would~~and bestate ~~subject~~laws toprohibiting aunfair ~~number~~and ofdeceptive ~~risks~~acts and ~~relating~~practices, and federal and state advertising laws. Failure to ~~acquisitions~~comply with these requirements may result in, ~~any~~among ofother ~~which~~things, revocation ~~could~~of ~~cause~~required uslicenses, ~~not~~indemnification liability to ~~realize~~contract ~~the~~counterparties, ~~anticipated~~administrative enforcement actions, and ~~benefits.~~civil and criminal liability.

~~While~~Our weproperty ~~currently have~~is nosubject ~~plans~~ to ~~acquire additional real estate, we may do so in the future. Acquisition transactions involve various inherent~~numerous ~~risks,~~laws ~~including,~~and ~~among~~regulations ~~others,~~regarding ~~the~~real ~~following:~~estate.

·At ~~Uncertainties~~December in31, ~~assessing~~2012, we ~~the value~~owned, ~~strengths~~among other land, ~~and~~approximately ~~potential~~244 ~~profitability~~acres of undeveloped, unplatted land intended for residential use, and ~~identifying~~approximately 219 ~~the~~additional ~~extent~~acres of undeveloped, unplatted land intended for commercial use. Changes in zoning or other regulations may prevent us from subdividing all ~~weaknesses~~or a substantial portion of such acreage, ~~risks~~which, ~~contingent~~in turn, may adversely affect our ability to generate revenue from real estate sales and/or ~~other~~our ~~liabilities~~ability ~~(including~~to ~~environmental)~~effect a bulk sale of, ~~acquisition~~all ~~opportunities~~or substantially all of our assets.

·Potential ~~Acquired~~purchasers of ~~property~~land from us may ~~fail~~be subject to ~~perform~~periodic asdelays weor ~~expected~~may inbe ~~analyzing~~precluded ~~our~~entirely ~~investments;~~from ~~our~~construction ~~estimates~~on ofsuch ~~the~~land ~~costs~~due to building moratoriums or ~~repositioning~~“slow-growth” or ~~redeveloping~~“no-growth” ~~acquired~~initiatives ~~property~~that ~~may~~could be ~~inaccurate;~~implemented ~~and~~in the ~~development~~future. ~~opportunity~~A purchaser of land from us who has received land use and building entitlements or approvals may bestill ~~abandoned~~require ~~after~~a ~~expending~~variety ~~significant~~of ~~resources~~other governmental approvals and permits during the construction process. The possibility of such actions could adversely affect our ability to generate revenue from real estate sales and/or our ability to effect a bulk sale of all or substantially all of our assets.

·We ~~Problems~~are ~~that~~subject ~~could~~to ~~arise~~many ~~from~~laws ~~the~~and regulations ~~integration~~regarding ofenvironmental ~~the new businesses or property~~matters.

·We ~~Unanticipated~~are ~~changes~~subject into various ~~business~~federal, ~~industry~~state and local laws, ordinances and regulations regarding environmental matters. Under these laws, we may be required to investigate and clean up hazardous or ~~general~~toxic ~~economic~~substances ~~conditions~~or ~~that~~petroleum ~~affect~~product releases on land currently or formerly owned by us, and may be held liable to a governmental entity or to third parties for property damage and the ~~assumptions~~cost ~~underlying~~of ~~our~~investigation, removal ~~rationale~~and decontamination incurred by such parties. The penalty may be imposed whether or not we were aware of, or responsible for, ~~pursuing~~the hazardous or toxic substances, and the ~~acquisition~~liability ~~opportunity~~under such laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The costs of investigation, removal and decontamination of such substances could be substantial. If such substances are found on land currently owned by us, or there is a failure to properly remove or decontaminate the area, the property could be difficult to sell, rent, or develop. Some environmental laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with such contamination. We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site.

Page 3032

~~Should~~An weaccident ~~engage~~at innearby ~~real estate development,~~facilities wecould ~~would~~adversely beaffect ~~subject~~our ~~to numerous laws and regulations regarding the development of real estate~~business.

WeMilitary ~~may~~Ocean ~~decide~~Terminal Sunny toPoint ~~engage in~~is ~~development~~among ofthe ~~our~~largest ~~property~~military toterminals ~~increase~~in ~~our~~the ~~revenue.~~world ~~Development~~and ofserves ~~real~~as ~~estate~~a istransfer ~~subject~~point tobetween ~~zoning~~rail, ~~laws~~trucks, and ~~other regulations~~ships ~~that~~for ~~govern~~ the ~~use~~import and ~~subdivision~~export of ~~land~~weapons, ammunition, explosives, and military equipment for the United States Army. ~~Changes~~The inmilitary terminal ~~zoning~~is orapproximately ~~other~~ten ~~regulations~~miles ~~may~~from ~~require~~Boiling ~~substantially~~Spring ~~greater~~Lakes. ~~expenditures~~Progress Energy’s Brunswick Nuclear Plant, consisting of totwo ~~complete~~units ~~one~~generating ora ~~more~~total ~~new~~of ~~projects~~approximately ~~than~~1,875 ~~would~~megawatts beof ~~the~~electrical ~~case~~energy, ~~without~~is ~~such~~situated ~~changes~~on a 1,200-acre site approximately ten miles from Boiling Spring Lakes. ~~Seeking~~The nuclear plant is serviced by a ~~favorable~~2½ ~~change~~mile tolong ~~zoning~~intake ~~laws~~canal, ~~and~~which brings water to ~~regulations~~the ~~can~~plant befor ancooling ~~expensive,~~the ~~time-consuming~~nuclear reactors, and, ~~ultimately~~a 5½ mile long discharge canal, ~~futile~~which ~~process.~~directs ~~Adverse~~the ~~changes~~heated towater ~~zoning~~about ~~and~~½ mile out into the Atlantic Ocean. A terrorist or other ~~laws~~attack ~~and regulations~~against ~~can~~either ~~preclude~~the military terminal or the ~~development~~nuclear ofplant, ~~some~~or a significant accident at either facility, or ~~all~~significant ofdamage to the transportation links to either facility or to a ~~developer’s~~canal ~~land~~serving the nuclear plant, ~~often~~could ~~with~~result noin ~~compensation~~a ~~for~~decrease in the ~~loss~~desirability of ~~future~~ ~~earnings~~our ~~from~~property ~~development~~among potential buyers of ~~the~~real ~~affected~~estate, which, in turn, could have an adverse affect on our land sales and, in turn, a material adverse effect on our financial condition and results of operations.

AtTerrorist ~~December~~attacks ~~31, 2011, we owned, among other land, approximately 244 acres of undeveloped, unplatted land intended for residential use,~~ and ~~approximately 219~~threatened ~~additional acres of undeveloped, unplatted land intended for commercial use. Changes in zoning~~ or ~~other~~actual ~~regulations~~war may ~~prevent us from subdividing all or a substantial portion of such acreage, which, in turn, may~~ adversely affect our ~~ability to generate revenue from real estate sales and/or our ability to effect a bulk sale of all or substantially all of our assets~~business. ~~If we are unable to obtain a rezoning of commercial land, we may be unable to realize any value in a sale of such land.~~

~~Should~~Terrorist weattacks ~~engage~~or inthreats, ~~real~~whether ~~estate~~within ~~development,~~the weUnited ~~may~~States beor ~~unable~~abroad, torumors ~~obtain~~or ~~and~~threats ~~renew~~of ~~permits~~war, ~~necessary~~actual ~~for~~conflicts ~~development~~involving the United ~~projects~~States weor ~~decide~~its allies, or military or trade disruptions may cause prospective buyers to ~~undertake,~~postpone ~~which~~or ~~could~~cancel ~~reduce~~real ~~our~~estate ~~anticipated~~transactions. Any ~~cash~~widespread ~~flow~~pattern ~~and~~of ~~profitability~~such ~~from~~postponements ~~those~~or ~~projects~~cancellations could adversely affect real estate markets generally, orand ~~cause~~our usmarket ~~not~~in toparticular, ~~realize~~which could reduce the ~~anticipated~~demand ~~benefits~~for ~~from~~our ~~the~~real ~~projects.~~estate and adversely affect our business and results of operations.

~~Real~~Litigation ~~estate~~resulting ~~companies must~~from ~~obtain numerous governmental permits or approvals that impose strict conditions and obligations relating to various environmental~~disputes ~~and safety matters in connection~~ with ~~real~~our ~~estate~~customers development. The permitting rules are complex and can change over time. Regulatory authorities exercise considerable discretion in the timing and scope of permit issuance. The public has the right to comment on certain permit applications and otherwise participate in the permitting process, including through court intervention. Accordingly, permits required by us to conduct development projects may ~~not~~result ~~be issued, maintained or renewed, or may not be issued or renewed~~ in asubstantial ~~timely fashion~~costs, ~~or may involve requirements that restrict our ability to economically conduct our development projects. Should we engage in real estate development~~liabilities, ~~these~~ and ~~other~~loss ~~eventualities we presently deem not to be material to our current or future business could adversely affect our future results~~ of ~~operations and financial condition~~revenues.

~~Contractors~~From ~~are~~time ~~generally exposed~~ to ~~risks not only with respect to a project in which~~ time we have andisputes ~~interest,~~with ~~but~~purchasers ~~also other projects in which they are involved. A default by a contractor, or the bankruptcy, insolvency or other failure~~ of a contractor engaged by us on a project we decide to undertake may require, among other possibilities, that we determine whether we want to fund monies beyond what we are contractually obligated to fund, take over contracting of the project, find another contractor for the project, or sell our ~~interest in the project~~property. ~~These~~ ~~events~~Disputes ~~could~~may ~~delay~~occur ~~the completion of the project, result~~ in ~~our incurring additional costs, and/or preclude us from realizing anticipated returns, if any. These events could cause a decrease in~~ the ~~value~~future ~~of our assets~~ and ~~compel~~we ~~us to seek additional sources of liquidity, which~~ may ~~or may~~ not be ~~available,~~able into ~~order~~resolve tothose ~~complete~~disputes in ~~the~~a ~~project~~satisfactory manner.

~~Page~~The 31appraised value of our land may vary significantly from previous appraisals and from the realizable value upon a sale.

~~Purchasers~~From time to time, we obtain an appraisal of ~~land~~our ~~from~~real usestate ~~may~~assets belocated in the City of Boiling Spring Lakes. See “Item 2. Properties – ~~subject~~Appraisal toof ~~delays~~Real orEstate Assets.” Each appraisal is based upon, among other factors, recent sales of real estate and the then-current market conditions for real estate generally, as well as in North Carolina, Brunswick County, and Boiling Spring Lakes, in particular. The appraised value of the assets set forth in one appraisal report may bevary ~~precluded~~significantly from ~~building~~the ~~due~~appraised tovalue set ~~building~~forth ~~moratoriums~~in any previous or ~~“slow-growth”~~future appraisal report for one or ~~“no-growth”~~more reasons, including, among others, a change in market conditions ~~initiatives~~and a change in the assets being appraised. There is no guarantee that we could beobtain ~~implemented~~the appraised value upon a sale of the appraised assets, and, in the ~~future.~~event of a sale of the appraised assets, the actual sale price could be higher or lower than the appraised value set forth in any appraisal report.

~~Purchasers~~Page of land from us may be subject to periodic delays or may be precluded entirely from building in certain portions of Boiling Spring Lakes due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local and state governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction. A project for which a purchaser of land from us has received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process. Such a project can also be adversely affected by unforeseen health, safety, and welfare issues, which can further delay the project or prevent its completion. An occurrence of any of the foregoing may have the potential effect of reducing our future sales of real estate.33

~~Any~~If ~~loans~~the market ~~that~~value weof ~~originate~~our ~~from land~~real ~~sales~~estate ~~are~~were ~~subject~~to drop below its book value, we would be required to write-down the ~~risks~~book value of ~~delinquency~~our real estate, which would have an adverse affect on our balance sheet and ~~foreclosure.~~our earnings.

~~We currently sell land~~Most ~~for~~of ~~all~~our ~~cash.~~property Wewas ~~may,~~acquired ~~in the future, elect to originate loans~~ by ~~selling~~our ~~land~~predecessor ~~for~~corporation ain ~~combination~~the ~~of cash and a note~~1960’s. ~~Any~~During ~~such~~the ~~loan is subject to risks of delinquency and foreclosure~~1980’s, ~~and~~following ~~risks of loss. The ability of a borrower to repay a loan secured by land~~tightened ~~depends~~requirements ~~primarily~~on ~~upon~~ the ~~existence~~installation of ~~independent~~septic ~~income~~systems, orwe ~~assets~~established ofa ~~the~~valuation ~~borrower.~~allowance Wethat ~~would~~effectively ~~bear~~reduced the ~~risks~~book ~~of loss of principal~~value ~~to the extent~~ of ~~any~~much ~~deficiency between the value~~ of ~~the~~our ~~land~~property ~~and~~to ~~the~~reflect ~~principal~~lower ~~and~~market ~~accrued interest of the loan~~values. InAdverse ~~the~~market ~~event of~~conditions, ~~the~~in ~~bankruptcy~~certain ~~of the borrower~~circumstances, ~~the~~may ~~loan~~require tous ~~that borrower will be deemed~~ to further bereduce ~~collateralized only to~~ the ~~extent~~book ~~of the~~ value of ~~the underlying collateral at the time~~ of ~~bankruptcy~~our ~~(as~~property ~~determined~~in bywhat ~~the~~is ~~bankruptcy~~often ~~court),~~referred ~~and the lien securing the loan will be subject~~ to ~~the~~as ~~avoidance~~a ~~powers~~“write-down” ~~of the bankruptcy trustee~~ or ~~debtor-in-possession to the extent the lien is unenforceable~~“impairment.” ~~under~~A ~~state~~write-down ~~law. Foreclosure~~ of ~~a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on~~ our ~~anticipated~~property ~~return~~would ondecrease the ~~foreclosed~~value ~~mortgage loan, and the cash portion~~ of the ~~sale~~asset ~~price~~on ~~paid~~our ~~for~~balance ~~the~~sheet ~~land~~and bywould ~~the borrower~~reduce ~~may not cover~~ our ~~legal~~earnings ~~and~~for ~~other costs relating to foreclosure or bankruptcy of~~ the ~~borrower. Should we foreclose on~~ aperiod ~~property,~~in ~~we may be unable to resell that property, whether at the original sale price or otherwise. Should we foreclose on a property on~~ which the ~~borrower~~write-down ~~has~~is ~~commenced construction of a building or otherwise altered the property, we may be required to incur substantial costs to place the property in a sellable condition~~recorded.

~~Page~~Our 32business may be adversely affected by damage to dams.

We ~~may~~are ~~have~~responsible for ~~balances~~the atmaintenance ~~banks~~and repair of a dam designed to retain water in one of the lakes within the City of Boiling Spring Lakes. ~~excess~~The dam was breeched and partially washed out following a severe storm in 1996. We have spent approximately $185,000 since 2001 to repair the dam. We had intended to deed the dam to the City of ~~FDIC-insured~~Boiling ~~limits~~Spring Lakes after the repairs were completed, and the City indicated that it would accept the title after completion of the work; however, from time to time, the City has requested certain additional work be completed on the dam prior to transfer of title. At this time we contemplate no additional work but until such time as the title is transferred, there can be no assurance that the City will not require us to undertake and complete additional work on the dam, or decide not to accept title, notwithstanding additional work on the dam. The occurrence of a hurricane, flood, or unusually heavy or prolonged rain could result in damage to the dam. In such an eventuality before the transfer of title to the dam, we would be responsible for the repair costs, which could be substantial, and until such repair is completed, our ability to develop and sell property or realize income from projects could be materially adversely affected.

~~We typically~~The ~~hold~~City ~~our~~of ~~cash~~Boiling Spring ~~primarily~~Lakes inhas ~~checking~~many lakes and ~~money market accounts~~ponds, ~~and~~some ~~in certificates~~ of ~~deposit.~~which ~~Certificates of~~were ~~deposit~~created ~~include~~or ~~those~~enhanced ~~held~~by atusing ~~our~~earthen ~~principal~~dams ~~bank,~~to onraise ~~account under~~ the ~~Certificate~~water oflevel ~~Deposit Account Registry~~behind ~~Service~~the ~~(“CDARS”) program, and brokered certificates of deposit arranged through a securities broker-dealer~~dams. ~~Our~~We ~~principal~~own ~~bank,~~ and ~~each~~maintain ~~bank~~only ~~where~~one weof ~~hold~~those adams; ~~certificate~~all of ~~deposit, is insured by~~ the ~~Federal~~other ~~Deposit~~dams ~~Insurance~~are, ~~Corporation~~to ~~(“FDIC”).~~our ~~The FDIC~~knowledge, anowned ~~independent~~and ~~agency~~maintained ofby either the ~~United States~~City ~~government,~~of ~~insures~~Boiling ~~deposits~~Spring ~~(including,~~Lakes ~~but~~or ~~not~~the ~~limited~~owner ~~to, certificates~~ of ~~deposit)~~The upLakes toCountry ~~$250,000~~Club. ~~per~~From ~~depositor, per~~time ~~bank, subject~~ to ~~certain conditions; however~~time, ~~the~~a ~~insurance~~dam ~~limit~~owned isby ~~currently~~others ~~set~~may toneed ~~drop to $100~~repair,~~000 after December 31,~~ ~~2013.~~for ~~In addition~~example, ~~effective~~as ~~from~~a ~~December~~result ~~31,~~of ~~2010~~a ~~through~~“wash ~~December~~out” ~~31,~~of ~~2012,~~a ~~the~~portion ~~FDIC~~of ~~insures~~a ~~all~~dam ~~deposits~~following ina ~~noninterest bearing~~hurricane, ~~transaction accounts~~flood, ~~such~~or asperiod ~~checking~~of ~~accounts,~~unusually heavy ~~without~~or ~~limitation~~prolonged asrain, toand ~~amount.~~it We may ~~also~~become ~~hold~~necessary ~~cash~~for ~~in one or more cash sweep programs, which involve~~ the ~~allocation~~owner of ~~cash~~such indam ~~money market accounts among several participating banks up~~ to lower the ~~FDIC~~water ~~insurance~~level ~~limit~~behind ~~in each bank. It is~~ the ~~intent~~dam offor ~~the CDARS~~an ~~program,~~extended ~~the~~period ~~brokered certificates~~ of ~~deposit,~~time. ~~and~~During ~~the~~such ~~cash~~time, ~~sweep~~we ~~programs~~may tobe ~~limit~~unable ~~our exposure in any bank~~ to ~~FDIC insurance~~sell ~~limits;~~land ~~however,~~near ~~there can be no assurance that~~ the ~~balance~~lake ~~held~~or atpond ~~any~~with ~~bank~~reduced ~~through~~water ~~any~~levels, ~~such program~~ or ~~product~~the ~~will~~price ~~not exceed the FDIC insurance limit. In the event~~ that ~~any bank where~~ we ~~hold~~could ~~funds (including~~realize ~~through~~upon a ~~certificate~~sale of ~~deposit~~such orland ~~cash sweep program) becomes insolvent, we~~ may ~~lose~~be ~~some~~substantially orless ~~all~~than ofwould ~~any~~be ~~excess over~~the ~~FDIC-insured~~case ~~limits~~if ~~that~~the wewater ~~hold~~level atwas ~~that bank. From time to time, we have had cash balances at our principal bank in~~not ~~excess of FDIC-insured amounts~~reduced.

WePage ~~may have balances in our brokerage account in excess of SIPC-insured limits.~~34

We ~~hold cash, and~~ may ~~from~~face ~~time~~significant tocosts ~~time purchase and hold money market funds, U.S. Treasury securities, and brokered certificates of~~associated ~~deposit~~with ~~and~~building participate in cash sweep programs through a brokerage account at a securities broker-dealer insured by the Securities Investor Protection Corporation (“SIPC”). The SIPC, a non-profit corporation set up and ~~funded~~maintaining by the brokerage industry, insures investors’ accounts up to $500,000 per investor, subject to certain conditions, in the event that a member brokerage firm goes bankrupt, and cash and securities are missing from customer accountsroads. At December 31, 2011, we held in the brokerage account cash and money market funds totaling $1,204,699, or $704,699 in excess of SIPC-insured amounts. In the event that the broker-dealer where we maintain our account becomes insolvent or amounts in our account are lost or missing due to fraud or otherwise, we may lose some or all of any excess over SIPC-insured amounts.

We ~~face~~are ~~risks~~responsible for ~~associated~~maintaining ~~with~~certain ~~short~~roads, most of which are unpaved, and certain road rights-~~term~~of-way within the City of Boiling Spring Lakes. ~~liquid~~We ~~investments~~may complete some or all of the roads, or a portion of some or all of the roads, but we are under no contractual obligation to do so. It may be difficult or impossible for us to sell lots located on uncompleted roads or on roads that are not rocked or paved with asphalt, and the sales price of a lot situated on an uncompleted road or a road that is neither rocked nor paved with asphalt would likely be substantially less than what we might otherwise obtain. We have not set aside any money or entered into any bond, escrow, or trust agreement to assure completion of the roads, or to fund the rocking or paving of roads with asphalt.

~~From~~The ~~time~~costs to ~~time we~~complete ~~may~~a ~~have~~road, ~~significant~~and ~~cash balances invested in short-term investments that are intended~~ to ~~preserve~~rock ~~principal~~or ~~value~~pave ~~and maintain~~ a ~~high~~road ~~degree~~with ofasphalt, ~~liquidity~~are ~~while~~capitalized ~~providing current income. These investments may include money market funds~~ and~~/or~~ ~~direct~~added ~~obligations issued~~to by the ~~U.S.~~cost ~~Treasury.~~basis ~~Investments~~of inour ~~these~~land ~~funds~~held ~~and~~for ~~securities are not insured against loss of principal~~sale. ~~Under~~When ~~certain~~we ~~circumstances~~sell weland ~~may~~situated ~~seek~~on toa ~~redeem~~completed ~~all or part of our investment in money market funds~~road, ~~and our right to redeem some~~ or ~~all~~ ofa ~~our~~road ~~investment~~that ~~may~~has bebeen ~~delayed~~rocked or ~~suspended.~~paved Inwith ~~addition~~asphalt, ~~there~~the isdirect nocost ~~guarantee~~of ~~that~~land ~~our~~sold ~~investments in these funds~~ will bereflect ~~redeemable~~the atcapitalized ~~par value~~costs. ~~Under~~As ~~certain~~a ~~circumstances~~result, we ~~may~~will belikely ~~required~~achieve toa ~~sell~~higher ~~all~~sales orprice ~~part~~for ofland ~~our~~situated ~~investment~~on ina ~~U.S.~~completed ~~Treasury~~road, ~~securities~~or ~~prior~~a toroad ~~maturity~~that athas ~~less~~been ~~than~~rocked ~~par~~or ~~value.~~paved Awith ~~significant~~asphalt, ~~decline~~but in the ~~value~~direct cost of ~~our~~such ~~investment~~land orsold awill ~~significant~~also ~~delay or~~be ~~suspension~~higher ofthan ~~our~~for ~~right to redeem may have~~ a ~~material~~lot which ~~adverse~~does ~~effect~~not onreflect ~~our~~such ~~results~~capitalized ~~of operations or financial condition~~costs.

~~Page~~The 33City of Boiling Spring Lakes will not assume any road that is not paved with asphalt, and the City need not assume any paved road. Accordingly, unless and until we complete a road, have it paved with asphalt, and the road has been assumed by the City, we will be responsible for maintaining such road and the right-of-way. Since 2001, we have spent approximately $193,000 for rocking and paving roads. Otherwise, in recent years, we have not spent significant amounts toward building or maintaining roads and rights-of-way, and the cost to maintain them may increase substantially. Our failure to provide proper maintenance of the roads and rights-of-way which have not been assumed by the City may subject us to substantially greater risk of litigation from persons adversely affected by such failure.

~~Our~~During ~~business~~the is1960’s, we ~~subject~~sold a number of five- and ten-acre timber tracts. In some cases, we provided an easement across our land to ~~complex~~the buyer of such ~~corporate~~a ~~governance~~tract for access to and egress from the tract, ~~public~~and ~~disclosure~~the buyer was responsible for building a road across such easement. In cases where the purchase contract was silent on the issue, local laws required only that we provide the buyer with access to and ~~accounting~~egress from ~~requirements~~a tract but it was not clear who was responsible for building a road to and from the tract. We maintain that our only obligation in such cases is and has been to provide an easement for access to and egress from the tract, and if at some subsequent time the buyer wanted a road across such an easement, we were not obligated to build it. We have ~~increased~~not ~~both~~been ~~our~~involved ~~costs~~in any litigation involving a dispute over whose responsibility it is to build a road in such a case. If such litigation were to be initiated, we believe that we would prevail but that the cost of defending the case could be material, and should we not prevail, the ~~risk~~cost of ~~noncompliance.~~building any such road could be material.

~~Because~~Page we are required to file periodic and other reports with the SEC, we are subject to numerous rules and regulations of federal, state, and other entities charged with the protection of investors. These entities, including but not limited to the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, and the SEC, have implemented requirements, standards, and regulations, including expanded disclosures and more complex accounting rules, and continue developing additional requirements. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from operating activities to compliance activities.35

~~Because~~We ~~new and modified laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, their application in practice~~ may ~~evolve~~incur over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding related financial disclosures and compliance matters, and additional costs ~~necessitated by ongoing revisions to our disclosures and governance practices. Changes~~ in ~~these laws, regulations, and standards can be difficult~~connection to predict and can materially affect how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. In addition, the preparation of financial statements in conformity with ~~accounting principles generally accepted in~~ the ~~United States~~removal of ~~America~~an ~~(“GAAP”)~~underground ~~requires~~storage ~~management~~tank to make significant estimates that affect the financial statements. Due to the inherent nature of these estimates, no assurance can be given that we will not be required to recognize significant, unexpected income or losses due to actual results varying materially from management’s estimates. Additional information regarding our critical accounting policies can be found in ~~the section captioned “Critical Accounting Policies” in Item 7 of this Annual Report on Form 10-K~~2000.

In 2000, we removed an underground storage tank located adjacent to the club house building of Fox Squirrel Country Club. We ~~experience~~owned ~~fluctuations~~that ~~and~~golf ~~variability~~club until we sold it to a third party in ~~our~~2001, ~~operating~~and the club was subsequently renamed The Lakes Country Club. Soil samples taken shortly after the removal showed a certain amount of contamination of soil and indications that diesel fuel may have leaked into the subsurface groundwater. We undertook remediation by removing approximately 15 tons of contaminated soil and adding fill to the affected area. Test wells were placed near the former site of the underground storage tank to measure the level of subsurface groundwater contamination, and the test results were submitted to the North Carolina Department of Environment and Natural Resources (“NCDENR”). Initial test results showed levels of groundwater contamination to be just above the standards. From time to time during 2002 and 2003, asadditional tests were performed on subsurface groundwater samples, and the test results were submitted to NCDENR. With one exception, all of the additional test results showed that the concentration of hydrocarbon compounds in the subsurface groundwater were either below detection limits or were substantially below standards; the one exception was the testing in May 2003, which showed that “C11-C22 aromatic concentration is non-compliant.” As requested by NCDENR, we continued to monitor and sample the groundwater and to submit the test results to NCDENR periodically. The written test results of sampling of subsurface groundwater taken in February 2004, showing that the concentration of hydrocarbon compounds in the subsurface groundwater were either below detection limits or were substantially below standards, were submitted to NCDENR. On May 4, 2004, NCDENR issued a Notice ~~result~~of No Further Action, ~~our~~stating ~~historical~~that ~~performance~~NCDENR ~~may~~determined that we need not becontinue the monitoring and sampling of groundwater. Such determination shall apply unless NCDENR makes a ~~meaningful~~later ~~indicator~~determination that the concentration of ~~future~~hydrocarbon ~~results~~compounds that resulted from the release of diesel fuel from the now removed underground storage tank once again poses an unacceptable risk or a potentially unacceptable risk to human health or the environment.

We ~~historically~~believe ~~have experienced,~~that ~~and expect to continue to experience, variability in sales of real estate and results of operations on both an annual~~we ~~and~~will ~~a quarterly basis. As a result of such variability, our historical performance may~~ not be aincurring ~~meaningful~~any ~~indicator~~further ofcosts ~~future results.~~associated ~~Factors~~with ~~that~~release ~~contribute to this variability include: (i) the timing~~ of ~~land~~diesel ~~sales;~~fuel ~~(ii)~~from ~~conditions of~~ the ~~real~~now ~~estate market~~removed ~~where~~underground westorage ~~operate and of the general economy; (iii) the cyclical nature of the real estate industry; (iv) changes in prevailing~~tank. ~~interest~~If, ~~rates; (v) changes in environmental and government regulations; and (vi) the availability of mortgage or construction financing. Historically~~however, aNCDENR ~~significant~~should ~~percentage~~request ofthat ~~our~~we ~~real~~conduct ~~estate~~additional ~~purchase~~monitoring ~~contracts are entered into in the spring~~ and ~~summer months.~~testing Asor ato ~~result~~conduct ofadditional ~~these combined factors~~remediation, we believe ~~historically~~that ~~have~~the ~~experienced~~cost ~~uneven~~of ~~quarterly~~any ~~results,~~such ~~with~~additional ~~lower~~monitoring ~~revenues~~ and ~~operating~~ ~~income~~testing ~~generally~~or ~~during~~remediation ~~the~~is ~~first~~not ~~and~~likely ~~fourth~~to ~~quarters~~be ~~of the year~~material.

~~Page~~In 34connection with the sale of the assets of Fox Squirrel Country Club, we entered into an indemnification agreement with WW-Golf, the buyer of the assets. Pursuant to such indemnification agreement, as amended, our liability related to testing and remediation involving the underground storage tank terminated on June 17, 2005. However, should NCDENR require additional testing and/or remediation, and should WW-Golf be unable to bear the entire cost of such testing and/or remediation, it is possible that we will be required to bear some or all of such costs.

~~Changes~~Page ~~in accounting principles, interpretations and practices may affect our reported revenues, earnings and results of operations.~~36

~~Generally~~Should ~~accepted accounting~~we ~~principles~~acquire ~~and~~additional ~~the accompanying standards, implementation guidelines, interpretations and practices for certain aspects~~real ~~of our business are complex and may involve subjective judgments~~estate, ~~estimates~~we ~~and~~would ~~assumptions,~~be ~~such~~subject as revenue recognition, inventory valuations and income taxes. Changes in interpretations could significantly affect our reported revenues, earnings and operating results, and could add significant volatility to ~~those measures without~~ a ~~comparable~~number ~~underlying change in cash flows from operations. The imposition~~ of ~~new~~risks ~~accounting~~relating ~~standards~~to ~~(e.g.~~acquisitions, ~~International~~any ~~Financial~~of ~~Reporting~~which ~~Standards)~~ could ~~result~~cause inus ~~increased expenses~~not ~~as we may be required~~ to ~~modify~~realize ~~our~~the ~~current practices and systems in order to comply with such standards~~anticipated benefits.

~~Our failure~~While towe ~~file~~currently have ~~timely~~no ~~reports~~plans orto ~~any~~acquire ~~material~~additional ~~inaccuracies~~real inestate, ~~our~~we ~~reports~~ may ~~subject~~do usso toin ~~regulatory~~the orfuture. ~~shareholder litigation,~~Acquisition ~~which~~transactions ~~may~~involve ~~materially~~various ~~and~~inherent risks, ~~adversely~~including, ~~affect~~among ~~our~~others, ~~business.~~the following:

~~Our failure~~• toUncertainties ~~file our reports~~ in aassessing ~~timely~~the ~~manner~~value, orstrengths, ~~any~~and ~~material~~potential ~~inaccuracies~~profitability ~~in our reports may subject us to regulatory or shareholder litigation~~of, ~~which~~and ~~may~~identifying ~~divert~~ the ~~attention~~extent of ~~our~~all ~~management~~weaknesses, ~~and~~risks, ~~force~~contingent ~~us to expend resources to defend against such claims. Any litigation may have a material~~ and ~~adverse~~other ~~effect~~liabilities on(including ~~our~~environmental) ~~business and future results~~ of, ~~operations~~acquisition opportunities.

~~There may~~• beAcquired ~~deficiencies~~property ~~with~~may ~~our~~fail ~~internal~~to ~~controls~~perform ~~that~~as ~~require~~we ~~improvements,~~expected ~~and~~in weanalyzing ~~will~~our beinvestments; ~~exposed~~our toestimates ~~potential~~of ~~risks~~the ~~from~~costs ~~legislation requiring~~or ~~companies~~repositioning toor ~~evaluate~~redeveloping ~~controls~~acquired ~~under~~property ~~Section 404~~may ofbe inaccurate; and the ~~Sarbanes-Oxley~~development ~~Act~~opportunity ofmay ~~2002.~~be abandoned after expending significant resources.

~~While we~~• ~~believe~~Problems that wecould ~~currently~~arise ~~have adequate internal control procedures in place, we are still exposed to potential risks~~ from ~~legislation~~ ~~requiring companies to evaluate controls under Section 404(a) of~~ the ~~Sarbanes-Oxley~~integration ~~Act~~ of ~~2002. Under~~ the ~~supervision~~new ~~and~~businesses with the participation of our management, we have evaluated our internal controls system in order to allow management to report on our internal controls, as required by Section 404(a) of that Act. We have performed the system and process evaluation and testing which we believe is required in an effort to comply with the management certification requirements of Section 404(a). As a result, we have incurred and will in the future incur additional expenses and a diversion of management’s time. If we are not able to meet the requirements of Section 404(a) in a timely manner or ~~with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities, such as the SEC~~property.

~~Failure~~• toUnanticipated ~~maintain~~changes ~~effective~~in ~~internal control~~business, ~~over~~industry ~~financial~~or ~~reporting~~general ~~could~~economic ~~have~~conditions athat ~~material~~affect ~~adverse~~the ~~effect~~assumptions onunderlying our ~~business,~~rationale ~~our~~for ~~operating~~pursuing ~~results and~~ the ~~value~~acquisition ~~of our units~~opportunity.

~~Maintaining~~Should ~~effective internal~~we ~~control~~engage ~~over financial reporting is necessary for us to produce reliable financial reports and is important~~ in ~~helping to~~real ~~prevent financial fraud. If we are unable to maintain adequate internal control over financial reporting, our business operating~~estate ~~results and financial condition could be harmed. On an annual basis~~development, we ~~will~~would furnish an assessment by our management on the design and operating effectiveness of our internal control over financial reporting with our Annual Report on Form 10-K. During the course of the documentation and testing necessary to make our annual assessment, we may identify significant deficiencies or material weaknesses that we may be ~~unable~~subject to ~~remediate~~numerous ~~before~~laws the requisite deadline for that report. If our management were to conclude in its reports that our internal control over financial reporting was not effective, this could have a material adverse effect on our ability to process and ~~report~~regulations ~~financial~~regarding ~~information and~~ the ~~value~~development of ~~our~~real ~~partnership units could decline significantly~~estate.

~~Page~~We 35may decide to engage in development of our property to increase our revenue. Development of real estate is subject to zoning laws and other regulations that govern the use and subdivision of land. Changes in zoning or other regulations may require substantially greater expenditures to complete one or more new projects than would be the case without such changes. Seeking a favorable change to zoning laws and regulations can be an expensive, time-consuming, and, ultimately, futile process. Adverse changes to zoning and other laws and regulations can preclude the development of some or all of a developer’s land, often with no compensation for the loss of future earnings from development of the affected land.

~~Errors~~At inDecember ~~estimates~~31, 2012, we owned, among other land, approximately 244 acres of undeveloped, unplatted land intended for residential use, and ~~judgments~~approximately ~~that~~219 ~~affect~~additional ~~decisions~~acres ~~about~~of ~~how~~undeveloped, weunplatted ~~operate~~land ~~and~~intended onfor ~~our~~commercial ~~reported~~use. ~~amounts~~Changes in zoning or other regulations may prevent us from subdividing all or a substantial portion of ~~assets~~such acreage, ~~liabilities~~which, ~~revenues~~in turn, may adversely affect our ability to generate revenue from real estate sales and/or ~~expenses~~our ~~could~~ability ~~have~~to effect a bulk sale of all or substantially all of our assets. If we are unable to obtain a ~~material~~rezoning ~~impact~~of oncommercial usland, we may be unable to realize any value in a sale of such land.

InPage the ordinary course of business, we must make estimates and judgments that affect decisions about how we operate and the reported amounts of assets, liabilities, revenues and expenses. These estimates include, but are not limited to, those related to: recognition of income and expenses; impairment of assets; estimates of sales levels and sales prices; capitalization of costs to our inventory of real estate held for sale; and cost of complying with government regulations. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, we evaluate and adjust our estimates based upon the information then currently available. Actual results may differ from these estimates, assumptions and conditions.37

~~Information~~Should we ~~technology~~engage ~~failures~~in real estate development, we may be unable to obtain and ~~data~~renew ~~security~~permits ~~breaches~~necessary for development projects we decide to undertake, which could ~~harm~~reduce our ~~business~~anticipated cash flow and profitability from those projects, or cause us not to realize the anticipated benefits from the projects.

WeReal ~~use~~estate ~~information~~companies ~~technology,~~must ~~digital~~obtain ~~communications~~numerous ~~and~~governmental ~~other~~permits ~~computer~~or ~~resources~~approvals tothat ~~carry~~impose ~~out~~strict ~~important~~conditions ~~operational~~and ~~activities~~obligations ~~and~~relating to ~~maintain~~various ~~our~~environmental ~~business~~and ~~records.~~safety ~~Many~~matters ofin ~~these~~connection ~~resources~~with ~~are~~real ~~maintained~~estate ~~on our behalf by third-party service providers~~development. ~~Although~~The wepermitting ~~and~~rules ~~our service providers employ what we believe~~ are ~~adequate~~complex ~~security~~ and ~~other~~can ~~preventative~~change ~~and~~over ~~corrective~~time. ~~measures, our ability to conduct our~~Regulatory ~~business~~authorities ~~may~~exercise beconsiderable ~~impaired~~discretion ifin ~~these~~the ~~resources~~timing ~~are~~and ~~compromised,~~scope ~~degraded, damaged, or fail, whether due to a virus or other harmful circumstance, intentional penetration, or disruption~~ of ~~our~~permit information technology resources by a third party, natural disaster, hardware or software corruption failure or error, telecommunications system failure, service provider error or failure, or otherwiseissuance. A ~~significant~~The ~~and~~public ~~extended~~has ~~disruption in~~ the ~~functioning~~right ~~of these resources could damage our reputation and cause us~~ to ~~lose~~comment ~~customers,~~on ~~sales~~certain ~~and~~permit ~~revenue,~~applications ~~result in the unintended~~ and~~/or~~ ~~unauthorized~~otherwise ~~public~~participate ~~disclosure~~in or the ~~misappropriation~~permitting ~~of proprietary~~process, ~~personal identifying and confidential information (~~including ~~information~~through ~~about~~court ~~our~~intervention. ~~customers and business partners)~~Accordingly, permits ~~and~~required ~~require~~by us to ~~incur significant~~conduct ~~expense~~development toprojects ~~address and remediate or otherwise resolve these kinds of issues. The release of confidential information~~ may ~~also~~not ~~lead~~be toissued, ~~litigation~~maintained or ~~other~~renewed, ~~proceedings~~or ~~against~~may usnot bybe ~~affected~~issued ~~individuals and/~~or ~~business partners and/or by regulators,~~renewed ~~and~~in ~~the~~a ~~outcome~~timely ~~of such proceedings~~fashion, ~~which could include penalties~~ or ~~fines,~~may ~~could~~involve ~~have~~requirements athat ~~material~~restrict ~~and adverse effect on~~ our ~~financial statements.~~ability Into ~~addition,~~economically ~~the~~conduct ~~costs~~our ofdevelopment ~~maintaining~~projects. ~~adequate~~Should we ~~protection~~engage ~~against~~in ~~such~~real ~~threats,~~estate ~~depending on their evolution~~development, ~~pervasiveness and~~these ~~frequency~~ and~~/or~~ ~~government-mandated~~other ~~standards~~eventualities orwe ~~obligations~~presently ~~regarding~~deem ~~protective~~not ~~efforts,~~to ~~could~~ be material to our ~~financial~~current or future ~~statements~~business incould aadversely ~~particular~~affect ~~period~~our orfuture ~~over~~results ~~various~~of ~~periods~~operations and financial condition.

~~Page~~Contractors 36are generally exposed to risks not only with respect to a project in which we have an interest, but also other projects in which they are involved. A default by a contractor, or the bankruptcy, insolvency or other failure of a contractor engaged by us on a project we decide to undertake may require, among other possibilities, that we determine whether we want to fund monies beyond what we are contractually obligated to fund, take over contracting of the project, find another contractor for the project, or sell our interest in the project. These events could delay the completion of the project, result in our incurring additional costs, and/or preclude us from realizing anticipated returns, if any. These events could cause a decrease in the value of our assets and compel us to seek additional sources of liquidity, which may or may not be available, in order to complete the project.

■Purchasers ~~Risks~~of land from us may be ~~Relating~~subject to andelays ~~Investment~~or may be precluded from building due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in ~~Our~~the ~~Partnership~~future. ~~Units~~

WePurchasers doof ~~not~~land from ~~expect~~us may be subject to ~~make~~periodic ~~any~~delays ~~distributions~~or may be precluded entirely from building in certain portions of Boiling Spring Lakes due to ~~unitholders~~building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local and state governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction. A project for which a purchaser of land from us has received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the ~~foreseeable~~development ~~future~~process. Such a project can also be adversely affected by unforeseen health, ~~even~~safety, ~~during~~and ~~periods~~welfare ~~when~~issues, wewhich ~~record~~can ~~net~~further ~~income~~delay the project or prevent its completion. An occurrence of any of the foregoing may have the potential effect of reducing our future sales of real estate.

WePage do not anticipate that we will make any cash distributions to unitholders in the foreseeable future. Accordingly, investors must rely on sales of their units after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash distributions in the foreseeable future should not purchase our partnership units.38

~~The~~Any ~~amount~~loans ~~and~~that ~~timing of future cash distributions, if any, to unitholders principally depends upon the amount of cash~~ we ~~generate~~originate from ~~our operations,~~ ~~which~~land ~~will~~sales ~~fluctuate~~are ~~from~~subject ~~quarter~~ to ~~quarter~~the ~~based~~risks ~~on,~~of ~~among~~delinquency ~~other~~and ~~things,~~foreclosure. ~~the following:~~

·We currently sell land for all cash. We may, in the future, elect to originate loans by selling land for a combination of cash and a note. Any such loan is subject to risks of delinquency and foreclosure, and risks of loss. The ~~level~~ability of a borrower to repay a loan secured by land depends primarily upon the existence of independent income or assets of the borrower. We would bear the risks of loss of principal to the extent of any deficiency between the value of the land and the principal and accrued interest of the loan. In the event of the bankruptcy of the borrower, the loan to that borrower will be deemed to be collateralized only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our ~~operating~~anticipated return on the foreclosed mortgage loan, and the cash portion of the sale price paid for the land by the borrower may not cover our legal and other costs relating to foreclosure or bankruptcy of the borrower. Should we foreclose on a property, we may be unable to resell that property, whether at the original sale price or otherwise. Should we foreclose on a property on which the borrower has commenced construction of a building or otherwise altered the property, we may be required to incur substantial costs to place the property in a sellable condition.

·■ ~~The~~Risks ~~amount~~Relating ~~of land which we are able~~ to ~~sell~~an ~~and~~Investment ~~the~~in ~~price~~Our atPartnership ~~which we are able to sell land.~~Units

·We ~~Federal~~do not expect to make any distributions to unitholders for the foreseeable future, ~~state~~even ~~and~~during ~~local~~periods ~~regulations~~when ~~and~~we ~~taxes~~record net income.

·We ~~Prevailing~~do ~~economic~~not ~~conditions~~anticipate that we will make any cash distributions to unitholders in the foreseeable future. Accordingly, investors must rely on sales of their units after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash distributions in the foreseeable future should not purchase our partnership units.

InThe ~~addition~~amount and timing of future cash distributions, if any, to unitholders principally depends upon the ~~actual~~ amount of cash ~~available~~we ~~for~~generate ~~distribution~~from our operations, which will ~~depend~~fluctuate ~~upon~~from ~~other~~quarter ~~factors,~~to ~~including~~quarter based on, among ~~others~~other things, the following:

·• The level of our ~~capital~~operating ~~expenditures~~costs.

·• The ~~cost~~amount of ~~acquisitions,~~land ifwhich ~~any~~we are able to sell and the price at which we are able to sell land.

·• ~~Our~~Federal, ~~debt~~state ~~service requirements~~ and ~~restrictions~~local onregulations ~~distributions~~and ~~contained in future debt agreements, if any~~taxes.

·• ~~Fluctuations~~Prevailing ineconomic ~~our working capital needs~~conditions.

·Page ~~Our ability to borrow under future credit agreements, if any, to make distributions to our unitholders.~~39

·In ~~The amount~~addition, ifthe ~~any,~~actual amount of cash ~~reserves~~available ~~established~~for bydistribution ~~the~~will ~~General~~depend ~~Partner,~~upon inother ~~its~~factors, ~~discretion~~including, ~~for~~among others, the ~~proper conduct of our business.~~following:

We• ~~experienced~~The ~~operating losses~~level ~~for each~~ of ~~the years ended December 31, 2009, 2010, and 2011, and there can be no assurance that the amounts available from internally generated funds, cash on hand, and sale of~~ our remaining assets will be sufficient to fund our anticipated operations and meet existing and future liabilities. These losses, and the uncertainty surrounding liabilities and other claims, create uncertainties about our ability to meet existing and future liabilities as they become due. We have taken certain steps, including conservation of cash, in light of these uncertainties. We may be required to seek additional capital, ~~such as in the form of bank financing; however, there is no assurance that such additional capital will be available or, if available, will be on terms favorable to us~~expenditures.

~~Page~~• 37The cost of acquisitions, if any.

~~Because~~• ofOur ~~the~~debt ~~above factors,~~service ~~among~~requirements ~~others,~~and werestrictions ~~may~~on ~~not have sufficient available cash to pay cash~~ distributions tocontained ~~our~~in ~~unitholders~~future ~~even~~debt ~~during~~agreements, ~~periods when~~if ~~we record net income~~any.

~~The~~• ~~amount~~Fluctuations ofin ~~distributions to unitholders, if any, is uncertain, and may be less than~~ our ~~book~~working ~~value.~~capital needs.

We• ~~expect~~Our ability to ~~sell~~borrow ~~the remainder~~under offuture ~~our~~credit ~~property~~agreements, ~~over~~if ~~time with a view towards ultimately dissolving the partnership. Despite repeated efforts in the past~~any, ~~we were unable~~ to ~~effect~~make adistributions ~~sale of all or substantially all of our real estate, and have found ourselves generally able~~ to ~~sell~~ ~~only a small portion of~~ our ~~land at any one time through the sale of individual lots or groups of individual lots and/or the sale of relatively small tracts of land~~unitholders.

We• may be required to use a liquidation basis of accounting in view of the foregoing. Should we adopt a liquidation basis of accounting, we would need to make reasonable provisions to pay all claims and obligations, which include contingent and conditional claims as well as unknown claims that may arise after dissolution, such as assessments for water and sewer systems. The ~~consequence is that unitholders would likely not receive any distributions prior to dissolution~~amount, or if ~~they did~~any, ~~the distributions might be lower than the current book value~~ of ~~the units. Because the amount of reserve required is uncertain, we might reserve a higher amount than necessary. We would not plan on distributing~~ cash toreserves ~~unitholders~~established ~~before~~by ~~entering~~the ~~dissolution.~~General ~~Our ability to make cash distributions during dissolution would depend upon resolution of claims and liabilities. Under any liquidation scenario~~Partner, ~~unitholders would not have control over the divestiture of our remaining assets or the liquidation process. We cannot make any assurance that changes~~ in ~~our policies~~its ~~would serve fully the interests of all unitholders or that under any liquidation scenario the unitholders would receive any liquidating distributions of cash or other property~~discretion, orfor ~~if they do, that~~ the ~~distributions~~proper ~~would~~conduct ~~equal or exceed the book value~~ of ~~the~~our ~~units at any past, present, or future time~~business.

~~Our~~We ~~units~~experienced operating losses for each of the years ended December 31, 2010, 2011, and 2012, and there can be no assurance that the amounts available from internally generated funds, cash on hand, and sale of our remaining assets will be sufficient to fund our anticipated operations and meet existing and future liabilities. These losses, and the uncertainty surrounding liabilities and other claims, create uncertainties about our ability to meet existing and future liabilities as they become due. We have ataken ~~limited~~certain ~~public~~steps, ~~trading~~including conservation ~~market~~of cash, in light of these uncertainties. We may be required to seek additional capital, such as in the form of bank financing; however, there is no assurance that such additional capital will be available or, if available, will be on terms favorable to us.

~~There~~Because ~~has~~of ~~been,~~the ~~and~~above ~~continues to be~~factors, aamong ~~limited public market for our units. Our units are quoted on OTCQB~~others, anwe ~~electronic~~may ~~quotation and trading system in the over-the-counter securities trading market that is operated by OTC Markets Group, Inc.; however, an active trading market for our units has~~ not ~~developed,~~have ~~and~~sufficient ~~may~~available ~~never~~cash ~~develop or be sustained. You may not be able~~ to ~~sell~~pay ~~your~~cash ~~units~~distributions ~~at or above the price you paid. You may not be able~~ to ~~liquidate your investment in units without considerable delay, if at all. If a more active market does develop, the price may be highly volatile. If~~ our ~~units~~unitholders ~~should~~even ~~stop~~during ~~being quoted on OTCQB, it is possible that it could~~periods ~~materially~~when ~~and/or~~we ~~adversely~~record ~~affect~~net ~~any future liquidity in the units~~income.

~~Page~~The 38amount of distributions to unitholders, if any, is uncertain, and may be less than our book value.

~~The~~We ~~market~~are ~~price~~seeking to sell the remainder of our ~~units~~property ~~may~~with a view towards ultimately dissolving the partnership. Despite repeated efforts in the bepast, ~~volatile~~we have been unable to effect a sale of all or substantially all of our real estate, and ~~could~~have befound ~~based~~ourselves ongenerally able ~~many~~to ~~factors~~sell only a small portion of our land at any one time through the sale of individual lots or groups of individual lots and/or the sale of relatively small tracts of land. At the present time, ~~including~~we ~~perceptions~~are ~~that~~again doseeking ~~not~~to ~~accurately~~sell ~~reflect~~all ~~actual~~of ~~conditions~~our real estate.

~~The~~Page ~~market price of our units may fluctuate significantly in response to numerous factors, many of which are beyond our control, including, among others, the following:~~40

·We ~~Conditions~~may be required to use a liquidation basis of accounting in ~~equity~~view of the foregoing. Should we adopt a liquidation basis of accounting, ~~financial~~we would need to make reasonable provisions to pay all claims and obligations, which include contingent and ~~credit~~conditional ~~markets~~claims ~~generally~~as well as unknown claims that may arise after dissolution, such as assessments for water and sewer systems. The consequence is that unitholders would likely not receive any distributions prior to dissolution, or if they did, the distributions might be lower than the current book value of the units. Because the amount of reserve required is uncertain, we might reserve a higher amount than necessary. We would not plan on distributing cash to unitholders before entering dissolution. Our ability to make cash distributions during dissolution would depend upon resolution of claims and liabilities. Under any liquidation scenario, unitholders would not have control over the divestiture of our remaining assets or the liquidation process. We cannot make any assurance that changes in our policies would serve fully the interests of all unitholders or that under any liquidation scenario the unitholders would receive any liquidating distributions of cash or other property, or if they do, that the distributions would equal or exceed the book value of the units at any past, present, or future time.

·Our ~~Actual,~~units ~~anticipated,~~have ora ~~perceived~~limited ~~fluctuations~~public trading ~~in our operating results or financial condition~~market.

·There ~~Actual~~has been, ~~anticipated~~and continues to be, a limited public market for our units. Our units are not quoted on any trading market; an active trading market for our units does not exist and may never develop or ~~perceived~~be ~~changes~~sustained. inYou may not be able to sell your units at or above the price you paid. You may not be able to liquidate your investment in units without considerable delay, if at all. If a more active market were ~~value~~to ofdevelop, ~~our~~which ~~real~~we ~~estate~~believe ~~assets~~is unlikely, the price may be highly volatile.

·The ~~Changes in~~ market ~~valuations~~price of ~~other~~our ~~real~~units ~~estate~~may be ~~companies,~~volatile ~~particularly~~and ~~those~~could ~~that~~be ~~sell~~based ~~real~~on ~~estate~~many ~~similar~~factors, toincluding orperceptions ~~near~~that ~~ours~~do not accurately reflect actual conditions.

·The ~~Announcements~~market byprice usof our orunits ~~our~~may ~~competitors~~fluctuate ofsignificantly ~~significant~~in ~~acquisitions,~~response ~~strategic~~to ~~partnerships~~numerous factors, ~~joint~~many ~~ventures~~of orwhich ~~capital~~are ~~commitments.~~beyond our control, including, among others, the following:

·• ~~The~~Conditions ~~sale of a relatively large number of units at one time or~~ in aequity, ~~short~~financial, ~~period~~and ofcredit ~~time~~markets ~~by one or more unitholders~~generally.

·• ~~The~~Actual, ~~market’s~~anticipated, ~~perception~~or ofperceived fluctuations in our ~~future~~operating ~~cash~~results ~~distributions~~or financial condition.

·• ~~Departure~~Actual, anticipated, or perceived changes in the market value of ~~key~~our ~~personnel~~real estate assets.

·• ~~Government~~Changes ~~action~~in ormarket ~~regulation~~valuations of other real estate companies, ~~including~~particularly ~~changes~~those inthat ~~tax~~sell ~~law~~real estate similar to or near ours.

~~Any~~• ofAnnouncements ~~the~~by ~~above~~us ~~factors,~~ or ~~others,~~our ~~may~~competitors ~~have~~of a significant ~~negative~~acquisitions, ~~effect~~strategic onpartnerships, ~~the~~joint ~~market~~ventures ~~price~~or ofcapital ~~our units~~commitments.

~~Our~~• The sale of a relatively large number of units ~~are~~at ~~subject~~one totime ~~“penny stock”~~or ~~rules.~~in a short period of time by one or more unitholders.

~~Our~~• ~~units are~~The currently defined as a “penny stock” under Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). “Penny stocks” are subject to Rules 15g-2 through 15g-7 and Rule 15g-9 under the Exchange Act, which impose additional sales practice requirements on broker-dealers that sell penny stocks to persons other than established customers and institutional accredited investors. Among other things, for transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasermarket’s ~~written~~perception ~~consent to the transaction prior to sale. Consequently, these rules may affect the ability~~ of ~~broker-dealers~~ ~~to sell~~ our ~~units~~future ~~and~~cash ~~affect the ability of holders to sell their units in the secondary market~~distributions. ~~To the extent our units are subject to the penny stock regulations, the market liquidity for our units will be adversely affected.~~

~~Page~~• 39Departure of key personnel.

~~The~~• ~~Financial~~Government ~~Industry~~action ~~Regulatory Authority~~or ~~has~~regulation, ~~adopted~~including ~~sales~~changes ~~practice~~in ~~requirements~~tax ~~which may limit a unitholder’s ability to buy and sell our units~~law.

~~The~~Any ~~Financial~~of ~~Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that~~ the ~~investment~~above ~~is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers~~factors, ~~broker-dealers must make reasonable efforts to obtain information about~~ ~~the~~or ~~customer’s financial status~~others, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our units, which may ~~limit your ability to buy and sell our units and~~ have ana ~~adverse~~significant negative effect on the market ~~for~~price of our units.

WePage may issue an unlimited number of units, on terms and conditions established by our general partner, without the consent of our unitholders, which would dilute the ownership interest of existing unitholders. 41

~~The~~Our ~~issuance by us of additional~~ units orare ~~other~~subject ~~equity~~to ~~securities~~“penny stock” ofrules. ~~equal or senior rank would have adverse effects, including, among others, the following:~~

· Our ~~unitholders~~units are currently defined as a “penny stock” under Rule 3a51-1 promulgated under the Exchange Act. “Penny stocks” are subject to Rules 15g-2 through 15g-7 and Rule 15g-9 under the Exchange Act, which impose additional sales practice requirements on broker-dealers that sell penny stocks to persons other than established customers and institutional accredited investors. Among other things, for transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s ~~proportionate~~written ~~ownership~~consent ~~interest~~to the transaction prior to sale. Consequently, these rules may affect the ability of broker-dealers to sell our units and affect the ability of holders to sell their units in usthe ~~would~~secondary ~~decrease~~market. To the extent our units are subject to the penny stock regulations, the market liquidity for our units will be adversely affected.

· The ~~amount~~Financial ofIndustry ~~cash~~Regulatory Authority ~~ultimately~~has ~~available~~adopted ~~for~~sales ~~distribution~~practice onrequirements ~~each~~which ~~previously~~may ~~outstanding~~limit ~~unit~~a ~~may~~unitholder’s ~~decrease~~ability to buy and sell our units.

· The ~~relative~~Financial ~~voting~~Industry Regulatory ~~strength~~Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of ~~each~~these ~~previously~~rules, ~~outstanding~~FINRA ~~unit~~believes ~~may~~that there is a high probability that speculative low priced securities will not be ~~diminished~~suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our units, which may limit your ability to buy and sell our units and have an adverse effect on the market for our units.

·We ~~The~~may ~~ratio~~issue an unlimited number of ~~taxable~~units, ~~income~~on toterms ~~distributions~~and ~~may~~conditions ~~increase~~established by our General Partner, without the consent of our unitholders, which would dilute the ownership interest of existing unitholders.

· The ~~market~~issuance ~~price~~by us of ~~our~~additional units ~~may~~or ~~decline.~~other equity securities of equal or senior rank would have adverse effects, including, among others, the following:

~~Your~~• ~~liability~~Our ~~as a limited partner may not be limited, and our~~ unitholders’ ~~may~~proportionate ~~have~~ownership tointerest ~~repay~~in ~~distributions to~~ us ~~under~~would ~~certain circumstances~~decrease.

As• aThe ~~limited~~amount ~~partner in a partnership organized under South Carolina law, you could be held liable for our obligations to the same extent as a general partner if you participate in the “control”~~ of ~~our~~cash ~~business.~~ultimately ~~Our~~available ~~general partner generally has unlimited liability~~ for ~~our~~distribution ~~obligations, except for those contractual obligations that are expressly made by us without recourse to our general partner. Additionally, the limitations~~ on ~~the~~each ~~liability~~previously ofoutstanding ~~unitholders~~unit ~~for~~may ~~our obligations have not been clearly established in many jurisdictions~~decrease.

~~Under~~• ~~certain~~The ~~circumstances, our~~relative ~~unitholders~~voting ~~may~~strength ~~have to repay amounts wrongfully distributed to them. If, for example, we should make a distribution that would cause our liabilities to exceed the fair value~~ of ~~our~~each ~~assets,~~previously ~~unitholders~~outstanding ~~who~~unit ~~received the distributions~~ may be ~~required to return the amount of distributions to us~~diminished.

~~Page~~• 40The ratio of taxable income to distributions may increase.

~~Fees~~• ~~paid~~The ~~and~~market ~~cost~~price ~~reimbursements due~~of to our ~~general~~units ~~partner~~ may ~~be substantial and reduce our ability to ultimately pay distributions to unitholders~~decline.

~~Prior~~Page to making any distributions to our unitholders, we will pay all fees owed to our general partner and its affiliates, and reimburse them for all expenses they have incurred on our behalf. The payment of these fees and reimbursement of these expenses may adversely affect our ability to make distributions to the unitholders. Our general partner has sole discretion to determine the amount of these fees and expenses. For additional information, please see “Item 13. Certain Relationships and Related Transactions, and Director Independence – Transactions with Related Persons.”42

~~Our~~Your ~~unitholders~~liability doas ~~not~~a ~~elect~~limited ~~our~~partner ~~general~~may ~~partner~~not orbe ~~vote~~limited, onand our ~~general~~unitholders ~~partner’s~~may ~~officers~~have orto ~~directors~~repay distributions to us under certain circumstances.

~~Unlike~~As ~~the holders~~a oflimited ~~common stock~~ partner in a ~~corporation,~~partnership ~~our~~organized ~~unitholders~~under ~~have~~South ~~only~~Carolina ~~limited~~law, ~~voting~~you ~~rights~~could onbe ~~matters~~held ~~affecting~~liable for our ~~business and,~~obligations ~~therefore,~~to ~~limited~~the ~~ability~~same toextent ~~influence~~as ~~the~~a general partner’s ~~decisions~~if ~~regarding~~you participate in the “control” of our business. ~~Unitholders~~Our ~~did~~general ~~not~~partner ~~elect~~generally has unlimited liability for our ~~general~~obligations, ~~partner~~except ~~and~~for ~~have~~those nocontractual ~~right~~obligations tothat ~~elect~~are expressly made by us without recourse to our general partner. Additionally, the limitations on anthe ~~annual~~liability orof ~~other~~unitholders ~~continuing~~for ~~basis~~our obligations have not been clearly established in many jurisdictions.

~~Any~~Under ~~future~~certain ~~indebtedness~~circumstances, our unitholders may ~~limit~~have to repay amounts wrongfully distributed to them. If, for example, we should make a distribution that would cause our ~~ability~~liabilities to ~~borrow~~exceed ~~additional~~the ~~funds~~fair value of our assets, ~~make~~unitholders who received the distributions may be required to ~~unitholders~~return orthe ~~capitalize~~amount onof ~~business~~distributions ~~opportunities~~to us.

AtFees ~~December 31, 2011,~~paid ~~our~~and ~~total~~cost ~~indebtedness~~reimbursements due ~~outstanding~~to ~~was~~our ~~zero.~~General WePartner may ~~incur~~be ~~indebtedness~~substantial inand ~~the~~reduce ~~future.~~our ~~Any~~ability ~~such~~to ~~indebtedness~~ultimately ~~may~~pay ~~have~~distributions ~~adverse effects~~to ~~including,~~unitholders. ~~among others, the following:~~

·Prior ~~Our~~to ~~ability~~making any distributions to ~~finance~~our ~~future~~unitholders, ~~operations~~we will pay all fees owed to our General Partner and ~~capital~~its ~~needs~~affiliates, and reimburse them for all expenses they have incurred on our behalf. The payment of these fees and reimbursement of these expenses may beadversely ~~restricted~~affect our ability to make distributions to the unitholders. Our General Partner has sole discretion to determine the amount of these fees and expenses. For additional information, please see “Item 13. Certain Relationships and Related Transactions, and Director Independence – Transactions with Related Persons.”

· Our ~~ability~~unitholders todo ~~pursue~~not ~~acquisitions~~elect ~~and~~our General ~~other~~Partner ~~business~~or ~~opportunities~~vote ~~may~~on beour ~~limited~~General Partner’s officers or directors.

·Unlike ~~Our~~the ~~results~~ holders of ~~operations~~common ~~may~~stock bein ~~more~~a ~~susceptible~~corporation, our unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to ~~adverse~~influence ~~economic~~the General Partner’s decisions regarding our business. Unitholders did not elect our General Partner and have no right to elect our General Partner on an annual or ~~operating~~other ~~conditions~~continuing basis.

~~Our~~Any ~~payments of principal and interest on any~~ future indebtedness ~~will~~may ~~reduce the cash available for distribution on~~ limit our ~~units.~~ability Weto ~~will~~borrow ~~likely~~additional befunds, ~~prohibited from~~make ~~making cash~~ distributions ~~during~~to anunitholders ~~event of default under any future indebtedness,~~ or ~~if,~~capitalize ~~either~~on ~~before~~business ~~or after such distribution, we fail to meet a coverage test set forth in the loan documents of any such future indebtedness~~opportunities.

~~Limitations~~At ~~in debt~~December 31, ~~agreements~~2012, ofour ~~any~~total ~~future~~ indebtedness ~~may~~outstanding ~~reduce~~was ~~our~~zero. ~~ability~~We tomay incur ~~additional~~ indebtedness, toin ~~engage~~the infuture. ~~some~~Any ~~transactions~~such ~~and~~indebtedness may have adverse toeffects ~~capitalize~~including, onamong ~~business~~others, ~~opportunities.~~the following:

• Our ~~general~~ability ~~partner’s~~to ~~executive officers~~finance ~~and~~future ~~directors~~operations ~~face~~and ~~potential~~capital ~~conflicts~~needs ofmay ~~interest~~be ~~in managing our business~~restricted.

• Our ~~limited~~ability ~~partnership agreement provides that our general partner (a) shall devote such time~~ to ~~our~~pursue ~~business~~acquisitions ~~as the general partner, in its sole discretion, “deem[s] to be necessary to manage~~ and ~~supervise the Partnership business and affairs in an efficient manner”, and (b) “may engage in, or possess an interest in,~~ other business ventures of any nature and description” and neither the Partnership nor its unitholders “shall have any rights in and to such ventures or the income or profits derived therefrom, and the pursuit of such activities, even if competitive with the business of the Partnership, shall not be deemed wrongful or improper.” These provisions may create conflicts of interest regarding corporate opportunities ~~and other matters. The resolution of any such conflicts~~ may ~~not always~~ be ~~in our or our unitholders’ best interests~~limited. In addition, our general partner’s officers and directors face potential conflicts regarding the allocation of their time, which may adversely affect our business, results of operations, and/or financial condition.

Page 4143

• Our ~~general~~results ~~partner’s discretion in determining the level~~ of ~~cash~~operations ~~reserves~~ may ~~adversely~~be ~~affect~~more ~~our~~susceptible ~~ability~~ to ~~make~~adverse ~~cash~~economic ~~distributions~~or tooperating ~~our unitholders~~conditions.

Our ~~partnership~~payments ~~agreement~~of principal ~~requires~~and ~~our~~interest ~~general~~on ~~partner~~any tofuture ~~deduct~~indebtedness ~~from~~will ~~operating~~reduce ~~cash~~the ~~flow~~ cash ~~reserves,~~available ~~in its sole discretion,~~ for ~~“working~~distribution ~~capital, contingent~~on ~~liabilities,~~our ~~taxes,~~units. ~~debt~~We ~~service,~~will ~~repairs,~~likely ~~replacements,~~be ~~renewals,~~prohibited from ~~capital~~making ~~expenditures,~~cash ordistributions ~~other~~during ~~purposes”~~an ~~necessary for~~event ~~the~~of ~~proper~~default ~~conduct~~under ofany ~~our~~future ~~business~~indebtedness, or toif, ~~comply~~either ~~with~~before ~~applicable law~~ or ~~agreements~~after tosuch ~~which~~ distribution, we ~~are~~fail ato ~~party.~~meet ~~See~~a ~~“Item 1.~~coverage ~~Business~~test –set ~~Liquid~~forth ~~Assets~~in ~~and Reserves for Calculating Distributable Cash.” These cash reserves will affect~~ the ~~amount~~loan documents of ~~cash~~any ~~available~~such ~~for~~future ~~distribution to unitholders~~indebtedness.

~~Our~~Limitations ~~general~~in ~~partner has conflicts~~debt agreements of ~~interest~~any ~~and~~future ~~limited~~indebtedness ~~fiduciary~~may ~~responsibilities,~~reduce ~~which~~our ~~may~~ability ~~permit~~to ~~our~~incur ~~general~~additional ~~partner~~indebtedness, to ~~favor~~engage ~~its~~in ~~own~~some ~~interests~~transactions and to ~~the~~capitalize ~~detriment of~~on ~~our~~business ~~unitholders~~opportunities.

~~Conflicts~~Our ofGeneral ~~interest~~Partner’s executive ~~could~~officers ~~arise in the future as a result of relationships between our general partner~~ and ~~its~~directors ~~affiliates,~~face onpotential ~~the one hand, and us, on the other hand. As a result of these~~ conflicts ~~our general partner may favor its own interests and those~~ of ~~its~~interest ~~affiliates~~in ~~over the~~managing ~~interests of~~ our ~~unitholders~~business. ~~The nature of these conflicts includes certain considerations, including, among others, the following:~~

·Our ~~Remedies~~limited ~~available~~partnership agreement provides that our General Partner (a) shall devote such time to our ~~unitholders~~business ~~for~~as ~~breaches~~the ofGeneral ~~fiduciary~~Partner, ~~duty~~in its sole discretion, “deem[s] ~~among~~to ~~other~~be ~~things~~necessary to manage and supervise the Partnership business and affairs in an efficient manner”, and (b) “may beengage ~~limited.~~in, ~~Unitholders~~or ~~are~~possess ~~deemed~~an tointerest in, other business ventures of any nature and description” and neither the Partnership nor its unitholders “shall have ~~consented~~any rights in and to ~~some~~such ~~actions~~ventures or the income or profits derived therefrom, and ~~conflicts~~the pursuit of ~~interest~~such ~~that~~activities, ~~might~~even ~~otherwise~~if competitive with the business of the Partnership, shall not be deemed awrongful ~~breach~~or improper.” These provisions may create conflicts of ~~fiduciary~~interest orregarding corporate opportunities and other ~~duties~~matters. ~~under~~The ~~applicable~~resolution of ~~state~~any ~~law~~such conflicts may not always be in our or our unitholders’ best interests. In addition, our General Partner’s officers and directors face potential conflicts regarding the allocation of their time, which may adversely affect our business, results of operations, and/or financial condition.

· Our ~~general~~General ~~partner~~Partner’s ~~and~~discretion in ~~its~~determining ~~affiliates~~the ~~are~~level ~~not~~of ~~prohibited~~cash ~~from~~reserves ~~engaging~~may inadversely ~~other~~affect ~~businesses~~our orability ~~activities,~~to ~~including~~make ~~those~~cash indistributions ~~direct~~to ~~competition~~our ~~with us~~unitholders.

· Our ~~general~~partnership ~~partner~~agreement requires ~~determines~~our ~~the~~General ~~amount~~Partner ~~and~~to ~~timing~~deduct offrom ~~our~~operating ~~asset~~cash ~~purchases~~flow ~~and~~cash ~~sales~~reserves, in its sole discretion, for “working capital, contingent ~~expenditures~~liabilities, ~~borrowings~~taxes, ~~and~~debt ~~reserves~~service, ~~each~~repairs, replacements, renewals, capital expenditures, or other purposes” necessary for the proper conduct of our business, or to comply with applicable law or agreements to which ~~can~~we are a party. See “Item 1. Business – Liquid Assets and Reserves for Calculating Distributable Cash.” These cash reserves will affect the amount of cash ~~that~~available isfor ~~ultimately~~distribution ~~distributed~~ to unitholders.

·Page ~~Our general partner determines whether to issue additional units or other equity securities in us.~~44

· Our ~~general~~General ~~partner~~Partner ~~determines~~has conflicts of interest and limited fiduciary responsibilities, which ~~costs~~may ~~are~~permit ~~reimbursable~~our byGeneral usPartner to favor its own interests to the detriment of our unitholders.

·Conflicts ~~Our~~of ~~general~~interest could ~~partner~~arise ~~controls~~in the ~~enforcement~~future as a result of ~~obligations~~relationships ~~owed~~between toour General Partner and its affiliates, on the one hand, and us, on bythe itother hand. As a result of these conflicts our General Partner may favor its own interests and those of its affiliates over the interests of our unitholders. The nature of these conflicts includes certain considerations, including, among others, the following:

~~Page~~• 42Remedies available to our unitholders for breaches of fiduciary duty, among other things, may be limited. Unitholders are deemed to have consented to some actions and conflicts of interest that might otherwise be deemed a breach of fiduciary or other duties under applicable state law.

·• Our ~~general~~General ~~partner~~Partner ~~decides~~and ~~whether~~its toaffiliates ~~retain~~are ~~separate~~not ~~counsel,~~prohibited ~~accountants,~~from engaging in other businesses or ~~others~~activities, toincluding ~~perform~~those ~~services~~in ~~for~~direct competition with us.

·• Our ~~general~~General ~~partner~~Partner isdetermines ~~not~~the ~~restricted~~amount ~~from~~and ~~causing~~timing usof toour ~~pay~~asset itpurchases orand ~~its~~sales, ~~affiliates~~capital ~~for~~expenditures, ~~any~~borrowings, ~~services rendered on terms that are fair~~ and ~~reasonable~~reserves, toeach usof orwhich ~~from~~can ~~entering~~affect ~~into~~the ~~additional~~amount ~~contractual~~of ~~arrangements~~cash ~~with~~that ~~any~~is ofultimately ~~these~~distributed ~~entities~~to ~~on our behalf~~unitholders.

• Our ~~partnership~~General ~~agreement~~Partner ~~limits our~~determines ~~general~~whether ~~partner’s fiduciary duties~~ to ~~our~~issue ~~unitholders~~additional ~~and~~units ~~restricts~~or ~~the~~other ~~remedies~~equity ~~available~~securities toin ~~unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty~~us.

• Our ~~partnership~~General ~~agreement contains~~Partner ~~provisions~~determines ~~that waive or consent to conduct by our general partner and~~ which ~~reduce~~costs ~~the~~are ~~obligations~~reimbursable ~~to which our general partner would otherwise be held~~ by ~~state-law fiduciary duty standards~~us. ~~In order to become a limited partner of our partnership, a unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions described above.~~

~~Should~~• ~~you~~Our ~~acquire~~General aPartner ~~unit,~~controls ~~you~~the ~~do not~~enforcement ~~automatically~~of ~~become~~obligations aowed ~~limited~~to ~~partner.~~us by it.

~~Because~~• weOur ~~are~~General ~~organized as~~Partner adecides ~~limited~~whether partnership, a transfer of units is not the same, legally, as the transfer of a share of common stock in a corporation, for example. A transfer of units has two components, namely: the transfer of the economic interest (that is, the right to ~~receive distributions,~~retain ifseparate ~~and when made) in the units~~counsel, ~~and the transfer of rights (principally~~accountants, voting rights) as a limited partner. Upon the effectiveness of a transfer, the transferor surrenders to the transferee all of the economic interests (that is, the right to receive distributions, if and when made) of the units. The transferee may then, in turn, sell or ~~transfer the economic interests in those units to~~ others. ~~The transferee does not, however, upon the effectiveness of a transfer, automatically become a substituted limited partner in us and does not become vested with the right~~ to ~~vote~~perform atservices ~~meetings~~for ~~of the partners~~us. A transferee is not required to become a substituted limited partner, and most transferees of our units do not become substituted limited partners. Becoming a substituted limited partner involves legal expenses which, given our size, among other factors, a unitholder might not wish to incur, especially since (a) the economic interest in the units may be easily transferred without incurring any of such legal costs, and (b) we have not held a meeting of partners since our inception in 1980 because the limited partnership agreement confers upon our general partner broad authority to conduct our business and very limited voting rights to limited partners.

■• ~~Tax~~Our ~~Risks Relating~~General Partner is not restricted from causing us to anpay ~~Investment~~it inor ~~Our~~its ~~Partnership~~affiliates ~~Units~~for any services rendered on terms that are fair and reasonable to us or from entering into additional contractual arrangements with any of these entities on our behalf.

~~Even~~Our ifpartnership ~~you~~agreement dolimits our ~~not~~General ~~receive~~Partner’s ~~any~~fiduciary ~~cash distributions~~duties ~~from~~to ~~us,~~our ~~you~~unitholders ~~will~~and berestricts ~~required~~the toremedies ~~pay~~available ~~taxes~~to onunitholders ~~your~~for ~~share~~actions taken ofby our ~~taxable~~General ~~income~~Partner that might otherwise constitute breaches of fiduciary duty.

~~You~~Our ~~will~~partnership ~~be required~~agreement tocontains ~~pay~~provisions ~~federal~~that ~~income~~waive ~~taxes~~or ~~and,~~consent into ~~some~~conduct ~~cases,~~by ~~state~~our ~~and~~General ~~local~~Partner ~~income~~and ~~taxes,~~which onreduce ~~your~~the ~~share~~obligations ofto which our ~~taxable~~General Partner ~~income,~~would ~~whether~~otherwise orbe ~~not you~~held ~~receive~~by ~~cash~~state-law ~~distributions~~fiduciary ~~from~~duty usstandards. WeIn doorder ~~not currently have plans~~ to ~~make~~become a ~~distribution~~limited topartner ~~unitholders.~~of ~~Even~~our ~~if we were to~~partnership, ~~make~~ a ~~distribution,~~unitholder ~~the~~is ~~amount~~required ~~that~~to ~~you~~agree ~~receive~~to ~~from us may not~~ be ~~equal~~bound toby ~~your~~the ~~share~~provisions ofin ~~our~~the ~~taxable~~partnership ~~income~~agreement, orincluding ~~even equal to~~ the ~~actual~~provisions ~~tax liability that results from your share of our taxable income~~described above.

Page 4345

~~You~~Should ~~may~~you beacquire ~~subject~~a tounit, ~~state and local taxes and income tax return filing requirements in jurisdictions where~~ you do not ~~live~~automatically asbecome a ~~result~~limited ~~of investing in our units~~partner.

InBecause ~~addition~~we toare ~~federal~~organized ~~income~~as ~~taxes~~a limited partnership, ~~you~~a ~~may~~transfer beof ~~subject~~units tois ~~other~~not ~~taxes~~the same, ~~such~~legally, as ~~state~~the ~~and~~transfer ~~local~~of ~~income~~a ~~taxes,~~share ~~unincorporated~~of ~~business~~common ~~taxes,~~stock ~~and~~in ~~estate~~a corporation, ~~inheritance~~for example. A transfer of units has two components, ornamely: ~~intangible~~the ~~taxes~~transfer of the economic interest (that ~~are~~is, orthe ~~may~~right beto ~~imposed~~receive distributions, byif ~~the~~and ~~various~~when ~~jurisdictions~~made) in ~~which~~the weunits, doand ~~business~~the ortransfer ~~own~~of ~~property~~rights (principally, voting rights) as a limited partner. Upon ~~You~~the ~~may~~effectiveness beof ~~required~~a transfer, the transferor surrenders to ~~file~~the ~~state~~transferee ~~and~~all ~~local~~of ~~income~~the ~~tax~~economic ~~returns~~interests ~~and~~(that ~~pay~~is, ~~state~~the right to receive distributions, if and ~~local~~when ~~income~~made) ~~taxes~~of the units. The transferee may then, in ~~some~~turn, sell or ~~all~~transfer ofthe ~~these~~economic ~~various~~interests ~~jurisdictions~~in those units to others. ~~Further~~The transferee does not, ~~you~~however, ~~may~~upon bethe ~~subject~~effectiveness of a transfer, automatically become a substituted limited partner in us and does not become vested with the right to ~~penalties~~vote ~~for~~at ~~failure~~meetings of the partners. A transferee is not required to ~~comply~~become ~~with~~a ~~those~~substituted ~~requirements~~limited partner, and most transferees of our units do not become substituted limited partners. ~~While~~Becoming a wesubstituted ~~currently~~limited ~~own~~partner ~~real~~involves legal expenses which, given our size, among other factors, a unitholder might not wish ~~estate~~to ~~only~~incur, especially since (a) the economic interest in ~~North~~the ~~Carolina~~units may be easily transferred without incurring any of such legal costs, and (b) we ~~may~~have ~~own~~not ~~property~~held ora ~~conduct~~meeting ~~business~~of inpartners ~~other~~since ~~states~~our inception in ~~the~~1980 ~~future.~~because Itthe islimited ~~your~~partnership ~~responsibility~~agreement confers upon our General Partner broad authority to ~~file~~conduct ~~all~~our ~~federal~~business and very limited voting rights to limited partners. See, ~~state~~however, ~~and~~Item ~~local~~1-“Proposed ~~tax~~Reverse ~~returns~~Unit Split” regarding a proposed special meeting of partners.

~~Even~~■ ifTax ~~you~~Risks ~~have~~Relating noto ~~state~~an orInvestment ~~local tax~~in ~~liability,~~Our wePartnership ~~may pay state and local taxes on your share of our taxable income.~~Units

AsEven aif ~~limited~~you ~~partnership, we~~do ~~generally~~not ~~pass~~receive ~~income~~any ~~tax liability, including for state and local income taxes, through to our partners. The administrative~~cash ~~cost~~distributions offrom ~~allocating liability among the partners~~us, ~~and~~you ~~maintaining~~will ~~records therefor, can~~ be ~~extremely~~required ~~time-consuming and complex. Therefore, for certain years in which we have taxable income, we may elect~~ to pay ~~state and local income~~ taxes that would otherwise be passed through to our partners, with the result that each partner’s pro rata share of our taxable income for each such year would be reduced by a pro rata share of such taxes paid. Consequently, we may pay state and local income taxes on your share of our taxable income~~, even if you have no state or local income tax liability~~.

AYou ~~unitholder~~will ~~whose~~be ~~units are loaned~~required to apay ~~“short~~federal ~~seller”~~income totaxes ~~cover~~and, ain ~~short~~some ~~sale~~cases, ofstate ~~units~~and ~~may~~local beincome ~~considered~~taxes, ason ~~having~~your ~~disposed~~share of ~~those~~our ~~units.~~taxable ~~If so~~income, hewhether ~~would~~or nonot ~~longer~~you bereceive ~~treated~~cash ~~for~~distributions ~~tax~~from ~~purposes~~us. asWe do not currently have plans to make a ~~partner~~distribution ~~with~~to ~~respect~~unitholders. Even if we were to ~~those~~make ~~units~~a ~~during~~distribution, the ~~period~~amount ofthat ~~the~~you ~~loan~~receive ~~and~~from us may ~~recognize gain~~not be equal to your share of our taxable income or ~~loss~~even ~~from~~equal to the ~~disposition.~~actual tax liability that results from your share of our taxable income.

~~Because~~You ~~a unitholder whose units are loaned to a “short seller” to cover a short sale of units~~ may be ~~considered~~subject ~~as having disposed of the loaned units, he may no longer be treated for tax purposes as a partner with respect~~ to ~~those~~state ~~units during the period of the loan~~and tolocal ~~the~~taxes ~~short seller~~ and ~~the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our~~ income, ~~gain,~~tax ~~loss,~~return orfiling ~~deduction~~requirements ~~with~~in ~~respect~~jurisdictions towhere ~~those~~you ~~units~~do ~~may~~ not belive ~~reportable by the unitholder and any cash distributions received by the unitholder~~ as toa ~~those~~result ~~units~~of ~~could~~investing bein ~~fully~~our ~~taxable as ordinary income~~units.

~~Page~~In 44addition to federal income taxes, you may be subject to other taxes, such as state and local income taxes, unincorporated business taxes, and estate, inheritance, or intangible taxes that are or may be imposed by the various jurisdictions in which we do business or own property. You may be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, you may be subject to penalties for failure to comply with those requirements. While we currently own real estate only in North Carolina, we may own property or conduct business in other states in the future. It is your responsibility to file all federal, state, and local tax returns.

IfPage ~~we were to become subject to entity-level taxation for federal or state tax purposes, the amount of our cash that is ultimately available for distribution to you would be substantially reduced.~~46

~~The~~A ~~anticipated~~unitholder ~~after-tax~~whose units are loaned ~~benefit~~to ofa an“short ~~investment~~seller” into ~~our~~cover ~~units~~a ~~depends~~short ~~largely~~sale ~~upon~~of ~~our~~units ~~being~~may ~~treated~~be considered as ahaving ~~partnership~~disposed ~~for~~of ~~federal~~those ~~income~~units. ~~tax~~If ~~purposes.~~so, he Wewould ~~have~~no ~~not~~longer ~~requested,~~be ~~and~~treated dofor ~~not~~tax ~~plan~~purposes as a partner with respect to ~~request,~~those aunits ~~ruling~~during ~~from~~the period of the ~~Internal~~loan ~~Revenue~~and ~~Service~~may ~~(“IRS”)~~recognize gain onor ~~this~~loss ~~matter~~from the disposition.

~~Despite~~Because ~~the~~a ~~fact that~~unitholder wewhose units are loaned to a ~~limited~~“short ~~partnership~~seller” ~~under~~to ~~South~~cover ~~Carolina~~a ~~law,~~short itsale isof ~~possible~~units inmay ~~certain~~be ~~circumstances~~considered ~~for~~as ahaving ~~partnership~~disposed ~~such~~of the asloaned ~~ours~~units, to he may no longer be treated for tax purposes as a ~~corporation~~partner ~~for~~with ~~federal~~respect ~~income~~to ~~tax~~those ~~purposes.~~units ~~Although~~during wethe doperiod ~~not~~of ~~believe,~~the loan ~~based~~to ~~upon~~the ~~our~~short ~~current~~seller ~~operations~~and the unitholder may recognize gain or loss from such disposition. Moreover, ~~that~~during the period of the weloan ~~are~~to sothe ~~treated~~short seller, aany ~~change~~of in our ~~business~~income, orgain, aloss, ~~change~~or indeduction ~~current~~with ~~law~~respect ~~could~~to ~~cause~~those usunits tomay not be ~~treated~~reportable asby athe unitholder ~~corporation~~and ~~for~~any ~~federal income~~cash ~~tax~~distributions ~~purposes~~received orby ~~otherwise~~the ~~subject~~unitholder usas to ~~taxation~~those units could be fully taxable as anordinary ~~entity~~income.

If we were ~~treated as~~to abecome ~~corporation~~subject ~~for~~to entity-level ~~federal~~taxation ~~income~~for ~~tax purposes, we would pay~~ federal ~~income~~or ~~tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay~~ state ~~income~~ tax ~~at varying rates. Distributions to you would generally be taxed again as corporate distributions~~purposes, ~~and no income, gains, losses, deductions or credits would flow through to you. Because taxes would be imposed upon us as a corporation,~~ the amount of our cash that is ultimately available for distribution to you would be substantially reduced. ~~Thus, treatment of us as a corporation would result in a material reduction in our anticipated cash flow and after-tax return to you, likely causing a substantial reduction in the value of our units.~~

~~Current~~The ~~law~~anticipated ~~may change, causing us to be treated as a corporation for federal income tax purposes or otherwise subjecting us to entity~~after-~~level taxation. At the federal level, legislation has been proposed from time to time that would eliminate partnership~~ tax ~~treatment for certain~~ ~~publicly~~benefit ~~traded partnerships. Any such change, if enacted, could negatively affect the value~~ of an investment in our units. ~~At the~~depends ~~state~~largely ~~level,~~upon ~~because~~our ofbeing ~~widespread~~treated ~~state~~as ~~budget~~a ~~deficits~~partnership ~~and~~for ~~other~~federal ~~reasons,~~income ~~several~~tax ~~states are evaluating ways to subject partnerships~~purposes. toWe ~~entity-level~~have ~~taxation~~not ~~through the imposition of state income~~requested, ~~franchise,~~and ordo ~~other~~not ~~forms~~plan ~~of taxation. If any state were~~ to ~~impose~~ request, a ~~tax~~ruling ~~upon~~from ~~us as an entity,~~ the ~~amount~~Internal ofRevenue ~~our~~Service ~~cash~~(“IRS”) ~~that~~on isthis ~~ultimately available for distribution to you would be reduced~~matter.

IfDespite the ~~IRS~~fact ~~were~~that we are a limited partnership under South Carolina law, it is possible in certain circumstances for a partnership such as ours to ~~contest~~be ~~the~~treated as a corporation for federal income tax ~~positions~~purposes. Although we ~~take~~do not believe, itbased ~~may~~upon ~~adversely~~our ~~impact~~current ~~the~~operations, that ~~market~~we ~~for~~are ~~our~~so ~~units~~treated, ~~and~~a ~~the~~change ~~costs~~in ofour ~~any~~business ~~such~~or ~~contest~~a ~~would~~change ~~reduce the~~in ~~amount~~current oflaw ~~our~~could ~~cash~~cause ~~that~~us isto ~~ultimately~~be ~~available~~treated as a corporation for federal ~~distribution~~income tax purposes or otherwise subject us to ~~our~~taxation ~~unitholders~~as an entity.

WeIf ~~have~~we ~~not~~were ~~requested~~treated ~~a ruling from the IRS with respect to our treatment~~ as a ~~partnership~~corporation for federal income tax purposes., ~~The~~we ~~IRS~~would ~~may~~pay ~~adopt~~federal ~~positions that~~income ~~differ~~tax ~~from~~on ~~the~~our ~~positions~~taxable ~~that~~income weat ~~take,~~the ~~even~~corporate ~~positions~~tax ~~taken~~rate, which ~~with~~is ~~the~~currently ~~advice~~a maximum of ~~counsel.~~35%, Itand ~~may~~would belikely ~~necessary~~pay tostate ~~resort~~income ~~to administrative~~tax orat ~~court~~varying ~~proceedings~~rates. Distributions to ~~sustain~~you ~~some~~would orgenerally be ~~all~~taxed ofagain ~~the~~as ~~positions~~corporate wedistributions, ~~take.~~and Ano ~~court~~income, ~~may~~gains, ~~not~~losses, ~~agree~~deductions ~~with some~~ or ~~all~~credits ~~of the~~would ~~positions~~flow wethrough ~~take~~to you. ~~Any~~Because taxes ~~contest~~would ~~with~~be ~~the~~imposed ~~IRS~~upon ~~may~~us ~~materially~~as ~~and~~a ~~adversely~~corporation, ~~impact~~ the ~~market~~amount ~~for~~of our ~~units~~cash ~~and~~that ~~the~~is ~~prices~~ultimately ~~at which~~available ~~they~~for ~~trade.~~distribution ~~Moreover,~~to ~~the~~you ~~costs~~would be ofsubstantially ~~any~~reduced. ~~contest~~Thus, ~~between~~treatment of us ~~and~~as ~~the~~a ~~IRS~~corporation ~~will~~would result in a material reduction in ~~the amount of~~ our anticipated cash ~~that~~flow isand ~~ultimately~~after-tax ~~available~~return ~~for distribution~~ to ~~our~~you, ~~unitholders~~likely ~~and~~causing ~~thus~~a ~~will~~substantial bereduction ~~borne~~in ~~indirectly~~the byvalue of our ~~unitholders~~units.

~~Page~~Current 45law may change, causing us to be treated as a corporation for federal income tax purposes or otherwise subjecting us to entity-level taxation. At the federal level, legislation has been proposed from time to time that would eliminate partnership tax treatment for certain publicly traded partnerships. Any such change, if enacted, could negatively affect the value of an investment in our units. At the state level, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise, or other forms of taxation. If any state were to impose a tax upon us as an entity, the amount of our cash that is ultimately available for distribution to you would be reduced.

~~The~~Page ~~sale or exchange of 50% or more of our capital and profits interests within a twelve-month period will result in the termination of our partnership for federal income tax purposes.~~ 47

WeIf ~~will~~the beIRS ~~considered~~ were to ~~have~~contest ~~terminated~~the ~~our partnership for~~ federal income tax ~~purposes~~positions ifwe ~~there~~take, isit amay ~~sale~~adversely orimpact ~~exchange of 50% or more of~~ the ~~total~~market ~~interests in~~for our ~~capital~~units, and ~~profits within a twelve-month period. Our termination would, among other things, result in~~ the ~~closing~~costs of ~~our taxable~~any ~~year~~such ~~for~~contest ~~all unitholders, which~~ would ~~result in us filing two tax returns (and our unitholders could receive two Schedules~~reduce ~~K-1) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In~~ the ~~case~~amount of ~~a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of~~ our ~~taxable year~~cash ~~may~~that ~~also~~is ~~result~~ultimately inavailable ~~more~~for ~~than~~distribution ~~twelve~~to ~~months of~~ our ~~taxable income or loss being includable in his taxable income for the year of termination~~unitholders.

~~Tax~~We ~~gain~~have ornot ~~loss~~requested a onruling from the ~~disposition~~IRS with respect to our treatment as a partnership for federal income tax purposes. The IRS may adopt positions that differ from the positions that we take, even positions taken with the advice of counsel. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our units ~~could~~and bethe ~~different~~prices ~~than~~at which ~~expected~~they trade. Moreover, the costs of any contest between us and the IRS will result in a reduction in the amount of our cash that is ultimately available for distribution to our unitholders and thus will be borne indirectly by our unitholders.

IfThe ~~you~~sale ~~sell~~or ~~your~~exchange ~~units, you~~of ~~will~~50% ~~recognize gain~~ or ~~loss equal to the difference between the amount realized and your tax basis in those units. Because~~more ~~distributions in excess~~ of ~~your~~our ~~allocable~~capital ~~share~~and ofprofits ~~our~~interests ~~net~~within ~~taxable~~a ~~income~~twelve-month ~~decrease~~period ~~your~~will ~~tax~~result ~~basis~~ in ~~your units,~~ the ~~amount,~~termination ~~if any,~~ of ~~such~~our ~~prior~~partnership ~~excess~~for ~~distributions with respect to the units you sell will, in effect, become taxable~~ federal income ~~to you if you sell such units at a price greater than your~~ tax ~~basis therein, even if the price you receive is less than your original cost~~purposes. ~~Furthermore,~~ ~~a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income to you due to potential recapture items, including depreciation recapture.~~

~~Tax-exempt~~We ~~entities~~will be considered to have terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and ~~non~~profits within a twelve-Umonth period.~~S. persons~~ ~~owning~~Our termination would, among other things, result in the closing of our taxable ~~units~~year ~~face~~for ~~unique~~all unitholders, which would result in us filing two tax ~~issues~~returns ~~that~~(and ~~may~~our unitholders could receive two Schedules K-1) for one fiscal year and could result in ~~adverse~~a ~~tax~~deferral ~~consequences~~of todepreciation ~~them~~deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination.

~~Investment~~Tax ingain ~~units by~~or ~~tax-exempt~~loss ~~entities,~~on ~~such~~the ~~as individual retirement accounts (known as “IRA’s”) and non-U.S. persons, raises~~disposition ~~issues~~of ~~unique~~our tounits ~~them.~~could Ifbe ~~you~~different ~~are~~than ~~a tax exempt entity or a non-U~~expected.S. ~~person, you should consult your tax advisor before investing in our units.~~

~~Tax~~If ~~rules~~you ~~relating~~sell your units, you will recognize gain or loss equal to the difference between the amount realized and your tax basis in those units. Because ~~and~~distributions ~~holding~~in ~~period~~excess of ~~interests~~your inallocable ashare ~~partnership~~of ~~differ~~our ~~from~~net ~~those~~taxable ~~rules~~income ~~affecting~~decrease ~~corporate~~your ~~stock~~tax ~~generally~~basis in your units, ~~and~~the ~~these~~amount, ~~special~~if ~~rules~~any, ~~may~~of ~~affect~~such ~~purchases~~prior ~~and~~excess ~~sales~~distributions ofwith ~~our~~respect to the units you sell will, in ~~separate~~effect, ~~transactions~~become taxable income to you if you sell such units at a price greater than your tax basis therein, even if the price you receive is less than your original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income to you due to potential recapture items, including depreciation recapture.

~~The~~Page IRS has ruled that an investor who acquires interests in an entity taxed as a partnership, like us, in separate transactions must combine those interests and maintain a single adjusted tax basis for those interests. Accordingly, should you sell or otherwise dispose of less than all of your units, the tax basis allocated to the units that you sold may be subject to different tax treatment than if you had sold less than all of your shares in a corporation. Furthermore, if you acquired your units at different times, the units may be subject to different holding periods – and, therefore, be subject to different tax treatment upon sale – than if you had acquired shares in a corporation at different times. Other differences in tax treatment between interests in a partnership and shares of a corporation may also be involved. We urge you to consult your tax advisor as to the possible tax consequences of purchases and sales of units in separate transactions.48

~~Page~~Tax-exempt 46entities and non-U.S. persons owning our units face unique tax issues that may result in adverse tax consequences to them.

~~Item~~Investment 1Bin units by tax-exempt entities, such as individual retirement accounts (known as “IRA’s”) and non-U.S. ~~Unresolved~~persons, ~~Staff~~raises issues ~~Comments~~unique to them. If you are a tax exempt entity or a non-U.S. person, you should consult your tax advisor before investing in our units.

~~Not~~Tax ~~applicable~~rules relating to the tax basis and holding period of interests in a partnership differ from those rules affecting corporate stock generally, and these special rules may affect purchases and sales of our units in separate transactions.

~~Item~~The 2IRS has ruled that an investor who acquires interests in an entity taxed as a partnership, like us, in separate transactions must combine those interests and maintain a single adjusted tax basis for those interests. Accordingly, ~~Properties~~should you sell or otherwise dispose of less than all of your units, the tax basis allocated to the units that you sold may be subject to different tax treatment than if you had sold less than all of your shares in a corporation. Furthermore, if you acquired your units at different times, the units may be subject to different holding periods – and, therefore, be subject to different tax treatment upon sale – than if you had acquired shares in a corporation at different times. Other differences in tax treatment between interests in a partnership and shares of a corporation may also be involved. We urge you to consult your tax advisor as to the possible tax consequences of purchases and sales of units in separate transactions.

~~Boiling~~Item 1B. ~~Spring~~Unresolved ~~Lakes,~~Staff ~~North Carolina~~ Comments

~~Boiling~~Not ~~Spring Lakes began in 1962 as a 14,000-acre development~~applicable. Part of the tract is now within the City of Boiling Spring Lakes, North Carolina, which had a 2011 population of 5,084 residents. Boiling Spring Lakes is in Brunswick County, 25 miles southwest of Wilmington, North Carolina, and 8 miles northwest of Southport, placing the city in the northern portion of the coastal corridor connecting Wilmington, North Carolina and Myrtle Beach, South Carolina, inland of the beach area known as the Grand Strand.

~~The outline map of~~Item ~~North Carolina below shows the approximate location of the City of Boiling Spring Lakes~~2. Properties

~~Our principal asset is our undeveloped land in~~ Boiling Spring Lakes, ~~comprising~~North ~~approximately 816 acres. As of December 31, 2011, we owned the following:~~Carolina

·Boiling ~~Approximately~~Spring ~~354~~Lakes began ~~acres~~in 1962 as a 14,000-acre ~~divided~~development. ~~into~~Part 1of the tract is now within the City of Boiling Spring Lakes,~~073~~ ~~platted~~North ~~unimproved~~Carolina, ~~individual~~which had ~~lots~~a 2011 population of 5,084 ~~both~~residents. ~~recorded~~Boiling Spring Lakes is in Brunswick County, 25 miles southwest of Wilmington, North Carolina, and ~~unrecorded~~8 miles northwest of Southport, ~~intended~~placing ~~for~~the ~~residential~~city ~~use~~in the northern portion of the coastal corridor connecting Wilmington, North Carolina and Myrtle Beach, South Carolina, inland of the beach area known as the Grand Strand.

Page 4749

·The ~~Approximately~~outline ~~244~~map ~~acres~~of North Carolina below shows the approximate location of ~~undeveloped~~the ~~land~~City ~~intended~~of ~~for~~Boiling ~~residential~~Spring ~~use~~Lakes.

·Our ~~Approximately~~principal ~~219~~asset is ~~acres~~our of undeveloped land ~~intended~~in ~~for~~Boiling ~~commercial~~Spring ~~use~~Lakes, comprising approximately 817 acres. As of December 31, 2012, we owned the following:

·• AApproximately ~~vacant~~354 ~~building~~acres, ~~comprising~~divided ~~approximately~~into ~~500~~1,071 ~~sq.~~platted ~~ft.~~unimproved ~~that~~individual ~~was~~lots, ~~formerly~~both ~~leased~~recorded toand ~~the~~unrecorded, ~~City~~intended ~~of Boiling Spring Lakes at a rate of $1 per year~~ for ~~use~~residential ~~as a post office~~use.

·• AApproximately ~~sales~~244 ~~office~~acres ~~comprising~~of ~~approximately~~undeveloped ~~1,269~~land ~~sq.~~intended ftfor residential use.

We• ~~intend~~Approximately to219 ~~continue emphasizing~~acres ~~the sale~~ of ~~individual~~undeveloped lots in Boiling Spring Lakes, concentrating on lots situated on existing paved roads and rocked roads. From time to time, we may add to our inventory of lots situated on paved roads and rocked roads by paving or rocking roads that are currently unpaved or not rocked. We intend to continue selling land onintended ~~an all-cash basis but are considering offering to provide qualified purchasers of our land seller financing~~ for acommercial ~~portion of the purchase price~~use. ~~Any program involving our providing seller financing, however, would be on a limited basis.~~

~~Appraisal~~• A vacant building comprising approximately 500 sq. ft. that was formerly leased to the City of ~~Real~~Boiling ~~Estate~~Spring ~~Assets~~Lakes at a rate of $1 per year for use as a post office.

We• ~~obtained~~A from Ingram and Company, Inc. (the “Appraiser”) an independent MAI appraisal report dated March 2012 valuing our real estate assets located in Boiling Spring Lakes at December 31, 2011. Such assets comprised substantially all of our assets on such date other than cash. The appraisal values the appraised assets at $2,230,000 (the “Appraised Value”). The Appraised Value is the Appraiser’s opinion of the most probable price which the property should bring in a sale to a single buyer in a competitive and open market under all conditions requisite to a fair sale, and assumes, among other things, a typically motivated buyer and seller in an “arm’s length” transaction, both parties are well informed or well advised about the assets and each acting in what he considers his own best interest, a reasonable time is allowed for exposure in the open market, payment is made in cash in U.S. dollars, and the price is unaffected by special or creative financing or sales ~~concessions~~office ~~granted~~comprising byapproximately anyone associated with the sale. There is no guarantee that we could realize the Appraised Value of such assets upon a sale. The actual sale price could be higher or lower than the Appraised Value. The appraisal is not in connection with any requested minimum1,269 ~~maximum or specific appraised value, any pending or proposed sale or other transaction, or approval of any loan involving the appraised assets or us~~sq. ~~The foregoing summary of the appraisal is limited in its entirety by reference to the full appraisal report, a copy of which is filed with the Securities and Exchange Commission as Exhibit 99~~ft.~~1 to this Annual Report on Form 10-K.~~

~~During~~We intend ~~1988,~~to wecontinue ~~reduced~~ the ~~carrying~~sale ~~value~~ of ~~the~~individual lots in Boiling Spring Lakes, ~~property~~concentrating ason alots ~~result~~situated ofon anexisting ~~appraisal~~paved ~~obtained~~roads and inrocked ~~December 1988~~roads. ~~During~~From ~~1993,~~time ~~1995, 1998,~~to ~~2000~~time, ~~2004,~~we ~~2006,~~may ~~2008,~~add to our inventory of lots situated on paved roads and ~~2010,~~rocked weroads ~~obtained~~by ~~updated~~paving ~~appraisals~~or rocking ofroads ~~the~~that ~~Boiling~~are ~~Spring~~currently ~~Lakes~~unpaved ~~property~~or not rocked. ~~Based~~We ~~upon~~intend ~~those~~to ~~updated appraisals,~~continue noselling ~~additional~~land ~~reduction~~on an all-cash basis but are considering offering to ~~the~~provide ~~carrying~~qualified ~~value~~purchasers ~~was~~of ~~made.~~our Asland seller financing for a ~~result~~portion of the ~~appraisal~~purchase asprice. ofAny ~~December~~program 31involving our providing seller financing, ~~2011~~however, ~~and~~would ~~in view~~be ofon ~~current~~a ~~market~~limited ~~conditions~~basis. However, wesee ~~believe~~Item ~~that~~1A-“We ~~the~~are ~~valuation~~undertaking ~~allowance~~the bulk atsale ~~December~~of 31our property, ~~2011~~although ~~was~~there ~~appropriate, and~~can ~~that~~be no ~~adjustment~~assurance that we will be able to ~~the~~sell ~~valuation~~our ~~allowance~~property ~~needed~~before we run out of cash to befund ~~made~~our operations.”

Page 4850

~~Item~~Appraisal 3.of ~~Legal~~Real ~~Proceedings~~Estate Assets

We ~~are~~obtained ~~not~~from ~~currently~~Ingram and Company, Inc. (the “Appraiser”) an independent MAI appraisal report dated January 23, 2013 valuing our real estate assets located in Boiling Spring Lakes at December 31, 2012. Such assets comprised substantially all of our assets on such date other than cash. The appraisal values the appraised assets at $2,010,000 (the “Appraised Value”). The Appraised Value is the Appraiser’s opinion of the most probable price which the property should bring in a ~~party~~sale to ~~any~~a ~~material~~single ~~pending~~buyer ~~legal~~within a ~~proceedings.~~period ~~From~~of ~~time~~12 months in a competitive and open market under all conditions requisite to ~~time~~a fair sale, weand ~~have~~assumes, ~~been~~among other things, a typically motivated buyer and ~~may~~seller ~~become~~in an “arm’s length” transaction, both parties are well informed or well advised about the assets and each acting in what he considers his own best interest, a ~~party~~reasonable totime ~~ordinary~~is ~~routine~~allowed ~~litigation~~for exposure ~~incidental~~in tothe ~~our~~open ~~business~~market, payment is made in cash in U.S. ~~While~~dollars, ~~our~~and ~~potential~~the ~~liability~~price ~~from~~is ~~any~~unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. There is no guarantee that we could realize the Appraised Value of such assets ~~proceedings~~upon ~~may~~a sale. The actual sale price could be ~~substantial,~~higher weor ~~believe~~lower ~~that~~than the Appraised Value. The appraisal is not in connection ~~likelihood~~with ofany ~~incurring~~requested minimum, maximum or specific appraised value, any ~~such~~pending ~~liability~~or proposed sale or other transaction, or approval of any loan involving the appraised assets or us. The foregoing summary of the appraisal is ~~low~~limited in its entirety by reference to the full appraisal report, a copy of which is filed with the Securities and Exchange Commission as Exhibit 99.1 to this Annual Report on Form 10-K.

~~Item~~During 41988, we reduced the carrying value of the Boiling Spring Lakes property as a result of an appraisal obtained in December 1988. Thereafter, we obtained ~~Mine~~several ~~Safety~~updated ~~Disclosures~~appraisals of the Boiling Spring Lakes property. Based upon those updated appraisals, no additional reduction to the carrying value was made. As a result of the latest appraisal as of December 31, 2012, we believe that the valuation allowance was appropriate, and that no adjustment to the carrying value was necessary.

~~Not Applicable~~Item 3. Legal Proceedings

~~[THE~~We ~~REST~~are OFnot ~~THIS~~currently a ~~PAGE~~party ISto ~~BLANK]~~any material pending legal proceedings. From time to time, we have been and may become a party to ordinary routine litigation incidental to our business. While our potential liability from any of such proceedings may be substantial, we believe that the likelihood of incurring any such liability is low.

~~Page~~Item 4. 49Mine Safety Disclosures

~~PART~~Not IIApplicable.

~~Item~~ [THE 5.REST ~~Market~~OF ~~for~~THIS ~~Registrant's~~PAGE ~~Common~~IS ~~Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~BLANK]

■Page ~~Market for the Partnership Units~~51

~~The~~PART partnership units are not listed on any national securities exchange, and there are only limited or sporadic quotations on the over-the-counter market for the units. It is not anticipated that there will ever be an active public market for the units.II

~~Our~~Item ~~units are quoted on OTCQB under the symbol REEV~~5. ~~OTCQB~~Market ~~is the middle tier of the over-the-counter marketplace operated by OTC Markets Group, Inc., an operator of an electronic marketplace~~ for ~~securities not listed on a national securities exchange but which are current in filings~~Registrant's ~~with~~Common ~~regulatory~~Equity, ~~agencies~~Related ~~such~~Stockholder asMatters ~~the SEC. The following table sets forth the high~~ and ~~low~~Issuer ~~closing~~Purchases ~~bid quotations in each~~ of ~~the four~~Equity quarters of fiscal 2010 and fiscal 2011. The information was obtained from OTC Markets Group, Inc. Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and do not represent actual transactions.Securities

~~TABLE~~■ 5:Market ~~QUARTERLY~~for ~~INFORMATION~~the ONPartnership ~~PRICE RANGE OF PARTNERSHIP UNITS~~Units

	High Bid		Low Bid
Fiscal 2011:
Fourth Quarter (October 1 - December 31)	$	0.40	$	0.30	[a]
Third Quarter (July 1 - September 30)		0.35		0.30	[a]
Second Quarter (April 1 - June 30)		0.30		0.29	[a]
First Quarter (January 1 - March 31)		0.29		0.26	[a]
Fiscal 2010:
Fourth Quarter (October 1 - December 31)	$	0.26	$	0.26
Third Quarter (July 1 - September 30)		0.26		0.25
Second Quarter (April 1 - June 30)		0.25		0.25
First Quarter (January 1 - March 31)		0.25		0.25

The partnership units are not listed on any national securities exchange, and there are only limited or sporadic quotations on the over-the-counter market for the units. It is not anticipated that there will ever be an active public market for the units. OTC Markets Group, Inc., an operator of an electronic marketplace for securities not listed on a national securities exchange, categorizes the units in the “Grey Market.” It describes the Grey Market as follows: There are no broker-dealers quoting this security. It is not listed, traded or quoted on any U.S. stock exchange or the OTC Markets. Trades in grey market stocks are reported by broker-dealers to their Self Regulatory Organization (SRO) and the SRO distributes the trade data to market data vendors and financial websites so investors can track price and volume. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investor's bids and offers are not collected in a central spot so market transparency is diminished and Best Execution of orders is difficult.

~~Notes:~~The following table sets forth the high and low sales prices in each of the four quarters of fiscal 2012 and fiscal 2011. The information was obtained from OTC Markets Group, Inc.

~~[a]~~TABLE ~~OTC~~5: ~~Markets~~QUARTERLY ~~Group,~~INFORMATION ~~Inc.~~ON ~~does~~PRICE ~~not~~RANGE ~~provide~~OF ~~average~~PARTNERSHIP ~~closing bid or bid/asked quotations if there are fewer than two market makers, which was the case for 2011. Prices indicated are for sale prices as reported by OTC Markets Group, Inc.~~UNITS

■ Holders of Units

		High		Low
Fiscal 2012:
Fourth Quarter	$	None	$	None
Third Quarter		0.60		0.17
Second Quarter		0.51		0.45
First Quarter		0.45		0.40

Fiscal 2011:
Fourth Quarter	$	0.40	$	0.30
Third Quarter		0.35		0.30
Second Quarter		0.30		0.29
First Quarter		0.29		0.26

As■ ofHolders ~~December 31, 2011, there were 2,104 record holders~~ of partnership units. The total number of record holders has not changed substantially from December 31, 2011 to March 19, 2012, the latest practicable date prior to the filing of this Annual Report on Form 10-K.Units

~~Page~~As 50of January 31, 2013, there were approximately 1,170 record holders of partnership units.

■Page ~~Distributions~~52

We■ ~~have paid no cash distributions to partners since our inception in 1980. We do not anticipate that we will make any cash distributions to unitholders in the foreseeable future.~~Distributions

~~The~~We ~~amount~~have ofpaid no cash wedistributions ~~can distribute~~ to unitholders ~~principally~~since ~~depends~~our ~~upon~~inception ~~the~~in ~~amount~~1980. ofWe ~~cash~~do wenot ~~generate~~anticipate ~~from~~that ~~our~~we ~~operations,~~will ~~which~~make ~~will~~any ~~fluctuate from~~cash ~~quarter~~distributions to ~~quarter~~unitholders in ~~based on, among other things,~~ the ~~following:~~foreseeable future.

· The ~~level~~amount of cash we can distribute to unitholders principally depends upon the amount of cash we generate from our ~~operating~~operations, ~~costs.~~which will fluctuate from quarter to quarter based on, among other things, the following:

·• The ~~amount~~level of ~~land~~our ~~which~~operating ~~we are able to sell and the price at which we are able to sell land~~costs.

·• ~~Federal,~~The ~~state~~amount ~~and~~of ~~local~~land ~~regulations~~which we are able to sell and ~~taxes~~the price at which we are able to sell land.

·• ~~Prevailing~~Federal, ~~economic~~state ~~conditions~~and local regulations and taxes.

In• ~~addition,~~Prevailing ~~the~~economic ~~actual amount of cash available for distribution will depend upon other factors, including, among others, the following:~~conditions.

·In ~~The~~addition, ~~level~~the actual amount of ~~our~~cash ~~capital~~available ~~expenditures.~~for distribution will depend upon other factors, including, among others, the following:

·• The ~~cost~~level of ~~acquisitions,~~our ifcapital ~~any~~expenditures.

·• ~~Our~~The ~~debt~~cost ~~service~~of ~~requirements and restrictions on distributions contained in future debt agreements~~acquisitions, if any.

·• ~~Fluctuations~~Our debt service requirements and restrictions on distributions contained in ~~our~~future ~~working~~debt ~~capital~~agreements, ~~needs~~if any.

·• ~~Our~~Fluctuations ~~ability~~in toour ~~borrow~~working ~~under~~capital ~~future credit agreements, if any, to make distributions to our unitholders~~needs.

·• ~~The~~Our ~~amount,~~ability ifto ~~any,~~borrow ofunder ~~cash~~future ~~reserves~~credit ~~established by the General Partner~~agreements, inif ~~its discretion~~any, ~~for~~to ~~the~~make ~~proper~~distributions ~~conduct~~to of our ~~business~~unitholders.

~~Because~~• ofThe ~~the above factors~~amount, ~~among~~if ~~others~~any, weof ~~may~~cash ~~not~~reserves ~~have~~established ~~sufficient~~by ~~available~~the ~~cash~~General toPartner, ~~pay~~in ~~cash~~its ~~distributions~~discretion, tofor ~~our~~the ~~unitholders~~proper ~~even~~conduct ~~during~~of ~~periods when~~our ~~we record net income~~business.

■Because ~~Purchases~~ of ~~Units~~the above byfactors, Usamong ~~and~~others, we may not have sufficient available cash to pay cash distributions to our ~~Affiliates~~unitholders even during periods when we record net income.

~~Our~~■ ~~limited~~Purchases ~~partnership agreement~~of ~~allows~~Units usby toUs ~~repurchase~~and ~~partnership units; however, the agreement does not require that we or~~ our ~~general partner repurchase partnership units on demand of partners, nor does the agreement provide for a minimum purchase price or establish a mechanism for determining a purchase price.~~Affiliates

~~From~~Our ~~time~~limited ~~to time, in accordance with applicable securities laws, we may utilize excess cash by repurchasing~~ partnership ~~units, although we have rarely~~ ~~done~~agreement soallows inus ~~the past and there are currently no plans~~ to repurchase partnership units.; ~~Since~~however, the ~~amount~~agreement ofdoes ~~excess~~not ~~cash~~require ~~available for~~that ~~such~~we ~~purpose~~or ~~cannot be estimated at this time due to the inability to accurately estimate the amount of any assessments related to water and sewer service and also due to the highly variable nature of~~ our ~~cash~~General ~~flow,~~Partner ~~there can be no assurance as to the number~~repurchase of partnership units ~~which~~on wedemand ~~will~~of ~~actually repurchase~~unitholders, ifnor ordoes ~~when~~the ~~any~~agreement ~~such~~provide ~~repurchases~~for ~~will,~~a inminimum ~~fact,~~purchase ~~occur,~~price or ~~the~~establish ~~prices~~a atmechanism ~~which~~for ~~such~~determining ~~repurchases,~~a ifpurchase ~~any, will be made~~price.

Page 5153

~~There~~From ~~were~~time to time, in accordance with applicable securities laws, we may utilize excess cash by repurchasing partnership units, although we have rarely done so in the past and there are currently no ~~purchases~~plans to repurchase partnership units. Since the amount of excess cash available for such purpose cannot be estimated at this time due to the inability to accurately estimate the amount of any assessments related to water and sewer service and also due to the highly variable nature of our cash flow, there can be no assurance as to the number of partnership units bywhich ~~us,~~we ~~our~~will ~~general~~actually ~~partner~~repurchase, if or when any ~~affiliate~~such ofrepurchases uswill, in fact, occur, or ~~our~~the ~~general~~prices ~~partner~~at which ~~during~~such ~~2011~~repurchases, if any, will be made.

~~Item~~There 6.were ~~Selected~~no ~~Financial~~purchases of ~~Data~~partnership units by us, our General Partner, or any affiliate of us or our General Partner during 2012.

~~The selected financial~~Item ~~data set forth in Tables~~ 6 ~~and 7, below, has been derived from our historical audited financial statements~~. ~~The~~Selected ~~selected financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of~~ Financial ~~Condition and Results of Operations” and the audited financial statements and related notes thereto.~~Data

ItThe isselected ~~our experience~~financial ~~that~~data ~~our~~set ~~historical~~forth ~~financial~~in ~~condition~~Tables 6 and ~~results~~7, ofbelow, ~~operations~~has ~~are~~been ~~not~~derived ~~reliable~~from ~~indicators~~our ofhistorical ~~future~~audited financial ~~condition and results of operations~~statements. ~~Sales~~The ofselected ~~real~~financial data ~~estate~~should ~~for~~be ~~development~~read in ~~Boiling~~conjunction ~~Spring~~with ~~Lakes are highly variable, both as to the amount of land sold as well as the sales price per lot. See also~~ “Item 1A7. ~~Risk~~Management’s ~~Factors”~~Discussion ~~for~~and aAnalysis ~~discussion~~ of ~~material~~Financial ~~uncertainties that~~Condition ~~might~~and ~~cause our future financial condition or results~~ Results of ~~operations~~Operations” toand ~~be materially different from~~ the ~~historical~~audited financial ~~condition~~ statements and ~~results~~related ofnotes ~~operations~~thereto.

~~TABLE~~It 6:is ~~SELECTED~~our ~~INCOME~~experience that ~~STATEMENT~~our ~~DATA~~historical financial condition and results of operations are not reliable indicators of future financial condition and results of operations. Sales of real estate for development in Boiling Spring Lakes are highly variable, both as to the amount of land sold as well as the sales price per lot. See also “Item 1A. Risk Factors” for a discussion of material uncertainties that might cause our future financial condition or results of operations to be materially different from the historical financial condition and results of operations.

TABLE 6: SELECTED INCOME STATEMENT DATA
	Year Ended December 31,
	2011			2010			2009			2008			2007
	2012			2011			2010			2009			2008
Revenues:
Property sales	$	6612,~~678~~817		$	—66,678		$	~~17,904~~-		$	—17,904		$	~~499,755~~-
Interest income		~~4,516~~689			144,~~923~~516			3314,~~270~~923			9633,~~047~~270			~~181~~96,~~790~~047
Other revenue		17,~~583~~769			21,~~673~~583			972,673			~~25,764~~97			425,~~234~~764
Total revenues		7221,~~777~~275			1772,~~596~~777			5117,~~271~~596			~~121~~51,~~811~~271			~~685~~121,~~779~~811
Operating expenses:
Direct costs of property sold		~~2,752~~517			—2,752			6-			—6			~~14,598~~-
Selling, general and admin. expenses		~~509~~514,~~344~~933			~~496~~509,~~966~~344			~~512~~496,~~916~~966			~~534~~512,~~710~~916			~~675~~534,~~214~~710
Depreciation		3,~~550~~546			3,~~779~~550			3,~~846~~779			3,846			3,~~924~~846
Total operating expenses		~~515~~518,~~646~~996			~~500~~515,~~745~~646			~~516~~500,~~768~~745			~~538~~516,~~556~~768			~~693~~538,~~736~~556
Net loss	$	(~~442~~497,~~869~~721	)	$	(~~483~~442,~~149~~869	)	$	(~~465~~483,~~497~~149	)	$	(~~416~~465,~~745~~497	)	$	(7416,~~957~~745	)
Per Unit Data
Net loss	$	(0.2427	)	$	(0.2724	)	$	(0.2627	)	$	(0.2326	)	$	—(0.23	)
Distributions		—-			—-			—-			—-			—-

Page 5254

TABLE 7: SELECTED BALANCE SHEET DATA

	At December 31,
	As of December 31,
	2011		2010		2009		2008		2007
	2012		2011		2010		2009		2008
Cash, prepaid expenses and other current assets	$	1,935,978	$	2,355,080	$	2,852,898	$	3,351,240	$	3,659,565
Cash, prepaid expenses and other
Note receivable		—		—		—		—		128,823
Current assets	$	1,293,884	$	1,935,978	$	2,355,080	$	2,852,898	$	3,351,240
Properties held for sale and property and equipment, net		~~622~~523,~~486~~184		~~625~~622,~~437~~486		~~628~~625,~~120~~437		~~581~~628,~~029~~120		~~570~~581,~~253~~029
Total assets	$	21,~~558~~817,~~464~~068	$	2,~~980~~558,~~517~~464	$	32,~~481~~980,~~018~~517	$	3,~~932~~481,~~269~~018	$	43,~~358~~932,~~641~~269
Accounts payable and accrued expenses	$	~~246~~3,~~708~~033	$	~~225~~246,~~892~~708	$	~~243~~225,~~244~~892	$	~~228~~243,~~998~~244	$	~~238~~228,~~625~~998
Total liabilities	$	~~246~~3,~~708~~033	$	~~225~~246,~~892~~708	$	~~243~~225,~~244~~892	$	~~228~~243,~~998~~244	$	~~238~~228,~~625~~998
Partners' capital		21,~~311~~814,~~756~~035		2,~~754~~311,~~625~~756		32,~~237~~754,~~774~~625		3,~~703~~237,~~271~~774		43,~~120~~703,~~016~~271
Total liabilities and partners' capital	$	2,558,464	$	2,980,517	$	3,481,018	$	3,932,269	$	4,358,641
Total liabilities and partners’ capital	$	1,817,068	$	2,558,464	$	2,980,517	$	3,481,018	$	3,932,269

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our audited financial statements and the notes thereto which are included as part of this Annual Report on Form 10-K.

Critical Accounting Policies

A “critical accounting policy” is one that is both important to the portrayal of our financial condition and results and requires Management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following of our accounting policies fit this description:

■ Depreciation

Our investments in property other than real estate held for sale are recorded at cost. Improvements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. Depreciation iswith respect to our depreciable assets is computed using the straight-line method over the estimated useful lives of 8 to 40 years for buildings, and 5 to 20 years for equipment and land improvements.

For purposes of determining the amount of depreciation to record on an annual basis ~~with respect to our depreciable assets~~, we are required to make subjective assessments as to the useful lives of those assets. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in those assets, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

Page 5355

■ Impairment of Real Estate Held for Sale

Our long-lived assets, primarily real estate held for sale which is our most significant asset, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We assess the recoverability of the carrying value of our long-lived assets whenever triggering events or changes in circumstance indicate that an impairment may have occurred in accordance with the provisions of ASC 60-10, “Property, Plant and Equipment.” In general, our review of recoverability is based principally upon the latest independent appraisal of our Boiling Spring Lakes property, Management’s determination of the extent to which the latest appraisal accurately depicts the fair market value of the appraised assets as of the appraisal date, changes in our real estate holdings since the date of the latest appraisal, and Management’s determination of changes, if any, in market conditions and trends from the date of the latest appraisal. An appraisal of real estate typically includes an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use (if any) and eventual disposition. These estimates consider factors such as expected future sale prices, operating income, market and other applicable trends, and residual value expected, as well as the effects of demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property. We are required to make subjective assessments as to whether there are impairments in the values of our investments in real estate. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income.

During the 1980’s, Brunswick County changed its health code to become much more stringent regarding on-site septic systems and sewage disposal. After the changes in the health code, we obtained an appraisal of the fair market value of our real estate held for sale in Boiling Spring Lakes. Based upon that appraisal, Management determined that the value of much of our land was impaired as a result of the changes in the heath code. To reflect that impairment, we established a valuation allowance to reduce the book value of our affected land to its fair market value as set forth in that appraisal. We allocate a valuation allowance to individual lots and parcels of land that are unsuitable for the installation of an individual septic system as determined by testing conducted by the local health department or, in the absence of such testing, as determined by us based upon topography. The determinations by us of which land is unsuitable for septic (and, therefore, has allocated to it a valuation allowance) have a direct impact on our net income because the sales price of a lot or parcel of land is determined in large part upon whether or not the land being sold is suitable for a septic system, and the direct cost of land sold is net of the valuation allowance, if applicable.

Due to uncertainties inherent in the valuation process and in assessing market conditions and trends, among other factors, it is reasonably possible that the actual results of operating and disposing of our real estate held for sale could be materially different from current expectations.

Page 5456

Year Ended December 31, ~~2011~~2012 Compared to Year Ended December 31, ~~2010~~2011

■ Revenues

Overall, revenues ~~increased~~decreased ~~314~~71% to $7221,~~777~~275 in ~~2011,~~2012 compared to $1772,~~596~~777 in ~~2010~~2011. The principal components of revenues and Management’s explanations ~~for~~ for year-to-year changes are set forth below.

Property Sales

Revenue from ~~property~~the ~~sales~~sale of 2 lots was $6612,~~678~~817 in ~~2011~~2012, or an average of approximately $6,400 per lot. We had no$66,678 of revenue from ~~property~~the sale ~~sales~~of 10 lots in ~~2010~~2011, or approximately $6,700 per lot. Poor economic conditions and tightened credit markets, as well as efforts, beginning in April 2006, by Fish and Wildlife to protect the habitat of the endangered Red-cockaded Woodpecker, resulted in a continuation of depressed home building activity and real estate sales in Boiling Spring Lakes in ~~2011~~ 2012 and ~~2010~~2011.

Interest Income

Interest income in ~~2011~~2012 was $~~4,516,~~689 compared to $144,~~923~~516 in ~~2010~~2011. Management attributes the 7085% decrease primarily to a lower amount invested in certificates of deposit and money market funds during ~~2011~~2012 than in ~~2010~~2011, and, to a lesser extent, to lower interest rates earned on ~~certificates~~those certificates of deposit and money market funds during ~~2011~~ 2012 than in ~~2010~~2011. ~~The~~We ~~former~~retained ismost ~~due~~of to our ~~retaining in~~ cash ~~and cash equivalents the~~ proceeds received ~~upon~~from ~~maturity~~maturing of certificates of deposit and withdrawals from money market funds during ~~2011,~~2012 ~~and~~in ~~the~~a ~~latter~~non-interest isbearing account at our bank which was fully FDIC-insured. Interest rates in 2012 were lower due primarily to policies pursued by the U.S Federal Reserve System to lower interest ~~rates~~ ~~during 2011~~rates.

Other ~~Revenue~~Income

Other ~~revenue~~ ~~was~~income was $17,~~583~~769 in ~~2011~~2012, compared to $21,~~673~~583 in ~~2009~~2011. ~~The~~This ~~decrease~~consisted isof ~~due principally to~~ $210,~~393~~041 ~~received in 2010 from the telephone cooperative that serves Boiling Spring Lakes and other portions~~ of ~~Brunswick County. As~~ a ~~non~~one-~~profit cooperative, the telephone company may, from~~ time torefund ~~time,~~of ~~distribute~~unclaimed toproperty ~~its~~less ~~members any excess~~ $2,273 of ~~revenues over operating~~ expenses., Wewhich ~~received no~~was ~~such~~netted ~~distribution~~to ~~during~~equal ~~2011~~$7,769.

■ Direct Cost of Property Sold

Direct cost of property sold in ~~2011~~2012 was $2517,~~752.~~ ~~There~~compared ~~was~~to no$2,752 ~~direct cost of property sold~~ in ~~2010~~2011, because wefewer ~~sold~~lots nowere ~~land~~sold ~~during~~in ~~2010~~2012.

■ Selling, General and Administrative Expenses

Selling, general ~~and~~ and administrative expenses increased 21% to $~~509~~514,~~344~~933 in ~~2011~~2012, compared to $~~496~~509,~~966~~344 in ~~2010~~2011. Noteworthy ~~changes from 2010 in the~~ components of selling, general and administrative expenses, and changes from 2011 and the reasons ~~therefor~~therefore, are as follows:

Page 5557

Real estate taxes

Real estate taxes for ~~2011~~2012 ~~were~~of $146,~~653,~~591 anwere ~~increase~~virtually ofunchanged ~~19%~~from ~~over~~2011 ~~real estate~~ taxes ~~in 2010. The increase reflects an increase in the assessed value~~ of ~~our land following a county-wide reassessment during 2011 over the assessed value of our land for 2010~~$146,653.

Accounting fees

Accounting ~~fees~~ fees for ~~2011~~2012 were $3742,~~103~~051, compared to $5537,~~018~~103 for ~~2010~~2011. The ~~decrease~~increase of 3313% is due principally to the fact that we ~~estimated~~hired an ~~fees~~appraisal ~~and~~consultant ~~expenses~~for ~~relating to the 2010 audit at~~ $25,~~000,~~284 ~~and~~in ~~accrued~~2012 ~~that~~(in ~~amount~~connection atwith ~~December~~determining ~~31, 2010, whereas~~ the ~~actual cost,~~fairness ~~paid~~of ~~during 2011, was $19,209. This had~~ the ~~effect~~price ofto ~~reducing~~be ~~accounting~~paid ~~fees and expenses~~ for ~~2011~~old byunits as ~~the~~part ~~difference~~ of ~~$5,791.~~ ~~But~~the ~~for~~proposed ~~this~~reverse ~~difference~~unit split), ~~accounting~~partially ~~fees~~offset ~~for~~by ~~2011~~a ~~and 2010 would have been~~ $4220,~~894~~336 ~~and~~reduction ~~$49,226,~~in ~~respectively.~~other ~~Another~~areas ~~principal reason~~of ~~for the decrease in~~ accounting ~~fees is that we estimated fees and~~ expenses, including ~~relating~~a toreduction ~~the~~of ~~2011 audit at~~ $12,~~000,~~055 ~~which amount~~paid weto ~~accrued at December 31, 2011, whereas~~ our ~~actual~~outside ~~cost~~public ~~for~~accounting ~~the 2010 audit was $19,209, or $7,209 higher than the estimated cost for the 2011 audit~~firm.

Legal Fees

Total legal fees for ~~2011~~2012 were $1350,~~487~~825, compared to $1913,~~324~~487 for ~~2010~~2011. Management attributes the 30277% ~~decrease~~increase principally to ~~the decrease in non-recurring~~ legal ~~fees~~expenses ~~and other costs incurred during 2011 compared to 2010. During 2011, these non-recurring costs totaled $2,679 and~~ related to awork ~~Form~~done ~~8-K and a Form 8-K Amendment that we filed with the SEC~~ in ~~January~~connection ~~2011 regarding a change in our auditors. During 2010, we incurred non-recurring legal fees and other costs totaling $8,150 relating to a Form 8-K and a Form 8-K Amendment that we filed~~ with the ~~SEC~~proposed inreverse ~~January~~unit ~~2010, also relating to a change in our auditors~~split.

~~Filing~~Other ~~Fees~~

~~Total~~The ~~fees~~above ~~related~~increases towere ~~the~~partially ~~filing~~offset ofby ~~our~~cost ~~Annual~~saving ~~Report~~efforts onin ~~Form~~several ~~10-K~~areas, ~~Quarterly~~including ~~Reports on Form 10-Q~~advertising, ~~and Periodic Reports on Form 8-K and 8-K/A were $14~~telephone,~~356~~ ~~for~~reduction ~~2011, compared to $10,039 for 2010. Management attributes the 43% increase principally to the requirement imposed by the SEC, beginning~~ in ~~2011,~~personnel ~~that filings include XBRL data. XBRL, short for eXtensible Business Reporting Language, is a computerized language for the electronic communication of business~~ and ~~financial data. For 2010, we paid an outside service that prepares our~~transfer ~~filings~~agent ~~with the SEC $5,000 for preparing to file XBRL data~~fees. ~~For 2011, we paid that same outside service $10,000 for filing XBRL data, or an increase of $5,000.~~

~~Miscellaneous Expenses~~■ Depreciation

~~During~~Depreciation ~~2011, we incurred~~expense ~~$12,985~~ in ~~miscellaneous~~2012 ~~expenses,~~was ~~compared~~nearly tounchanged ~~$8,900~~from ~~in 2010. Management attributes the 46% increase principally to costs incurred in~~ 2011 ~~in connection with the periodic appraisal of our real estate assets~~. ~~We did not obtain an appraisal, and, therefore, did not incur costs in connection with an appraisal, in 2010.~~

~~Page~~Year 56Ended December 31, 2011 Compared to Year Ended December 31, 2010

~~■ Depreciation~~Overall, revenues increased 314% to $72,777 in 2011, compared to $17,596 in 2010. The principal components of revenues and Management’s explanations for year-to-year changes are set forth below.

~~Depreciation~~Page expense in 2011 was $3,550, compared to $3,779 in 2010. Management attributes the 6% decrease to the fact that an asset became fully depreciated during 2011, so the amount of depreciation recorded for that asset in 2011 was less than for 2010. 58

~~Year~~Property ~~Ended December 31, 2010 Compared to Year Ended December 31, 2009~~Sales

■We had ~~Revenues~~no revenue from property sales in 2010, The severe economic recession and the tightened credit markets, as well as efforts, beginning in April 2006, by Fish and Wildlife to protect the habitat of the endangered Red-cockaded Woodpecker, resulted in a continuation of depressed home building activity and real estate sales in Boiling Spring Lakes in 2011 and 2010.

~~Overall,~~Interest ~~revenues decreased~~Income ~~66% to $17,596 in 2010, compared to $51,271 in 2009. The principal components of revenues and Management’s explanations for year-to-year changes are set forth below.~~

~~Property~~Interest ~~Sales~~income in 2011 was $4,516, compared to $14,923 in 2010. Management attributes the 70% decrease to the combination of lower amounts invested during 2011 than in 2010 and to somewhat lower interest rates earned on our investments during 2011 than during 2010.

WeOther ~~had~~Income no revenue from property sales in 2010, compared to revenue from property sales of $17,904 in 2009. The severe economic recession and the tightened credit markets, as well as efforts, beginning in April 2006, by Fish and Wildlife to protect the habitat of the endangered Red-cockaded Woodpecker, resulted in a continuation of depressed home building activity and real estate sales in Boiling Spring Lakes in 2010 and 2009.

~~Interest~~Other income ~~Income~~was $1,583 in 2011, compared to $2,673 in 2010. The decrease is due principal to $2,393 received in 2010 from the telephone cooperative that serves Boiling Spring Lakes and other portions of Brunswick County. As a non-profit cooperative, the telephone company may, from time to time, distribute to its members any excess of revenues over operating expenses. We received no such distribution during 2011.

~~Interest~~■ ~~income in 2010 was $14~~Selling,~~923,~~ ~~compared~~General ~~to $33,270 in 2009. Management attributes the 55% decrease to the combination of lower amounts invested during 2010 than in 2009~~ and toAdministrative ~~somewhat lower interest rates earned on our investments during 2010 than during 2009.~~Expenses

~~Other~~Selling, ~~Revenue~~general and administrative expenses increased 2% to $509,344 in 2011 compared to $496,966 in 2010. Noteworthy changes from 2010 in the components of selling, general and administrative expenses, and the reasons therefore, are as follows:

~~Other revenue~~Accounting ~~was $2,673 in 2010, compared to $97 in 2009. The increase is due principally to $2,393 received in 2010 from the~~fees telephone cooperative that serves Boiling Spring Lakes and other portions of Brunswick County. As a non-profit cooperative, the telephone company may, from time to time, distribute to its members any excess of revenues over operating expenses.

~~■ Selling~~Accounting fees for 2011 were $37, ~~General and Administrative Expenses~~103, compared to $55,018 for 2010.

~~Selling,~~Legal ~~general~~Fees and administrative expenses decreased 3% to $496,966 in 2010, compared to $512,916 in 2009. Noteworthy changes from 2009 in the components of selling, general and administrative expenses, and the reasons therefor, are as follows:

~~Page~~Total 57legal fees for 2011 were $13,487, compared to $19,324 for 2010.

~~Advertising~~Filing Fees

~~Advertising~~Total ~~expenses increased~~fees ~~73%~~related to ~~$7,783~~the infiling ~~2010~~of our Annual Report on Form 10-K, ~~compared~~Quarterly toReports $4on Form 10-Q,~~494~~ inand ~~2009.~~Periodic ~~Management~~Reports ~~attributes~~on ~~the~~Forms ~~increase~~8-K toand ~~efforts~~8-K/A towere ~~stimulate~~$14,356 ~~land~~in ~~sales~~2011, compared ~~through~~to ~~advertising~~$10,039 for 2010.

~~Legal~~Page ~~Fees~~ 59

~~During 2010, we paid~~Miscellaneous ~~total~~Expenses legal fees of $19,324, compared to $33,135 in 2009. Management attributes the 42% decrease, in part, to higher than anticipated legal fees incurred during 2009 in connection with the review before filing of our Annual Report on Form 10-K for the year ended December 31, 2008, which higher fees were recorded and paid during 2009. The decrease is also due, in part, to our changing legal counsel during 2010, from a law firm based in Nassau County, New York to law firm based in Hartford County, Connecticut. Typically, law firms based in or near New York City charge higher fees than law firms based elsewhere.

~~Miscellaneous~~During 2011, we incurred ~~Expenses~~$12,985 in miscellaneous expenses, compared to $8,900 in 2010.

~~During~~Page 2010, we incurred $8,900 in miscellaneous expenses, compared to $14,286 in 2009. Management attributes the 38% decrease principally to costs incurred in 2009 in connection with the periodic appraisal of our real estate assets. We did not obtain an appraisal, and, therefore, did not incur costs in connection with an appraisal, in 2010.60

■ Depreciation

Depreciation expense in ~~2010~~2011 was $3,~~779~~550, compared to $3,~~846~~779 in ~~2009. Management attributes the 2% decrease to the fact that an asset became fully depreciated during~~ 2010~~, so the amount of depreciation recorded for that asset in 2010 was less than for 2009~~.

Liquidity and Capital Resources

■ General

We require cash primarily for the payment of operating expenses, overhead, and capital expenditures incurred in connection with real estate sales.

Much of our land is accessible only by roads that are incomplete, or that are unpaved or lack a rocked surface, or which require repairs. Management believes that we will be able to sell such land only if incomplete roads are completed, the roads that are now unpaved or that lack a rocked surface are rocked, and that roads in need of repairs are repaired. In addition, Management believes that we will be able to achieve higher sales prices for many of our lots by paving certain roads with asphalt. The cost of such road improvements is generally substantial.

~~Page~~We 58may have to bear assessments relating to the installation of water and sewer lines installed by the City and the County. The Partnership owns property along Highway 87 where construction of the sewer system has begun. The County has estimated that the cost of this portion of the project will be approximately $3,000,000. This cost will then be assessed against property owners along the portion of Highway 87 along which the sewer lines are being built. While the County has stared that it has not yet determined the method by which the costs will be assessed to property owners, the Partnership believes that the most likely method will result in an assessment of approximately $1,040,000 against the Partnership’s property. The County has stated that the assessment, which will be made after completion of the project, which the Partnership believes will be in the third quarter of 2013, may be paid in a lump at a 5% discount or over 10 years at an interest rate of 2.84%. The Partnership believes it will choose to pay over the 10-year period.

We ~~may have to bear assessments relating to the installation of water and sewer lines installed by the City and others. We~~ cannot reliably ~~estimate~~ estimate the amounts of ~~future~~any additional assessments, nor can we accurately predict when any ~~future~~additional assessments will become due. The total of such additional assessments is likely to be substantial. ~~Our current cash balances and short-term investments may not be sufficient to meet all of these capital requirements.~~

~~Cash~~In ~~is generated~~light ~~primarily~~of ~~from~~the ~~individual lot sales and may not be sufficient to meet future operating costs, debt service, if any,~~assessment ~~and~~for other cash requirements. When individual lot sales have not been sufficient, historically, we have met our liquidity requirements by drawing upon cash reserves, accruing general partner fees and certain other fees and expenses payable to the ~~General~~ ~~Partner~~sewer ~~and~~project ~~its~~along ~~affiliates,~~Highway ~~selling certain non-real estate assets~~87, ~~and, from time to time, borrowing from local banks or the General Partner and/or its affiliates. We may also seek to supplement~~ our current cash balances and short-term investments byare ~~negotiating~~not ~~credit~~sufficient ~~facilities,~~to ~~issuing~~meet ~~debt~~all onof these ~~such~~known ~~terms~~ and ~~conditions~~potential ascapital ~~the General Partner deems prudent, or seeking other forms of debt or equity financing as the General Partner deems appropriate~~requirements.

~~■ Cash Flows from Operating Activities~~Page 61

~~During~~Cash ~~2011,~~is wegenerated ~~used~~primarily ~~$408~~from individual lot sales and when lot sales are at a low number as has been the case for the past five years (see Table 1),~~978~~ ofrevenue is ~~net~~not ~~cash~~sufficient into meet operating ~~activities~~costs and other cash requirements. When individual lot sales have not been sufficient, ~~compared~~historically, we tohave ~~$505~~met our liquidity requirements by drawing upon cash reserves,~~865~~ ofwhich ~~net~~has reduced, and will continue to reduce, such cash reserves ~~used~~significantly, inaccruing ~~2010.~~general ~~Management~~partner ~~attributes~~fees and certain other fees and expenses payable to the ~~change~~General ~~principally~~Partner and its affiliates, selling certain non-real estate assets, and, from time to ~~revenue~~time, ~~received~~borrowing from local banks or the ~~sale~~General ofPartner ~~real~~and/or its ~~estate~~affiliates. ~~during~~We ~~2011,~~may ~~whereas~~also weseek ~~had~~to nosupplement ~~such~~our ~~revenue~~current incash ~~2010~~balances and short-term investments by negotiating credit facilities, issuing debt on such terms and toconditions aas ~~higher~~the ~~amount~~General Partner deems prudent, or seeking other forms of debt or equity financing ~~accrued~~as ~~expenses~~the ~~payable~~General ~~and~~Partner adeems ~~lesser~~appropriate. ~~amount~~The ability of ~~accrued~~the ~~interest~~Partnership ~~receivable~~to ataccess ~~December~~these ~~31,~~sources ~~2011~~of ~~than~~cash atto ~~December~~an ~~31,~~extent ~~2010~~sufficient to meet the Partnership’s operating costs is unlikely.

■ Cash Flows from ~~Investing~~ Operating Activities

~~Net~~During ~~cash~~2012, ~~provided~~we ~~from~~used ~~investing activities in 2011 was~~ $1647,~~886,000,~~069 ~~compared to $687,096~~ of net cash ~~used~~ in ~~2010.~~operating ~~Management~~activities, ~~attributes~~compared ~~the change primarily~~ to a$408,978 ~~change in the amount~~ of ~~cash invested in certificates of deposit~~ net of cash ~~received~~used ~~upon~~in ~~their maturity. More particularly, during~~ 2011, wean ~~invested~~increase ~~$490,000~~ of ~~cash in certificates of deposit while receiving~~ $2238,~~376~~091,~~000~~ ~~of cash at maturity~~or of58.2%. ~~certificates~~Management ofattributes ~~deposit,~~the ~~whereas~~change ~~during~~principally ~~2010~~to wepaying ~~invested~~accrued ~~$3,091,000~~expenses ofand ~~cash~~accounts payable in ~~certificates~~the amount of ~~deposit while receiving~~ $2243,~~405,000~~675 inand ~~cash~~to ata ~~maturity~~lesser ofextent ~~certificates~~to ~~of deposit. Because we invest in certificates of deposit with maturities of less than one year,~~ the ~~foregoing~~increased ~~amounts~~net ~~include~~loss, inpartially ~~some~~offset ~~cases,~~by ~~cash~~the ~~invested~~receipt ~~in certificates~~ of ~~deposit~~approximately ~~in a particular year that matured and were rolled over that same year. As a consequence~~$95,000 ~~the~~due ~~foregoing~~to ~~amounts do not represent the total~~ refunds of ~~certificates~~water ofassessments ~~deposit outstanding~~previously ~~at any one time~~paid.

~~Off-Balance~~■ ~~Sheet~~Cash ~~Arrangements~~Flows from Investing Activities

WeNet ~~have~~cash noprovided ~~off~~from investing activities in 2012 was $0 compared to $1,886,000 of net cash provided upon maturity of certificates of deposit in 2011. None of the proceeds were reinvested in extremely low interest paying instruments. During 2012, the funds were held in a non-~~balance~~interest ~~sheet~~paying ~~arrangements~~checking account which was fully FDIC-insured and up to $250,000 was held in money market funds which were also FDIC-insured.

~~Page~~Off-Balance 59Sheet Arrangements

~~Impact~~We ofhave ~~Inflation~~no off-balance sheet arrangements.

~~Generally,~~Impact ~~demand for real estate is adversely affected by increases in interest rates. To the extent that a significant increase in the rate~~ of ~~inflation leads to a significant increase in interest rates, our ability to sell real estate may be significantly adversely affected.~~Inflation

~~Inflation~~Generally, ~~has~~demand ~~had only~~for areal ~~minor~~estate ~~impact~~is onadversely ~~our~~affected ~~operations~~by ~~during~~increases in interest rates. To the ~~fiscal~~extent ~~years~~that ~~ended~~a ~~December~~significant 31increase in the rate of inflation leads to a significant increase in interest rates, ~~2011~~our ~~and~~ability ~~2010~~to sell real estate may be significantly adversely affected.

~~Item~~The ~~7A.~~low ~~Quantitative~~rate of inflation experienced during the fiscal years ended December 31, 2012 and ~~Qualitative~~2011 ~~Disclosures~~has ~~About~~had ~~Market~~only ~~Risk~~a minor impact on our operations.

~~Our~~Page principal market risk exposure is to changes in interest rates, which are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in the general level of interest rates can affect our revenue from property sales, since the market for real estate in general varies to a large degree upon the level and stability of interest rates. Generally, when interest rates are high or are increasing, the market for real estate declines, and when interest rates are low or are decreasing, the market for real estate increases. Management believes that the extent of such risk is neither quantifiable nor predictable because of the variability of future interest rates and because of the highly variable nature of our real estate sales.62

~~We also have exposure~~Item to7A. ~~market~~Quantitative ~~risk~~and ~~for~~Qualitative ~~changes~~Disclosures inAbout ~~interest~~Market ~~rates due primarily to the following:~~Risk

•Our ~~Cash:~~principal ~~Substantially~~market risk ~~all~~exposure ofis ~~our~~to ~~cash~~changes isin ~~deposited~~interest inrates, awhich ~~noninterest-bearing~~are ~~checking~~highly ~~account~~sensitive ~~and~~to anmany ~~interest-bearing~~factors, ~~money~~including ~~market~~governmental ~~account~~monetary atand tax apolicies, ~~local~~domestic ~~financial~~and ~~institution~~international economic and political considerations, ~~with~~and ~~interest~~other onfactors beyond our control. Changes in the ~~money~~general level of interest rates can affect our revenue from property sales, since the market ~~account~~for atreal estate in general varies to a ~~variable~~large ~~rate~~degree upon the level and stability of interest rates. IfGenerally, when interest rates ~~were~~are tohigh ~~increase~~or are increasing, wethe market ~~would~~for ~~earn~~real ~~more~~estate declines, and when interest ~~income~~rates onare ~~our~~low ~~cash~~or ~~balances~~are decreasing, the market for real estate increases. IfManagement believes ~~interest~~that ~~rates~~the ~~were~~extent toof ~~decrease,~~such werisk ~~would~~is ~~earn~~neither ~~less~~quantifiable nor predictable because of the variability of future interest ~~income~~rates and onbecause of the highly variable nature of our ~~cash~~real ~~balances~~estate sales.

•We ~~Short-term~~also ~~Investments:~~have ~~From time~~ exposure to ~~time~~market werisk ~~invest~~for ~~excess~~changes ~~cash~~ in U.S. Treasury securities or certificates of deposit having a maturity at the time of purchase of more than 91 days but less than one year. All of these short-term investments are classified as securities held to maturity. During 2011, we had some cash invested in certificates of deposit; however, as of December 31, 2011, none of our cash was invested in these short-term investments. If we were to invest in U.S. Treasury securities and/or certificates of deposit, and interest rates ~~were to increase, upon sale or maturity of the investments, we would earn more interest income upon reinvestment of the proceeds~~ due toprimarily ~~a higher interest rate on the securities then purchased. If we were~~ to ~~invest in these short-term investments, and interest rates were to decrease, upon sale or maturity of~~ the investments, we would earn less interest income upon reinvestment of the proceeds due to a lower interest rate on the securities then purchased. Unrealized gains or losses on securities classified as held to maturity that arise due to changes in interest rates would not be realized so long as the securities are held to maturity.following:

~~Page~~• 60Cash: Substantially all of our cash is deposited in a noninterest-bearing checking account and an interest-bearing money market account at a local financial institution, with interest on the money market account at a variable rate. If interest rates were to increase, we would earn more interest income on our cash balances held in the money market account. If interest rates were to decrease, we would earn less interest income on our cash balances held in the money market account. To the extent we maintain balances in our in a noninterest-bearing checking account, changes in interest rates would have no effect on us.

At• ~~December~~Short-term ~~31,~~Investments: ~~2011, we~~From ~~had~~time ~~cash~~to oftime ~~$1,935,978~~we ~~and~~may ~~held~~invest noexcess ~~certificates~~cash ofin ~~deposit;~~U.S. ~~however,~~Treasury ~~during~~securities ~~2011,~~or ~~we had as much as $1,886,000 invested in~~ certificates of deposit having a maturity at the time of purchase of more than 91 days but less than one year. ~~Had~~All ~~the~~of ~~average~~these ~~level~~short-term ofinvestments ~~interest rates~~are ~~during~~classified ~~2011~~as ~~been~~securities ~~higher~~held orto ~~lower~~maturity. byDuring ~~100~~2012, ~~basis~~we ~~points~~had orno ~~one~~short-term ~~percent~~investments; ~~(1%)~~in January, ~~our~~2013, ~~net~~we ~~income~~invested ~~would~~$500,000 ~~have~~in ~~been~~3-month ~~approximately~~CD’s and $17500,~~226 more~~000 orin $43-month U.S. Treasury bills. If interest rates were to increase,~~516~~ ~~less~~upon sale or maturity of these investments, ~~respectively.~~we ~~The~~would ~~foregoing~~earn ~~estimate~~more interest income upon reinvestment of the ~~change~~proceeds indue ~~net~~to ~~income~~a ishigher ~~based~~interest ~~upon~~rate on the ~~average~~securities then purchased. If interest rates were to decrease, upon sale or maturity of the ~~balances at~~investments, ~~the~~we ~~beginning~~would ~~and~~earn ~~end~~less ofinterest ~~each~~income upon reinvestment of the ~~quarters~~proceeds ~~ended~~due ~~March~~to ~~31,~~a ~~June~~lower ~~30,~~interest ~~September~~rate ~~30,~~on ~~and~~the ~~December~~securities ~~31,~~then ~~2011,~~purchased. ~~and~~Unrealized ~~reflects~~gains ~~the fact~~or losses on securities classified as held to maturity that ~~annual~~arise due to changes in interest rates onwould ~~investments~~not ~~that~~be ~~are~~realized ~~less~~so ~~than~~long 1%as ~~cannot~~the ~~fall~~securities ~~below~~are 0%held to maturity.

At December 31, ~~2010~~2012, we had cash of $~~458~~1,~~956~~288,909, ~~and~~of ~~held~~which $1250,~~886,000~~313 inwas ~~certificates~~held ofin ~~deposit~~a ~~having~~money amarket ~~maturity~~fund atand the ~~time~~balance ofin ~~purchase~~no-interest, ofliquid ~~more than 91 days but less than one year~~accounts. Had the average level of interest rates during ~~2010~~2012 been higher or lower by 100 basis points or one percent (1%), our net income would have been approximately $2416,~~931~~000 (assuming all cash had been held in interest bearing accounts) more or $~~14,912~~689 less, respectively. The foregoing estimate of the change in net income is based upon the average of the balances at the beginning and end of each of the quarters ended March 31, June 30, September 30, and December 31, ~~2010~~2012, and reflects the fact that annual interest rates on investments that are earning less than 1% cannot fall below 0%.

WeAt December 31, 2011, we had cash of $1,935,978 and held no ~~interest-bearing~~certificates of deposit; however, we had certificates of deposit during the year. Had the ~~debt~~average ~~outstanding~~level of interest rates during 2011 been higher or ~~2010~~lower by 100 basis points or one percent (1%), our net income would have been approximately $17,226 more or $4,516 less, respectively. The foregoing estimate of the change in net income is based upon the average of the balances at the beginning and end of each of the quarters ended March 31, June 30, September 30, and December 31, 2011, and reflects the fact that annual interest rates on investments that are earning less than 1% cannot fall below 0%.

WePage ~~do not enter into derivative contracts for our own account to hedge against the risk of changes in interest rates.~~63

~~Item~~We 8.had ~~Financial~~no ~~Statements~~interest-bearing debt ~~and~~outstanding ~~Supplementary~~during ~~Data~~2012 or 2011.

~~See~~We ~~Part~~do ~~IV,~~not ~~“Item~~enter into ~~15.~~derivative ~~Exhibits~~contracts ~~and~~for ~~Financial~~our ~~Statement~~own ~~Schedules”~~account ~~for~~to hedge against the ~~response~~risk toof ~~this~~changes ~~item~~in interest rates.

Item 9 8. ~~Changes~~Financial inStatements and ~~Disagreements~~Supplementary ~~with Accountants on Accounting and Financial Disclosure~~Data

~~None~~See Part IV, “Item 15. Exhibits and Financial Statement Schedules" for the response to this item.

Item 9A 9. ~~Controls~~Changes in and ~~Procedures~~Disagreements with Accountants on Accounting and Financial Disclosure

~~Disclosure Controls and Procedures~~None.

WeItem ~~maintain~~9A. ~~disclosure~~Controls ~~controls~~ and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, or the person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.Procedures

~~Page~~Disclosure 61Controls and Procedures

~~Our management has~~We ~~the~~maintain ~~responsibility for establishing and maintaining adequate~~ disclosure controls and procedures. ~~Since~~that we are adesigned ~~limited~~to ~~partnership, we~~provide ~~have~~reasonable noassurance ~~officers~~that orinformation ~~directors. Mr. Davis P. Stowell, president of the General Partner, carries out the functions of our principal~~required ~~executive officer and principal financial officer, and, accordingly, is deemed~~ to be ~~our~~disclosed ~~“management”~~in ~~for~~our ~~purposes involving~~reports ~~the~~under ~~evaluation of~~ the ~~disclosure~~Exchange ~~controls~~Act ~~and~~is ~~procedures and the effectiveness thereof. Mr. Stowell has~~recorded, ~~as of the end of the period covered by this Annual Report on Form 10-K~~processed, ~~evaluated~~summarized ~~the~~and ~~effectiveness~~reported ofwithin the ~~disclosure~~time ~~controls~~periods ~~and procedures~~specified ~~(as defined~~ in ~~Rules 13a-15(e) or 15d-15(e) under~~ the ~~Exchange~~SEC’s ~~Act).~~rules ~~Based~~and ~~upon that evaluation~~forms, ~~Mr.~~and ~~Stowell~~to ~~has~~ensure ~~concluded~~ that ~~our~~ ~~disclosure~~such ~~controls~~information ~~and~~is ~~procedures~~accumulated ~~were~~and ~~effective~~communicated ~~in ensuring that information required~~ to beour ~~disclosed~~management, byincluding our usChief inExecutive ~~the~~Officer ~~reports that~~and weChief ~~file~~Financial Officer, or ~~submit under~~ the ~~Exchange~~person ~~Act~~performing ~~was~~similar ~~recorded~~functions, as ~~processed,~~appropriate ~~summarized~~to ~~and reported within the time periods specified~~allow intimely ~~the~~decisions ~~SEC’s~~regarding ~~rules~~required ~~and forms~~disclosure.

~~Internal~~Our ~~Control~~management ~~Over~~has the ~~Financial~~responsibility ~~Reporting~~for establishing and maintaining adequate disclosure controls and procedures. Since we are a limited partnership, we have no officers or directors. Mr. Peter Metz, who became President of the General Partner in June, 2012 , carries out the functions of our principal executive officer and principal financial officer, and, accordingly, is deemed to be our “management” for purposes involving the evaluation of the disclosure controls and procedures and the effectiveness thereof. Mr. Metz has, as of the end of the period covered by this Annual Report on Form 10-K, evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, Mr. Metz has concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

~~Our~~Page management has the responsibility for establishing and maintaining adequate internal control over our financial reporting. Since we are a limited partnership, we have no officers or directors. Mr. Davis P. Stowell, president of the General Partner, carries out the functions of our principal executive officer and principal financial officer, and, accordingly, is deemed to be our “management” for purposes of establishing and maintaining adequate internal control over our financial reporting and the evaluation of the effectiveness thereof. Mr. Stowell has, as of the end of the period covered by this Annual Report on Form 10-K, evaluated the effectiveness of our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) and has determined that such internal control over our financial reporting is effective at the reasonable assurance level. Mr. Stowell based this assessment on criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.64

InInternal ~~designing~~Control and evaluating the internal controls, including internal control over financial reporting, management recognized that any internal controls, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible internal controls. Because of the inherent limitations in all internal control systems, no evaluation of internal controls can provide absolute assurance that all internal control issues and instances of fraud, if any, within Reeves Telecom Limited Partnership have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, internal controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the internal control. The design of any system of internal controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any internal control will succeed in achieving its stated goals under all potential future conditions. Over ~~time,~~Financial an internal control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures related to the internal control may deteriorate. Because of the inherent limitations in a cost-effective internal control system, misstatements due to error or fraud may occur and not be detected.Reporting

~~Page~~Our 62management has the responsibility for establishing and maintaining adequate internal control over our financial reporting. Since we are a limited partnership, we have no officers or directors. Mr. Metz, President of the General Partner, carries out the functions of our principal executive officer and principal financial officer, and, accordingly, is deemed to be our “management” for purposes of establishing and maintaining adequate internal control over our financial reporting and the evaluation of the effectiveness thereof. Mr. Metz has, as of the end of the period covered by this Annual Report on Form 10-K, evaluated the effectiveness of our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) and has determined that such internal control over our financial reporting is effective at the reasonable assurance level. Mr. Metz based this assessment on criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission.

~~There~~In ~~has~~designing ~~been~~and ~~no change~~evaluating inthe ~~our~~internal controls, including internal control over financial reporting ~~identified~~, inmanagement ~~connection~~recognized ~~with~~that ~~the~~any ~~evaluation~~internal ~~required~~controls, byno matter ~~paragraph~~how ~~(d)~~well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management ~~Rule~~necessarily ~~13a-15~~was orrequired ~~Rule~~to ~~15d~~apply its judgment in evaluating the cost-15benefit relationship of possible internal controls. Because of the ~~Exchange~~inherent ~~Act~~limitations ~~that~~in ~~occurred~~all ~~during~~internal ~~the~~control ~~last~~systems, ~~fiscal~~no ~~quarter~~evaluation of ~~2011~~internal controls can provide absolute assurance that ~~has~~all ~~materially~~internal control ~~affected~~issues and instances of fraud, if any, within Reeves Telecom Limited Partnership have been detected. orThese isinherent ~~reasonably~~limitations ~~likely~~include tothe ~~materially~~realities ~~affect~~that judgments in decision-making can be faulty, ~~our~~and ~~internal~~that ~~control~~breakdowns ~~over~~can ~~financial~~occur because ~~reporting~~of simple error or mistake. WeAdditionally, dointernal ~~not~~controls ~~believe~~can ~~any~~be ~~significant~~circumvented by the individual acts of some persons, ~~deficiencies~~by collusion of two or ~~material~~more ~~weaknesses~~people ~~exist~~or inby ~~our~~management override of the internal control. The design of any system of internal controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any internal control ~~over~~will ~~financial~~succeed ~~reporting~~in achieving its stated goals under all potential future conditions. ~~Accordingly~~Over time, noan ~~corrective~~internal control may ~~actions~~become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures related to ~~have~~the ~~been~~internal control ~~taken~~may deteriorate. Because of the inherent limitations in a cost-effective internal control system, misstatements due to error or fraud may occur and not be detected.

~~Item~~There 9Bhas been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 of the Exchange Act that occurred during the last fiscal quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ~~Other~~We ~~Information~~do not believe any significant deficiencies or material weaknesses exist in our internal control over financial reporting. Accordingly, no corrective actions have been taken.

~~None.~~Page 65

~~[THE~~Item 9B. ~~REST~~Other ~~OF THIS PAGE IS BLANK]~~Information

~~Page 63~~None.

~~PART~~[THE ~~III~~REST OF THIS PAGE IS BLANK]

~~Item~~Page ~~10. Directors, Executive Officers, and Corporate Governance~~66

~~General~~PART ~~Partner~~III

~~Since we are a limited~~Item ~~partnership, we have no officers or directors~~10. ~~Grace Property Management~~Directors, ~~Inc.,~~Executive ~~our general partner~~Officers, ~~performs~~ ~~functions generally performed by officers~~ and ~~directors.~~Corporate ~~Grace Property Management, Inc. is a Delaware corporation engaged in the business of real estate management, and has served as our general partner since May 15, 1980.~~Governance

~~Officers and Directors of the~~ General Partner

~~Davis~~Since P.we ~~Stowell,~~are ~~55,~~a ~~President~~limited ~~and~~partnership, ~~Director~~we ofhave ~~the~~no ~~General~~officers ~~Partner.~~or Mrdirectors. ~~Stowell has been President and a director of~~ Grace Property Management, Inc., ~~since 2003.~~our HeGeneral ~~was~~Partner, performs ~~Vice~~functions ~~President~~generally ofperformed ~~the~~by ~~General~~officers ~~Partner~~and ~~from~~directors. ~~1993~~Grace toProperty ~~2003~~Management, Inc. He is ~~also~~a anDelaware ~~officer~~corporation ofengaged in ~~affiliates~~the business of ~~Grace~~real ~~Property~~estate ~~Management~~management, ~~Inc.,~~ ~~most~~and ofhas ~~which~~served ~~positions~~as heour ~~has~~general ~~held~~partner since ~~1989~~May 15, 1980.

~~Section~~Officers ~~16(a)~~and ~~Beneficial~~Directors ~~Ownership~~of ~~Reporting~~the General ~~Compliance~~Partner

~~Section~~Peter 16Metz, of48 ~~the Exchange~~has ~~Act~~been ~~requires~~President ~~that reports of beneficial ownership of partnership units~~ and ~~changes in such ownership be filed with~~ the ~~Securities and~~sole ~~Exchange~~Director ~~Commission~~of by Section 16 “reporting persons.” We are required to disclose in this Annual Report on Form 10-K each reporting person whom it knows to have failed to file any required reports under Section 16 on a timely basis during the ~~fiscal~~General ~~year ended December 31~~Partner, ~~2011.~~since ~~On March 22~~June, ~~2011, John S~~2012. ~~Grace~~He ~~filed~~is aalso ~~Form 3 for~~ an ~~event~~officer ~~dated~~of ~~October~~affiliates ~~24,~~of ~~2006.~~Grace ~~By that~~Property ~~Form 3~~Management, MrInc. ~~Grace reported direct ownership of 182~~,~~434 limited partnership units, and indirect ownership of 25,100 limited~~ ~~partnership~~most ~~units. To our knowledge, based solely upon a review~~ of ~~all~~which ~~Section~~positions ~~16(a)~~he ~~filings~~has ~~furnished~~held tosince us by Section 16(a) reporting persons or written representations that no such reports were required, during the fiscal year ended December 31, 2011, all other Section 16(a) reporting persons complied with all Section 16(a) filing requirements applicable to them1999.

~~Code~~Section of16(a) ~~Ethics~~Beneficial Ownership Reporting Compliance

InSection ~~connection~~16 ~~with~~of the Exchange ~~its~~Act ~~role~~requires asthat ~~our~~reports ~~general~~of ~~partner,~~beneficial ~~the~~ownership ~~General~~of ~~Partner~~partnership ~~has~~units ~~adopted~~and achanges ~~Code~~in ofsuch ~~Ethics~~ownership ~~that~~be ~~applies~~filed towith ~~each~~the ~~person~~Securities and ~~who~~Exchange ~~performs~~Commission ~~one or~~by ~~more~~Section of16 ~~the~~“reporting ~~following~~persons.” ~~functions:~~We ~~principal~~are ~~executive~~required ~~officer,~~to ~~principal~~disclose ~~financial~~in ~~officer,~~this ~~and~~Annual ~~principal~~Report ~~accounting~~on ~~officer~~Form or10-K ~~controller.~~each ~~There~~reporting ~~has~~person ~~been~~who nowe ~~change~~know has failed to orfile ~~amendment~~any ofrequired ~~the~~reports ~~Code~~under ofSection ~~Ethics~~16 on a timely basis during ~~2011.~~the Wefiscal year ~~shall~~ended ~~furnish~~December 31, ~~without~~2012. ~~charge~~To our knowledge, based solely upon a ~~copy~~ review of ~~the~~all ~~Code~~Section of16(a) ~~Ethics~~filings furnished to ~~any~~us ~~person~~by ~~who~~Section 16(a) ~~requests~~reporting apersons ~~copy~~or inwritten ~~writing~~representations ~~sent~~that tono ~~the~~such ~~General~~reports ~~Partner~~were atrequired, during the ~~following~~fiscal ~~address:~~year ~~Mr. Davis~~ended P.December ~~Stowell~~31, ~~President~~ 2012, ~~Grace~~all ~~Property~~Section ~~Management,~~16(a) ~~Inc.,~~reporting 55persons ~~Brookville~~complied ~~Road,~~with ~~Glen~~all ~~Head,~~Section NY16(a) ~~11545~~filing requirements applicable to them.

~~Page~~Code 64of Ethics

~~Nominating~~In ~~Committee~~connection with its role as our General Partner, Grace Property Management, Inc. has adopted a Code of Ethics that applies to each person who performs one or more of the following functions: principal executive officer, principal financial officer, and principal accounting officer or controller. There has been no change to or amendment of the Code of Ethics during 2012. We shall furnish, without charge, a copy of the Code of Ethics to any person who requests a copy in writing sent to the General Partner at the following address: Mr. Peter Metz, President, Grace Property Management, Inc., 55 Brookville Road, Glen Head, NY 11545.

~~Since~~Page we are a limited partnership, we have no officers or directors. Grace Property Management, Inc., our general partner, performs functions generally performed by officers and directors. The General Partner has no committees, including a nominating committee. The Board of Directors of the General Partner functions in the capacity of a nominating committee. 67

~~Audit~~Nominating Committee

Since we are a limited partnership, we have no officers or directors. Grace Property Management, Inc., our ~~general~~General ~~partner~~Partner, performs functions generally performed by officers and directors. The General Partner has no committees, including ana ~~audit~~ nominating committee. The Board of Directors of the General Partner functions in the capacity of ana ~~audit~~nominating committee. The Board of Directors of the General Partner has determined that Davis P. Stowell is an “audit committee financial expert” and that he is not “independent” as each such term is defined by the SEC.

~~Item~~Audit ~~11. Executive Compensation~~Committee

~~The~~Since ~~total~~we ~~compensation~~are a limited ~~earned~~partnership, we have no officers or directors. Grace Property Management, Inc., our General Partner, performs functions generally performed by officers and directors. The General Partner has no committees, including an audit committee. The Board of Directors of the General Partner ~~during~~functions ~~each~~in the capacity of an audit committee. The Board of Directors of the ~~last~~General Partner ~~three~~consists ~~fiscal~~of ~~years~~Peter ~~ended~~Metz, ~~December~~who 31is not “independent” as such term is ~~set~~defined ~~forth~~by inthe ~~Table~~SEC. 8,The ~~below~~Board of Directors of the General Partner has determined that Peter Metz is an “audit committee financial expert” as such term is defined by the SEC.

~~TABLE~~Item 11. 8:Executive ~~SUMMARY COMPENSATION TABLE~~Compensation

~~FOR~~The ~~FISCAL~~total ~~YEARS~~compensation earned ~~ENDING~~by ~~DECEMBER~~the General Partner during each of the last three fiscal years ended December 31~~, 2011,~~ ~~2010,~~is ~~AND~~set ~~2009~~forth in Table 8, below.

Name and Principal Position	Year		General Partner Fee
TABLE 8: SUMMARY COMPENSATION TABLE FOR FISCAL YEARS ENDING DECEMBER 31, 2012, 2011 AND 2010
Grace Property Management, Inc., General Partner		2011	$	160,000
	Year		General Partner Fee
Grace Property Management Inc., General Partner		2012	$	160,000
		2011		160,000
		2010		160,000
		2009		160,000

~~Notes~~Note:

~~[a]~~ Excludes payments made to affiliates of the General Partner as described in "Item 13. Certain Relationships and Related Transactions, and Director Independence."

During ~~2011~~2012, payments ~~made~~totaling ~~by us to the General Partner totaled~~ $160,000, ~~representing~~were ~~general partner fees for the first, second, and third quarters of 2011 as well as the fourth quarter of 2010. During 2010, payments~~ made ~~by us~~ to the General Partner ~~totaled $160~~,~~000,~~ representing general partner fees for the first, second, ~~and~~ third ~~quarters~~and ~~of 2010 as well as the~~ fourth ~~quarter of 2009. During 2009, payments made by us to the General Partner totaled $160,000, representing general partner fees for the first, second, and third~~ quarters of ~~2009 as well as the fourth quarter of 2008~~2012. As of December 31, 2011, general partner fees accrued but not paid to Grace Property Management, Inc. totaled $40,000, representing general partner fees for the fourth quarter of 2011. As of December 31, 2010, general partner fees accrued but not paid to Grace Property Management, Inc. totaled $40,000, representing general partner fees for the fourth quarter of 2010. As of December 31, 2009, general partner fees accrued but not paid to Grace Property Management, Inc. totaled $40,000, representing general partner fees for the fourth quarter of 2009. Our partnership agreement provides for compensation to the general partners. We have no other contract, agreement, plan, or arrangement with respect to future remuneration to Grace Property Management, Inc. other than to accrue interest (at an annual rate of 10%, compounded quarterly) on the unpaid balance when cash flow is insufficient to pay general partner fees.

~~Page~~Our 65partnership agreement provides for compensation to the general partners. We have no other contract, agreement, plan, or arrangement with respect to future remuneration to Grace Property Management, Inc. other than to accrue interest (at an annual rate of 10%, compounded quarterly) on the unpaid balance when cash flow is insufficient to pay general partner fees.

The General Partner does not compensate its officers and directors. Each of the officers and directors of the General Partner has duties and responsibilities with affiliates of the General Partner and is compensated by one or more of such affiliates. Such compensation is not directly related to general partner fees paid by us to the General Partner.

AsPage of December 31, 2011, we had a group health insurance plan in place covering our full-time employees located in our Boiling Spring Lakes sales office. We have no pension, retirement, or profit sharing plan but we do provide for incentive bonus compensation to our employees located in Boiling Spring Lakes for meeting or exceeding predesignated budget targets. We have no options, warrants, appreciation rights, or other awards outstanding. No Management person is indebted to us. Other than for accrued vacation and accrued travel and other expenses, we are not indebted to any of our employees.68

~~See~~As ~~“Item~~of 13December 31, 2012, we had a group health insurance plan in place covering our full-time employees located in our Boiling Spring Lakes sales office. We have no pension, retirement, or profit sharing plan but we do provide for incentive bonus compensation to our employees ~~Certain~~located ~~Relationships~~in ~~and~~Boiling ~~Related~~Spring ~~Transactions~~Lakes for meeting or exceeding predesignated budget targets. We have no options, ~~and~~warrants, ~~Director~~appreciation rights, ~~Independence”~~or other awards outstanding. No Management person is indebted to us. Other than for accrued vacation and accrued travel and other ~~payments~~expenses, ~~made~~we are not indebted to ~~affiliates~~any of ~~the~~our ~~General Partner~~employees.

See “Item 1213. Certain ~~Security~~Relationships ~~Ownership~~and ofRelated ~~Certain~~Transactions, ~~Beneficial~~and ~~Owners~~Director ~~and~~Independence” ~~Management~~for ~~and~~other ~~Related~~payments ~~Stockholder~~made ~~Matters~~to affiliates of the General Partner.

~~Securities~~Item 12. ~~Authorized~~Security ~~for~~Ownership ~~Issuance~~of ~~Under Equity~~Certain ~~Compensation~~Beneficial ~~Plans~~Owners and Management and Related Stockholder Matters

WeSecurities ~~have~~Authorized nofor ~~compensation~~Issuance ~~plans (including~~Under ~~individual~~Equity ~~compensation~~Compensation ~~arrangements) under which our equity securities are authorized for issuance.~~Plans

~~Security~~We ~~Ownership~~have ofno ~~Certain~~compensation ~~Beneficial~~plans (including ~~Owners~~individual compensation arrangements) under which our equity securities are authorized for issuance.

AsSecurity ofOwnership ~~March 19, 2012, we had 1,811,062 partnership units issued and outstanding. Information as~~ of ~~March~~Certain ~~19, 2012 concerning the number of partnership~~Beneficial units beneficially owned by the persons who, to the knowledge of Management, based solely on records available to us, beneficially owned more than 5% of the units issued and outstanding on such date is set forth in Table 9, below.Owners

~~[THE~~As ~~REST~~of OFJanuary ~~THIS~~31, ~~PAGE~~2013, we IShad ~~BLANK]~~1,811,062 partnership units issued and outstanding. Information as of January 31, 2013 concerning the number of partnership units beneficially owned by the persons who, to the knowledge of Management, based solely on records available to us, beneficially owned more than 5% of the units issued and outstanding on such date is set forth in Table 9, below.

Page 6669

TABLE 9: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

TABLE 9: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Name and Address of Beneficial Owner	Amount Beneficially Owned [a]			Percent of Class

US Bank Trust National Association, as trustee 141 North Main Avenue Suite 300 Sioux Falls, SD		316,403	[b]		17.5	%

Grace & White, Inc. 515 Madison Avenue Suite 1700 New York, NY		233,507	[c]		12.9	%

John S. Grace 55 Brookville Road Glen Head, NY		207,534	[d]		11.5	%

MPF Flagship Fund 10, LLC; SCM Special Fund, LLC; and MPF-NY 2006, LLC c/o MacKenzie Patterson Fuller, LP 1640 School Street Moraga, CA		107,724	[e]		5.9	%

Name and Address of Beneficial Owner		Amount Beneficially Owned [a]		Percent of Class
Notes:
US Bank Trust National Association, as trustee 141 North Main Avenue Suite 300 Sioux Falls, SD		316,403	[b]	17.5	%
[a]	Unless otherwise indicated, each of the persons named has sole voting and investment power.
Grace & White, Inc. 515 Madison Avenue Suite 1700 New York, NY		233,507	[c]	12.9	%
[b]	Includes an aggregate of 109,173 units owned by 22 separate trusts, and 207,230 units owned by the Lorraine QTIP Trust, of which trusts US Bank Trust National Association is trustee.
John S. Grace 55 Brookville Road Glen Head, NY		182,434	[d]	10.1	%
[c]	Information was obtained from Schedule 13G, Amendment No. 5 filed with the Securities and Exchange Commission on January 30, 2013 as an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. The party’s Schedule 13G, Amendment No. 4 states that the party has sole voting power as to 200,807 units, and sole dispositive power as to 233,507 units.
MPF Flagship Fund 10, LLC; SCM Special Fund, LLC; and MPF-NY 2006, LLC c/o MacKenzie Patterson Fuller, LP 1640 School Street Moraga, CA		107,724	[e]	5.9	%
[d]	Information was obtained from Schedule 13D, Amendment No. 1 filed with the Securities and Exchange Commission on March 22, 2011. Includes 25,100 units owned by the General Partner, of which Mr. Grace is a controlling person.
[e]	Information was obtained from Schedule TO, Amendment No. 2, filed with the Securities and Exchange Commission on November 16, 2006 by the parties and certain of their affiliates, and Schedule TO, Amendment No. 3, filed with the Securities and Exchange Commission on July 19, 2006, by the parties and certain of their affiliates. According to the filings, the holdings are allocated as follows: MPF Flagship Fund 10, LLC: 77,170 units; SCM Special Fund, LLC: 25,461 units; and MPF-NY 2006, LLC: 5,092 units, for a total of 107,723 units; however, the more recent filing states that the aggregate holding is 107,724 units.

~~Notes:~~Page 70

~~[a]~~Security ~~Unless~~Ownership ~~otherwise indicated, each~~ of ~~the persons named has sole voting and investment power.~~Management

~~[b]~~Information ~~Includes~~as anof ~~aggregate~~January 31, 2013 concerning the number of ~~109,173~~partnership units beneficially owned by 22(1) ~~separate~~Grace ~~trusts~~Property Management, ~~and~~Inc., ~~207~~the General Partner,~~230~~ (2) ~~units~~each ~~owned~~director byof ~~the~~Grace ~~Lorraine~~Property ~~QTIP~~Management, ~~Trust~~Inc., ofand ~~which~~(3) ~~trusts~~the USdirectors ~~Bank~~and ~~Trust~~executive ~~National~~officers ~~Association~~of Grace Property Management, Inc. as a group is ~~trustee~~set forth in Table 10, below.

[c] Information was obtained from Schedule 13G, Amendment No. 4 filed with the Securities and Exchange Commission on February 8, 2012 as an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. The party’s Schedule 13G, Amendment No. 4 states that the party has sole voting power as to 197,507 units, and sole dispositive power as to 233,507 units.

TABLE 10: SECURITY OWNERSHIP OF MANAGEMENT
Name and Address of Beneficial Owner	Amount Beneficially Owned [a]			Percent of Class
Grace Property Management, Inc. (the General Partner)[b]		25,100			1.4	%

Peter Metz [b]		—	[c]		—

All directors and officers of the general partner as a group (1 person)		—	[c]		—

[d] Information was obtained from Schedule 13D, Amendment No. 1 filed with the Securities and Exchange Commission on March 22, 2011. Excludes 25,100 units owned by the General Partner.

Notes:
[a]	Unless otherwise indicated, each of the persons named has sole voting and investment power.
[b]	Address is 55 Brookville Road, Glen Head, NY.
[c]	Excludes 25,100 units owned by the General Partner.

~~[e]~~Changes ~~Information~~in was obtained from Schedule TO, Amendment No. 2, filed with the Securities and Exchange Commission on November 16, 2006 by the parties and certain of their affiliates, and Schedule TO, Amendment No. 3, filed with the Securities and Exchange Commission on July 19, 2006, by the parties and certain of their affiliates. According to the filings, the holdings are allocated as follows: MPF Flagship Fund 10, LLC: 77,170 units; SCM Special Fund, LLC: 25,461 units; and MPF-NY 2006, LLC: 5,092 units, for a total of 107,723 units; however, the more recent filing states that the aggregate holding is 107,724 units.Control

~~Page~~We 67know of no arrangement, including any pledge by any person of units, the operation of which may at a subsequent date result in a change in control of the Partnership.

~~Security~~Page ~~Ownership of Management~~71

~~Information~~Item ~~as of March 19, 2012 concerning the number of partnership units beneficially owned by (1) Grace Property Management, Inc~~13., ~~the~~Certain ~~General Partner,~~Relationships ~~(2)~~and ~~each~~Related ~~director of Grace Property Management~~Transactions, ~~Inc.,~~ and ~~(3)~~Director ~~the directors and executive officers of Grace Property Management, Inc. as a group is set forth in Table 10, below.~~Independence

~~TABLE~~Transactions ~~10:~~with ~~SECURITY~~Related ~~OWNERSHIP OF MANAGEMENT~~Persons

Name and Address of Beneficial Owner	Amount Beneficially Owned [a]			Percent of Class
Grace Property Management, Inc. (the general partner)[b]		25,100			1.4	%
Davis P. Stowell [b]		—	[c]		—
All directors and officers of the general partner as a group (1 person)		—	[c]		—

For 2012, 2011, and 2010, the General Partner and its affiliates charged us for general partner fees, rent, and reimbursement of expenses as set forth in Table 11, below.

Notes:

TABLE 11: CHARGES BY GENERAL PARTNER AND AFFILIATES
2010-2012

	2012		2011		2010
General Partner’s fee	$	160,000	$	160,000	$	160,000
Rent for office space		19,000		19,000		19,000
Reimbursement of expenses		12,337		1,787		-
Total	$	191,337	$	180,787	$	179,000

~~[a]~~An ~~Unless~~affiliate ~~otherwise~~of ~~indicated,~~the General ~~each~~Partner charges us for office space used by officers of the ~~persons~~General ~~named~~Partner. ~~has~~The ~~sole~~amounts ~~voting~~charged for 2012, 2011, and ~~investment~~2010, are ~~power~~set forth in Table 11, above. At December 31, 2012, $4,975 was prepaid for rent with respect to the first quarter of 2013.

~~[b]~~Officers ~~Address~~of the General Partner charge us for their out-of-pocket expenses incurred when traveling on partnership business or otherwise incurred in connection with our business or us. The amounts charged for and paid during 2012, 2011, and 2010 are set forth in Table 11, above. At December 31, 2012, we owed approximately $750 with respect to reimbursement of out-of-pocket expenses, which amount is 55included ~~Brookville~~above. ~~Road~~In 2012, ~~Glen~~these ~~Head~~out-of-pocket expenses included the reimbursement to Sheffield Investments, NYan affiliate of the General Partner, for bookkeeping services previously performed by an employee of the Partnership at its office in Boiling Spring Lakes.

~~[c]~~The ~~Excludes~~General 25Partner and its affiliates may charge us late fees on amounts not timely paid,~~100~~ ~~units~~with ~~owned~~interest byat ~~the~~an ~~general~~annual ~~partner~~rate of 10%, compounded quarterly. No amounts were charged for 2012, 2011, or 2010.

~~Changes~~Except infor ~~Control~~the preceding items, there were no transactions between the General Partner or its affiliates (including Management of the General Partner and their immediate families) and us during the fiscal year ended December 31, 2012 or thereafter. There were no other related party transactions and there existed no indebtedness to us from the General Partner or its affiliates (including Management of the General Partner and their immediate families).

WePage ~~know of no arrangement, including any pledge by any person of units, the operation of which may at a subsequent date result in a change in control of the Partnership.~~72

~~Item~~Review, ~~13.~~Approval, ~~Certain~~or ~~Relationships~~Ratification ~~and Related~~ of Transactions, ~~and~~with ~~Director~~Related ~~Independence~~Persons

~~Transactions~~The ~~with~~General ~~Related~~Partner has ~~Persons~~the ultimate authority to approve all related party transactions.

~~For~~Director 2011, 2010, and 2009, the General Partner and its affiliates charged us for general partner fees, rent, and reimbursement of expenses as set forth in Table 11, below. All of such charges have been provided for in our financial statements. Amounts paid by us to the General Partner and its affiliates during 2011, 2010, and 2009 reflect amounts previously accrued and unpaid. See “Item 11. Executive Compensation,” for information on general partner fees paid to the General Partner.Independence

~~Page~~We 68have no directors. The General Partner performs functions generally performed by directors.

~~TABLE~~Item 14. ~~11:~~Principal ~~CHARGES~~Accountant BYFees ~~GENERAL~~and ~~PARTNER AND AFFILIATES~~Services

~~2009~~As more fully described in a Form 8-K that we filed with the SEC on January 5, 2011, and in Amendment No. 1 to Form 8-K that we filed on January 19, 2011, we were notified that Frazer Frost, LLP (“Frazer Frost”), our independent accountant, and the principal accountant engaged to audit our financial statements, was winding down operations as Frazer Frost and that the firms that had combined to form Frazer Frost, namely, Frost, PLLC (“Frost”) and Moore Stephens Wurth Frazer and Torbert, LLP, would resume their separate operations. Accordingly, Frazer Frost resigned as our certifying accountant on January 3, 2011 with immediate effect. We engaged Frost effective January 5, 2011 as our independent registered accounting firm to perform the audit of our financial statements for the fiscal year ended December 31, 2010. Frost was registered with the Public Company Accounting Oversight Board effective December 21, 2010.

	2011		2010		2009
General partner fee	$	160,000	$	160,000	$	160,000
Rent for office space		19,000		19,000		19,000
Reimbursement of expenses		1,787		—		1,301
Total	$	180,787	$	179,000	$	180,301

The General Partner approved the appointment of Frost as our independent registered public accountants for the fiscal year ended December 31, 2011, and reappointed Frost for the fiscal year ended December 31, 2012.

~~An affiliate of the General Partner charges us for office space used by officers of the General Partner. The amounts charged for 2011, 2010, and 2009, are set forth in~~ Table 1112, ~~above. The amount paid by us during 2011 was $18~~below,~~950,~~ ~~which represents rent for the first, second, and~~details ~~third quarters of 2011, except for $50 remaining to be paid with respect to~~ the ~~third~~aggregate ~~quarter~~fees ~~of 2011, as well as the fourth quarter of 2010. The amount paid by us during 2010 was $19,000, which represents rent~~ for ~~the~~professional ~~first,~~services ~~second,~~ and ~~third~~expenses ~~quarters~~by ofour ~~2010 as~~Independent ~~well~~Registered asPublic ~~the~~Accounting ~~fourth~~firm ~~quarter of 2009. The amount paid by us~~ during ~~2008 was $19,000, which represents rent for the first, second, and third quarters of 2008 as well as the fourth quarter of 2007. At December 31,~~ 2011, ~~the amount of accrued but unpaid rent was~~and ~~$4,800~~2010.

Officers of the General Partner charge us for their out-of-pocket expenses incurred when traveling on partnership business or otherwise incurred in connection with our business or us. The amounts charged for and paid during 2011, 2010, and 2009 are set forth in Table 11, above. At March 23, 2012 and December 31, 2011, we owed nothing with respect to reimbursement of out-of-pocket expenses.

TABLE 12: FEES FOR PROFESSIONAL SERVICES BY THE PARTNERSHIP'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

	Year Ended December 31,
	2012		2011
Audit fees [a]	$	18,527	$	30,582
Audit-related fees		0		0
Tax compliance fees		0		0
Other fees		0		0
Total	$	18,527	$	30,582

During 2011, an affiliate of the General Partner reimbursed us $454 for an advance we made on behalf of that affiliate to a third party that we and that affiliate have separately engaged for filing SEC documents.Notes:

[a] The ~~General~~aggregate ~~Partner and~~fees ~~its~~for ~~affiliates~~professional ~~charge~~services usrendered ~~late~~by ~~fees~~the onindependent ~~amounts~~registered ~~not~~public ~~timely~~accounting ~~paid,~~firm ~~with~~for ~~interest~~the ataudit anof our annual ~~rate~~financial statements, review of financial statements included in our Quarterly Reports on Form 10%-Q, ~~compounded~~or ~~quarterly. No~~services ~~amounts~~normally ~~were~~provided ~~charged~~by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements for ~~2011,~~the ~~2010~~fiscal years ended December 31, or2012 ~~2009~~and 2011.

~~Except~~Page for the preceding items, there were no transactions between the General Partner or its affiliates (including Management of the General Partner and their immediate families) and us during the fiscal year ended December 31, 2011 or thereafter. There were no other related party transactions and there existed no indebtedness to us from the General Partner or its affiliates (including Management of the General Partner and their immediate families).73

~~Review,~~ Approval, ~~or Ratification of Transactions with Related Persons~~Process

The General Partner has no committees, including an Audit Committee. The Board of Directors of the ~~ultimate~~General ~~authority~~Partner tois ~~approve~~responsible ~~all~~for the appointment, compensation, and oversight of the work of the independent registered public accounting firm and approves in advance any services, whether audit-related ~~party~~or not, ~~transactions~~to be performed by the independent registered public accounting firm.

~~Page~~[THE 69REST OF THIS PAGE IS BLANK]

~~Director~~Page ~~Independence~~74

WePART ~~have no directors. The General Partner performs functions generally performed by directors.~~IV

Item 1415. ~~Principal~~Exhibits ~~Accountant Fees~~ and ~~Services~~Financial Statement Schedules

AsFinancial more fully described in a Form 8-K that we filed with the SEC on January 5, 2011, and in Amendment No. 1 to Form 8-K that we filed on January 19, 2011, we were notified that Frazer Frost, LLP (“Frazer Frost”), our independent accountant, and the principal accountant engaged to audit our financial statements, was winding down operations as Frazer Frost and that the firms that had combined to form Frazer Frost, namely, Frost, PLLC (“Frost”) and Moore Stephens Wurth Frazer and Torbert, LLP, would resume their separate operations. Accordingly, Frazer Frost resigned as our certifying accountant on January 3, 2011 with immediate effect. We engaged Frost effective January 5, 2011 as our independent registered accounting firm to perform the audit of our financial statements for the fiscal year ended December 31, 2010. Frost was registered with the Public Company Accounting Oversight Board effective December 21, 2010.Statements

The ~~General~~documents ~~Partner approved~~filed ~~the~~as ~~appointment~~part of ~~Frost~~this asreport are ~~our~~listed ~~independent~~in ~~registered~~the ~~public~~Index ~~accountants~~to ~~for~~Financial ~~the~~Statements ~~fiscal~~set ~~year~~forth ~~ended~~in ~~December~~Table ~~31,~~13 ~~2011~~below.

Table 12, below, details the aggregate fees for professional services and expenses by our Independent Registered Public Accounting firm during 2011 and 2010.

TABLE 13: INDEX TO FINANCIAL STATEMENTS

Document		Page
The following financial information is contained within the Audited Financial Statements:

	Frost, PLLC – Report of Independent Registered Public Accounting Firm	F-1

	Balance Sheets as of December 31, 2012 and 2011	F-2

	Statements of Operations for the years ended December 31, 2012, 2011, and 2010	F-3

	Statements of Changes in Partners’ Capital for the years ended December 31, 2012, 2011, and 2010	F-4

	Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010	F-5

	Notes to Financial Statements	F-6-13

~~TABLE~~Financial ~~12:~~Statement ~~FEES FOR PROFESSIONAL SERVICES BY THE PARTNERSHIP'S~~Schedules

~~INDEPENDENT~~The ~~REGISTERED~~financial ~~PUBLIC~~statement schedules ~~ACCOUNTING~~filed as part of this report are listed in the Index to Financial Statement Schedules set forth in Table 14, below. All ~~FIRM~~ other required supplemental financial schedules are either contained within the notes to the financial statements or are not applicable.

		Year Ended December 31,
Document		Page
		2011		2010
Independent Registered Public Accounting Firm Report on Supplementary Information		F-14
Audit fees	[a]	$	30,582	$	44,038
Valuation and Qualifying Accounts		F-15
Audit-related fees			—		—
Real Estate and Accumulated Depreciation		F-16
Tax compliance fees			—		—
Reconciliation of Gross and Net Book Value		F-17
Other fees			—		—
		$	30,582	$	44,038

~~Notes:~~Page 75

[a] The aggregate fees for professional services rendered by the independent registered public accounting firm for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q, or services normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2011 and 2010.Exhibits

~~Page~~A 70complete listing of exhibits, including those incorporated by reference, is shown on Table 15, below. All other exhibits are not applicable.

Approval Process

TABLE 15: LIST OF EXHIBITS

Exhibit No.		Description of Exhibit
3.1		Amended and Restated Partnership Agreement of Reeves Telecom Limited Partnership (as amended October 28, 2008). Filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed on November 3, 2008. [a]
31		Rule 13a-14(a)/15d-14(a) Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Ingram & Company, Inc. appraisal of the Boiling Spring Lakes property as of December 31, 2012.

The General Partner has no committees, including an Audit Committee. The Board of Directors of the General Partner is responsible for the appointment, compensation, and oversight of the work of the independent registered public accounting firm and approves in advance any services, whether audit-related or not, to be performed by the independent registered public accounting firm.Notes:

[~~THE~~a] Incorporated ~~REST~~herein OFby ~~THIS PAGE IS BLANK]~~reference.

~~Page~~[THE 71REST OF THIS PAGE IS BLANK]

~~PART~~Page IV76

~~Item 15. Exhibits and Financial Statement Schedules~~SIGNATURES

~~Financial~~Pursuant ~~Statements~~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.

~~The~~REEVES ~~documents~~TELECOM ~~filed~~LIMITED ~~as part of this report are listed in the Index to Financial Statements set forth in Table 13 below.~~PARTNERSHIP

TABLE 13: INDEX TO FINANCIAL STATEMENTS

Signatures		Title	Date

By:	Grace Property Management, Inc.	General Partner	February 19, 2013

By:	/s/ PETER METZ
	Peter Metz
	President

Document		Page
The following financial information is contained within the Audited Financial Statements:
Frost, PLLC – Report of Independent Registered Public Accounting Firm		F-1
Balance Sheets as of December 31, 2011 and 2010		F-2
Statements of Operations for the years ended December 31, 2011, 2010, and 2009		F-3
Statements of Changes in Partners’ Capital for the years ended December 31, 2011, 2010, and 2009		F-4
Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009		F-5
Notes to Financial Statements		F-6-13

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.

Financial Statement Schedules

Signature		Title	Date

By:	/s/ PETER METZ	President and Director of	February 19, 2013
	Peter Metz	General Partner
		(Principal Executive Officer,
		Principal Financial Officer,
		Principal Accounting Officer)

~~The~~Page financial statement schedules filed as part of this report are listed in the Index to Financial Statement Schedules set forth in Table 14, below. All other required supplemental financial schedules are either contained within the notes to the financial statements or are not applicable.77

~~[THE~~REEVES TELECOM ~~REST~~LIMITED ~~OF THIS PAGE IS BLANK]~~PARTNERSHIP

~~Page~~December 31, 722012 and 2011

TABLE 14: INDEX TO FINANCIAL STATEMENT SCHEDULES
Document		Page
Independent Registered Public Accounting Firm Report on Supplementary Information		F-14
Valuation and Qualifying Accounts		F-15
Real Estate and Accumulated Depreciation		F-16
Reconciliation of Gross and Net Book Value		F-17

Financial Statements

~~Exhibits~~And

~~A complete listing~~Supplementary ~~of exhibits, including those incorporated by reference, is shown on Table 15, below. All other exhibits are not applicable.~~Information

TABLE 15: LIST OF EXHIBITS
Exhibit No.		Description of Exhibit
3.1		Amended and Restated Partnership Agreement of Reeves Telecom Limited Partnership (as amended October 28, 2008). Filed as Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed on November 3, 2008. [a]
31		Rule 13a-14(a)/15d-14(a) Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Ingram & Company, Inc. appraisal of the Boiling Spring Lakes property as of December 31, 2011.

With

~~Notes:~~Report of Independent Registered Public Accounting Firm

~~[a]~~Table of ~~Incorporated herein by reference.~~Contents

[THE REST OF THIS PAGE IS BLANK]

	Page

Financial Statements

Report of Independent Registered Public Accounting Firm	F-1

Balance Sheets	F-2

Statements of Operations	F-3

Statements of Changes in Partners’ Capital	F-4

Statements of Cash Flows	F-5

Notes to Financial Statements	F-6 – F-13

Supplementary Information

Independent Registered Public Accounting Firm Report on Supplementary Information	F-14

Valuation and Qualifying Accounts	F-15

Real Estate and Accumulated Depreciation	F-16

Reconciliation of Gross and Net Book Value	F-17

~~Page~~Report of 73Independent Registered Public Accounting Firm

~~SIGNATURES~~Partners

~~Pursuant~~Reeves toTelecom ~~the~~Limited ~~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.~~Partnership

~~REEVES~~Glen ~~TELECOM~~Head, ~~LIMITED~~New ~~PARTNERSHIP~~York

Signatures		Title	Date
By:	Grace Property Management, Inc.	General Partner	March 30, 2012
By:	/s/ DAVIS P. STOWELL
	Davis P. Stowell
	President

We have audited the accompanying balance sheets of Reeves Telecom Limited Partnership as of December 31, 2012 and 2011, and the related statements of operations, changes in partners’ capital and cash flows for each of the years in the three-year period ended December 31, 2012. The Partnership’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

~~Pursuant~~We conducted toour audits in accordance with the ~~requirements~~ standards of the ~~Securities~~Public ~~Exchange~~Company ~~Act~~Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of ~~1934~~material misstatement. The Partnership is not required to have, ~~this~~nor ~~report~~were ~~has~~we ~~been~~engaged ~~signed~~to ~~below~~perform, byan audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the ~~following~~circumstances, ~~persons~~but not for the purpose of expressing an opinion on ~~behalf~~the effectiveness of the ~~Registrant~~Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the ~~capacities~~financial statements, assessing the accounting principles used and onsignificant estimates made by management, as well as evaluating the ~~dates~~overall ~~indicated~~financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

Signature		Title	Date
By:	/s/ DAVIS P. STOWELL	President and Director of	March 30, 2012
	Davis P. Stowell	General Partner
		(Principal Executive Officer,
		Principal Financial Officer,
		Principal Accounting Officer)

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Reeves Telecom Limited Partnership as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2012 in conformity with U.S. generally accepted accounting principles.

~~[THE~~Little ~~REST~~Rock, OFArkansas ~~THIS~~/s/ ~~PAGE~~Frost ISPLLC ~~BLANK]~~February 19, 2013

~~Page 74~~F-1

REEVES TELECOM LIMITED PARTNERSHIP

~~December 31, 2011 and 2010~~Balance Sheets

~~Financial~~December 31, ~~Statements~~2012 and 2011

And

	2012		2011

Assets

Cash and cash equivalents	$	1,288,909	$	1,935,978
Prepayments		4,975		-
Properties held for sale and property and equipment
Properties held for sale		295,441		391,197
Property and equipment, net		224,393		227,939
Other assets		3,350		3,350
Total assets	$	1,817,068	$	2,558,464

Liabilities and Partners' Capital

Current liabilities
Accounts payable and accrued expenses	$	3,033	$	201,908
Accrued expenses - affiliates		-		44,800
Total current liabilities		3,033		246,708

Commitments and contingencies

Partners' capital		1,814,035		2,311,756
Total liabilities and partners' capital	$	1,817,068	$	2,558,464

~~Supplementary~~The ~~Information~~accompanying notes are an integral part of these financial statements.

~~With~~F-2

~~Report of Independent Registered Public~~REEVES ~~Accounting~~TELECOM ~~Firm~~LIMITED PARTNERSHIP

~~Table~~ Statements of ~~Contents~~Operations

	Page
Financial Statements
Report of Independent Registered Public Accounting Firm	F-1
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Changes in Partners’ Capital	F-4
Statements of Cash Flows	F-5
Notes to Financial Statements	F-6 – F-13
Supplementary Information
Independent Registered Public Accounting Firm Report on Supplementary Information	F-14
Valuation and Qualifying Accounts	F-15
Real Estate and Accumulated Depreciation	F-16
Reconciliation of Gross and Net Book Value	F-17

For the Years Ended December 31, 2012, 2011, and 2010

Report of Independent Registered Public Accounting Firm

	2012			2011			2010
Revenues
Property sales	$	12,817		$	66,678		$	-
Interest income		689			4,516			14,923
Other income		7,769			1,583			2,673
Total revenues		21,275			72,777			17,596

Operating expenses
Direct costs of property sold		517			2,752			-
Selling, general and administrative expenses		514,933			509,344			496,966
Depreciation		3,546			3,550			3,779
Total operating expenses		518,996			515,646			500,745

Net loss		(497,721	)		(442,869	)		(483,149	)

Net loss per partnership unit	$	(0.27	)	$	(0.24	)	$	(0.27	)
Weighted average partnership units issued and outstanding		1,811,062			1,811,062			1,811,262

~~Partners~~The accompanying notes are an integral part of these financial statements.

~~Reeves Telecom Limited Partnership~~F-3

~~Glen~~REEVES TELECOM ~~Head,~~LIMITED ~~New York~~PARTNERSHIP

~~We have audited the~~Statements ~~accompanying balance sheets~~ of ~~Reeves~~Changes ~~Telecom Limited Partnership as of December 31, 2011 and 2010, and the related statements of operations, changes~~ in ~~partners~~Partners’ capital and cash flows for each of the years in the three-year period ended December 31, 2011. The Partnership’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.Capital

WeFor ~~conducted our audits in accordance with~~ the ~~standards of the Public Company Accounting Oversight Board (United States). Those standards require that~~ weYears ~~plan~~Ended ~~and~~December ~~perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have~~31, ~~nor were we engaged to perform~~2012, an2011 audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.2010

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Reeves Telecom Limited Partnership as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2011 in conformity with U.S. generally accepted accounting principles.

Balance - January 1, 2010	$	3,237,774

Net loss		(483,149	)

Balance - December 31, 2010		2,754,625

Net loss		(442,869	)

Balance - December 31, 2011		2,311,756

Net loss		(497,721	)

Balance - December 31, 2012	$	1,814,035

~~Certified~~The ~~Public~~accompanying ~~Accountants~~notes are an integral part of these financial statements.

~~Little Rock, Arkansas~~F-4

~~March~~REEVES TELECOM ~~28,~~LIMITED ~~2012~~PARTNERSHIP

~~F-1~~Statements of Cash Flows

~~REEVES~~For ~~TELECOM~~the Years ~~LIMITED~~Ended ~~PARTNERSHIP~~December 31, 2012, 2011 and 2010

Balance Sheets

	2012			2011			2010
Cash flows from operating activities
Net loss	$	(497,721	)	$	(442,869	)	$	(483,149	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		3,546			3,550			3,779
Changes in operating assets and liabilities
Prepaid expenses and other current assets		(4,975	)		10,124			(9,143	)
Property held for sale, net		95,756			2,751			-
Other assets		0			(3,350	)		-
Accounts payable and accrued expenses		(198,875	)		20,766			(17,352	)
Accrued expenses - affiliates		(44,800	)		50			-
Net cash used by operating activities		(647,069	)		(408,978	)		(505,865	)

Cash flows from investing activities
Purchase of land improvements and equipment		-			-			(1,096	)
Purchase of certificates of deposit		-			(490,000	)		(3,091,000	)
Proceeds upon maturity of certificates of deposit		-			2,376,000			2,405,000
Net cash provided (used) by investing activities		-			1,886,000			(687,096	)

Net increase (decrease) in cash and cash equivalents		(647,069	)		1,477,022			(1,192,961	)

Cash and cash equivalents - beginning of period		1,935,978			458,956			1,651,917

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