Item 1. Business. --------
Carolina Investment Partners, Limited Partnership (the "Registrant") is a limited partnership organized in 1985 under the North Carolina Uniform Limited Partnership Act. The Registrant was formed for the purpose of investing in certain unimproved real properties located in Cary, North Carolina. The Registrant acquired these properties, commonly known as the Martin Parcel and the Wellington Parcel, in 1986. See "Properties." The Registrant has the option to develop the Martin Parcel for office and institutional uses or hold it for resale. The only option for the Wellington Parcel was to hold it for resale. At this time the Registrant is not developing the Martin Parcel and is attempting to sell it. However, the Registrant will consider its options with respect to development of the Martin Parcel and is formulating a plan for development of the Martin Parcel. As of April 9, 1998 all of the Wellington Parcel was sold.
Item 2.
Item 2. Properties. ----------
The Martin Parcel is located in the southern portion of Cary, North Carolina, a rapidly expanding community to the immediate southwest of Raleigh, North Carolina. Cary is part of a region in central North Carolina known as the Research Triangle area, which includes Raleigh, Durham, Chapel Hill and the Research Triangle Park. The Martin Parcel is located near the residential single family subdivisions known as Ridgepath, Wellington Park, MacGregor Downs, Lochmere, Kildaire Farms, Wimbledon, and McDonald Woods. The map below shows the locations of the Martin Parcel in Cary.
[MAP]
The Martin Parcel contains approximately 25.1 acres of unimproved land, which is divided into two tracts by the Cary Parkway. The tract lying to the west of the Cary Parkway contains 15.76 acres of land, while the tract lying to the east of the Cary Parkway contains 9.34 acres of land. The Martin Parcel is located immediately to the north of the interchange.
Upon the sale of the Martin Parcel, the General Partner is entitled to a broker-listing fee under some circumstances. See Item 11 "Executive Compensation." In addition to the broker-listing fee, in the event the parcel is sold by a broker unaffiliated with the General Partner, the Registrant may pay the unaffiliated broker a 2.5% broker-referral fee.
Item 3.
Item 3. Legal Proceedings. -----------------
No material legal proceedings are pending against the Registrant or its properties.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------
No matters were submitted to a vote by the limited partners of the Registrant during the fourth quarter of 2000.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder ----------------------------------------------------------------- Matters. -------
(a) The Registrant has no common stock. There is no established public trading market for the Units.
(b) The Registrant had 985 Limited Partners holding 5,900 Units as of March 30, 2001. The number of Limited Partners was determined by the Partnership's records maintained by the General Partner. An affiliate of the General Partner owns 25 of these 5,900 units.
(c) Until the Limited Partners have received distributions of cash from the Registrant of an aggregate amount equal to 100% of the Capital Contributions of the Limited Partners, plus an additional return equivalent to 10% per annum simple interest on their "Unreturned Capital Contributions", the Limited Partners will receive at least 99% of all distributions of cash, which will be distributed and allocated among them in the ratio which the number of Units owned by each of them bears to the total number of Units outstanding. Thereafter, the Registrant's distributions will be allocated 90% to the Limited Partners and 10% to the General Partner. "Unreturned Capital Contribution" means the Capital Contribution of a Limited Partner less any distributions of cash made by the Registrant to such Limited Partner.
Item 6.
Item 6. Selected Financial Data. -----------------------
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. ---------------------
The Registrant's operations resulted in a net loss of $47,718 during 2000, compared to a net loss of $39,658 during 1999 and a net income of $378,121 in 1998. The primary differences between 2000 in comparison to 1999 and 1998 were:
2000 vs. 1999 -------------
. A property tax refund of $6,113 in 1999 was received by the Registrant. There was no such refund received in 2000.
. Interest received by the Registrant from investment in a money market account totaled $6,798 in 2000 compared to $10,833 in 1999 due to higher balances in the account during 1999.
2000 vs. 1998 -------------
. There were no land sales in 2000 compared to a gain of $291,596 in 1998 from the sale of the remaining 3.4 acres of the Registrant's Wellington Parcel.
. Interest of $66,167 and a late closing penalty of $77,605 in 1998 were received by the Registrant due to the deferral of the closing of the remaining 3.4 acres of the Wellington Parcel. There was no such interest received in 2000.
. Interest received by the Registrant from investment in a money market account totaled $6,798 in 2000 compared to $16,263 in 1998 due to higher balances in the account during 1998.
The Registrant has submitted a site plan for the development portion of the Martin Parcel to the town of Cary. The town has failed to approve the site plan because of traffic concerns. The General Partner and its representatives are presently meeting with the North Carolina Department of Transportation representatives and representatives of the town of Cary in an attempt to alleviate the concerns of town officials. The General Partner believes that a favorable outcome of these discussions will enhance the marketability of the property. There can be no assurances that there will be a favorable outcome of the discussions with the North Carolina Department of Transportation or the Town of Cary.
Development of real property in the Research Triangle Area is highly competitive. Factors which affect competition include price, financing terms, economics, location, social and demographic conditions in the surrounding areas, roads, sewers, utilities and other items of infrastructure, zoning and similar governmental regulations which affect the cost of development and the uses of the property. Many of these factors are beyond the control of the Registrant. These competitive conditions may affect the Registrant's ability to locate purchasers for, or develop the property at prices acceptable to the Registrant. The Registrant believes, however, that the proximity of the property to the full access highway interchange and overpass which connects the Cary Parkway and U.S. Highway 1 and 64 (the "Interchange") enhances their marketability and minimizes the effects of competition.
As of March 30, 2001, the Registrant has $274,720 in cash and short-term investments, which is sufficient to meet its needs during the next year. The Registrant expects to retain these.
The Registrant maintains its excess funds in money market account at Centura Bank. The General Partner believes the account is an appropriate investment of the Registrant's funds. Until the Martin Parcel is sold, placed into development and/or refinanced, the Registrant anticipates deficits from operations and administrative expenses.
Cautionary Statement Identifying Important Factors That Could Cause the Registrant's Actual Results to Differ From Those Projected in Forward Looking Statements.
In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, readers of this document, and any document incorporated by reference herein, are advised that this document and documents incorporated by reference into this document contain both statements of historical facts and forward looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Registrant or its management, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about the Registrant or its business.
This document and any documents incorporated by reference herein also identify important factors which could cause actual results to differ materially from those indicated by the forward looking statements. These risks and uncertainties include uncertainties about whether real estate sales under contract will close, the ability of the Registrant to sell its other real estate assets, the price of real estate sales, environmental and similar liabilities, future operating expenses and the adequacy of capital resources to meet future operating expenses, which are described herein and/or in documents incorporated by reference herein.
The cautionary statements made pursuant to the Private Securities Litigation Reform Act of 1995 above and elsewhere by the Registrant should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Registrant prior to the effective date of such Act. Forward looking statements are beyond the ability of the Registrant to control and in many cases the Registrant cannot predict what factors would cause actual results to differ materially from those indicated by the forward looking statements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. -----------------------------------------------------------
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data. -------------------------------------------
Registrant's financial statements are included elsewhere herein. See "List of Financial Statements."
Item 9.
Item 9. Changes in and Disagreements with Accountant on Accounting and -------------------------------------------------------------- Financial Disclosure. ---------------------
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant. --------------------------------------------------
The Registrant has no directors or executive officers. The Registrant is managed, and its investment decisions are made, by the general partners of the General Partner. The General Partner is Walsmith Associates Two, a North Carolina general partnership. Except as expressly provided in the Partnership Agreement, the General Partner has the power to do any and all things necessary or incident to the conduct of the Registrant's business. The general partners of the General Partner are:
To the knowledge of the Registrant, no person is the beneficial owner of more than 590 units, 10% of the outstanding Units.
Item 11.
Item 11. Executive Compensation. ----------------------
The Agreement of Limited Partnership of the Registrant (the "Partnership Agreement") governs the amount of compensation payable to Walsmith Associates, Two, the General Partner of the Registrant.
Each year any portion of the properties of the Registrant remain undeveloped, the Registrant pays the General Partner an annual $3,000 management fee. This fee was not paid to the General Partner by the Registrant during 2000.
If any portion of the Registrant's properties is developed by the Registrant, the Registrant will pay the General Partner a 3% development fee based upon the cost of improvements, net of land. No amounts were paid to the General Partner as a development fee during the year ended December 31, 2000.
The Registrant may also pay personnel engaged by or on its behalf to coordinate or supervise development, construction and operational activities, including partners and employees of its General Partner. During the year ended December 31, 2000, the Registrant paid affiliates of the General Partner $1,314 for writing checks and depositing funds. The Registrant has hired an outside accounting firm for all other record keeping such as securities law filings and maintenance of the partnership database.
The Partnership Agreement calls for the General Partner to be allocated a minimum of 1% of the gain from the sale of property. The General Partner receives cash to the extent it is allocated income. The General Partner has been allocated no net income for 2000. (See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations.")
Upon the sale of the Martin Parcel the General Partner will be paid a broker listing fee of up to five (5%) percent of the sales price if the sale is to a party unaffiliated with the General Partner. If the property is sold by a broker unaffiliated with the General Partner, the Registrant may also pay the unaffiliated broker a two and one-half (2 1/2%) percent broker-reallowance fee. The Registrant paid no broker listing fees during the year ended December 31, 2000.
No other amounts were paid for services during the year ended December 31, 2000 to the General Partner or any of its partners or employees.
If the Registrant operates developed projects, the General Partner will receive standard leasing commissions and standard property management fees. No amounts were paid during the year ended December 31, 2000.
The General Partner receives cash to the extent it is allocated income. Pursuant to the Partnership Agreement, the General Partner is allocated 1% of each material item of Partnership income, gain, loss, deduction, or credit. Otherwise all distributions are to the limited partners until such time as these distributions equal their original capital contributions plus an additional return of 10% per annum simple interest on their outstanding capital contribution (original contributions as reduced by any prior distributions). Thereafter, Partnership distributions will be allocated 10% to the General Partner and 90% to the limited partners.
Information about comparative five-year return on investment in the Registrant compared to market indexes has not been included herein because there is no public market in Units of the Registrant. The limited partnership agreement of the Registrant places substantial restrictions on transfer of Units of the Registrant. Accordingly, the Registrant believes comparisons to indexes of publicly traded securities would not be meaningful disclosure for investors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------
(a) As of March 30, 2001, no person was known by the Registrant to beneficially own more than 5% of the Units. The table set forth below indicates the ownership of units by certain general partners of the General Partner as of March 30, 2001:
* Indicates less than 1%.
(1) Held in trust for Mr. Smith's children. Mr. Smith serves as trustee of the trust.
(b) As a limited partnership, the Registrant has no officers and directors, although Alton L. Smith, III, a general partner of the General Partner, serves the Registrant in the role of its principal financial "officer". The General Partner has contributed $1,000 to the Registrant's capital account; however, this contribution is not treated as the equivalent of a Unit of limited partnership interest. The General Partner's contribution constitutes less than 1% of the total capital contributed to the Registrant. Messrs. Walston, Smith and Smith are general partners of the General Partner. Alton L. Smith III beneficially owns 25 units through a trust, for which he serves as trustee. Neither Mr. Walston nor Mr. C. Stephen Smith beneficially owns any units of the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions. ----------------------------------------------
See Item 11 "Executive Compensation."
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. ----------------------------------------------------------------
(a) The following documents are filed as part of this report:
(1) List of Financial Statements: See "List of Financial Statements."
(2) List of Financial Statement Schedules: All schedules are omitted as they are not applicable or the required information is shown in the financial statements or the notes thereto.
(3) Exhibit Index. All exhibits are incorporated by reference.
(b) No Current Report on Form 8-K was filed during the quarter ended December 31, 2000.
(c) The following exhibits have been filed by the Registrant with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (File Number 0-15571) and are incorporated herein by reference:
Exhibit No. 3.1 Amended Agreement of Limited Partnership of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report filed on Form 10-K for the year ended December 31, 1986).
Exhibit No. 10.1 Purchase Agreement between Registrant and Walsmith Associates regarding the Martin Parcel (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report filed on Form 10-K for the year ended December 31, 1986).
Exhibit No. 10.2 Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as of January 24, 1986, between Wellington Park Associates and the Registrant (incorporated by reference to Exhibit 6A to the Registrant's Quarterly Report filed on Form 10-Q for the period ended June 30, 1989).
Exhibit No. 10.3 Agreement between the North Carolina Department of Transportation and Walsmith Associates (incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986).
Exhibit No. 10.4 Assignment and Assumption Agreement between the Registrant and Walsmith Associates (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986).
Exhibit No. 10.5 Amendment to Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as of February 1, 1990, between Wellington Park Associates and the Registrant (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report filed on Form 10-K for the period ended December 31, 1989).
Exhibit No. 10.6 Agreement for the Purchase and Sale of Real Estate, dated as of April 20, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit C to the Registrant's Current Report filed on Form 8-K, dated April 20, 1995).
Exhibit No. 10.7 First Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of August 9, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit C to the Registrant's Current Report filed on Form 8-K, dated August 9, 1995).
Exhibit No. 10.8 Second Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of April 19, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 28.5 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1996).
Exhibit No. 10.9 Third Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 10, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1996).
Exhibit No. 10.10 Fourth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September __, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1996).
Exhibit No. 10.11 Fifth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 27, 1996, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1996).
Exhibit No. 10.12 Sixth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 12, 1997, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.12 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended September 30, 1997).
Exhibit No. 10.13 Letter Agreement to amend the Agreement for the Purchase and Sale of Real Estate, dated December 12, 1997 between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).
Exhibit No. 10.14 Eighth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated March 24, 1998 between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.14 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).
Exhibit No. 27 Financial Data Schedule
(d) All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements attached hereto or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 21, 2001.
CAROLINA INVESTMENT PARTNERS
By: WALSMITH ASSOCIATES TWO, General Partner
By: /s/ Alton L. Smith, III ---------------------------- Alton L. Smith, III General Partner and Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Supplemental Information to be Furnished With Reports Filed Pursuant to Section - ------------------------------------------------------------------------------- 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to - -------------------------------------------------------------------------------- Section 12 of the Act. - ---------------------
No annual report or proxy statement has been or will be sent to the Limited Partners of the Registrant.
ANNUAL REPORT ON FORM 10-K
ITEMS 8 AND 14 (a) (1)
FINANCIAL STATEMENTS
LIST OF FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2000
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
RALEIGH, NORTH CAROLINA
Form 10-K--Items, 8, 14 (a) (1) and (2) and (d)
CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP
December 31, 2000
LIST OF FINANCIAL STATEMENTS
The following financial statements of Carolina Investment Partners, Limited Partnership are included in Item 8:
Independent Auditors Report
Balance Sheets--December 31, 2000 and 1999
Statements of Operations--Years Ended December 31, 2000, 1999 and 1998
Statements of Changes in Partners' Equity--Years Ended December 31, 2000, 1999, and 1998
Statements of Cash Flows--Years Ended December 31, 2000, 1999, and 1998
Notes to Financial Statements
Schedules to the financial statements for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are inapplicable or the required information is included in the financial statements or the notes thereto.
INDEX TO EXHIBITS
Exhibit No. Description ----------- -----------
3.1 Amended Agreement of Limited Partnership of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report filed on Form 10-K for the year ended December 31, 1986).
10.1 Purchase Agreement between Registrant and Walsmith Associates regarding the Martin Parcel (incorporated by reference to Exhibit 10.1to the Registrant's Annual Report filed on Form 10-K for the year ended December 31, 1986).
10.2 Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as of January 24, 1986, between Wellington Park Associates and the Registrant (incorporated by reference to Exhibit 6A to the Registrant's Quarterly Report filed on Form 10-Q for the period ended June 30, 1989).
10.3 Agreement between the North Carolina Department of Transportation and Walsmith Associates (incorporated by reference to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986).
10.4 Assignment and Assumption Agreement between the Registrant and Walsmith Associates (incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986).
10.5 Amendment to Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as
of February 1, 1990, between Wellington Park Associates and the Registrant (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report filed on Form 10-K for the period ended December 31, 1989).
10.6 Agreement for the Purchase and Sale of Real Estate, dated as of April 20, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit C to the Registrant's Current Report filed on Form 8-K, dated April 20, 1995).
10.7 First Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of August 9, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit C to the Registrant's Current Report filed on Form 8-K, dated August 9, 1995).
10.8 Second Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of April 19, 1997, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 28.5 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1997).
10.9 Third Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 10, 1997, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1997).
10.10 Fourth Amendment to the
Agreement for the Purchase and Sale of Real Estate, dated as of September __, 1997, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1997).
10.11 Fifth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 27, 1997, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report filed on Form 8-K, dated September 25, 1997).
10.12 Sixth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 12, 1997, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.12 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended September 30, 1997).
10.13 Letter Agreement to amend the Agreement for the Purchase and Sale of Real Estate, dated December 12, 1997 between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).
10.14 Eighth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated March 24, 1998 between Churchill & Banks, Ltd., ADA Corporation of
North Carolina, and the Registrant (incorporated by reference to Exhibit 10.14 to the Registrant's Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).
[LETTERHEAD OF LYNCH & HOWARD, P.A]
INDEPENDENT AUDITOR'S REPORT
To the Partners Carolina Investment Partners Limited Partnership Raleigh, North Carolina
We have audited the accompanying balance sheets of Carolina Investment Partners Limited Partnership as of December 31, 2000 and December 31, 1999, and the related statements of operations, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Carolina Investment Partners Limited Partnership as of December 31, 2000 and December 31, 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with U.S. generally accepted accounting principles.
/s/ Lynch & Howard, P.A.
Raleigh, North Carolina January 30, 2001
Exhibit A
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina BALANCE SHEETS
The Notes to Financial Statements are an integral part of this statement.
Exhibit B
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina STATEMENTS OF OPERATIONS
The Notes to Financial Statements are an integral part of this statement.
Exhibit C
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina STATEMENTS OF CHANGES IN PARTNERS' EQUITY
The Notes to Financial Statements are an integral part of this statement.
Exhibit D
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina STATEMENTS OF CASH FLOWS
The Notes to Financial Statements are an integral part of this statement.
CAROLINA INVESTMENT PARTNERS LIMITED PARTRNERSHIP Raleigh, North Carolina NOTES TO FINANCIAL STATEMENTS December 31, 2000
(1) ORGANIZATION AND NATURE OF OPERATIONS
Carolina Investment Partners Limited Partnership (the "Partnership") was organized in 1985 to invest in real property which it will sell or lease undeveloped or develop into office or commercial projects. Walsmith Associates Two, a North Carolina General Partnership, is the general partner ("General Partner"). The Partnership has invested in two parcels of real estate located in Cary, North Carolina.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
For the purposes of reporting cash flows, the Partnership considers cash equivalents to be cash on hand, cash in banks, and all highly liquid debt instruments with a maturity of less than three months.
Land Held for Investment
Land held for investment is stated at contract cost plus highway interchange construction costs and capitalized appraisal, survey, and closing costs and adjusted for impairments as required by Financial Accounting Standards Board Statement No. 121. Management compares the cost of land held to sales of similar property to determine the potential for impairment. There are no material differences between the book and federal tax cost basis of the property.
Income Taxes
No provision has been made for income taxes since income or loss is includable in the partners' returns as they report to tax authorities in their respective capacities as partners.
Management's Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina NOTES TO FINANCIAL STATEMENTS December 31, 2000
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Concentrations of Credit Risk
The Partnership maintains cash deposits in banks in excess of the federally insured amounts.
Allocation of Net Income or Net Loss
Pursuant to the Partnership Agreement, the General Partner is allocated 1% of each material item of Partnership income, gain, loss, deduction or credit. The limited partners receive 99% of each material item of Partnership income, gain, loss, deduction or credit until their original capital contributions plus interest have been distributed (see Cash Distribution Policy below). Thereafter, the net income is allocated 10% to the General Partner and 90% to the limited partners.
Net loss is allocated 10% to the General Partner and 90% to the limited partners. The Partnership Agreement provides that no partner's capital account balance shall be less than zero. For purposes of the allocation, net income or net loss is the amount recognized by the Partnership for federal income tax purposes, excluding gains or losses from the disposition of land. For the years ended December 31, 2000, 1999 and 1998 there were no material differences between net income (loss) as reported for financial statement and federal income tax purposes.
Cash Distribution Policy
The General Partner receives cash to the extent it is allocated income. Otherwise, all distributions are to the limited partners until such time as these distributions equal 100% of their original capital contributions plus an additional return of 10% per annum simple interest on their outstanding capital contribution (original contributions as reduced by any prior distributions). Thereafter, Partnership distributions will be allocated 10% to the General Partner and 90% to the limited partners.
Short-Term Investments
Short-term investments consisted of certificates of deposit and money market funds.
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina NOTES TO FINANCIAL STATEMENTS December 31, 2000
(3) RELATED PARTY TRANSACTIONS
The Partnership Agreement allows the General Partner to receive a broker listing fee of 5% of the sales price for all properties sold by the Partnership to unaffiliated buyers. An affiliate of the General Partner received a broker listing fee of $0, $0, and $11,947 in 2000, 1999 and 1998, respectively, and the General Partner received a broker listing fee of $0, $0 and $14,831 in 2000, 1999 and 1998, respectively (See Note 5).
The Partnership Agreement allows the Partnership to pay the General Partner a $3,000 annual management fee while the properties are in an undeveloped state. In addition, affiliates of the General Partner performed Partnership accounting, SEC reporting, administrative services and engineering consulting totaling $1,314, $2,815 and $9,455 during 2000, 1999 and 1998, respectively. Amounts payable to related parties at December 31, 2000 and 1999 were $6,158 and $3,000, respectively.
(4) LAND HELD FOR INVESTMENT AND RELATED COMMITMENTS
Martin Parcel
In June 1986, the Partnership purchased for approximately $3,080,200 an undeveloped 26.7 acre parcel of land in Cary, North Carolina, known as the Martin Parcel, from an affiliate of the General Partner.
Wellington Parcel
In July 1986, the Partnership purchased for $1,223,175 an undeveloped 16.3 acre parcel of land in Cary, North Carolina, known as the Wellington Parcel, from an affiliate of the General Partner. The purchase contract provides that the Partnership will share evenly with the affiliate in any profits resulting from the sale of the Wellington Parcel. The Partnership may, at its option, require the affiliate to repurchase the Wellington Parcel for $225,000 per acre (the "Put Option"). A 75% vote of the limited partners is required for this Put Option to be exercised.
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina NOTES TO FINANCIAL STATEMENTS December 31, 2000
(4) LAND HELD FOR INVESTMENT AND RELATED COMMITMENTS - Continued
Wellington Parcel - continued
At a meeting of the limited partners held in March 1990, fewer than 75% of the partners voted to exercise the Put Option discussed above. A new agreement was entered into called the Put Option Agreement Amendment. Under the terms of the Put Option Agreement Amendment, the Partnership will retain a greater percentage of the property appreciation upon sale of the Wellington Parcel to an unaffiliated third party than would be retained if the Put Option were exercised. If the limited partners elect to exercise the Put Option at a later date, the Put Option Agreement Amendment will be void.
Of the total 16.3 acres in the Wellington Parcel, 10.9 acres were sold prior to 1997. A total of 2.0 acres were sold in 1997, and the remaining 3.4 acres were sold during 1998. (See Note 5).
(5) GAIN ON SALE OF LAND
Year 2000
There was no land sale during 2000.
Year 1999
There was no land sale during 1999.
Year 1998
During 1998 the Partnership sold the remaining 3.4 acres of the Wellington Parcel to an unrelated party. The total sales price for the property, a portion of which was owned by an affiliate of the General Partner, was $597,352. This sales price was allocated among the Partnership and the affiliate based upon acreage sold by each, with $593,258 to the Partnership and $4,094 to the affiliate.
CAROLINA INVESTMENT PARTNERS LIMITED PARTNERSHIP Raleigh, North Carolina NOTES TO FINANCIAL STATEMENTS December 31, 2000
(5) GAIN ON SALE OF LAND - Continued
Year 1998 - continued
The Partnership's proceeds were as follows:
The Partnership agreement calls for the General Partner to be allocated a minimum of 1% of any gain from the sale of property. To the extent the General Partner is allocated gain, it also receives a distribution. Accordingly, the General Partner's share of the gain was $2,916 (net sale proceeds of $547,577 less the Registrant's basis in the property sold of $255,980 equals a gain of $291,596; 1% of this amount is $2,916).
On April 30, 1998 the Registrant distributed a total of $1,306,627, with $1,298,000 going to the limited partners ($220.00 per unit) and $8,627 to the General Partner.