REEVES TELECOM LTD PARTNERSHIP - FORM 10-K

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EX-32 - REEVES TELECOM LTD PARTNERSHIP	v216571_ex32.htm
EX-31 - REEVES TELECOM LTD PARTNERSHIP	v216571_ex31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2010

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

For the transition period from ________________________ to _______________________

Commission file number: 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)

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 o 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 o 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 o

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 o No o

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.x

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 o Accelerated filer o

Non-accelerated filer o Smaller reporting company x

(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 o No x

The aggregate market value of the registrant’s limited partnership units held by non-affiliates computed by reference to the average of closing bid quotations as of June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, was $395,507.

On March 23, 2011, 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	44
Item 2.	Properties	44
Item 3.	Legal Proceedings	45
Item 4.	[REMOVED AND RESERVED]	46

PART II		47
Item 5.	Market for Registrant’s Common Equity, Related Unitholder Matters, and Issuer Purchases of Equity Securities	47
Item 6.	Selected Financial Data	49
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	58
Item 9A.	Controls and Procedures	58
Item 9B.	Other Information	59

PART III		60
Item 10.	Directors, Executive Officers, and Corporate Governance	60
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters	62
Item 13.	Certain Relationships and Related Transactions, and Director Independence	64
Item 14.	Principal Accountant Fees and Services	66

PART IV		67
Item 15.	Exhibits and Financial Statement Schedules	67

SIGNATURES		69

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 for these forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements. Words such as “may,” “might,” “will,” “will be,” “will continue,” “will likely result,” “expect,” “could,” “should,” “potential,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify 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 properties, 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.

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.

Page 1

Item 1. Business

As used herein, the terms “we”, “us” and “our” refer to Reeves Telecom Limited Partnership, a South Carolina limited partnership. As used herein, the term “our general partner” and “General Partner” refers 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.

Background; Development of Business

Reeves Telecom Corporation (the “Corporation”), our predecessor, was principally engaged in owning and operating commercial radio stations and television stations, and also engaged in real estate development. In 1979, the Corporation’s stockholders approved a plan of liquidation. Pursuant to the plan, as amended, the Corporation sold all of its broadcasting assets and substantially all of the land held for development and sale at one of its two land development locations during the twelve-month period ended May 15, 1980, and distributed to its stockholders cash of $0.90 per share on February 29, 1980 and $2.30 per share on May 14, 1980. The Corporation’s stockholders were thereafter entitled to receive one of our limited partnership units in exchange for each share of the Corporation’s common stock. We were organized on October 25, 1979 for the purpose of accepting from the Corporation the assets that remained unliquidated and certain undischarged liabilities, but had only nominal assets and no liabilities until May 15, 1980. To reflect a change in South Carolina law, our name was changed from Reeves Telecom Associates to Reeves Telecom Limited Partnership on January 21, 1987.

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 significantly exceeded revenue from such sales.

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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 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 receivable. The buyer of the assets made a substantial prepayment of principal on the note receivable in June 2003 and paid the remaining balance on the note receivable in June 2008.

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

See our audited financial statements and the summary information set forth in Table 5, “Selected Income Statement Data,” and Table 6, “Selected Balance Sheet Data,” for financial information on our business.

Description of Business

■ Real Estate Sales

Boiling Spring Lakes began 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 land sold for each of the last five fiscal years ended December 31, 2010 are shown on Table 1, below.

As used in Table 1 and throughout this Annual Report on Form 10-K, the following terms have the definitions indicated:

“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).

“unimproved individual lot”:

An individual lot on which construction of a house has not yet been started.

“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.

“commercial land”:

Land zoned or otherwise intended by us for commercial use.

“other land”:

All other types of unimproved land of varying sizes.

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TABLE 1: REVENUE FROM REAL ESTATE SALES

AND TYPE OF PROPERTY SOLD IN BOILING SPRING LAKES, NC

	Year Ended December 31,
	2010		2009		2008		2007		2006
Revenue
Individual lots:
Unimproved	$	—	$	17,904	$	—	$	449,890	$	664,974	[a]
Improved		—		—		—		—		—
Commercial land		—		—		—		29,940		234,437	[a]
Other land		—		—		—		19,926		—
Total revenue	$	—	$	17,904	$	—	$	499,756	$	899,411
Type of Property Sold
Individual lots:
Unimproved		0		1		0		14		25
Improved		0		0		0		0		0
Commercial land (acres)		0.00		0.00		0.00		0.13		1.30 [b]
Other land (acres)		0.00		0.00		0.00		1.42		0.00

Notes:

[a]

In the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2006, revenue from the sale of commercial land was included in revenue from the sale of unimproved individual lots.

[b]

In the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2006, 1.30 acres of commercial land was inadvertently omitted.

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 the property in Boiling Spring Lakes that would have complied with applicable regulations in the 1970’s does not meet present health standards. This has had a detrimental effect on our real estate operations by substantially reducing the number of our unimproved 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.

In 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. Brunswick County’s plans for the first phase of municipal sewer service involve sewer lines for the business district that runs along a stretch of State Road 87, the main road into and out of the development. The Partnership believes that the first phase will be started in 2011 and be completed by the end of 2013.

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Additional 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 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.

See “Item 1A. Risk Factors – Most of our real estate lacks municipal water and sewer services.”

■ Other Revenue and Rental Income

From time to time, we have generated revenue from sources other than real estate sales, such as rental income. The amount of revenue generated from such sources during the last five fiscal years ended December 31, 2010 is shown on Table 2, below.


TABLE 2: OTHER REVENUE AND RENTAL INCOME
BOILING SPRING LAKES, NC
	Year Ended December 31,
		2010		2009		2008		2007		2006

Other revenue [a]		$	—	$	—	$	—	$	4,237	$	23,668

Notes:

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

■ Seasonality

The sale of real estate in North Carolina is seasonal. We generally experience slower than average lot sales in the period from November to January, inclusive.

■ Marketing and Advertising

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

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■ Patents, Trademarks, Licenses, Franchises, and Concessions Held

Other than a real estate brokerage license issued by the State of 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.

■ Dependence Upon Customers

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.

■ Competition

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 properties within the City of Boiling Spring Lakes.

Property values are dependent upon, among other factors, the following:

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

•	Proximity to places of employment.

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

•	Proximity to and the nature and quality of schools.

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

Many real estate 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.

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Some real 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 properties 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.

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.

■ Recent Real Estate Market Conditions

Local financial institutions have maintained tight credit requirements. These credit requirements were generally tightened during 2008 and 2009, in part due to concerns over the subprime lending market, that is, real estate loans extended to borrowers with poor credit. We believe that these more restrictive lending practices by area banks have contributed, in part, to a sluggish local real estate market.

The market for undeveloped land within the City of Boiling Spring Lakes has continued to be 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). We believe that certain restrictions that went into effect in 2006 on building within proximity to known or suspected nesting or foraging areas of the red-cockaded woodpecker has 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, that houses can be built on lots 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 2011. We believe that this program may reduce the amount of our land 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. We are also participating in a program to study the possibility of relocating the nests of the red-cockaded woodpecker to nearby lands. During 2009, the State of North Carolina allocated resources to a community board to fund the development of this citywide habitat conservation plan; however, the City of Boiling Spring Lakes has, at least temporarily, put any such conservation plan on hold and, in any event, there can be no assurance that relocation of nests will, in fact, occur as a result of this study or otherwise.

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Residential

In late 2010, the National Bureau of Economic Research declared that the worst recession to have hit the United States since World War II ended in June 2009. While there are many indications of economic growth across the country, the real estate market in Brunswick County remains significantly slower than in 2008 and 2009, as evidenced by the following:

•	City-data.com, an Internet-based source for information on real estate, reports that the number of homes in Brunswick County sold during the fourth quarter of 2010 was lower than for any quarter since 2004; and

•

Data from the North Carolina Association of Realtors for the Brunswick County Multiple Listing Service region (which region includes, in North Carolina, all of Bladen, Brunswick, and Columbus Counties and a portion of New Hanover County, and, in South Carolina, a portion of Horry County) shows that, for 2010, the number of existing homes sold was 1,520, 24% less than for 2009 and 15% less than for 2008.

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. In addition, the real estate market in the City of Boiling Spring Lakes 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 certain restrictions that went into effect in 2006 on building within proximity to known or suspected nesting or foraging areas of the red-cockaded woodpecker have contributed to our lack of real estate sales in 2010 by limiting new construction in the community.

It is unclear at this time when the market in Brunswick County and, more particularly, in the City of Boiling Spring Lakes will see any significant improvement. 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 dropped 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 of Boiling Spring Lakes. In February 2011, we dropped 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 of Boiling Spring Lakes, and relatively few transactions are being completed. Notwithstanding the recent temporary reductions in our asking prices, we expect to have no significant 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.

See “Item 1A. Risk Factors,” below, for a discussion on numerous risk factors associated with our real estate business.

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Commercial

Historically, our sales of commercial land have been sporadic, and often we record no sales of commercial land in a year. Commercial development in the City of Boiling Spring Lakes has largely been concentrated along a stretch of State Road 87, the main road into and out of the development. 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 Wilmington. Construction of commercial buildings along State Road 87 was active during 2006, declined in 2007 and 2008, was very slow in 2009, and virtually nonexistent in 2010. We believe that the resumption of construction of commercial buildings along State Road 87 could have a positive effect on our sales of commercial land, but the timing and amount of revenue generated from such sales cannot be accurately projected.

■ Government Regulation; Environmental Laws and Regulations; Endangered and Protected Species

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.

We are subject to the Interstate Land Sales Full Disclosure Act, which generally requires registration with the U.S. Department of Housing and Urban Development of any project that consists of 100 or more lots. 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.

We are subject to 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.

■ Employees

We employ two full-time employees in our sales office in Boiling Spring Lakes, North Carolina. The General Partner has no full-time employees. The President of the General Partner devotes a portion of his time to our management and affairs. Such person, however, has other responsibilities and he will devote only as much of his time to our business as the General Partner, in its judgment and experience, determines is reasonably required.

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■ Liquid Assets and Reserves

As of December 31, 2010, we held $458,956 in cash and had $1,886,000 invested in certificates of deposit having an initial maturity of more than 91 days but less than one year. Accounts payable and accrued expenses, including accrued expenses owed to affiliates, as of such date totaled $225,892.

Our partnership agreement obligates the General Partner to distribute 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 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 is shown in Table 3, below.

TABLE 3: RESERVES FOR CALCULATING DISTRIBUTABLE CASH
	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..

Notes:
These reserves are used solely for calculating Distributable Cash and are not treated as deductions from income for accounting purposes.

As a result of losses incurred in prior years and the reserves for calculating Distributable Cash set forth in Table 3, there has been no Distributable Cash and, therefore, no distributions of Distributable Cash have been made since our inception.

Assessments relating to the first phase of Brunswick County’s sewer system have not yet been determined; however, we believe that the assessment on our commercial land along the Route 87 corridor will likely be between $1,000,000 and $1,500,000, and in 2010 we established a reserve for calculating Distributable Cash of $1,500,000 for that purpose. Since our commercial land along Route 87 currently represents approximately 27% of our total land available for sale, measured by acreage, and our total reserves for calculating Distributable Cash relating to the extension of sewer service to all of our land was $3,175,000 at the beginning of 2010, we believe it appropriate to add an additional reserve of $900,000 relating to the extension of sewer service to all of our land. Since the timing of, and costs associated with, the extension of sewer service to other land that we own cannot presently be estimated with any certainty, the total reserve relating to the extension of sewer service to our land of $5,575,000 may have to be supplemented further in future years.

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■ Available Information

We 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.

Item 1A. Risk Factors

Our business faces numerous 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 our units involves numerous risks and uncertainties, including those described below. These risks and uncertainties are not the only ones that we or 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.

■ Risks Relating to Real Estate Generally

We are subject to risks associated with investments in real estate.

Our revenues and the value of our real estate may decline due to developments that adversely affect real estate generally and those that are specific to our properties. General factors that may adversely affect our properties include, among others, the following:

•	Increases in interest rates.

•	A general tightening of the availability of credit.

•	A decline in the level of employment.

•	A decline in the economic conditions in our primary market.

•	A decline in consumer confidence.

•	A decline in consumer income.

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•	An adverse change in demographics.

•	An increase in competition for customers.

•	An increase in supply of houses and/or homesites in our primary market.

•	The adoption on the national, state, or local level of more restrictive laws and governmental regulations, including more restrictive zoning, land use or environmental regulations, and increased real estate taxes.

Additional factors may adversely affect the value of, and our income from, our properties, including the following:

•	Adverse changes in the perceptions of prospective purchasers of the attractiveness of our real estate.

•	Opposition from local community or political groups with respect to development or construction at a particular site.

•	Increased efforts by government to protect endangered and/or protected species, such as the red-cockaded woodpecker, through laws and/or regulations that limit or prohibit development or construction at a particular site.

•	A change in existing comprehensive zoning plans or zoning regulations that impose additional restrictions on use or requirements with respect to our property.

•	Our inability to provide adequate management and maintenance or to obtain adequate insurance.

•	An increase in operating costs.

•	New development of a competitor’s property in or in close proximity to our primary market.

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

Should we undertake development activities, we would be exposed to risks associated with real estate development.

Real estate development activities entail risks that include, among others, the following:

•	Construction delays or cost overruns, which may increase project development costs.

•	An increase in commodity costs.

•	An inability to obtain required governmental permits and authorizations.

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•	An inability to secure buyers and/or tenants.

•	An inability to secure sufficient financing on favorable terms, including an inability to refinance construction loans.

•	Compliance with building codes and other local regulations.

These factors are largely beyond our control. At the present time, we have no plans to engage in development activities.

The real estate business is competitive.

The real estate business is highly competitive. We compete with a large number of companies and individuals, many of whom are believed to have substantially greater financial and other resources than we have. Some of our competitors are active in markets in other regions or throughout the entire United States. Our ability to weather downturns in the local real estate market or respond to changing trends in the real estate business may be substantially less than some or many of our competitors.

The real estate industry is cyclical.

The sale 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 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 cyclical factors, which factors may work in conjunction with or wholly unrelated to general economic conditions. Sales of undeveloped land are also affected by the supply of alternatives to new homes, such as rental properties and used 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 cause 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 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.

Real estate assets are illiquid.

Real estate generally cannot be sold quickly. We experience great volatility in the sale of our land, especially our commercial land and tracts. Often, we record no sales of commercial land and tracts in a fiscal year. It may not be possible for us to sell property on favorable terms when it is to our economic advantage to do so. The illiquidity of real estate investments generally may impair our ability to respond promptly to changing circumstances.

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The real 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 compared to prior years.

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, shrinking gross domestic product, reduced consumer spending, significantly tighter lending standards for borrowers, and the disruption in financial and credit markets generally have all contributed to a severe economic recession in the United States and a severe downturn in the domestic housing market from which portions of the country have only recently begun to recover. North Carolina has experienced a substantial decline in demand in most of its residential real estate markets in recent years. 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.

These adverse market conditions have negatively affected our residential and commercial real estate business. Our revenues from the sale of real estate have drastically declined in the past several years, which has had an adverse affect on our financial condition and results of operations.

While some sections of the country have seen some improvement in the real estate market beginning in 2010, we do not know if such improvement will spread to other sections of he country, if at all, or when real estate markets will return to more normal conditions. Our business will continue to suffer until market conditions improve.

Increasing interest 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.

Prior to 2006, many home buyers financed their purchases using financing products that involve adjustable rates, interest only mortgages, or other mortgages, including sub-prime mortgages, that involve, at least during initial years, monthly payments that were significantly lower than those required by conventional fixed-rate mortgages. As monthly mortgage payments increase, either as a result of increasing adjustable rates or as a result of principal payments coming due, some of these home buyers could default on their payments and have their homes foreclosed, which would increase the inventory of homes available for resale. Foreclosure sales and other distress sales may result in declines in market prices for homes from current levels. In an environment of declining prices, many home buyers may delay purchases of homes in anticipation of lower prices in the future. At the same time, as lenders perceive deterioration in credit quality among home buyers, lenders increase the qualifications needed for mortgages or adjust lending terms to address increased credit risk. All of such actions have a negative affect on our business by making it more difficult for certain of our potential customers to obtain financing or resell their existing homes.

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Changes that adversely affect liquidity in the secondary mortgage market could adversely affect our business.

The Federal National 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.

■ Risks Relating to Our Business

We have operated at a loss in recent years.

We operated at a loss and experienced negative operating cash flow in each of 2007, 2008, 2009, and 2010. A substantial portion of our negative cash flow is due to the carrying costs, primarily property taxes, of our land. Since 2007, we 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 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.

A prolonged recession in the national economy, or a deterioration in national or regional economic conditions, especially in North Carolina, could continue to adversely affect our business.

A prolonged recession will have a material adverse effect on our business, results of operations, and financial condition. If economic conditions were to deteriorate, our financial condition could worsen.

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

The results of our operations will depend upon, among other things, our ability to market our real estate. Our operations may not generate income sufficient to meet operating expenses or may generate income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain our business. Our operations may be affected by many factors, some known by us, some unknown, and some 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 are subject to risks associated with changes in interest rates.

The real estate 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 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.

Many buyers of our 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 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 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.

We currently invest most of our cash in a money market account at a local financial institution and in U.S. Treasury securities and/or certificates of deposit having a maturity of one year or less that are held to maturity. We have exposure to changes in 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 lower interest rate, and (b) interest rates paid on money market balances fluctuate with changes in market interest rates, therefore, interest earned on balances held in a money market account will decrease if market interest rates decrease.

We currently have no long-term debt; however, 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 lower the amount of proceeds secured from a refinancing, and (b) 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.

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Our business may be adversely affected by changes in income tax laws.

Changes in federal income tax laws may affect demand for real estate. Various proposals have been publicly discussed to limit or eliminate mortgage interest deductions and to limit or eliminate the exclusion of gain from the sale of a principal residence. Enactment of such proposals may have an adverse effect on the homebuilding industry in general and, in turn, on businesses, such as ours, that sell undeveloped real estate. We cannot make a meaningful prediction as to whether any such proposals will be enacted and, if enacted, the particular form such laws would take.

We are subject to risks associated with changes in property taxes and government fees.

Increases in real 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 and moderate income housing, could increase our costs and have an 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 in Boiling Spring Lakes or elsewhere.

We may be unable to obtain financing.

As of December 31, 2010, 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. 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 properties for far less than their market value. At this time, however, we do not anticipate having to resort to selling our properties at substantial discounts from their market value.

Our customers may be unable to obtain financing.

Many purchasers of our real estate may need to obtain mortgage loans to finance the construction costs of homes to be built on homesites purchased from us. Also, our homebuilder customers depend upon retail purchasers who rely on mortgage financing. 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. Despite unprecedented efforts by the federal government to stabilize the nation’s banks, 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.

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

We may experience economic harm if any damage to our real estate is not covered by insurance. We carry comprehensive liability and fire insurance coverage on our properties. We believe all our properties are adequately insured; however, we cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We may suffer losses 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 in large part to the terrorist activities of September 11, 2001, insurance companies re-examined many aspects of their business and took certain actions in 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 affect our ability to obtain appropriate insurance coverages. However, at this time the only impact on our business has been an increase in insurance premiums.

Increases in property insurance premiums and decreases in the availability of homeowner property insurance in the coastal regions of North Carolina could reduce customer demand for our properties.

Homeowner property insurance companies doing business in the portions of the southeastern United States that are most subject to occasional hurricanes have reacted to recent hurricanes by significantly increasing premiums, requiring higher deductibles, reducing limits, restricting coverages, imposing exclusions, refusing to insure certain property owners, and in some instances, ceasing insurance operations in particular states. It is uncertain what effect these actions will have on property insurance availability and rates in the coastal regions of North Carolina. This trend of decreasing availability of insurance and rising insurance rates could continue if there are severe hurricanes in the future.

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The increasing costs of property insurance 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 operations.

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

Because of 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 properties could experience significant, if not catastrophic, damage. Such damage could materially delay sales in or could lessen demand for real estate in affected coastal communities. 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 and develop properties or realize income from our projects. 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 occurrence of drought in Southeastern North Carolina could adversely affect our business.

Due 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 develop and sell properties.

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Increases in real estate property taxes could reduce customer demand for homes and homesites in our market.

Brunswick County experienced significant increases in property values during the record-setting real estate activity in the first half of the last decade. As a result, many local governments have been, and may continue, aggressively re-assessing the value of homes and real estate for property tax purposes. These larger assessments increase the total real estate property taxes due from property owners annually. Because of decreased revenues from other sources due to economic factors, many local governments have also increased their property tax rates.

The current 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.

We are subject to numerous laws and regulations regarding the sale of real estate.

The real estate industry is 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, federal and state laws prohibiting unfair and deceptive acts and practices, and federal and state advertising laws. Failure to comply with these requirements may result in, among other things, revocation of required licenses, indemnification liability to contract counterparties, administrative enforcement actions, and civil and criminal liability.

We are subject to numerous laws and regulations regarding the development of real estate.

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.

At December 31, 2010, we owned, among other 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 or other regulations may prevent us from subdividing all or a substantial portion of such acreage, which, in turn, may adversely affect our ability to continue generating revenue from real estate sales and/or our ability to effect a bulk sale of all or substantially all of our assets. 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.

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Purchasers of land from us may be subject to periodic delays or may be precluded entirely from developing 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 we have, or 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 development.

We are subject to many laws and regulations regarding environmental matters.

We 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.

We are subject to laws and regulations relating to endangered or protected species.

Real estate development is subject to various laws and regulations intended to limit disturbance of endangered and protected species. 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. We may be subject to common law claims 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 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 Spring Lakes and the surrounding area. We understand that 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 the endangered woodpecker if the City issued building permits for lots with nests. Under such 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 site. City ordinances are somewhat more restrictive and prohibit certain cutting of long-leaf pine trees with a diameter of 8 inches or more.

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We believe 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.

An accident at nearby facilities could adversely affect our business.

Military Ocean Terminal Sunny Point is among the largest military terminals in the world and serves as a transfer point between rail, trucks, and ships for the import and export of weapons, ammunition, explosives, and military equipment for the United States Army. The military terminal is approximately ten miles from Boiling Spring Lakes. Progress Energy’s Brunswick Nuclear Plant, consisting of two units generating a total of approximately 1,875 megawatts of electrical energy, is situated on a 1,200-acre site approximately ten miles from Boiling Spring Lakes. The nuclear plant is serviced by a 2½ mile long intake canal, which brings water to the plant for cooling the nuclear reactors, and a 5½ mile long discharge canal, which directs the heated water about ½ mile out into the Atlantic Ocean. A terrorist or other attack against either the military terminal or the nuclear plant, or a significant accident at either facility, or significant damage to the transportation links to either facility or to a canal serving the nuclear plant, could result in a decrease in the desirability of our property among potential buyers of real 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.

Terrorist attacks and threatened or actual war may adversely affect our business.

Terrorist attacks or 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 prospective buyers to postpone or cancel real estate transactions. 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 operations.

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Litigation resulting from disputes with our customers may result in substantial costs, liabilities, and loss of revenues.

From time to time we have disputes with purchasers of our properties. Disputes may occur in the future and we may not be able to resolve those disputes in a satisfactory manner.

Real estate acquisitions involve a number of risks, any of which could cause us not to realize the anticipated benefits.

Acquisition transactions involve various inherent risks, including, among others, the following:

•	Uncertainties in assessing the value, strengths, and potential profitability of, and identifying the extent of all weaknesses, risks, contingent and other liabilities (including environmental) of, acquisition opportunities.

•	Acquired properties may fail to perform as we expected in analyzing our investments; our estimates of the costs or repositioning or redeveloping acquired properties may be inaccurate; and the development opportunity may be abandoned after expending significant resources.

•	Problems that could arise from the integration of the new businesses or properties.

•	Unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition opportunity.

We currently have no plans to acquire real estate but we may do so in the future.

We may be unable to obtain and renew permits necessary for development projects we decide to undertake, which could reduce our anticipated cash flow and profitability from those projects.

Real estate companies must obtain numerous governmental permits or approvals that impose strict conditions and obligations relating to various environmental and safety matters in connection with real estate 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 be issued, maintained or renewed, or may not be issued or renewed in a timely fashion, or may involve requirements that restrict our ability to economically conduct our development projects.

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A contractor on an existing project or a project we decide to undertake may default on its obligations or become bankrupt or insolvent, which may result in substantial costs, liabilities, and loss of revenues, or cause us not to realize the anticipated benefits from the project.

Contractors are 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 an existing project or 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.

We may incur significant costs to comply with the Americans with Disabilities Act.

Investment in real estate assets may be subject to the Americans with Disabilities Act of 1990, as amended. Under this act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The act’s requirements could require us to remove access barriers in any property we own, and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages.

Should any property we own contain or develop harmful mold, we could face liability for adverse health effects and costs of remediating the problem.

The presence of mold at any property we currently own, or acquire or build in the future, could require us to undertake a costly program to remediate, contain or remove the mold. Mold growth may occur when moisture accumulates in buildings or on building materials. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing because exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. The presence of mold could expose us to liability from tenants and others if property damage or health concerns arise.

We are vulnerable to concentration risks because our operations are currently exclusive to a Brunswick County, North Carolina submarket.

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 developers. The performance of the Brunswick County economy greatly affects our sales and, consequently the underlying values of our properties. The Brunswick County economy is heavily influenced by conditions and employment in the defense industry, recreation, and in government. A decrease in government supported projects, through budget cuts or otherwise, could adversely affect the economy in our market.

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The economic growth of Southeastern North Carolina is an important factor in creating demand for our real estate. 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.

One significant infrastructure improvement that has been proposed for Southeastern North Carolina is the North Carolina International Terminal, a marine cargo facility intended to be capable of handling 1.5 million containers annually. 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 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, 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 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 will 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.

Attracting new employers that can create new jobs is a key factor in the economic growth of Southeastern North Carolina. In order to improve the economy of the region, state and local governments, 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.

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Changes in the demographics affecting projected population growth in Southeastern North Carolina, including a decrease in the migration of Baby Boomers, could adversely affect our business.

Our business prospects 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.

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

From time to time, typically every two years, we obtain an appraisal of our real estate assets located in the City of Boiling Spring Lakes. See “Item 2. Properties – Appraisal of Real Estate 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 vary significantly from the appraised value set forth in any previous or future appraisal report for one or more reasons, including, among others, a change in market conditions and a change in the assets being appraised. There is no guarantee that we could obtain the appraised value upon a sale of the appraised assets, and, in the 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.

If the market values of our real estate assets were to drop below the book value of those properties, we would be required to write-down the book value of those properties, which would have an adverse affect on our balance sheet and our earnings.

Most of our land was acquired by our predecessor corporation in the 1960’s. During the 1980’s, following tightened requirements on the installation of septic systems, we established a valuation allowance that effectively reduced the book value of much of our land to reflect lower market values. Consequently, we have a low cost basis in most of our land. In recent years, we incurred significant capital expenditures, such as for rocking or paving roads, and many of these costs are capitalized as part of the book value of our land. Adverse market conditions, in certain circumstances, may require the book value of real estate assets to be decreased, often referred to as a “write-down” or “impairment.” A write-down of an asset would decrease the value of the asset on our balance sheet and would reduce our earnings for the period in which the write-down is recorded.

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Most of our real estate lacks municipal water service.

Most of our land lacks municipal water service. The City of Boiling Spring Lakes began to phase in municipal water service to certain portions of the development in 2004 and, in 2009, began work on an expansion of the municipal water system. That expansion was completed in January 2011. The cost of the expansion is to be borne by owners of land directly passed by new water mains by the payment of an assessment of $500 per lot plus a tap fee of $860 per lot containing a dwelling. 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 expansions of 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 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 cannot estimate with any certainty the amount of 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 and have insufficient funds to pay such assessment when due or we are unable to obtain financing on terms that we believe to be acceptable, we may be unable to continue operating and may become insolvent.

Most of our real estate lacks public sewer service.

The lack of public sewer service has been a major inhibiting factor in our efforts to sell and/or develop land in Boiling Spring Lakes. Prior to 2004, virtually all residents in the development were forced to rely upon individual septic systems. Brunswick County has plans for an area-wide sewer system for Boiling Spring Lakes. We expect that the County will begin installation of the first phase in 2011 to service the City’s commercial corridor along Highway 87, and that the first phase will be completed in 2013; however, there is no certainty that the first phase of 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 or some of our land to such expansion 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.

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A significant 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.

We cannot estimate with any certainty the amount of any assessments for sewer lines, 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 and have insufficient funds to pay such assessment when due or we are unable to obtain financing on terms that we believe to be acceptable, we may be unable to continue operating and may become insolvent.

Our business may be adversely affected by damage to dams.

We are responsible for the maintenance and repair of a dam designed to retain water in one of the lakes within the City of Boiling Spring Lakes. 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 Boiling 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 properties or realize income from projects could be materially adversely affected.

The City of Boiling Spring Lakes has many lakes and ponds, some of which were created or enhanced by using earthen dams to raise the water level behind the dams. We own and maintain only one of those dams; all of the other dams are, to our knowledge, owned and maintained by either the City of Boiling Spring Lakes or the owner of The Lakes Country Club. From time to time, a dam owned by others may need repair, for example, as a result of a “wash out” of a portion of a dam following a hurricane, flood, or period of unusually heavy or prolonged rain, and it may become necessary for the owner of such dam to lower the water level behind the dam for an extended period of time. During such time, we may be unable to sell land near the lake or pond with reduced water levels, or the price that we could realize upon a sale of such land may be substantially less than would be the case if the water level was not reduced.

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We may face significant costs associated with building and maintaining roads.

We 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.

The costs to complete a road, and to rock or pave a road with asphalt, are capitalized and added to the cost basis of our land held for sale. When we sell land situated on a completed road, or a road that has been rocked or paved with asphalt, the direct cost of land sold will reflect the capitalized costs. As a result, we will likely achieve a higher sales price for land situated on a completed road, or a road that has been rocked or paved with asphalt, but the direct cost of such land sold will also be higher than for a lot which does not reflect such capitalized costs.

The City 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.

During the 1960’s, we sold a number of five- and ten-acre timber tracts. In some cases, we provided an easement across our land to the buyer of such a tract for access to and egress from the tract, and 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 egress from 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 not been involved 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 cost of building any such road could be material.

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We may incur costs in connection with the removal of an underground storage tank in 2000.

In 2000, we removed an underground storage tank 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, 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, additional 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 of No Further 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 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 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.

In connection 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.

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Any loans that we originate from land sales are subject to the risks of delinquency and foreclosure.

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 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 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 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 restore the property to a sellable condition.

We may have cash balances in our bank accounts in excess of FDIC-insured limits.

We hold our cash primarily in checking and money market accounts, and in certificates of deposit. Certificates of deposit include those held at our principal bank, on account under the Certificate of Deposit Account Registry Service (“CDARS”) program, and brokered certificates of deposit arranged through a securities broker-dealer. Our principal bank, and each bank where we hold a certificate of deposit, is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC, an independent agency of the United States government, insures deposits (including, but not limited to, certificates of deposit) up to $250,000 per depositor, per bank, subject to certain conditions; however, the insurance limit is currently set to drop to $100,000 after December 31, 2013. In addition, effective from December 31, 2010 through December 31, 2012, the FDIC insures all deposits in noninterest bearing transaction accounts, such as checking accounts, without limitation as to amount. In the event that any bank where we hold funds (including through a certificate of deposit) becomes insolvent, we may lose some or all of any excess over FDIC-insured limits that we hold at that bank. From time to time, we have had cash balances at our principal bank in excess of FDIC-insured amounts.

We may have balances in our brokerage account in excess of SIPC-insured limits.

We hold cash, and purchase and hold money market mutual funds, U.S. Treasury securities, and brokered certificates of deposit 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 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 accounts. At December 31, 2010, we held in the brokerage account cash, investments in money market mutual funds, and brokered certificates of deposit totaling $1,442,029, or $942,029 in excess of SIPC-insured amounts. Of that $1,442,029, a total of $1,201,000 was invested in brokered certificates of deposit that are fully insured by the FDIC. 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.

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Our business is subject to complex corporate governance, public disclosure, and accounting requirements that have increased both our costs and the risk of noncompliance.

Because 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.

Because 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 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 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 of America (“GAAP”) requires management 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.

Our failure to file timely reports may subject us to shareholder litigation, which may materially and adversely affect our business.

Our failure to file our reports in a timely manner may subject us to 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.

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There may be deficiencies with our internal controls that require improvements, and we will be exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

While we believe that we currently 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 Act of 2002. Under the supervision and 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 the Sarbanes-Oxley Act. We have performed the system and process evaluation and testing required in an effort to comply with the management certification requirements of Section 404(a). As a result, we have incurred 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.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, our operating results and the value of our units.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If we are unable to maintain adequate internal control over financial reporting, our 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 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 to remediate before 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 financial information and the value of our partnership units could decline significantly.

■ Risks Relating to an Investment in Our Partnership Units

We do not expect to make any distributions to unitholders for the foreseeable future.

We 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.

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The amount of distributions to unitholders, if any, is uncertain.

We expect to sell the remainder of our properties over time with a view towards ultimately dissolving the partnership. Despite repeated efforts in the past, we were unable to effect a 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.

The amount and timing of future cash distributions, if any, to unitholders will depend upon generation of cash from sales of real estate holdings and the resolution of liabilities and associated costs. We experienced operating losses for the years ended December 31, 2008, 2009, and 2010, 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.

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, 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.

Distributions to unitholders are not guaranteed and may fluctuate with our performance and other external factors.

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

•	The level of our operating costs.

•	The price at which we are able to sell land.

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•	Federal, state and local regulations and taxes.

•	Prevailing economic conditions.

In addition, the actual amount of cash available for distribution will depend upon other factors, including, among others, the following:

•	The level of our capital expenditures.

•	The cost of acquisitions, if any.

•	Our debt service requirements and restrictions on distributions contained in future debt agreements, if any.

•	Fluctuations in our working capital needs.

•	Our ability to borrow under future credit agreements, if any, to make distributions to our unitholders.

•	The amount, if any, of cash reserves established by the General Partner, in its discretion, for the proper conduct of our business.

Because of the above factors, among others, we may not have sufficient available cash to pay cash distributions to our unitholders even during periods when we record net income.

Our units have a limited public trading market.

There has been, and continues to be, a limited public market for our units. Our units are quoted on OTCQB, an electronic 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, and may never develop or be sustained. You may not be able to sell your units at or above the initial 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 should stop being quoted on OTCQB, it is possible that it could materially and/or adversely affect any future liquidity in the units.

The market price of our units may be volatile and could be based on many factors, including perceptions that do not accurately reflect actual conditions.

The 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:

•	Conditions in equity, financial, and credit markets generally.

•	Actual, anticipated, or perceived fluctuations in our operating results or financial condition.

•	Actual, anticipated, or perceived changes in the market value of our real estate assets.

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•	Changes in market valuations of other real estate companies, particularly those that sell real estate similar to or near ours.

•	Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments.

•	The sale of a relatively large number of units at one time or in a short period of time by one or more unitholders.

•	The market’s perception of our future cash distributions.

•	Departure of key personnel.

Any of the above factors, or others, may have a significant negative effect on the market price of our units.

Our units are subject to “penny stock” rules.

Our 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, 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 written consent 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 the secondary market. To the extent our unit are subject to the penny stock regulations, the market liquidity for our units will be adversely affected.

The Financial Industry Regulatory Authority has adopted sales practice requirements which may limit a unitholder’s ability to buy and sell our units.

The Financial 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 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 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 an adverse effect on the market for our units.

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We 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.

The issuance by us of additional units or other equity securities of equal or senior rank would have adverse effects, including, among others, the following:

•	Our unitholders’ proportionate ownership interest in us would decrease.

•	The amount of cash ultimately available for distribution on each previously outstanding unit may decrease.

•	The relative voting strength of each previously outstanding unit may be diminished.

•	The ratio of taxable income to distributions may increase.

•	The market price of our units may decline.

Your liability as a limited partner may not be limited, and our unitholders may have to repay distributions to us under certain circumstances.

As a limited 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 business. Our general partner generally has unlimited liability for our obligations, except for those contractual obligations that are expressly made by us without recourse to our general partner. Additionally, the limitations on the liability of unitholders for our obligations have not been clearly established in many jurisdictions.

Under certain circumstances, our unitholders may 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 assets, unitholders who received the distributions may be required to return the amount of distributions to us.

Fees paid and cost reimbursements due to our general partner may be substantial and reduce our ability to ultimately pay distributions to unitholders.

Prior 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 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.”

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Our unitholders do not elect our general partner or vote on our general partner’s officers or directors.

Unlike the holders of common stock in a corporation, our unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’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 other continuing basis.

Our future indebtedness may limit our ability to borrow additional funds, make distributions to unitholders or capitalize on business opportunities.

At December 31, 2010, our total indebtedness outstanding was zero. We may incur indebtedness in the future. Any such indebtedness may have adverse effects including, among others, the following:

•	Our ability to finance future operations and capital needs may be restricted.

•	Our ability to pursue acquisitions and other business opportunities may be limited.

•	Our results of operations may be more susceptible to adverse economic or operating conditions.

Our payments of principal and interest on any future indebtedness will reduce the cash available for distribution on our units. We will likely be prohibited from making cash distributions during an event of default under any future indebtedness, or if, either before or after such distribution, we fail to meet a coverage test set forth in the loan documents of any such future indebtedness.

Limitations in debt agreements of any future indebtedness may reduce our ability to incur additional indebtedness, to engage in some transactions and to capitalize on business opportunities.

Our general partner’s executive officers and directors face potential conflicts of interest in managing our business.

Our limited partnership agreement provides that our general partner (a) shall devote such time to our business 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. 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.

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Our general partner’s discretion in determining the level of cash reserves may adversely affect our ability to make cash distributions to our unitholders.

Our partnership agreement requires our general partner to deduct from operating cash flow cash reserves, in its sole discretion, for “working capital, contingent liabilities, taxes, debt service, 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 we are a party. See “Item 1. Business – Liquid Assets and Reserves.” These cash reserves will affect the amount of cash available for distribution to unitholders.

Our general partner has conflicts of interest and limited fiduciary responsibilities, which may permit our general partner to favor its own interests to the detriment of our unitholders.

Conflicts of interest could arise in the future as a result of relationships between our general partner and its affiliates, on 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 affiliates over the interests of our unitholders. The nature of these conflicts includes certain considerations, including, among others, the following:

•	Remedies 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 partner and its affiliates are not prohibited from engaging in other businesses or activities, including those in direct competition with us.

•	Our general partner determines the amount and timing of our asset purchases and sales, capital expenditures, borrowings, and reserves, each of which can affect the amount of cash that is ultimately distributed to unitholders.

•	Our general partner determines whether to issue additional units or other equity securities in us.

•	Our general partner determines which costs are reimbursable by us.

•	Our general partner controls the enforcement of obligations owed to us by it.

•	Our general partner decides whether to retain separate counsel, accountants, or others to perform services for us.

•	Our general partner is not restricted from causing us to pay it or its affiliates 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.

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Our partnership agreement limits our general partner’s fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement contains provisions that waive or consent to conduct by our general partner and which reduce the obligations to which our general partner would otherwise be held by state-law fiduciary duty standards. 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 acquire a unit, you do not automatically become a limited partner.

Because we are organized as a limited 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) in the units, and the transfer of rights (principally, voting rights) as a limited partner. Upon the effectiveness of a transfer, the transferee surrenders to the transferor all of the economic interests (that is, the right to receive distributions, if and when made) of the units. The transferor may then, in turn, sell or transfer the economic interests in those units to others. The transferor 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 at meetings of the partners. 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 the general partner broad authority to conduct our business and very limited voting rights to limited partners.

■ Tax Risks Relating to an Investment in Our Partnership Units

Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income.

You will be required to pay federal income taxes and, in some cases, state and local income taxes, on your share of our taxable income, whether or not you receive cash distributions from us. We do not currently have plans to make a distribution to unitholders. Even if we were to make a distribution, the amount that you receive from us may not be equal to your share of our taxable income or even equal to the actual tax liability that result from your share of our taxable income.

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You may be subject to state and local taxes and income tax return filing requirements in jurisdictions where you do not live as a result of investing in our units.

In addition 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 on 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.

Even if you have no state or local tax liability, we may pay state and local taxes on your share of our taxable income.

As a limited partnership, we generally pass income tax liability, including for state and local income taxes, through to our partners. The administrative cost of allocating liability among the partners, and maintaining records therefor, can be extremely 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,

A unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.

Because a unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of the loaned units, he may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the 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, loss, or deduction with respect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable as ordinary income.

If 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.

The anticipated after-tax benefit of an investment in our units depends largely upon our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service (“IRS”) on this matter.

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Despite the fact that we are a limited partnership under South Carolina law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. Although we do not believe, based upon our current operations, that we are so treated, a change in our business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

If we were treated as a corporation for federal income tax purposes, we would pay federal income 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, 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 law 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.

If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our units, and the costs of any such contest would reduce the amount of our cash that is ultimately available for distribution to our unitholders.

We have not requested a ruling from the 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 and the prices at which 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.

The 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.

We 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 profits within a twelve-month period. Our termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our unitholders could receive two Schedules K-1) for one fiscal year and could result in a deferral of depreciation 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.

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Tax gain or loss on the disposition of our units could be different than expected.

If you 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 distributions in excess of your allocable share of our net taxable income decrease your tax basis in your units, the amount, if any, of such prior excess distributions with respect to the units you sell will, in effect, 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.

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

Investment in units by tax-exempt entities, such as individual retirement accounts (known as “IRA’s”) and non-U.S. persons, raises issues 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.

Tax 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.

The 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.

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Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Boiling Spring Lakes, North Carolina

Boiling Spring Lakes began in 1962 as a 14,000-acre development. Part of the tract is now within the City of Boiling Spring Lakes, North Carolina, which had a 2008 population of 4,686 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 North Carolina below shows the approximate location of the City of Boiling Spring Lakes.

Our principal asset is our undeveloped land in Boiling Spring Lakes, comprising approximately 818 acres. As of December 31, 2010, we owned the following:

•	Approximately 356 acres, divided into 1,078 platted unimproved individual lots, both recorded and unrecorded, intended for residential use.

•	Approximately 244 acres of undeveloped land intended for residential use.

•	Approximately 219 acres of undeveloped land intended for commercial use.

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

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•	A sales office comprising approximately 1,269 sq. ft.

We intend to continue emphasizing the sale of individual lots in Boiling Spring Lakes, concentrating on lots situated on existing paved roads and rocked roads. From time to time, we will 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 on an all-cash basis but are considering offering to provide qualified purchasers of our land seller financing for a portion of the purchase price. Any program involving our providing seller financing, however, would be on a limited basis.

Appraisal of Real Estate Assets

We obtained from Ingram and Company, Inc. (the “Appraiser”) an independent MAI appraisal report dated January 2010 valuing our real estate assets located in Boiling Spring Lakes at December 31, 2009. Such assets comprised substantially all of our assets on such date other than cash, U.S. Treasury securities, and brokered certificates of deposit. The appraisal values the appraised assets at $2,455,000 (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 granted by 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 minimum, maximum or specific appraised value, any pending or proposed sale or other transaction, or approval of any loan involving the appraised assets or us. The foregoing summary of the appraisal is limited in its entirety by reference to the full appraisal report, a copy of which was filed with the Securities and Exchange Commission as Exhibit 99.1 to the Annual Report on Form 10-K for the year ended December 31, 2009.

During 1988, we reduced the carrying value of the Boiling Spring Lakes property as a result of an appraisal obtained in December 1988. During 1993, 1995, 1998, 2000, 2004, 2006, and 2008, we obtained updated 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 appraisal as of December 31, 2009 and in view of current market conditions, we and our accountants believe that the valuation allowance at December 31, 2010 was appropriate, and that no adjustment to the valuation allowance needed to be made.

Item 3. Legal Proceedings

We are not currently a party to 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.

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Item 4. [REMOVED AND RESERVED]

[THE REST OF THIS PAGE IS BLANK]

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PART II

Item 5. Market for Registrant's Common Equity, Related Unitholder Matters, and Issuer Purchases of Equity Securities

■ Market for the Partnership Units

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.

Our units are quoted on OTCQB under the symbol REEV. OTCQB 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 with regulatory agencies such as the SEC. The following table sets forth the high and low closing bid quotations in each of the four quarters of fiscal 2009 and fiscal 2010. 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.

TABLE 4: QUARTERLY INFORMATION ON PRICE RANGE OF PARTNERSHIP UNITS
		High Bid			Low Bid
Fiscal 2010:
Fourth Quarter	(October 1 - December 31)	$	0.25		$	0.25
Third Quarter	(July 1 - September 30)		0.25			0.25
Second Quarter	(April 1 - June 30)		0.25			0.25
First Quarter	(January 1 - March 31)		0.25			0.25

Fiscal 2009:
Fourth Quarter	(October 1 - December 31)	$	0.25	[a]	$	0.25	[a]
Third Quarter	(July 1 - September 30)		0.25	[a]		0.25	[a]
Second Quarter	(April 1 - June 30)		0.50	[a]		0.25	[a]
First Quarter	(January 1 - March 31)		1.90	[a]		0.50	[a]

Notes:

[a]	OTC Markets Group, Inc. does not provide average closing bid or bid/asked quotations if there are fewer than two market makers, which was the case for 2009. Prices indicated are for the last sale price as reported by OTC Markets Group, Inc.

■ Holders of Units

As of December 31, 2010, there were 2,072 record holders of partnership units. The total number of record holders has not changed substantially from December 31, 2010 to March 23, 2011, the latest practicable date prior to the filing of this Annual Report on Form 10-K.

■ Distributions

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.

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•	The level of our operating costs.

•	The price at which we are able to sell land.

•	Federal, state and local regulations and taxes.

•	Prevailing economic conditions.

In addition, the actual amount of cash available for distribution will depend upon other factors, including, among others, the following:

•	The level of our capital expenditures.

•	The cost of acquisitions, if any.

•	Our debt service requirements and restrictions on distributions contained in future debt agreements, if any.

•	Fluctuations in our working capital needs.

•	Our ability to borrow under future credit agreements, if any, to make distributions to our unitholders.

•	The amount, if any, of cash reserves established by the General Partner, in its discretion, for the proper conduct of our business.

Because of the above factors, among others, we may not have sufficient available cash to pay cash distributions to our unitholders even during periods when we record net income.

■ Purchases of Units by Us and our Affiliates

Our limited partnership agreement allows us to repurchase 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.

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From 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 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 which we will actually repurchase, if any such repurchases will, in fact, occur, or the prices at which such repurchases, if any, will be made.

There were no purchases of partnership units by us, our general partner, or any affiliate of us or our general partner during 2010. At the request of a registered holder who owned 200 partnership units, we cancelled the 200 units that they owned during 2010 for no consideration, and removed them from the list of registered holders.

Item 6. Selected Financial Data

The selected financial data set forth in Tables 5 and 6, below, has been derived from our historical audited financial statements. The 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.

It is our experience that our 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 5: SELECTED INCOME STATEMENT DATA
	Year Ended December 31,
	2010			2009			2008			2007			2006
Revenues:
Property sales	$	—		$	17,904		$	—		$	499,755		$	899,411
Interest income		14,923			33,270			96,047			181,790			172,537
Other revenue		2,673			97			25,764			4,234			23,668
Total revenues		17,596			51,271			121,811			685,779			1,095,616

Operating expenses:
Direct costs of property sold		—			6			—			14,598			11,070
Selling, general and admin. expenses		496,966			512,916			534,710			675,214			652,290
Depreciation		3,779			3,846			3,846			3,924			3,969
Total operating expenses		500,745			516,768			538,556			693,736			667,329

Net income (loss)	$	(483,149	)	$	(465,497	)	$	(416,745	)	$	(7,957	)	$	428,287

Per Unit Data
Net income (loss)	$	(0.27	)	$	(0.26	)	$	(0.23	)	$	—		$	0.24
Distributions		—			—			—			—			—

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TABLE 6: SELECTED BALANCE SHEET DATA

	At December 31,
	2010		2009		2008		2007		2006

Cash, prepaid expenses and other
current assets	$	2,355,080	$	2,852,898	$	3,351,240	$	3,659,565	$	3,670,587
Note receivable		—		—		—		128,823		133,769
Properties held for sale and
property and equipment, net		625,437		628,120		581,029		570,253		517,796
Total assets	$	2,980,517	$	3,481,018	$	3,932,269	$	4,358,641	$	4,322,152

Accounts payable and
accrued expenses	$	225,892	$	243,244	$	228,998	$	238,625	$	194,179
Total liabilities		225,892		243,244		228,998		238,625		194,179
Partners' capital		2,754,625		3,237,774		3,703,271		4,120,016		4,127,973
Total liabilities and
partners' capital	$	2,980,517	$	3,481,018	$	3,932,269	$	4,358,641	$	4,322,152

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 real estate 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 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 real estate 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.

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■ Impairment of Real Estate Held for Sale

Our long-lived assets, primarily real estate held for sale, 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.

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Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

■ Revenues

Overall, revenues decreased 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 Sales

We had 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 Income

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

Other Revenue

Other revenue was $2,673, compared to $97 in 2009. The increase is due principally 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.

■ Selling, General and Administrative Expenses

Selling, general 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:

Advertising

Advertising expenses increased 73% to $7,783, compared to $4,494 in 2009. Management attributes the increase to efforts to stimulate land sales through advertising.

Legal Fees

During 2010, we paid total legal fees of $19,323, 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.

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Miscellaneous Expenses

During 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.

■ Depreciation

Depreciation expense in 2010 was $3,779, compared to $3,846 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.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

■ Revenues

Overall, revenues decreased 58% to $51,271 in 2009, compared to $121,811 in 2008. The principal components of revenues and Management’s explanations for year-to-year changes are set forth below.

Property Sales

We had revenue from property sales of $17,904 in 2009, compared to no revenues in 2008. 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.

Interest Income

Interest income in 2009 was $33,270 in 2009, compared to $96,047 in 2008. Management attributes the 65% decrease to the combination of lower amounts invested during 2009 than in 2008 and to somewhat lower interest rates earned on our investments during 2009 than during 2008.

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Other Revenue

Other revenue was $97 in 2009, compared to $25,764 in 2008. The decrease of 99% is due substantially to the receipt in January 2008 of a refund of $20,929 in income taxes we paid to the State of North Carolina for 2005. As a limited partnership, we generally pass income tax liability through to our partners. With respect to 2005, however, Management believes that the administrative cost of allocating liability among the partners, and maintaining records therefor, would be unreasonably time-consuming and complex. Management, therefore, elected to pay such taxes, with the result that each partner’s pro rata share of our income for such year was reduced by a pro rata share of such taxes paid. Since the refund for 2005 was received in 2008, the refund was treated for accounting purposes as income.

■ Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 4% to $512,916 in 2009, compared to $534,710 in 2008. Noteworthy changes from 2008 in the components of selling, general and administrative expenses, and the reasons therefor, are as follows:

Advertising

Advertising expenses decreased 60% to $4,494, compared to $11,308 in 2008. Management attributes the decrease primarily to efforts to minimize expenses in the face of limited revenues.

Accounting Fees

During 2009, we paid our independent registered public accountant and others total accounting fees of $66,120, compared to $59,289 in 2008. Management attributes the 12% increase primarily to a general increase in the audit requirements by independent registered public accounting firms of the financial statements of SEC-reporting entities, such as us.

Legal Fees

During 2009, we paid total legal fees of $33,135, compared to $40,431 in 2008. Management attributes the 18% decrease to the need for our attorneys to address during 2008 various matters that did not need to be addressed during 2009.

Insurance

During 2009, we paid $22,355 for health insurance and related costs, compared to $13,706 in 2008. Management attributes the 63% increase principally to increases in premiums.

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Transfer Agent Fees and Expenses

During 2009, we paid our transfer agents total fees and expenses of $7,326, compared to $25,370 during 2008. Management attributes the 71% decrease principally to one-time costs incurred in connection with the changing of our transfer agent in early 2008.

Miscellaneous Expenses

During 2009, we incurred $14,286 in miscellaneous expenses, compared to $8,190 in 2008. Management attributes the 74% increase 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 2008.

■ Depreciation

Depreciation expense in 2009 was $3,846, unchanged from in 2008. Management attributes the lack of material change to there being no material increase or decrease in depreciable assets during 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.

We may have to bear assessments relating to the installation of water and sewer lines installed by the City and others. During 2009 we incurred a total assessment of $49,500 relating to the expansion of the City’s municipal water system. We cannot reliably estimate the amounts of future assessments, nor can we accurately predict when any future assessments will become due. The total of such 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 is generated primarily from individual lot sales and may not be sufficient to meet future operating costs, debt service and 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 and its affiliates, selling certain non-real estate assets, 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 by negotiating credit facilities, issuing debt on such terms and conditions as the General Partner deems prudent, or seeking other forms of debt or equity financing as the General Partner deems appropriate.

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■ Cash Flows from Operating Activities

During 2010, we used $505,865 of net cash in operating activities, compared to $435,878 of net cash used in 2009. Management attributes the change principally to a lower amount of accrued expenses payable and a greater amount of accrued interest receivable at December 31, 2010 than at December 31, 2009.

■ Cash Flows from Investing Activities

Net cash used in investing activities in 2010 was $687,096, compared to $1,709,057 of net cash provided in 2009. Management attributes the change primarily to the maturity in late December 2009 of $1,200,000 principal amount of certificates of deposit and the reinvestment of the proceeds after December 31, 2009.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Impact of Inflation

Generally, 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 has had only a minor impact on our operations during the fiscal years ended December 31, 2010 and 2009.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our 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.

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We also have exposure to market risk for changes in interest rates due primarily to the following:

•

Cash: 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. If interest rates were to decrease, we would earn less interest income on our cash balances.

•

Short-term Investments: We invest excess 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. As of December 31, 2010, all of our short-term investments were in certificates of deposit. All of our short-term investments are classified as securities held to maturity. If interest rates were to increase, upon sale or maturity of the certificates of deposit currently held, we would earn more interest income upon reinvestment of the proceeds due to a higher interest rate on the securities then purchased. If interest rates were to decrease, upon sale or maturity of the certificates of deposit currently held, 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.

At December 31, 2010, we had cash of $458,956 and held $1,886,000 in certificates of deposit having a maturity at the time of purchase of more than 91 days but less than one year. Had the average level of interest rates during 2010 been higher or lower by 100 basis points or one percent (1%), our net income would have been approximately $24,931 more or $14,912 less, respectively. The foregoing estimate of the change in net income is based upon quarterly average balances shown on our balance sheets at March 31, June 30, September 30, and December 31, 2010, and reflects the fact that annual interest rates on investments that are less than 1% cannot fall below 0%.

At December 31, 2009, we had cash of $1,651,917 and held $1,200,000 in certificates of deposit having a maturity at the time of purchase of more than 91 days but less than one year. Had the average level of interest rates during 2009 been higher or lower by 100 basis points or one percent (1%), our net income would have been approximately $30,371 more or less, respectively. The foregoing estimate of the change in net income is based upon quarterly average balances shown on our balance sheets at March 31, June 30, September 30, and December 31, 2009.

We had no interest-bearing debt outstanding during 2010 or 2009.

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

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Item 8. Financial Statements and Supplementary Data

See Part IV, “Item 15. Exhibits and Financial Statement Schedules," for the response to this item.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (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.

Our management has the responsibility for establishing and maintaining adequate disclosure controls and procedures. 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 involving the evaluation of the disclosure controls and procedures and 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 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. Stowell 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.

Internal Control Over Financial Reporting

The following report of Management shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.

Our 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.

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In designing 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, 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.

There has 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 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We do not believe any significant deficiencies or material weaknesses exist in our internal control over financial reporting. Accordingly, no corrective actions have been taken.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers, and Corporate Governance

General Partner

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 real estate management, and has served as general partner since May 15, 1980.

Officers and Directors of the General Partner

Davis P. Stowell, 54, President and Director of the General Partner. Mr. Stowell has been President and a director of Grace Property Management, Inc. since 2003. He was Vice President of the General Partner from 1993 to 2003. He is also an officer of affiliates of Grace Property Management, Inc., most of which positions he has held since 1989.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires that reports of beneficial ownership of partnership units and changes in such ownership be filed with the Securities and Exchange Commission 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 year ended December 31, 2010. To our knowledge, based solely upon a review of all Section 16(a) filings furnished to us by Section 16(a) reporting persons or written representations that no such reports were required, during the fiscal year ended December 31, 2010, all Section 16(a) reporting persons complied with all Section 16(a) filing requirements applicable to them.

Code of Ethics

In connection with its role as our general partner, the General Partner 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 2010. 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. Davis P. Stowell, President, Grace Property Management, Inc., 55 Brookville Road, Glen Head, NY 11545.

Nominating Committee

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Audit Committee

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. The General Partner has no committees, including an audit committee. The Board of Directors of the General Partner functions in the capacity of an audit 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 11. Executive Compensation

The total compensation earned by the General Partner during each of the last three fiscal years ended December 31 is set forth in Table 7, below.

TABLE 7: SUMMARY COMPENSATION TABLE FOR FISCAL YEARS ENDING DECEMBER 31, 2010, 2009, AND 2008
Name and Principal Position	Year	General Partner Fee [a]
Grace Property Management, Inc.,General Partner	2010	$	160,000
	2009		160,000
	2008		160,000

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

During 2010, payments made by us to the General Partner totaled $160,000, representing general partner fees for the first, second, and third quarters 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. During 2008, payments made by us to the General Partner totaled $160,000, representing general partner fees for the first, second, and third quarters of 2008 as well as the fourth quarter of 2007. 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. As of December 31, 2008, general partner fees accrued but not paid to Grace Property Management, Inc. totaled $40,000, representing general partner fees for the fourth quarter of 2008. 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.

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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.

As of December 31, 2010, we had a group life 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.

See “Item 13. Certain Relationships and Related Transactions, and Director Independence” for other payments made to affiliates of the General Partner.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

We have no compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.

Security Ownership of Certain Beneficial Owners

As of March 23, 2011, we had 1,811,062 partnership units issued and outstanding. Information as of March 23, 2011 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 8, below.

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TABLE 8: 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		182,434[d	]		10.1	%
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	%

Notes:
[a]	Unless otherwise indicated, each of the persons named has sole voting and investment power.
[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.
[c]	Information was obtained from Schedule 13G, Amendment No. 3 filed with the Securities and Exchange Commission on February 1, 2011 as an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. The party’s Schedule 13G, Amendment No. 3 states that the party has sole voting power as to 183,157 units, and sole dispositive power as to 233,507 units.
[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.
[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.

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Security Ownership of Management

Information as of March 23, 2011 concerning the number of partnership units beneficially owned by (1) Grace Property Management, Inc., the General Partner, (2) each director of Grace Property Management, Inc., and (3) the directors and executive officers of Grace Property Management, Inc. as a group is set forth in Table 9, below.

TABLE 9: 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	%
Davis P. Stowell [b]		—[c	]		—
All directors and officers of the general partner as a group (1 person)		—[c	]		—

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.

Changes in Control

We 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.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Transactions with Related Persons

For 2010, 2009, and 2008, the General Partner and its affiliates charged us for general partner fees, rent, and reimbursement of expenses as set forth in Table 10, 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 2010, 2009, and 2008, reflect amounts previously accrued and unpaid. See “Item 11. Executive Compensation,” for information on general partner fees paid to the General Partner.

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TABLE 10: CHARGES BY GENERAL PARTNER AND ITS AFFILIATES 2008 - 2010
	2010		2009		2008
General partner fee	$	160,000	$	160,000	$	160,000
Rent for office space		19,000		19,000		19,000
Reimbursement of expenses		—		1,301		190

An affiliate of the General Partner charges us for office space used by officers of the General Partner. The amounts charged for 2010, 2009, and 2008, are set forth in Table 10, above. The amount paid by us during 2010 was $19,000, which represents rent for the first, second, and third quarters of 2010 as well as the fourth quarter of 2009. The amount paid by us during 2009 was $19,000, which represents rent for the first, second, and third quarters of 2009 as well as the fourth quarter of 2008. 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, 2010, the amount of accrued but unpaid rent was $4,750.

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 2010, 2009, and 2008 are set forth in Table 10, above. At March 23, 2011 and December 31, 2010, we owed nothing with respect to reimbursement of out-of-pocket expenses.

The General Partner and its affiliates charge us late fees on amounts not timely paid, with interest at an annual rate of 10%, compounded quarterly. No amounts were charged for 2010, 2009, or 2008.

Except 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, 2010 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).

Review, Approval, or Ratification of Transactions with Related Persons

The General Partner has the ultimate authority to approve all related party transactions.

Director Independence

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

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Item 14. Principal Accountant Fees and Services

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.

The financial statements for the year ended December 31, 2009 were reported on by Frazer Frost. Frost has assumed responsibility for the Frazer Frost audit of the Partnership for the year ended December 31, 2009 and all subsequent interim periods.

The General Partner approved the appointment of Frost as our independent registered public accountants for the fiscal year ended December 31, 2010.

Table 11, below, details the aggregate fees for professional services and expenses by our Independent Registered Public Accounting firm during 2010 and 2009.

TABLE 11: FEES FOR PROFESSIONAL SERVICES BY THE PARTNERSHIP'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
			Year Ended December 31,
			2010		2009

Audit fees	[a	]	$	44,038	$	50,365
Audit-related fees				—		—
Tax compliance fees				—		—
Other fees				—		—
			$	44,038	$	50,365

Notes:
[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, 2010 and 2009. Amounts for the fiscal year ended December 31, 2009 are for Frazer Frost. All other amounts are for Frost.

Approval Process

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.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements

The documents filed as part of this report are listed in the Index to Financial Statements set forth in Table 12 below.

TABLE 12: 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, 2010 and 2009	F-2
	Statements of Operations for the years ended December 31, 2010, 2009, and 2008	F-3
	Statements of Changes in Partners’ Capital for the years ended December 31, 2010, 2009, and 2008	F-4
	Statements of Cash Flows for the years ended December 31, 2010, 2009, and 2008	F-5
	Notes to Financial Statements	F-6-13

Financial Statement Schedules

The financial statement schedules filed as part of this report are listed in the Index to Financial Statement Schedules set forth in Table 13, below. All other required supplemental financial schedules are either contained within the notes to the financial statements or are not applicable.

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TABLE 13: 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

Exhibits

A complete listing of exhibits, including those incorporated by reference, is shown on Table 14, below. All other exhibits are not applicable.

TABLE 14: 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		The Ingram & Company, Inc. appraisal of the Boiling Spring Lakes property as of December 31, 2009. Filed as Exhibit 99.1 to the Partnership’s Annual Report on Form 10-K filed on March 30, 2010. [a]

Notes:
[a]	Incorporated herein by reference.

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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.

REEVES TELECOM LIMITED PARTNERSHIP

Signatures	Title	Date

By: Grace Property Management, Inc.	General Partner	March 31, 2011

By: /s/ DAVIS P. STOWELL
Davis P. Stowell
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date


By: /s/ DAVIS P. STOWELL	President and Director of	March 31, 2011
Davis P. Stowell	General Partner
	(Principal Executive Officer,
	Principal Financial Officer, Principal Accounting Officer)

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REEVES TELECOM LIMITED PARTNERSHIP

December 31, 2010 and 2009

Financial Statements

And

Supplementary Information

With

Report of Independent Registered Public Accounting Firm

Table of Contents

		Page

Financial Statements

	Report of Independent Registered Public Accounting Firm	1

	Balance Sheets	2

	Statements of Operations	3

	Statements of Changes in Partners’ Capital	4

	Statements of Cash Flows	5

	Notes to Financial Statements	6 – 13

Supplementary Information

	Independent Registered Public Accounting Firm
	Report on Supplementary Information	14

	Valuation and Qualifying Accounts	15

	Real Estate and Accumulated Depreciation	16

	Reconciliation of Gross and Net Book Value	17

Report of Independent Registered Public Accounting Firm

Partners

Reeves Telecom Limited Partnership

Glen Head, New York

We have audited the accompanying balance sheets of Reeves Telecom Limited Partnership as of December 31, 2010 and 2009, 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, 2010. The Partnership’s management is responsibility for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company 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 material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 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.

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, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2010 in conformity with U.S. generally accepted accounting principles.

	\s\ FROST, PLLC
	Certified Public Accountants

Little Rock, Arkansas

March 30, 2011

F-1

REEVES TELECOM LIMITED PARTNERSHIP

Balance Sheets

December 31, 2010 and 2009

	2010		2009
Assets

Cash and cash equivalents	$	458,956	$	1,651,917
Certificates of deposit		1,886,000		1,200,000
Accrued interest receivable		10,124		981
Properties held for sale and property and equipment
Properties held for sale		393,948		393,948
Property and equipment, net		231,489		234,172

	$	2,980,517	$	3,481,018


Liabilities and Partners' Capital

Liabilities
Accounts payable and accrued expenses	$	181,142	$	198,494
Accrued expenses - affiliates		44,750		44,750
Total liabilities		225,892		243,244

Commitments and contingencies

Partners' capital
Issued and outstanding 1,811,062 and 1,811,262 units at
December 31, 2010 and 2009, respectively		2,754,625		3,237,774

Total liabilities and partners' capital	$	2,980,517	$	3,481,018

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

F-2

REEVES TELECOM LIMITED PARTNERSHIP

Statements of Operations

	2010			2009			2008
Revenues
Property sales	$	-		$	17,904		$	-
Interest income		14,923			33,270			96,047
Other revenue		2,673			97			25,764
Total revenues		17,596			51,271			121,811

Operating expenses
Direct costs of property sold		-			6			-
Selling, general and administrative expenses		496,966			512,916			534,710
Depreciation		3,779			3,846			3,846
Total operating expenses		500,745			516,768			538,556

Net loss	$	(483,149	)	$	(465,497	)	$	(416,745	)

Loss per Partnership unit	$	(0.27	)	$	(0.26	)	$	(0.23	)

Partnership weighted-average units issued
and outstanding		1,811,262			1,811,454			1,811,562

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

F-3

REEVES TELECOM LIMITED PARTNERSHIP

Statements of Changes in Partners’ Capital

Balance - January 1, 2008	$	4,120,016

Net loss		(416,745	)

Balance - December 31, 2008		3,703,271

Net loss		(465,497	)

Balance - December 31, 2009		3,237,774

Net loss		(483,149	)

Balance - December 31, 2010	$	2,754,625

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

F-4

REEVES TELECOM LIMITED PARTNERSHIP

Statements of Cash Flows

	2010			2009			2008
Cash flows from operating activities
Net loss	$	(483,149	)	$	(465,497	)	$	(416,745	)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation		3,779			3,846			3,846
Changes in operating assets and liabilities
Accrued interest receivable		(9,143	)		11,521			(12,502	)
Property held for sale, net		-			6			(14,622	)
Accounts payable and accrued expenses		(17,352	)		14,246			(6,406	)
Accrued expenses - affiliates		-			-			(3,221	)
Net cash used by operating activities		(505,865	)		(435,878	)		(449,650	)

Cash flows from investing activities
Purchases of land improvements and equipment		(1,096	)		(50,943	)		-
Principal payment on note receivable		-			-			128,823
Purchases of certificates of deposit		(3,091,000	)		(3,840,000	)		(7,021,807	)
Proceeds from sale of certificates of deposit		2,405,000			5,600,000			7,401,000
Net cash provided (used) by investing activities		(687,096	)		1,709,057			508,016

Net increase (decrease) in cash and cash equivalents		(1,192,961	)		1,273,179			58,366

Cash and cash equivalents - beginning of year		1,651,917			378,738			320,372

Cash and cash equivalents - end of year	$	458,956		$	1,651,917		$	378,738

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

F-5

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

1.	Nature of Operations

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. 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 (the “Partnership”). Stockholders of the Corporation received one partnership unit in exchange for each share of common stock. The offering of the units is registered under the Securities Act of 1933, but the units are not listed on any national securities exchange. In 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. From the liquidation of the remaining assets, the Partnership may acquire additional properties or make distributions to the partners. The Partnership currently has no intent to acquire additional properties but is not precluded from doing so.

Pursuant to the Plan, the Corporation sold all of its broadcasting assets and substantially all of the land held for development and sale at one of its two land development locations and distributed to its stockholders cash of $.90 per share on February 29, 1980 and $2.30 per share on May 14, 1980.

The remaining assets of the Partnership are primarily land held for sale, certificates of deposit and cash. The cash was generated from real estate sales including the sale of a golf club. During the first quarter of 2001, the Partnership sold the golf club.

The Partnership intends to continue to sell lots in the normal course of business and, while no assurances can be given, the Partnership believes the carrying value of the remaining lots is less than their net realizable value. Should the Partnership elect to affect a bulk sale and/or abandonment, the net amount realized could be less than the carrying value.

The Partnership’s Managing General Partner is Grace Property Management, Inc.

2.	Summary of Significant Accounting Policies

Basis of accounting – The accompanying financial statements have been prepared using the accrual basis of accounting.

Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-6

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

2.	Summary of Significant Accounting Policies (cont.)

Property sales – Property sales represent individual building lots and other undeveloped land sold for cash and the gross sales price of residential houses built or acquired by the Partnership for resale. The revenue from these sales is recognized at the closing date unless a deferral is required pursuant to Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 360-20, “Real Estate Sales.” Land cost included in direct costs of property sold represents the proportionate amount of the total initial project costs, after recorded valuation allowances, based on the sales value of the lot to the total estimated project sales value plus the value per lot of any capital improvements made subsequent to the initial project costs.

Properties held for sale and property and equipment – Property and equipment are stated at cost less accumulated depreciation. Depreciation for financial reporting purposes is calculated on the straight-line basis over the estimated useful lives of 8 to 40 years for buildings and 5 to 20 years for equipment and land improvements.

Properties held for sale generally represent undeveloped lots for which depreciation expense is not recorded. The Partnership assesses the realizability of the carrying value of its properties held for sale and related buildings and equipment whenever triggering events or changes in circumstance indicate that impairment may have occurred in accordance with the provisions of ASC 60-10, “Property, Plant and Equipment.” The Partnership’s assets have been written down, from time to time, to reflect their fair values based upon appraisals.

Significant concentrations of credit risk – From time to time during 2010, the Partnership maintained cash balances in excess of Federal Deposit Insurance Corporation (“FDIC”) insured amounts. In the event the bank, where the Partnership maintains its accounts, becomes insolvent, the Partnership may lose some or all of such excess over FDIC insured amounts.

At December 31, 2010, the Partnership maintained cash, investments in money market mutual funds and brokered certificates of deposit totaling $1,442,029 at various broker-dealers, or $942,029 in excess of Securities Investor Protection Corporation insured amounts. Although a total of $1,201,000 is invested in brokered certificates of deposit that are fully insured by the FDIC, in the event the broker-dealers, where the Partnership maintains its accounts, become insolvent or amounts in the Partnership are lost or go missing due to fraud or otherwise, the Partnership may lose some or all of such excess over Securities Investor Protection Corporation insured amounts.

Cash and cash equivalents – For purposes of the statements of cash flows, the Partnership considers cash as cash on hand, cash deposited in financial institutions, money market accounts and U.S. Treasury securities with maturities of less than 91 days at the date of purchase. Cash equivalents are stated at cost, which approximates market value.

F-7

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

2.	Summary of Significant Accounting Policies (cont.)

Impairment of long-lived assets – The Partnership’s long-lived assets, primarily real estate held for sale, are carried at cost unless circumstances indicate the carrying value of the assets may not be recoverable. The Partnership obtains an appraisal periodically (typically, every two years) for the Boiling Spring Lakes property and evaluates the carrying value of the property based on such appraisal. The Partnership obtained an appraisal as of December 31, 2009, which did not indicate any impairment should be recognized. The Partnership applies a valuation allowance to land if such land is 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 the Partnership based upon topography. Land the Partnership believes to be suitable for the installation of an individual septic system based upon topography may, by subsequent testing, be determined to be unsuitable. More typically, land the Partnership believes to be unsuitable for septic based upon topography may, by subsequent testing, be determined to be suitable. The valuation allowance is allocated among the land held for sale only following each periodic appraisal, while the determination of a particular lot or parcel of land as being suitable or unsuitable for septic may be made at any time prior to the sale of such land. Since the direct cost of land sold is net of the applicable valuation allowance, the direct cost of a lot or parcel of land the Partnership believes to be suitable for septic that, on the basis of testing, is subsequently determined to be unsuitable may, therefore, exceed the sales price of such land, in which case the Partnership would realize a loss on the sale of such land. To the best of management’s knowledge, the Partnership has never realized such a loss, and if such a loss or losses were to occur, management believes the aggregate amount of such losses would not materially affect the Partnership’s financial condition or results from operations.

Advertising costs – Advertising costs of $7,783, $4,494 and $11,308 were expensed as incurred during the years ended December 31, 2010, 2009 and 2008, respectively.

3.	Properties Held for Sale and Property and Equipment

The Partnership obtained an independent appraisal report dated February 25, 2010 valuing the properties held for sale at December 31, 2009. Based upon this appraisal, management determined that no additional valuation allowances were required. Management believes the properties held for sale are not reported in excess of their fair values at December 31, 2010 or 2009.

A summary of properties held for sale and property and equipment at December 31, 2010 and 2009 is as follows:

	2010			2009
Properties held for sale
Boiling Spring Lakes land held for sale	$	932,862		$	932,862
Less valuation allowance		(538,914	)		(538,914	)
Total properties held for sale		393,948			393,948

F-8

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

3.	Properties Held for Sale and Property and Equipment (cont.)

	2010			2009
Property and equipment
Land and land improvement	$	248,738		$	248,506
Buildings		58,301			58,301
Equipment		11,045			10,182
		318,084			316,989
Less accumulated depreciation		(86,595	)		(82,817	)
Total property and equipment, net		231,489			234,172

Total properties held for sale and property
and equipment, net	$	625,437		$	628,120

4.	Investments

At December 31, 2010 and 2009, investments consist of certificates of deposit held with various financial institutions. The fair market value of the investments may fluctuate depending on changes in interest rates. Fair market value was $1,885,245 and $1,199,393 at December 31, 2010 and 2009, respectively. The net unrealized gains (losses) were $(755), $(607) and $2,811 at December 31, 2010, 2009 and 2008, respectively. Cost was $1,886,000 and $1,200,000 at December 31, 2010 and 2009, respectively. Investment income was $14,798, $32,837 and $84,963 at December 31, 2010, 2009 and 2008, respectively.

5.	Accrued Expenses – Affiliates

A summary of accrued expenses owed to affiliates at December 31, 2010 and 2009 is as follows:

	2010		2009

General Partner's fees	$	40,000	$	40,000
Rent		4,750		4,750

	$	44,750	$	44,750

General Partner’s fees represent amounts owed to the General Partner. Rent represents amounts owed to certain affiliates of the General Partner. From time to time, the General Partner and its affiliates charge the Partnership interest on amounts owed to them. See Note 6 for additional information regarding related party transactions.

F-9

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

6.	Related Party Transactions

The General Partner and its affiliates charged the Partnership for services and office space for the years ended December 31, 2010, 2009 and 2008 as follows:

	2010		2009		2008

General Partner's fees	$	160,000	$	160,000	$	160,000
Rent for office space		19,000		19,000		19,000
Reimbursement of other expenses		-		1,301		190

	$	179,000	$	180,301	$	179,190

Fees charged by the general partner are determined on an annual basis and represent services provided by the general partner for management, financial statement preparation and Securities and Exchange Commission filings throughout the year.

7.	Income Taxes

No provision has been made for federal income taxes since income or loss is includable in the partners’ returns as they report to tax authorities in their respective capacities as partners. There were no state income taxes paid in 2010 or 2009.

8.	Commitments and Contingencies

Dam Repairs

The Partnership is responsible for the maintenance and repair of an earthen dam designed to retain water in one of the lakes. The dam was breeched in 1996 and the Partnership has spent approximately $185,000 in repairs since 2001. The Partnership intends to deed the dam to the City of Boiling Spring Lakes, but the city has required additional repairs before accepting ownership. The Partnership believes that damage to the dam, such as could occur during a hurricane or a flood, before the transfer of title could result in significant additional repair costs.

Commitment for Municipal Water and Sewer Services

Most of the land owned by the Partnership lacks municipal water and sewer service. The City of Boiling Spring Lakes began to phase in municipal water service to certain portions of the development in 2004. A significant portion of the costs of water distribution and sewer lines to land owned by the Partnership must be borne by the Partnership or by subsequent purchasers of the land. In 2009, the City of Boiling Spring Lakes began work on an expansion of the municipal water system. That expansion was completed in January 2011. The cost of the expansion is to be borne by owners of land directly passed by new water mains by the payment of an assessment of $500 per lot plus a tap fee of $860 per lot containing a dwelling. The Partnership’s total assessment was determined to be $49,500 based upon a formula that allows adjoining lots to be aggregated into a

F-10

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

8.	Commitments and Contingencies (cont.)

group and counted as one lot for assessment purposes. Should the Partnership sell some, but not all of the lots that were aggregated into a group, an additional assessment may have to be paid by the Partnership with respect to such lots at the time the sale of such lots is closed. The Partnership capitalized $49,500 of assessments in 2009 by increasing the cost basis of land affected.

Environmental Matters

The Partnership is subject to various federal, state and local laws, ordinances and regulations regarding environmental matters. The Partnership may be required to investigate and clean up hazardous or toxic substances or petroleum product releases on land currently or formerly owned by it, and may be 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 the Partnership was aware, 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 cost of investigation, removal and decontamination of substances could be substantial. If such substances are found on land currently owned by the Partnership, 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 contaminated site in favor of the government for damages and cost it incurs in connection with such contamination. The Partnership may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. As of the date of this report, the Partnership is not aware of any environmental matters that would have a material effect on the financial statements and, accordingly, the Partnership has accrued no liabilities in these financial statements. However, it is at least reasonably possible that such matters may exist at the date of this report, and the effect on the Partnership and these financial statements could be substantial.

Endangered/Protected Species

Portions of Boiling Spring Lakes and surrounding area are known as or believed to be the habitat of various species of flora and fauna which have been identified as endangered or protected species. Development of the Partnership’s land is subject to various laws and regulations intended to limit disturbance of endangered and protected species.

The red-cockaded woodpecker is one endangered species known to inhabit portions of Boiling Spring Lakes. During 2006, the U.S. Fish and Wildlife Service undertook certain initiatives to preserve the habitat of the endangered woodpecker, and for a portion of 2006, the City of Boiling Spring Lakes temporarily ceased issuing building permits altogether for land in the proximity of a known or suspected nesting site. The Partnership believes that not more than approximately 200 acres, or approximately 24%, of the Partnership’s land may be affected by restrictions relating to the red-cockaded woodpecker, although the amount of land affected could increase under certain circumstances. Management believes that the Partnership’s land sales will continue to be reduced compared to past years until the City of Boiling Spring Lakes has developed a conservation plan to protect the habitat of the red-cockaded woodpecker or until other means of addressing the concerns of the U.S. Fish and Wildlife Service can be implemented.

F-11

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

8.	Commitments and Contingencies (cont.)

The Partnership has not made any representations or warranties to buyers of land as to the red-cockaded woodpecker or to protected or endangered species generally. Nevertheless, it is reasonably possible that one or more such buyers may seek compensation from the Partnership or seek rescission of their purchase of land from the Partnership, owing to the presence of protected or endangered species on or near the land or to restrictions on issuing building permits designed to preserve the habitat of protected or endangered species, preventing such buyer from utilizing the land in the matter intended. If any litigation is instituted seeking compensation or rescission due to endangered and protected species, the Partnership believes that it would prevail on the merits. As of the date of this report, there is no pending litigation, and the Partnership is not aware of any potential claims or actions relating to these matters. The Partnership has made no provision in the financial statements related to this contingent liability

Water Level of Lakes

The Partnership believes the lakes within the City of Boiling Spring Lakes are recreational and scenic attractions to potential buyers of land from the Partnership. The Partnership’s ability to sell land at its asking prices would be adversely affected if the water level in the lakes was substantially below normal for any length of time. Due to drought or near-drought conditions for much of 2007, nearly all the lakes within the City of Boiling Spring Lakes had a water level substantially below normal. These conditions resulted in a lowering of the water level, and sinkholes developed in the bed of Boiling Spring Lake, the largest lake in the community. Remedial measures taken by the city solved the issue of the sinkholes; however, the lack of normal rainfall prevented the lakes, including Boiling Spring Lake, from returning to approximately normal levels for some time after the remedial measures were taken. The water level of most of the lakes, including Boiling Spring Lake, has since returned to approximately normal. The Partnership has not made any representations or warranties to buyers of land as to the water level in the lakes. Nevertheless, it is reasonably possible that one or more of such buyers may seek compensation from the Partnership or seek rescission of their purchase of land from the Partnership, owing to the water level of the lakes being substantially below normal, whether due to damage to the dam, protracted drought conditions or otherwise. If any litigation is instituted seeking compensation or rescission, the Partnership believes that it would prevail on the merits, although no such assurances can be given, but the cost of defending such litigation could be substantial. As of the date of this report, there is no pending litigation, and the Partnership is not aware of any potential claims or actions in these matters. The Partnership has made no provision in the financial statements related to this contingent liability.

Building and Maintaining Roads

The Partnership is responsible for maintaining certain roads, most of which are unpaved, and certain road rights-of-way within the City of Boiling Spring Lakes. The Partnership may complete some or all of the roads, but there is no contractual obligation to do so. The Partnership has not set aside any money or entered into any bond, escrow or trust agreement to assure completion of the roads. It may be difficult or impossible for the Partnership to sell lots located on uncompleted roads. The City of Boiling Spring Lakes will not assume any road that is not paved with asphalt and the City of Boiling Spring Lakes need not assume any paved road. Accordingly, unless and until the Partnership completes a road and has it paved with asphalt, and the road has been assumed by the

F-12

REEVES TELECOM LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 2010 and 2009

8.	Commitments and Contingencies (cont.)

City of Boiling Spring Lakes, the Partnership will be responsible for maintaining such road and the right-of-way. Since 2001, the Partnership has spent approximately $193,000 for rocking and paving roads. The failure by the Partnership to provide proper maintenance of the roads and rights-of-way which have not been assumed by the City of Boiling Spring Lakes may subject the Partnership to substantially greater risk of litigation from persons adversely affected by such failure. If such litigation were to be initiated, management believes that the Partnership would prevail, but that the cost of defending the case could be material, and should the Partnership not prevail, the cost of building any such road could be material.

F-13

Independent Registered Public Accounting Firm

Report on Supplementary Information

Partners

Reeves Telecom Limited Partnership

Glen Head, New York

Our report on our audits of the basic financial statements of Reeves Telecom Limited Partnership as of December 31, 2010 and 2009 appears on page 1. Those audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules on pages 15 through 17 are not a required part of the basic financial statements but are supplementary information required by the Securities and Exchange Commission. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

	/s/FROST, PLLC
	Certified Public Accountants

Little Rock, Arkansas

March 30, 2011

F-14

REEVES TELECOM LIMITED PARTNERSHIP

Valuation and Qualifying Accounts

			Additions
	Balance at		Charged to					Changes		Balance at
	Beginning of		Costs and					Add		End of
	Period		Expenses		Deductions			(Deduct)		Period

For the year ended December 31, 2010
RE valuation allowance	$	538,914	$	-	$	-		$	-	$	538,914

For the year ended December 31, 2009
RE valuation allowance	$	539,373	$	-	$	(459	)	$	-	$	538,914

For the year ended December 31, 2008
RE valuation allowance	$	539,373	$	-	$	-		$	-	$	539,373

NOTES:

(1)	Additions to the real estate valuation allowance charged to costs and expenses reduce the reported book value of certain real estate held for sale to approximate market.

(2)	Deductions to the real estate valuation allowance reflect the sale of real estate to which the valuation allowance applies.

See independent registered public accounting firm report on supplementary information.

F-15

REEVES TELECOM LIMITED PARTNERSHIP

Real Estate and Accumulated Depreciation

Life Upon

Which

Depreciation

Cost

in Latest

Capitalized

Gross Amount

Income

Initial Cost to

Subsequent to

Carried at

Accumulated

Net Book

Date of

Statement is

Description

Encumbrances

Partnership

Acquisition

End of Period

Depreciation

Value

Acquisition

Computed

Boiling Spring Lakes, North Carolina

Building lots and land

557,042

375,820

932,862

May 1980

N/A

NOTES:

(1)	All building lots and land held for sale are unimproved.

(2)

The amounts shown for building lots and land in Boiling Spring Lakes do not reflect valuation allowance of $538,914 at December 31, 2010. See Valuation and Qualifying Accounts on page 15. The valuation allowance, established in previous years to reduce the carrying value of the Partnership’s land in Boiling Spring Lakes to approximate market value, is reviewed from time to time to determine its adequacy and is reduced as land is sold.

See independent registered public accounting firm report on supplementary information.

F-16

REEVES TELECOM LIMITED PARTNERSHIP

Reconciliation of Gross and Net Book Value

	Gross			Accumulated		Net
	Book Value			Depreciation		Book Value
Year Ended December 31, 2010
Balance - beginning of period	$	932,862		$	-	$	932,862
Additions during period
Improvements		-			-		-
Deductions during period
Cost of real estate sold		-			-		-

Balance - end of period	$	932,862		$	-	$	932,862

Year Ended December 31, 2009
Balance - beginning of period	$	883,204		$	-	$	883,204
Additions during period
Improvements		50,123			-		50,123
Deductions during period
Cost of real estate sold		(465	)		-		(465	)

Balance - end of period	$	932,862		$	-	$	932,862

Year Ended December 31, 2008
Balance - beginning of period	$	868,582		$	-	$	868,582
Additions during period
Improvements		14,622			-		14,622

Balance - end of period	$	883,204		$	-	$	883,204

NOTE:

(1)	Cost of real estate sold does not reflect valuation allowances. See Valuation and Qualifying Accounts on page 15.

See independent registered public accounting firm report on supplementary information.

F-17

Attached files

REEVES TELECOM LTD PARTNERSHIP Reports

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