UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
       OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1997

                                       OR

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

For the transition period from ________ to ___________

Commission file number: 1-9496


                          BODDIE-NOELL PROPERTIES, INC.
             (Exact name of Registrant as specified in its charter)

Maryland                                                     56-1574675
State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization                                Identification No.)

              3710 One First Union Center, Charlotte, NC 28202-6032
               (Address of principal executive offices) (Zip Code)

                                  704/333-1367
                         (Registrant's telephone number)

                 State of incorporation changed from Delaware to
                       Maryland effective July 31, 1997.

         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 ____

                      APPLICABLE ONLY TO CORPORATE ISSUERS:
         Indicate the number of shares outstanding of each of the registrant's
 classes of common stock, as of August 8, 1997 (the latest practicable date).

Common Stock, $.01 par value                                 3,113,540
(Class)                                                      (Number of shares)

Index to exhibits at page 15                          Total number of pages: 38

                                       1
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

  Item No.                                                                                   Page No.
         <S>          <C>                                                                        <C>
                       PART I - Financial Information
          1            Financial Statements                                                        3
          2            Management's Discussion and Analysis of Financial Condition
                       and Results of Operations                                                   8

                       PART II - Other Information
          4            Submission of Matters to a Vote of Security Holders                        13
          5            Other Information                                                          13
          6            Exhibits and Reports on Form 8-K                                           13

</TABLE>



                                       2
<PAGE>



                         PART I - Financial Information

Item 1. Financial Statements.

BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>

                                                                                    June 30           December 31
                                                                                      1997               1996
                                                                               ------------------- ------------------
                                                                                  (Unaudited)
<S>                                                                              <C>                 <C>
Assets
Real estate investments at cost:
   Apartment properties                                                            $ 66,956,648        $ 66,610,048
   Restaurant properties                                                             43,205,075          43,205,075
                                                                               ------------------- ------------------
                                                                                    110,161,723         109,815,123
   Less accumulated depreciation                                                    (12,739,629)        (11,461,365)
                                                                               ------------------- ------------------
                                                                                     97,422,094          98,353,758
Cash and cash equivalents                                                             1,211,595             842,604
Rent and other receivables                                                               17,455              12,695
Prepaid expenses and other assets                                                       544,453             392,302
Investment in and advances to Management Company                                        224,748             261,598
Notes receivable                                                                        843,920                   -
Intangible related to acquisition of management operations, net                       2,813,514           2,744,912
Deferred financing costs, net                                                           715,973             828,113
                                                                               =================== ==================
         Total assets                                                              $103,793,752        $103,435,982
                                                                               =================== ==================

Liabilities and Shareholders' Equity
Mortgage and other notes payable                                                   $ 70,896,540        $ 70,295,957
Notes payable to affiliates                                                           7,056,300           7,056,300
Accounts payable and accrued expenses                                                   776,829             476,938
Additional consideration due to former BTVC shareholders                                430,469             355,570
Escrowed security deposits and deferred revenue                                         302,997             348,779
                                                                               ------------------- ------------------
      Total liabilities                                                              79,463,135          78,533,544

Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized, 3,113,540 shares
   issued and outstanding at June 30, 1997,
   3,074,647 shares issued and outstanding at December 31, 1996                          31,135              30,746
Additional paid-in capital                                                           35,017,136          34,522,816
Dividends distributed in excess of net income                                       (10,717,654)         (9,651,124)
                                                                               ------------------- ------------------
      Total shareholders' equity                                                     24,330,617          24,902,438
                                                                               =================== ==================
         Total liabilities and shareholders' equity                                $103,793,752        $103,435,982
                                                                               =================== ==================
</TABLE>

                                       3
<PAGE>



BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>

                                                       Three months ended                  Six months ended
                                                            June 30                             June 30
                                                     1997              1996             1997              1996
                                               ----------------- ----------------- ---------------- -----------------
<S>                                               <C>               <C>               <C>              <C>
Revenues
Apartment rental income                            $ 2,638,539       $ 2,439,621       $ 5,226,276      $ 4,582,363
Restaurant rental income                             1,125,000         1,125,000         2,250,000        2,250,000
Equity in income of Management Company                  57,643            48,870           164,233           76,288
Interest and other income                               45,157            10,501            78,445           22,846
                                               ----------------- ----------------- ---------------- -----------------
                                                     3,866,339         3,623,992         7,718,954        6,931,497

Expenses
Depreciation                                           639,207           603,460         1,278,414        1,159,441
Amortization                                           148,848           133,218           293,538          255,507
Apartment operations                                   811,782           694,125         1,645,491        1,360,172
Administrative                                         316,410           265,854           543,493          498,080
Interest                                             1,567,287         1,491,997         3,104,430        2,843,785
                                               ----------------- ----------------- ---------------- -----------------
                                                     3,483,534         3,188,654         6,865,366        6,116,985
                                               ================= ================= ================ =================
Net income                                         $   382,805       $   435,338       $   853,588      $   814,512
                                               ================= ================= ================ =================


Per share data:
   Net income                                            $0.12             $0.14             $0.28            $0.27
                                               ================= ================= ================ =================
   Dividends declared                                     0.31              0.31              0.62             0.62
                                               ================= ================= ================ =================
   Weighted average shares outstanding               3,108,436         3,016,740         3,098,415        3,016,740
                                               ================= ================= ================ =================

</TABLE>

                                       4
<PAGE>



BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>

                                                                                       Dividends
                                                                      Additional      distributed
                                            Common Stock                paid-in       in excess of
                                       Shares          Amount           capital        net income         Total
                                   --------------- ---------------- ---------------- --------------- ----------------
<S>                                   <C>               <C>          <C>             <C>              <C>
Balance at December 31, 1996           3,074,647         $30,746      $34,522,816     $ (9,651,124)    $24,902,438

Net income                                     -               -                -          470,783         470,783
Common stock issued, DRIP                 12,036             121          154,844                -         154,965
Common stock issued, earnout              16,300             163          208,273                -         208,436
Dividends paid ($0.31)                         -               -                -         (958,194)       (958,194)
                                   --------------- ---------------- ---------------- --------------- ----------------
Balance at March 31, 1997              3,102,983          31,030       34,885,933      (10,138,535)     24,778,428
Net income                                     -               -                -          382,805         382,805
Common stock issued, DRIP                 10,557             105          131,203                -         131,308
Dividends paid ($0.31)                         -               -                -         (961,924)       (961,924)
                                   =============== ================ ================ =============== ================
Balance at June 30, 1997               3,113,540         $31,135      $35,017,136     $(10,717,654)    $24,330,617
                                   =============== ================ ================ =============== ================
</TABLE>

                                       5
<PAGE>




BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>

                                                                                            Six months ended
                                                                                                 June 30
                                                                                         1997              1996
                                                                                    ---------------- -----------------
<S>                                                                                   <C>              <C>
Cash flows from operating activities:
Net income                                                                             $    853,588     $    814,512
Adjustments to reconcile net income to
   net cash provided by operations:
   Equity in income of Management Company                                                  (164,233)         (76,288)
   Depreciation and amortization                                                          1,571,952        1,414,948
   Changes in operating assets and liabilities:
      Rent and other receivables                                                             (4,760)         235,112
      Prepaid expenses and other assets                                                    (148,755)         (45,988)
      Accounts payable and accrued expenses                                                 299,895          206,502
      Security deposits and deferred revenue                                                (45,782)          16,849`
                                                                                    ---------------- -----------------
Net cash provided by operating activities                                                 2,361,905        2,565,647

Cash flows from investing activities:
Acquisition of apartment property                                                                 -      (10,666,041)
Additions to apartment properties                                                          (313,416)        (234,975)
Investment in Management Company                                                                  -             (165)
Repayment of advances to Management Company                                                 100,000                -
Dividends received from Management Company                                                   97,687           75,719
Investment in notes receivable                                                             (843,920)               -
                                                                                    ---------------- -----------------
Net cash used in investing activities                                                      (959,649)     (10,825,462)

Cash flows from financing activities:
Proceeds of common stock issued through
   dividend reinvestment plan                                                               286,270                -
Payment of dividends                                                                     (1,920,118)      (1,870,379)
Proceeds from notes payable                                                                 843,920       10,650,000
Principal payments on notes payable                                                        (243,337)        (224,451)
Payment of deferred financing costs                                                               -         (311,151)
                                                                                    ---------------- -----------------
Net cash provided by (used in) financing activities                                      (1,033,265)       8,244,019
                                                                                    ---------------- -----------------

Net increase (decrease) in cash and cash equivalents                                        368,991          (15,796)
Cash and cash equivalents at beginning of period                                            842,604          700,863
                                                                                    ---------------- -----------------

Cash and cash equivalents at end of period                                             $  1,211,595     $    685,067
                                                                                    ================ =================
</TABLE>

                                       6
<PAGE>




BODDIE-NOELL PROPERTIES, INC.
-------------------------------------------------------------------------------
Notes to Financial Statements - June 30, 1997
(Unaudited)

Note 1.  Interim financial statements

The accompanying financial statements of Boddie-Noell Properties, Inc. (the
"Company") have not been audited by independent accountants, except for the
balance sheet at December 31, 1996, which was derived from the financial
statements included in the Company's 1996 Annual Report on Form 10-K. In the
opinion of the Company's management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the financial position
and results of operations for the periods presented have been included.

Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
These financial statements should be read in conjunction with the Company's 1996
Annual Report on Form 10-K.

The results of the first six months of 1997 are not necessarily indicative of
future financial results.

Note 2.  Note receivable and related financing

Effective February 27, 1997, the Company entered into a participating loan
agreement with The Villages of Chapel Hill Limited Partnership ("The Villages").
Under the terms of this agreement, the Company will loan up to $2,625,000 to The
Villages to fund a substantial rehabilitation of the 264-unit apartment property
owned by The Villages. In addition, the Company has provided a guaranty of
$1,500,000 to a bank on its loan to The Villages. The Company will receive
minimum interest on this loan at the greater of 12.5 percent or 30-day LIBOR
plus 6.125 percent, shared income interest, shared appreciation interest, and
certain loan and annual guaranty fees. The Company plans to fund advances to The
Villages through draws under an existing credit facility with a bank for
borrowings at 30-day LIBOR plus 2.25 percent, secured by deeds of trust on three
apartment properties. The Villages is a North Carolina limited partnership which
is managed by BNP Management, Inc. The general partner in The Villages is Boddie
Investment Company, whose sole shareholders and directors are Chairman and Vice
Chairman of the Company.

Note 3.  Common stock issued

On January 29, 1997, the Company issued 16,300 shares of common stock pursuant
to the earn-out provision of the acquisition agreement for BT Venture
Corporation. On February 14, 1997, and May 15, 1997, the Company issued 12,036
shares and 10,557 shares, respectively, of common stock through its Dividend
Reinvestment and Stock Purchase Plan.

Note 4.  Subsequent declaration of dividend

On July 16, 1997, the Company declared a cash dividend of $0.31 per share, which
will be paid on August 15, 1997, to shareholders of record on August 1, 1997.

Note 5.  Statement No. 128, "Earnings per Share"

In February 1997 the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share is not expected to be material.


                                       7
<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.

Certain matters discussed in this Quarterly Report on Form 10-Q are
forward-looking statements within the meaning of the federal securities laws.
Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. Factors that could cause
actual results to differ materially from the Company's current expectations
include general economic conditions, local real estate conditions, and other
risks detailed from time to time in the Company's SEC reports.

Overview

Boddie-Noell Properties, Inc. is a self-managed, self-advised real estate
investment trust ("REIT"). As of June 30, 1997, the Company owned five apartment
properties containing 1,328 apartments and 47 net-lease restaurant properties.
Through its unconsolidated subsidiary, BNP Management, Inc. (the "Management
Company"), the Company manages an additional seven apartment properties
containing 1,495 apartments and two shopping centers. The Company's headquarters
are in Charlotte, North Carolina, and all of the Company's operations are in the
states of North Carolina and Virginia.

The following discussion should be read in conjunction with the financial
statements and notes thereto included in this Quarterly Report on Form 10-Q and
the Company's audited financial statements and notes thereto included in the
Company's 1996 Annual Report on Form 10-K.

Results of Operations

Revenues. Revenues increased by 6.7 percent for the quarter ended June 30, 1997,
and 11.4 percent for the six months ended June 30, 1997, compared to the same
prior year periods. The increase in revenues for both the three-month and
six-month periods is primarily attributable to improved apartment operations and
the effect of the acquisition of Paces Village Apartments in April 1996.

Apartment rental income increased by 8.2 percent in second quarter 1997 and 14.1
percent through six months of 1997 compared to 1996. Paces Village Apartments,
acquired April 29, 1996, contributed $387,000 second quarter revenues and
$764,000 year-to-date revenues in 1997 compared to $266,000 revenues from
acquisition through June 30 in 1996. For apartment properties held throughout
the entire six months of both 1997 and 1996, apartment rental income increased
by 3.6 percent in second quarter 1997 and 3.4 percent through six months of 1997
compared to 1996.

Summary amounts related to apartment properties occupancy and revenue per
occupied unit are as follows:
<TABLE>
<CAPTION>

                                                                    1997                                    1996
                                    ---------------------------------------------------------------------
                                      Harris                             Paces       Paces
                                       Hill     Latitudes   Oakbrook    Commons     Village    Overall     Overall
<S>                                    <C>        <C>         <C>        <C>         <C>        <C>        <C>
Number of units                          184        448         162        336         198       1,328      1,328

Quarter ended June 30--
Average physical occupancy              94.8%      96.6%       95.1%      97.3%       95.9%       96.2%      93.7%
Average economic occupancy              96.2%      95.3%       95.5%      97.4%       95.6%       96.1%      93.9%
Average monthly revenue/unit            $702        $652        $762       $704        $682        $690       $683
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>

                                                                    1997                                    1996
                                    ---------------------------------------------------------------------
                                      Harris                             Paces       Paces
                                       Hill     Latitudes   Oakbrook    Commons     Village    Overall     Overall
<S>                                    <C>        <C>         <C>        <C>         <C>        <C>        <C>
Six months ended June 30--
Average physical occupancy              93.5%      95.1%       94.3%      96.9%       94.5%       95.1%      93.4%
Average economic occupancy              94.6%      94.1%       94.8%      96.9%       94.5%       95.0%      93.7%
Average monthly revenue/unit            $707        $651        $771       $701        $681        $690       $680
</TABLE>

On a same-units basis, average economic occupancy improved by 2.3 percent for
the quarter and 1.5 percent through six months, and average monthly revenue per
unit improved by 1.2 percent for the quarter and 1.9 percent through six months
of 1997 compared to 1996.

The Company owns apartment properties in Charlotte, North Carolina; Greensboro,
North Carolina; and Virginia Beach, Virginia. The Company's apartments are
priced in the moderate to moderately high range for apartments available within
these markets. Despite a substantial amount of new construction, especially in
Charlotte and Greensboro, these markets have remained relatively strong. This
strength is primarily attributable to demand for apartments created by continued
population and job growth. The Company experienced a nominal reduction in its
average economic occupancy during 1996. The Company has successfully maintained
a slight increase in average monthly revenue per unit through the first two
quarters of 1997 compared to fourth quarter of 1996, and increased occupancy
during the first quarter and again in the second quarter of 1997.

The Company has utilized three techniques to achieve these results: monitoring
and managing lease expiration dates; encouraging residents to sign longer lease
terms, up to 24 months; and providing incentives for residents who renew their
leases. At June 30, 1997, approximately one third of the Company's leases in
effect are for a duration of 13 months or more. While the Company expects some
continued pressure in its markets through 1997, management does not expect this
will have a material adverse effect on the Company's operations or cash flows.

Restaurant rental income was the minimum rent under the lease agreement with
Boddie-Noell Enterprises, Inc. in the first two quarters of both 1997 and 1996.
Under the terms of the lease agreement, restaurant rental income is the greater
of the minimum rent of $4.5 million per year or 9.875 percent of food sales. For
the second quarter of 1997, sales at the Company's restaurants totaled
$11,492,000, a decrease of 3.0 percent compared to second quarter of 1996.
Through six months of 1997, sales at the Company's restaurants totaled
$21,779,000, an increase of 0.4 percent compared to the first six months of
1996. For percentage rent payments to resume, restaurant sales would have to
increase by 1.3 percent over 1996 sales levels.

Equity in income of the Management Company increased significantly year-to-date
in 1997 compared to 1996, primarily due to the Management Company's receipt
during the first quarter of certain one-time refinancing fees from two managed
properties and sales commissions from two managed properties. The increase in
equity income in second quarter of 1997 compared to 1996 is attributable to fees
received by the Management Company for its planning and supervision of a
substantial rehabilitation project at The Villages, one of its managed
properties. Management does not expect the operation of the Management Company
to have a significant effect on the financial position, operating results, or
cash flows of the Company in future periods.

The increase in interest and other income for the second quarter and through six
months of 1997 compared to 1996 is primarily attributable to interest and fees
earned on loans made to facilitate the rehabilitation of The Villages. Effective
February 27, 1997, the Company entered into a participating loan agreement with
The Villages, described in detail in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997. Through June 30, 1997, the
Company has advanced approximately $844,000 under the loan agreement, and has
recorded interest income of approximately $30,000. Interest expense on related
borrowings totals approximately $13,000 through June 30, 1997.

                                       9
<PAGE>

Expenses. Expenses in the second quarter and first half of 1997 were generally
consistent with management's expectations. The increase in depreciation compared
to 1996 amounts reflects the acquisition of Paces Village Apartments ($10.7
million in apartment property assets) in April 1996, along with improvements at
other apartment properties. The increase in amortization expense is primarily
attributable to quarterly additions to the intangible asset related to the
earn-out provision of the 1994 BT Venture Corporation ("BTVC") acquisition
agreement.

Apartment operations expense increased by 17.0 percent in second quarter and
21.0 percent through six months of 1997 compared to 1996. These increases
reflect the impact of the Paces Village acquisition in April 1996, as well as
increased costs associated with attracting and retaining residents in a more
competitive apartment market. Apartment operations expense totaled 30.8 percent
of related income in second quarter 1997 compared to 28.5 percent in second
quarter of 1996, and 31.5 percent of related income through six months of 1997
compared to 29.7 percent through six months of 1996.

Operating expenses relating to restaurant properties are insignificant because
of the restaurant properties' triple net lease arrangement.

The increase in interest expense in the second quarter and through six months of
1997 compared to 1996 is primarily attributable to the addition of $10,650,000
of debt related to the acquisition of Paces Village in the second quarter of
1996. Weighted average interest rates were 8.1 percent in the second quarter of
1997 and 8.0 percent through six months of 1997 compared to 8.0 percent during
the same periods in 1996.

Liquidity and Capital Resources

Capital resources. At June 30, 1997, the Company's total book capitalization was
$102,283,000, comprised of $24,331,000 of shareholders' equity and $77,953,000
of debt.

During the second quarter of 1997, the Company issued 10,557 shares of common
stock under its Dividend Reinvestment and Stock Purchase Plan ("DRIP") for cash
proceeds totaling approximately $131,000.

During the second quarter of 1997, the Company recorded liability for additional
consideration of $141,667 to the former BTVC shareholders pursuant to an
earn-out provision in the BTVC acquisition agreement. No shares were issued
pursuant to this earn-out provision during the second quarter of 1997. Under the
terms of the acquisition agreement, at June 30, 1997, the former BTVC
shareholders were due additional consideration totaling approximately $430,000,
payable at the Company's option in up to 34,021 shares of common stock or in
cash. The earn-out period will end with the quarter ended September 30, 1997. By
agreement, the Company is prohibited from issuing such shares of common stock if
such issuance would cause the Company to become disqualified as a REIT.

During the second quarter of 1997, the Company advanced approximately $494,000
to The Villages under the participating loan agreement, which provides for
interest at the greater of 12.5 percent or 30-day LIBOR plus 6.125 percent plus
shared income interest. These advances were funded by draws under the Company's
1996 credit facility with a bank for borrowings at 30-day LIBOR plus 2.25
percent, secured by second deeds of trust on three apartment properties.

At June 30, 1997, the weighted average interest rate on outstanding debt was 8.1
percent, unchanged from March 31, 1997, with long-term debt comprised of
$60,137,000 at fixed interest rates and $17,816,000 at variable rates indexed on
30-day LIBOR rates. A 1 percent increase in variable rates would increase annual
interest expense by approximately $157,000, while a 1 percent decrease in
variable rates would decrease annual interest expense by approximately $180,000.

                                       10
<PAGE>

Cash flows and liquidity. Funds from operations ("FFO") is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures." Consistent with NAREIT guidelines, the Company
has disregarded all one-time fees received by the Management Company in the
first quarter of 1997 in calculating FFO.

Management considers FFO to be useful in evaluating potential property
acquisitions and measuring the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of the REIT to incur and service debt
and to fund acquisitions and other capital expenditures. FFO does not represent
net income or cash flows from operations as defined by generally accepted
accounting principles ("GAAP"), and FFO should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. FFO does not
measure whether cash flow is sufficient to fund all of the Company's cash needs,
including principal amortization, capital improvements and distributions to
shareholders. FFO does not represent cash flows from operating, investing or
financing activities as defined by GAAP. Further, FFO as disclosed by other
REITs may not be comparable to the Company's calculation of FFO.

A reconciliation of net income to FFO is as follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                            Three months ended              Six months ended
                                                                 June 30                         June 30
                                                           1997            1996           1997            1996
                                                      --------------- --------------- -------------- ---------------
<S>                                                      <C>             <C>            <C>             <C>
Net income                                                $   383         $   435        $   854         $   815
Depreciation                                                  639             603          1,278           1,159
Amortization of management intangible                          93              77            181             150
Less non-recurring equity income items
   excluded from FFO                                            -               -           (103)              -
                                                      --------------- --------------- -------------- ---------------

Funds from operations                                     $ 1,115         $ 1,116        $ 2,210         $ 2,124
                                                      =============== =============== ============== ===============
</TABLE>

Funds available for distribution ("FAD") is defined by the Company as FFO plus
non-cash expense for amortization of loan costs, less payments for scheduled
amortization of debt principal and recurring capital expenditures.

A reconciliation of FFO to FAD, along with summary cash flow information, is as
follows (all amounts in thousands):
<TABLE>
<CAPTION>

                                                            Three months ended              Six months ended
                                                                 June 30                         June 30
                                                           1997            1996           1997            1996
                                                      --------------- --------------- -------------- ---------------
<S>                                                       <C>             <C>            <C>             <C>       
Funds from operations                                      $1,115          $1,116         $2,210          $2,124
Amortization of loan costs                                     56              56            112             105
Scheduled debt principal payments                            (123)           (109)          (243)           (224)
Recurring capital expenditures                               (126)            (77)          (214)           (126)
Non-recurring equity income items
   excluded from FFO                                            -               -            103               -
                                                      --------------- --------------- -------------- ---------------

Funds available for distribution                           $  922          $  986         $1,969          $1,879
                                                      =============== =============== ============== ===============
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                                            Three months ended              Six months ended
                                                                 June 30                         June 30
                                                           1997            1996           1997            1996
                                                      --------------- --------------- -------------- ---------------
<S>                                                     <C>           <C>             <C>            <C>
Net cash provided by (used in):
   Operating activities                                  $  1,166      $    1,325      $   2,362      $    2,566
   Investing activities                                      (532)        (10,584)          (960)        (10,825)
   Financing activities                                      (460)          9,447         (1,033)          8,244

Dividends and distributions paid to shareholders             $962            $935      $   1,920      $    1,870

Nonrecurring capital expenditures:
   Acquisition improvements and replacements                  $25             $24            $41            $103
   Other apartment property improvements                       46               5             59               5
</TABLE>

Funds from operations increased by 4.1 percent through six months of 1997
compared to 1996, primarily attributable to improved operations at apartment
properties and the inclusion of operations of Paces Village for the full period
in 1997. Funds from operations was flat in second quarter of 1997 compared to
1996, attributed to increased cost of property operations and timing of
administrative expenses.

The Company paid dividends of $0.31 per share in the first and second quarters
of both 1997 and 1996. These dividends were funded from cash provided by
operating activities.

The Company capitalizes those expenditures relating to acquiring new assets,
materially enhancing the value of an existing asset, or substantially extending
the useful life of an existing asset. All carpet and vinyl replacements are
capitalized. Additions to apartment properties were funded from cash provided by
operating activities and proceeds of common stock issued through the Company's
DRIP.

In February 1997 the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share is not expected to be material.

Short- and long-term liquidity requirements. The Company continues to produce
sufficient cash flow to fund its regular dividend. The Company has announced
that it will pay a regular quarterly dividend of $0.31 per share on August 15,
1997, to shareholders of record on August 1, 1997.

The Company generally expects to meet its short-term liquidity requirements
through net cash provided by operations and utilization of credit facilities.
Management believes that net cash provided by operations is, and will continue
to be, adequate to meet both operating requirements and payment of dividends by
the Company in accordance with REIT requirements in both the short term and the
long term. The Company anticipates funding its acquisition activities, if any,
primarily by using short-term credit facilities or secured long-term debt. The
Company expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities and repayment of short-term financing of possible
property acquisitions, through long-term secured and unsecured borrowings and
the issuance of debt securities or additional equity securities of the Company.
The Company believes that it has sufficient resources to meet its short- and
long-term liquidity requirements.

Management does not believe that inflation poses a material risk to the Company.
The leases at the Company's apartment properties are short-term in nature, with
none exceeding two years. The restaurant properties are leased on a triple-net
basis, which places the risk of rising operating and maintenance costs on the
lessee.

                                       12
<PAGE>

                           PART II - Other Information

Item 4.  Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Shareholders on June 5, 1997. At that
meeting the following proposals were approved:
<TABLE>
<CAPTION>

                                                                                  Withheld/           Broker
                                                 For             Against          Abstained         Non-votes
                                           ----------------- ----------------- ----------------- -----------------
<S>                                           <C>                 <C>                <C>              <C>
Election of five directors:
   B. Mayo Boddie                              2,430,619                 -            15,130           340,324
   Nicholas B. Boddie                          2,430,619                 -            15,130           340,324
   Donald R. Pesta, Jr.                        2,426,381                 -            19,369           340,324
   William H. Stanley                          2,430,604                 -            15,145           340,324
   Richard A. Urquhart                         2,426,119                 -            19,631           340,324

Reincorporation in the State of Maryland       1,731,985            31,614            36,026           986,448
</TABLE>

Item 5.  Other Information

Re-election of officers

The Company has announced the re-election of the following officers:

   D. Scott Wilkerson                President and Chief Executive Officer
   Philip S. Payne                   Executive Vice President, Treasurer, and
                                     Chief Financial Officer
   Douglas E. Anderson               Vice President, Secretary
   Pamela B. Novak                   Vice President, Controller, 
                                     Chief Accounting Officer

Change of the Company's State of Incorporation from Delaware to Maryland

Effective July 31, 1997, pursuant to the proposed Agreement and Plan of Merger
which was included in the Company's proxy statement dated April 30, 1997, and
approved by the Company's shareholders on June 5, 1997, the Company changed its
state of incorporation from Delaware to Maryland.

No action by current holders of the Company's stock certificates is required.
Each share of the Company's common stock prior to the reincorporation has been
converted to one share of the Company's common stock following the
reincorporation.

Item 6. Exhibits and Reports on Form 8-K.

a)   Exhibits:

     Exhibit 2        Agreement and Plan of Merger, dated July 22, 1997, between
                      Boddie-Noell Properties, Inc. and Boddie-Noell Properties 
                      of Maryland, Inc.
     Exhibit 3.1      Amended and Restated Articles of Incorporation of Boddie-
                      Noell Properties, Inc., effective July 31, 1997
     Exhibit 3.2      Amended and Restated Bylaws of Boddie-Noell Properties, 
                      Inc., effective July 31, 1997
     Exhibit 27       Financial data schedule (electronic filing)

                                       13
<PAGE>

b)   Reports on Form 8-K:

     None

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            BODDIE-NOELL PROPERTIES, INC.
                                            (Registrant)




August 12, 1997                                 /s/ Philip S. Payne
                                            -----------------------
                                            Philip S. Payne
                                            Executive Vice President and
                                            Chief Financial Officer
                                            (Duly authorized officer)



August 12, 1997                                 /s/ Pamela B. Novak
                                            -----------------------
                                            Pamela B. Novak
                                            Vice President, Controller and
                                            Chief Accounting Officer


                                       14
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

  Exhibit
    No.                                                                                                Page
   <S>      <C>                                                                                         <C>     
     2       Agreement and Plan of Merger, dated July 22, 1997, between Boddie-Noell
             Properties, Inc. and Boddie-Noell Properties of Maryland, Inc.                              16
     3.1     Amended and Restated Articles of Incorporation of Boddie-Noell Properties, Inc.,
             effective July 31, 1997                                                                     21
     3.2     Amended and Restated Bylaws of Boddie-Noell Properties, Inc., effective July 31,
             1997                                                                                        29
     27      Financial data schedule (electronic filing)                                                  -
</TABLE>



                                       15
<PAGE>