SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 1, 1999
(Date of earliest event reported)
Inland Retail Real Estate Trust, Inc.
(Exact name of registrant as specified in the charter)
Maryland 333-64391 36-4246655
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
-1-
We filed a Form 8-K dated September 1, 1999, a Form 8-K dated September 30,
1999 and a Form 8-K dated October 26, 1999 on September 16, October 13 and
November 4, 1999, respectively, without the requisite financial information.
Accordingly, we are filing this Form 8-K/A to include that financial
information.
Item 7. Financial Statements and Exhibits
Index to Financial Statements
Page
Inland Retail Real Estate Trust, Inc.:
Pro Forma Consolidated Balance Sheet (unaudited)
at June 30, 1999................................................. F-1
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
at June 30, 1999................................................. F-3
Pro Forma Consolidated Statement of Operations (unaudited)
for the six months ended June 30, 1999............................ F-6
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the six months ended June 30, 1999............................ F-8
Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-11
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-13
Lake Olympia Square:
Independent Auditors' Report........................................ F-19
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-20
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-21
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-23
Notes to Historical Summary of Gross Income and Direct Operating
Expenses (unaudited) for the six months ended June 30, 1999....... F-24
Bridgewater Marketplace:
Independent Auditors' Report........................................ F-25
Historical Summary of Gross Income and Direct Operating Expenses
for the period from January 1, 1999 through June 30, 1999......... F-26
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the period from January 1, 1999
through June 30, 1999............................................. F-27
-2-
Bartow Marketplace:
Independent Auditors' Report........................................ F-30
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-31
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-32
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-34
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-35
Countryside Shopping Center:
Independent Auditors' Report........................................ F-36
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-37
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-38
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the six months ended June 30, 1999................ F-40
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the six months
ended June 30, 1999............................................... F-41
-3-
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 hereunto duly authorized.
Inland Retail Real Estate Trust, Inc.
(Registrant)
By:/s/ BARRY L. LAZARUS
Barry L. Lazarus
President, Chief Operating Officer,
Treasurer and Chief Financial Officer
Date: November 12, 1999
-4-
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
The following unaudited Pro Forma Consolidated Balance Sheet is presented as if
the acquisition of the properties indicated in Note B had occurred on June 30,
1999.
This unaudited Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been at June 30,
1999, nor does it purport to represent our future financial position. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.
F-1
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
Pro Forma
Adjustments
-------------
(A) Property Pro Forma
Historical Acquisitions as adjusted
------------- -------------- -------------
Assets
- ------
Net investment in
properties(B)............. $ 20,194,408 89,278,935 109,473,343
Cash........................ 7,403,226 837,587 8,240,813
Restricted cash (A)......... 232,711 - 232,711
Accounts and rents
receivable................ 263,166 - 263,166
Escrowed funds (E).......... 328,343 - 328,343
Furniture and Equipment..... 10,804 - 10,804
Loan fees................... 10,300 - 10,300
Other assets................ 43,961 - 43,961
------------- -------------- -------------
Total assets................ $ 28,486,919 90,116,522 118,603,441
============= ============== =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate taxes... 138,650 191,788 330,438
Security deposits........... 54,567 114,382 168,949
Mortgages payable (D)....... 14,379,884 66,330,524 80,710,408
Liability for subscriptions
received.................. 232,711 - 232,711
Accounts payable............ 86,673 - 86,673
Accrued interest payable.... 90,969 - 90,969
Other liabilities........... 21,816 66,149 87,965
Distribution payable........ 66,296 - 66,296
Due to Affiliates........... 361,036 - 361,036
Minority interest in
partnership (C)........... 2,000 - 2,000
Accrued offering costs...... 2,385,108 - 2,385,108
------------- -------------- -------------
Total liabilities........... 17,819,710 66,702,843 84,522,553
------------- -------------- -------------
Common Stock................ 13,980 27,224 41,204
Additional paid in capital
(net of Offering costs)... 10,653,229 23,386,455 34,039,684
------------- -------------- -------------
Total Stockholders' equity.. 10,667,209 23,413,679 34,080,888
------------- -------------- -------------
Total liabilities and
Stockholders' equity...... $ 28,486,919 90,116,522 118,603,441
============= ============== =============
See accompanying notes to pro forma consolidated balance sheet.
F-2
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
(A) The historical column represents our Consolidated Balance Sheet as of June
30, 1999. We were formed on September 3, 1998. As of June 30, 1999,
subscriptions for a total of 1,397,818 Shares had been received from the
public at $10 per Share resulting in $13,978,175 in Gross Offering
Proceeds. As of June 30, 1999, subscriber funds of $232,711 are currently
held in an interest-bearing escrow account. The escrow funds of $232,711
represents subscriptions for Shares from Pennsylvania residents.
Subscribers residing in Pennsylvania may not be admitted as Stockholders to
the Company until subscriptions have been received and accepted for
2,500,000 Shares ($25,000,000) from all sources. On August 24, 1999, we
had sold Shares in excess of $25,000,000, accordingly, proceeds received
from subscribers residing in Pennsylvania which had been in escrow were
released to the Company. In addition, we have received the Advisor's
capital contribution of $200,000 for which it was issued 20,000 Shares.
Through June 30, 1999, the Advisor advanced approximately $2,385,000 to us
for costs incurred with the Offering. As of June 30, 1999, approximately
$1,100,000 remained unpaid.
F-3
<TABLE>
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
(continued)
(B) The pro forma adjustments reflect the acquisition of the following properties:
<CAPTION>
Boynton Lake Bridgewater Bartow Countryside Total
Town Center Commons Olympia Marketplace Marketplace Shopping Property
Acquisition Acquisition Acquisition Acquisition Acquisition Center Acquisition
------------ ------------ ------------ ------------ ------------ ------------ ------------
Assets
- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment in
properties........... $ 9,656,381 30,563,440 9,873,627 6,093,855 24,496,029 8,595,602 89,278,934
Cash................... - 348,468 205,310 - - 283,810 837,588
Other assets........... - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total assets........... $ 9,656,381 30,911,908 10,078,937 6,093,855 24,496,029 8,879,412 90,116,522
============ ============ ============ ============ ============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real
estate taxes......... 22,000 20,572 67,012 35,000 11,204 36,000 191,788
Security deposits...... 19,443 26,412 29,983 14,444 12,400 11,700 114,382
Mortgages payable (D).. 7,600,000 22,922,581 5,932,943 4,780,000 18,375,000 6,720,000 66,330,524
Accrued interest
payable.............. - - - - - - -
Other liabilities...... 66,149 - - - - - 66,149
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total liabilities...... 7,707,592 22,969,565 6,029,938 4,829,444 18,398,604 6,767,700 66,702,843
------------ ------------ ------------ ------------ ------------ ------------ ------------
Common Stock........... 2,266 9,235 4,708 1,470 7,090 2,455 27,224
Additional paid in
capital (net of
Offering costs)...... 1,946,523 7,933,108 4,044,291 1,262,941 6,090,335 2,109,257 23,386,455
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Stockholders'
equity (E)........... 1,948,789 7,942,343 4,048,999 1,264,411 6,097,425 2,111,712 23,413,679
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity. $ 9,656,381 30,911,908 10,078,937 6,093,855 24,496,029 8,879,412 90,116,522
============ ============ ============ ============ ============ ============ ============
</TABLE>
F-4
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
(continued)
(C) The Pro Forma Consolidated Balance Sheet includes the accounts of the
Operating Partnership in which the Company has an approximately 99%
controlling general partner interest. The Advisor owns the remaining
approximately 1% limited partnership common units in the Operating
Partnership for which it paid $2,000 and which is reflected as a minority
interest.
(D) Represents the first mortgage loans assumed and originated in conjunction
with the acquisition of properties. These mortgage loans with an aggregate
principal balance of approximately $80,710,000 are payable to third parties
at interest rates ranging from 7.0% to 8.25% per annum and maturities
ranging from March 2000 to November 2008. This also represents debt
payable to an affiliate with a principal balance of approximately $800,000
which is payable at an interest rate of 10.9% per annum and matures April
2000.
(E) Represents real estate tax and insurance escrows held.
(F) Additional offering proceeds of $41,205,000, net of offering costs of
$7,124,112 are reflected as received as of June 30, 1999. Offering costs
consist principally of registration costs, printing and selling costs,
including commissions.
F-5
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)
The following unaudited Pro Forma Consolidated Statement of Operations is
presented to effect the acquisition of the properties indicated in Note B of
the Notes to the Pro Forma Consolidated Statement of Operations as though they
occurred on January 1, 1998.
This unaudited Pro Forma Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations would have been
for the six months ended June 30, 1999, nor does it purport to represent our
future financial position. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.
F-6
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)
Historical
------------
Company Pro Forma
(A) Adjustment Pro Forma
------------ ------------ -----------
Rental income.................... $ 379,788 4,544,720 4,924,508
Percentage rental income......... - 50,576 50,576
Operating expense and real
estate tax recoveries.......... 262,290 1,040,919 1,303,209
------------ ------------ -----------
Total income..................... 642,078 5,636,215 6,278,293
------------ ------------ -----------
Advisor asset management fee (C). - 518,371 518,371
Property operating expenses...... 386,463 1,128,102 1,514,565
Management fee (G)............... 17,194 263,318 280,512
Interest expense (H)............. 156,691 2,759,846 2,916,537
Depreciation (D)................. 87,819 1,421,880 1,509,699
------------ ------------ -----------
Total expenses................... 648,167 6,091,517 6,739,684
-----------
Net loss applicable to
common shareholders (F)........ $ (461,391)
===========
Weighted average number of
shares of common stock
outstanding (E)................ 4,120,500
===========
Basic and diluted net loss
per weighted average
shares of common stock
outstanding (E)................ $ (.11)
===========
See accompanying notes to pro forma consolidated statement of operations.
F-7
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)
(A) Historical information primarily represents operations of properties
acquired in May and June 1999.
(B) Total pro forma adjustments for acquisitions are as though they were
acquired January 1, 1998.
Lake Merchants Town Lake Boynton
Walden Square Center Olympia Commons
----------- ----------- ----------- ----------- ----------
Rental income........ $ 571,000 245,000 359,529 $ 425,560 1,191,020
Percentage rental
income............. - - - - 0
Additional rental
income............. 183,000 85,000 91,961 133,817 358,013
----------- ----------- ----------- ----------- ----------
Total income......... 754,000 330,000 451,490 559,377 1,549,033
----------- ----------- ----------- ----------- ----------
Advisor asset
management fee (C). 48,463 23,925 48,282 49,368 152,817
Property operating
expenses........... 186,165 52,634 84,921 141,885 434,767
Management fee (G)... 41,599 15,805 21,000 26,150 69,706
Interest expense (H). 286,988 133,720 266,000 244,734 790,594
Depreciation (D)..... 149,186 80,173 121,687 136,585 394,116
----------- ----------- ----------- ----------- ----------
Total expenses....... 712,401 306,257 541,890 598,722 1,842,000
----------- ----------- ----------- ----------- ----------
Net income (loss).... 41,599 23,743 (90,400) (39,345) (292,967)
=========== =========== =========== =========== ==========
Countryside
Bridgewater Bartow Shopping Total
Marketplace Marketplace Center Pro Forma
----------- ----------- ----------- -----------
Rental income........ 200,353 1,165,741 386,517 4,544,720
Percentage rental
income............. - 50,576 - 50,576
Additional rental
income............. 54,048 25,299 109,781 1,040,919
----------- ----------- ----------- -----------
Total income......... 254,401 1,241,616 496,298 5,636,215
----------- ----------- ----------- -----------
Advisor asset
management fee (C). 30,058 122,480 42,978 518,371
Property operating
expenses........... 65,670 27,260 134,800 1,128,102
Management fee (G)... 9,130 55,873 24,055 263,318
Interest expense (H). 167,061 631,181 239,568 2,759,846
Depreciation (D)..... 92,106 306,200 141,827 1,421,880
----------- ----------- ----------- -----------
Total expenses....... 364,025 1,142,994 583,228 6,091,517
----------- ----------- ----------- -----------
Net income (loss).... (109,624) 98,622 (86,930) (455,302)
=========== =========== =========== ===========
F-8
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)
(C) The advisor asset management fee has been calculated as 1% of the cost of
acquisition of the properties, prorated for the 6 months.
(D) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years for buildings and fifteen years
for improvements. The allocation of land, buildings and improvements was
based upon values stated in the related appraisal.
(E) The pro forma weighted average shares of common stock outstanding for the
six months ended June 30, 1999 was calculated by estimating the additional
shares sold to purchase each of the properties on a weighted average basis
plus the 20,000 shares purchased by the Advisor in connection with our
organization.
(F) The net income (loss) allocable to the minority interest is immaterial, and
therefore, has been excluded.
(G) Management fees are calculated as 4.5% of gross revenues.
(H) As part of the acquisition of certain of these properties, the Company
assumed existing debt. The pro forma adjustments relating to interest
expense were based on the following terms:
Lake Walden
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Walden Square of approximately $10,100,000 in connection
with the acquisition. The assumed debt, which originated October 30, 1997,
has an annual interest rate of 7.63% and requires monthly principal and
interest payments.
In addition, as part of the acquisition, the Company assumed a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.
Merchants Square
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Merchants Square Shopping Center of approximately $4,300,000 in
connection with the acquisition. The assumed debt, which originated
October 9, 1998, has an annual interest rate of 7.5% and requires monthly
principal and interest payments.
Town Center
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage
debts related to Town Center totaling approximately $7,600,000 in
connection with the acquisition. The assumed debts, which originated April
13, 1999, have annual interest rates ranging from 175 basis points over
LIBOR (currently 6.7%) to 7%.
F-9
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1999
(unaudited)
Boynton Commons
As part of the acquisition, the Company assumed the outstanding mortgage
debts related to Boynton Commons Shopping Center of approximately
$22,900,000. The assumed debts, which were modified March 19, 1999, have
annual interest rates of 175 basis points over LIBOR (currently 6.7%) and
7.21%, respectively.
Lake Olympia
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Olympia totaling approximately $5,933,000 in connection
with the acquisition. The assumed debt, which originated June 24, 1998,
has an annual interest rate of 8.25% and requires monthly principal and
interest payments.
Bridgewater Marketplace
As part of the acquisition, the Company assumed an outstanding mortgage
debt of approximately $4,450,000. The debt was modified on September 7,
1999. The principal balance was increased to approximately $4,780,000 and
has an annual interest rate of 175 basis points over LIBOR (currently
6.99%).
Bartow Marketplace
The Company purchased this property with the proceeds of a new first
mortgage loan in the amount of $18,375,000. The loan is evidenced by two
promissory notes. The notes bear an annual interest rate of 150 basis
points over LIBOR (currently 6.87%).
Countryside Shopping Center
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Countryside Shopping Center of approximately $6,720,000 in
connection with the acquisition. The assumed debt, which originated March
31, 1998, has an annual interest rate of 175 basis points over LIBOR
(currently 7.13%).
F-10
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
The following unaudited Pro Forma Consolidated Statement of Operations is
presented to effect the acquisition of the properties indicated in Note B of
the Notes to the Pro Forma Consolidated Statement of Operations as though they
occurred on January 1, 1998 except for Town Center and Bridgewater Marketplace
which were completed late in the fourth quarter of 1998 and significant
operations had not yet begun.
This unaudited Pro Forma Consolidated Statement of Operations is not
necessarily indicative of what the actual results of operations would have been
for the year ended December 31, 1998, nor does it purport to represent our
future financial position. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.
F-11
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
Historical
-------------
Pro Forma
Company Adjustment
(A) (B) Pro Forma
------------- ----------- ------------
Rental income..................... $ - 7,776,417 7,776,417
Operating expense and real
estate tax recoveries........... - 1,281,597 1,281,597
------------- ----------- ------------
Total income...................... - 9,058,014 9,058,014
------------- ----------- ------------
Advisor asset management fee (E).. - 938,201 938,201
Property operating expenses....... - 1,434,622 1,434,622
Management fee (G)................ - 411,818 411,818
Interest expense (H).............. - 5,015,871 5,015,871
Depreciation (C).................. - 2,597,755 2,597,755
------------- ----------- ------------
Total expenses.................... - 10,398,267 10,398,267
------------
Net loss applicable to
common shareholders (F)......... $(1,340,253)
============
Weighted average number of
shares of common stock
outstanding (D)................. 4,120,500
============
Basic and diluted net loss
per weighted average
shares of common stock
outstanding (D)................. $ (.33)
============
See accompanying notes to pro forma consolidated statement of operations.
F-12
<TABLE>
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
(A) Historical information is not applicable as the Company had no operations through December 31, 1998.
(B) Total pro forma adjustments for acquisitions are as though they were acquired January 1, 1998.
<CAPTION>
Countryside
Lake Merchants Boynton Lake Bartow Shopping Total
Walden Square Commons Olympia Marketplace Center Pro Forma
----------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income............. $1,636,260 582,001 1,637,021 811,499 2,331,129 778,507 7,776,417
Additional rental income.. 307,229 173,038 263,043 243,936 109,643 184,708 1,281,597
----------- ----------- ----------- ------------ ----------- ----------- -----------
Total income.............. 1,943,489 755,039 1,900,064 1,055,435 2,440,772 963,215 9,058,014
----------- ----------- ----------- ------------ ----------- ----------- -----------
Advisor asset
management fee (E)...... 145,495 57,420 305,634 98,736 244,960 85,956 938,201
Property operating
expenses................ 381,443 169,316 288,616 296,719 57,949 240,579 1,434,622
Management fees (G)....... 87,975 35,181 85,503 49,979 109,835 43,345 411,818
Interest expense (H)...... 869,275 322,500 1,581,188 501,409 1,262,363 479,136 5,015,871
Depreciation (C).......... 447,882 192,416 788,231 273,170 612,401 283,655 2,597,755
----------- ----------- ----------- ------------ ----------- ----------- -----------
Total expenses............ 1,932,070 776,833 3,049,172 1,220,013 2,287,508 1,132,671 10,398,267
----------- ----------- ----------- ------------ ----------- ----------- -----------
Net income (loss)......... 11,419 (21,794) (1,149,108) (164,578) 153,264 (169,456) (1,340,253)
=========== =========== =========== ============ =========== =========== ===========
</TABLE>
F-13
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
Acquisition of Lake Walden Square, Plant City, Florida
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Lake Walden Square
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 1,636,260 - 1,636,260
Additional rental income.. 307,229 - 307,229
------------ ----------- -----------
Total income.............. 1,943,489 - 1,943,489
------------ ----------- -----------
Advisor asset
management fee (E)...... - 145,495 145,495
Property operating
expenses................ 381,443 - 381,443
Management fees (G)....... 87,975 - 87,975
Interest expense (H)...... 782,075 87,200 869,275
Depreciation (C).......... - 447,882 447,882
------------ ----------- -----------
Total expenses............ 1,251,493 680,577 1,932,070
------------ ----------- -----------
Net income (loss)......... $ 691,996 (680,577) 11,419
============ =========== ===========
Acquisition of Merchants Square, Zephyrhills, Florida
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Merchants Square
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 582,001 - 582,001
Additional rental income.. 173,038 - 173,038
------------ ----------- -----------
Total income.............. 755,039 - 755,039
------------ ----------- -----------
Advisor asset
management fee (E)..... - 57,420 57,420
Property operating
expenses................ 169,316 - 169,316
Management fees (G)....... 35,181 - 35,181
Interest expense (H)...... 72,305 250,195 322,500
Depreciation (C).......... - 192,416 192,416
------------ ----------- -----------
Total expenses............ 276,802 500,031 776,833
------------ ----------- -----------
Net income (loss)......... $ 478,237 (500,031) (21,794)
============ =========== ===========
F-14
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
Acquisition of Boynton Commons, Boynton Beach, Florida
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Boynton Commons
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 1,637,021 - 1,637,021
Additional rental income.. 263,043 - 263,043
------------ ----------- -----------
Total income.............. 1,900,064 - 1,900,064
------------ ----------- -----------
Advisor asset
management fee (E)...... - 305,634 305,634
Property operating
expenses................ 288,616 - 288,616
Management fees (G)....... 49,111 36,392 85,503
Interest expense (H)...... 1,515,721 65,467 1,581,188
Depreciation (C).......... - 788,231 788,231
------------ ----------- -----------
Total expenses............ 1,853,448 1,195,724 3,049,172
------------ ----------- -----------
Net income (loss)......... $ 46,616 (1,195,724) (1,149,108)
============ =========== ===========
Acquisition of Lake Olympia, Ocoee, Florida
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Lake Olympia
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 811,499 - 811,499
Additional rental income.. 243,936 - 243,936
------------ ----------- -----------
Total income.............. 1,055,435 - 1,055,435
------------ ----------- -----------
Advisor asset
management fee (E)..... - 98,736 98,736
Property operating
expenses................ 296,719 - 296,719
Management fees (G)....... 49,979 - 49,979
Interest expense (H)...... 501,409 - 501,409
Depreciation (C).......... - 273,170 273,170
------------ ----------- -----------
Total expenses............ 848,107 371,906 1,220,013
------------ ----------- -----------
Net income (loss)......... $ 207,328 (371,906) (164,578)
============ =========== ===========
F-15
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
Acquisition of Bartow Marketplace, Cartersville, Georgia
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Bartow Marketplace
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 2,331,129 - 2,331,129
Additional rental income.. 109,643 - 109,643
------------ ----------- -----------
Total income.............. 2,440,772 - 2,440,772
------------ ----------- -----------
Advisor asset
management fee (E)..... - 244,960 244,960
Property operating
expenses................ 57,949 - 57,949
Management fees (G)....... - 109,835 109,835
Interest expense (H)...... - 1,262,363 1,262,363
Depreciation (C).......... - 612,401 612,401
------------ ----------- -----------
Total expenses............ 57,949 2,229,559 2,287,508
------------ ----------- -----------
Net income (loss)......... $ 2,382,823 (2,229,559) 153,264
============ =========== ===========
Acquisition of Countryside Shopping Center, Naples, Florida
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1998 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Countryside Shopping Center
------------------------------------
*As Pro Forma
Reported Adjustments Total
------------ ----------- -----------
Rental income............. $ 778,507 - 778,507
Additional rental income.. 184,708 - 184,708
------------ ----------- -----------
Total income.............. 963,215 - 963,215
------------ ----------- -----------
Advisor asset
management fee (E)..... - 85,956 85,956
Property operating
expenses................ 240,579 - 240,579
Management fees (G)....... 31,848 11,497 43,345
Interest expense (H)...... 336,092 143,044 479,136
Depreciation (C).......... - 283,655 283,655
------------ ----------- -----------
Total expenses............ 608,519 524,152 1,132,671
------------ ----------- -----------
Net income (loss)......... $ 354,696 (524,152) (169,456)
============ =========== ===========
F-16
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
(C) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years for buildings and fifteen years
for improvements. The allocation of land, buildings and improvements is
based upon values stated in the related appraisal.
(D) The pro forma weighted average number of shares of common stock for the
year ended December 31, 1998 was calculated by estimating the additional
shares sold to purchase each of the properties on a weighted average basis
plus the 20,000 shares purchased by the Advisor in connection with our
organization.
(E) The Advisor asset management fee has been calculated as 1% of the cost of
acquisition of the properties
(F) The net income (loss) allocable to the minority interest is immaterial, and
therefore, has been excluded.
(G) Management fees are calculated at 4.5% of gross revenues.
F-17
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Statement of Operations
For the year ended December 31, 1998
(unaudited)
(H) As part of the acquisition of certain of these properties, the Company
assumed existing debt. The pro forma adjustments relating to interest
expense were based on the following terms:
Lake Walden
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Walden Square of approximately $10,100,000 in connection
with the acquisition. The assumed debt, which originated October 30, 1997,
has an annual interest rate of 7.63% and requires monthly principal and
interest payments.
In addition, as part of the acquisition, the Company assumed a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.
Merchants Square
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Merchants Square Shopping Center of approximately $4,300,000 in
connection with the acquisition. The assumed debt, which originated
October 9, 1998, has an annual interest rate of 7.5% and requires monthly
principal and interest payments.
Boynton Commons
As part of the acquisition, the Company assumed the outstanding mortgage
debts related to Boynton Commons Shopping Center of approximately
$22,900,000. The assumed debts, which were modified March 19, 1999, have
annual interest rates of 175 basis points over LIBOR (currently 6.7%) and
7.21%, respectively.
Lake Olympia
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Lake Olympia totaling approximately $5,900,000 in connection
with the acquisition. The assumed debt, which originated June 24, 1998,
has an annual interest rate of 8.25% and requires monthly principal and
interest payments.
Bartow Marketplace
The Company purchased this property with the proceeds of a new first
mortgage loan in the amount of $18,375,000. The loan is evidenced by two
promissory notes. The notes bear an annual interest rate of 150 basis
points over LIBOR (currently 6.87%).
Countryside Shopping Center
Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Countryside Shopping Center of approximately $6,720,000 in
connection with the acquisition. The assumed debt, which originated March
31, 1998, has an annual interest rate of 175 basis points over LIBOR
(currently 7.13%).
F-18
Independent Auditors' Report
The Board of Directors
Inland Retail Real Estate Trust, Inc.:
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Lake Olympia Square for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
management of Inland Retail Real Estate Trust, Inc. Our responsibility is to
express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Lake Olympia Square's revenues
and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Lake Olympia Square for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 2, 1999
F-19
Lake Olympia Square
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $ 811,499
Operating expense and real estate
tax recoveries................................ 238,369
Other income.................................... 5,567
-----------
Total gross income.............................. 1,055,435
-----------
Direct operating expenses:
Operating expenses.............................. 107,963
Real estate taxes............................... 126,363
Utilities....................................... 39,554
Insurance....................................... 22,839
Management fees................................. 49,979
Interest expense................................ 501,409
-----------
Total direct operating expenses................. 848,107
-----------
Excess of gross income over
direct operating expenses..................... $ 207,328
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-20
Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Lake Olympia Square is located in Ocoee, Florida. It consists of
approximately 85,800 square feet of gross leasable area and was 95% leased
and occupied at December 31, 1998. Approximately 51% of Lake Olympia
Square is leased by one major tenant, Winn-Dixie Stores, representing
approximately 36% of base rental income. An Affiliate of Inland Retail
Real Estate Trust, Inc. purchased Lake Olympia Square from an unaffiliated
third party (the Seller) on behalf of Inland Retail Real Estate Trust, Inc.
on June 24, 1998. Inland Retail Real Estate Trust, Inc. will acquire Lake
Olympia Square from this Affiliate at their cost upon receipt of proceeds
from an equity offering.
2. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Lake Olympia Square's revenues and expenses. The
Historical Summary has been prepared on the accrual basis of accounting and
requires management of Lake Olympia Square to make estimates and
assumptions that affect the reported amounts of the revenues and expenses
during the reporting period. Actual results may differ from those
estimates.
3. Gross Income
Lake Olympia Square leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. The leases
include provisions under which Lake Olympia Square is reimbursed for common
area costs, real estate taxes, and insurance costs.
Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $48,724 for the
year ended December 31, 1998.
F-21
Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998 are as follows:
Year Amount
---- ------
1999 $ 828,960
2000 800,052
2001 719,510
2002 605,519
2003 605,519
Thereafter 4,207,448
-----------
$ 7,767,008
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Lake Olympia Square. Costs
such as depreciation, amortization, and professional fees are excluded from
the Historical Summary.
The seller provided management services for Lake Olympia for an annual fee
of 5% of gross revenues (as defined) through June 24, 1998. Subsequent to
the sale of Lake Olympia to the Affiliate (note 1), a new management
agreement was executed with an annual management fee of 4.5% of gross
revenues (as defined).
Inland Retail Real Estate Trust, Inc. will assume the outstanding first
mortgage debt related to Lake Olympia of approximately $5,933,000 in
connection with the acquisition (note 1). The assumed debt, which
originated May 1997 and matures April 2007, has an annual interest rate of
8.25% and requires monthly interest and principal payments.
F-22
Lake Olympia Square
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
Gross income:
Base rental income.............................. $ 425,560
Operating expense and real estate
tax and insurance recoveries.................. 133,817
-----------
Total gross income.............................. 559,377
-----------
Direct operating expenses:
Operating expenses.............................. 72,277
Management fees................................. 26,150
Real estate taxes............................... 67,012
Insurance....................................... 2,596
Interest expense................................ 244,734
-----------
Total direct operating expenses................. 412,769
-----------
Excess of gross income over
direct operating expenses..................... $ 146,608
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-23
Lake Olympia Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Lake Olympia Square to make estimates and assumptions that
affect the amounts of the revenues and expenses during that period. Actual
results may differ from those estimates.
In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
2. As part of the acquisition, the Company assumed the outstanding mortgage
debt related to Lake Olympia Square of approximately $5,900,000. The
assumed debt, which originated June 24, 1998, has an annual interest rate of
8.25% and requires monthly principal and interest payments.
F-24
Independent Auditors' Report
The Board of Directors
Inland Retail Real Estate Trust, Inc.:
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Bridgewater Marketplace for the
period from January 1, 1999 through June 30, 1999. This Historical Summary is
the responsibility of the management of Inland Retail Real Estate Trust, Inc.
Our responsibility is to express an opinion on the Historical Summary based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Bridgewater Marketplace's
revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Bridgewater Marketplace for the period from January 1, 1999
through June 30, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
August 26, 1999
F-25
Bridgewater Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999
Gross income:
Base rental income.............................. $ 200,353
Operating expense and real estate
tax recoveries................................ 54,048
-----------
Total gross income.............................. 254,401
-----------
Direct operating expenses:
Operating expenses.............................. 27,269
Real estate taxes............................... 35,000
Insurance....................................... 3,401
Management fees................................. 9,130
Interest expense................................ 152,635
-----------
Total direct operating expenses................. 227,435
-----------
Excess of gross income over
direct operating expenses..................... $ 26,966
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-26
Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999
1. Business
Bridgewater Marketplace (Bridgewater) is located in Orlando, Florida. It
consists of approximately 58,000 square feet of gross leasable area and was
94% leased and 86% occupied at June 30, 1999. Approximately 76% of
Bridgewater is leased to one tenant, Winn-Dixie, representing approximately
88% of base rental income. Inland Retail Real Estate Trust, Inc. has
signed a sale and purchase agreement for the purchase of Bridgewater from
an unaffiliated third-party.
Bridgewater was under development throughout the majority of 1998 with
significant operations commencing January 1, 1999. As such, the period
from January 1, 1999 through June 30, 1999 represents the operating results
of the property subsequent to development and is representative of future
anticipated operations.
2. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Bridgewater's revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Bridgewater to make estimates and assumptions that affect the
reported amounts of the revenues and expenses during the reporting period.
Actual results may differ from those estimates.
3. Gross Income
Bridgewater leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Bridgewater is reimbursed for common area
costs, real estate taxes, insurance costs and management fees. Certain of
the leases contain renewal options for various periods at various rental
rates.
Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $3,697 for the
six months ended June 30, 1999.
F-27
Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999
Minimum rents to be received from tenants under operating leases in effect
at June 30, 1999, are as follows:
Year Amount
---- ------
1999 $ 260,935
2000 534,587
2001 534,587
2002 519,315
2003 508,063
Thereafter 5,637,199
-----------
$ 7,994,686
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Bridgewater. Costs such as
depreciation, amortization, and professional fees are excluded from the
Historical Summary.
Bridgewater is managed pursuant to the terms of a management agreement for
an annual fee of 4% of rent collection (as defined). Subsequent to the
sale of Bridgewater (note 1), the current management will cease. Any new
management agreement may cause future management fees to differ from the
amounts reflected in the Historical Summary.
As Bridgewater was under development during 1998, the property is subject
to reassessment for real estate taxes. The amount included in the
financial statements represents management's best estimate of the 1999 real
estate tax liability.
Inland Retail Real Estate Trust, Inc. will assume certain outstanding
mortgage debt (note 5) related to Bridgewater of approximately $4,450,000
in connection with the acquisition. The assumed debt, which originated
February 1998 and matures February 2000, has an annual interest rate of
6.86% and requires interest only payments (note 5).
F-28
Bridgewater Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through June 30, 1999
5. Pro Forma Adjustment (unaudited)
In connection with the acquisition of Bridgewater by Inland Retail Real
Estate Trust, Inc. (note 1), the original debt (note 4) will be modified.
The principal balance will be increased to approximately $4,780,000 and the
annual interest rate will be based on LIBOR plus 1.75% (6.99% at June 30,
1999). Approximately $1,792,500 of the $4,780,000 will be due one year
from the date of closing and the remainder will be due six years
thereafter. The additional interest expense associated with the
modification, which will occur at the closing of the acquisition, was
excluded from the Historical Summary.
F-29
Independent Auditors' Report
The Board of Directors
Inland Retail Real Estate Trust, Inc.:
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Bartow Marketplace for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
management of Inland Retail Real Estate Trust, Inc. Our responsibility is to
express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Bartow Marketplace's revenues and
expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Bartow Marketplace for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
August 30, 1999
F-30
Bartow Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $2,331,129
Percentage rental income........................ 50,529
Operating expense and real estate
tax recoveries................................ 59,114
-----------
Total gross income.............................. 2,440,772
-----------
Direct operating expenses:
Operating expenses.............................. 22,796
Real estate taxes............................... 22,408
Insurance....................................... 2,081
Utilities....................................... 10,664
-----------
Total direct operating expenses................. 57,949
-----------
Excess of gross income over
direct operating expenses..................... $2,382,823
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-31
Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Bartow Marketplace (Bartow) is located in Bartow County, Georgia. It
consists of approximately 375,800 square feet of gross leasable area and
was 100% leased and occupied at December 31, 1998. Approximately 90% of
Bartow is leased to two tenants representing approximately 81% of base
rental income. Inland Retail Real Estate Trust, Inc. has signed a sale and
purchase agreement for the purchase of Bartow from an unaffiliated third-
party.
2. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Bartow's revenues and expenses. The Historical Summary has
been prepared on the accrual basis of accounting and requires management of
Bartow to make estimates and assumptions that affect the reported amounts
of the revenues and expenses during the reporting period. Actual results
may differ from those estimates.
3. Gross Income
Bartow leases retail space under various lease agreements with its tenants.
All leases are accounted for as operating leases. Certain of the leases
include provisions under which Bartow is reimbursed for common area costs,
real estate taxes, and insurance costs. Certain of the leases contain
renewal options for various periods at various rental rates. Certain of
the leases contain additional rental income based on a stated percentage of
gross sales over the tenant's annual break point.
Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments decreased base rental income by $4,431 for the
year ended December 31, 1998.
F-32
Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998, are as follows:
Year Amount
---- ------
1999 $ 2,329,189
2000 2,334,265
2001 2,152,889
2002 2,081,141
2003 2,083,304
Thereafter 22,835,586
-----------
$33,816,374
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Bartow. Costs such as
mortgage interest, depreciation, amortization, and professional fees are
excluded from the Historical Summary.
Two tenants, leasing approximately 90% of gross leasable area, pay their
operating expenses, including real estate taxes, directly. As such, the
amounts are excluded from the Historical Summary.
Bartow is currently managed by the seller and is not charged an annual
management fee. Subsequent to the sale of Bartow (note 1), Inland Retail
Real Estate Trust, Inc. will execute a management agreement with the
tenants in which an annual management fee would be charged. A new
management agreement may cause future operating expenses to differ from the
amounts reflected in the Historical Summary.
F-33
Bartow Marketplace
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
Gross income:
Base rental income.............................. $1,165,741
Percentage rental income........................ 50,576
Operating expense and real estate
tax and insurance recoveries.................. 25,299
-----------
Total gross income.............................. 1,241,616
-----------
Direct operating expenses:
Operating expenses.............................. 15,170
Management fees................................. 55,873
Real estate taxes............................... 11,204
Insurance....................................... 886
-----------
Total direct operating expenses................. 83,133
-----------
Excess of gross income over
direct operating expenses..................... $1,158,483
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-34
Bartow Marketplace
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Bartow Marketplace to make estimates and assumptions that
affect the amounts of the revenues and expenses during that period. Actual
results may differ from those estimates.
In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
F-35
Independent Auditors' Report
The Board of Directors
Inland Retail Real Estate Trust, Inc.:
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of Countryside Shopping Center for the
year ended December 31, 1998. This Historical Summary is the responsibility of
the management of Inland Retail Real Estate Trust, Inc. Our responsibility is
to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Historical Summary. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Historical Summary. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
for inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc., as described in note 2. The presentation is
not intended to be a complete presentation of Countryside Shopping Center's
revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in note 2 of Countryside Shopping Center for the year ended December 31, 1998,
in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
October 15, 1999
F-36
Countryside Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $ 778,507
Operating expense and real estate
tax recoveries................................ 183,010
Other income.................................... 1,698
-----------
Total Gross Income.............................. 963,215
-----------
Direct operating expenses:
Operating expenses.............................. 152,504
Real estate taxes............................... 67,117
Insurance....................................... 15,508
Management fees................................. 31,848
Utilities....................................... 5,450
Interest expense................................ 336,092
-----------
Total direct operating expenses................. 608,519
-----------
Excess of gross income over
direct operating expenses..................... $ 354,696
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-37
Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Countryside Shopping Center (Countryside) is located in Naples, Florida.
It consists of approximately 74,000 square feet of gross leasable area and
was 98% leased and occupied at December 31, 1998. Approximately 70% of
Countryside is leased to one tenant representing approximately 50% of base
rental income. An Affiliate of Inland Retail Real Estate Trust, Inc.
purchased Countryside from an unaffiliated third party (seller) on behalf
of Inland Retail Real Estate Trust, Inc. on March 31, 1998. Inland Retail
Real Estate Trust, Inc. will acquire Countryside from this affiliate at
their cost upon receipt of proceeds from an equity offering.
2. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for
inclusion in the Post Effective Amendment No. 2 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Countryside's revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Countryside to make estimates and assumptions that affect the
reported amounts of the revenues and expenses during the reporting period.
Actual results may differ from those estimates.
3. Gross Income
Countryside leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which Countryside is reimbursed for common
area costs, real estate taxes, management fees and insurance costs.
Certain of the leases contain renewal options for various periods at
various rental rates.
Base rentals are reported as income over the lease term as they become
receivable under the lease provisions. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents
during the lease term, the income is recognized based on effective rental
rates. Related adjustments increased base rental income by approximately
$16,900 for the year ended December 31, 1998.
F-38
Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1998, are as follows:
Year Amount
---- ------
1999 $ 797,855
2000 802,466
2001 802,466
2002 700,625
2003 609,485
Thereafter 6,181,488
-----------
$ 9,894,385
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Countryside. Costs such as
depreciation, amortization and professional fees are excluded from the
Historical Summary.
The seller provided management services to Countryside through March 31,
1998 and did not charge an annual management fee. Subsequent to the sale
of Countryside to the affiliate (note 1), a new management agreement was
executed with an annual management fee of 4.5% of gross revenues (as
defined).
Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debt related to Countryside of approximately $6,720,000 in connection with
the acquisition. The assumed debt, which originated March 31, 1998 and
matures March 31, 2001, has an annual interest rate of 1.75% over LIBOR
(6.8% at December 31, 1998) and requires monthly interest only payments.
5. Pro Forma Adjustment (unaudited)
The interest expense associated with the assumed debt discussed in note 4,
would have been approximately $480,000 if the related debt had been in
existence since January 1, 1998.
F-39
Countryside Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
Gross income:
Base rental income.............................. $ 386,517
Operating expense and real estate
tax and insurance recoveries.................. 109,781
-----------
Total gross income.............................. 496,298
-----------
Direct operating expenses:
Operating expenses.............................. 80,800
Management fees................................. 24,055
Real estate taxes............................... 36,000
Insurance....................................... 18,000
Interest expense................................ 239,568
-----------
Total direct operating expenses................. 398,423
-----------
Excess of gross income over
direct operating expenses..................... $ 97,875
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-40
Countryside Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Six months ended June 30, 1999
(unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the
six months ended June 30, 1999 has been prepared from operating statements
provided by the owners of the property during that period and requires
management of Countryside Shopping Center to make estimates and assumptions
that affect the amounts of the revenues and expenses during that period.
Actual results may differ from those estimates.
In the opinion of management, all normal recurring adjustments necessary for
a fair presentation of results for the unaudited interim period presented
have been reflected. Certain information in footnote disclosures included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
2. Inland Retail Real Estate Trust, Inc. assumed the outstanding mortgage debt
related to Countryside Shopping Center of approximately $6,720,000 in
connection with the acquisition. The assumed debt, which originated March
31, 1998, has an annual interest rate of 175 basis points over LIBOR
(currently 7.13%).
F-41
