SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 27, 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-
Item 2. Acquisition or Disposition of Assets
Boynton Commons, Boynton Beach, Florida
On July 27, 1999, we purchased an existing 210,772 gross leasable square foot
shopping center known as Boynton Commons by acquiring the interests of two
companies affiliated with our Advisor, Inland Southeast Investment Corporation
and Inland Southeast Acquisition Corp. (collectively, the "Boynton Commons
Affiliates"), in Inland Boynton Investment, L.L.C. and Inland Boynton
Acquisitions, L.L.C., respectively. Those two limited liability companies are
the general partners of Boynton Beach Development Associates (the "Boynton
Commons Property Partnership"), which is a general partnership that owns the
entire fee simple interest in Boynton Commons.
Boynton Commons is located on the southwest corner of North Congress Avenue and
Old Boynton Road, in Boynton Beach, Palm Beach County, Florida.
Inland Boynton Investment, L.L.C. and Inland Boynton Acquisitions, L.L.C.
purchased the interests of the former general partners of the Boynton Commons
Property Partnership on March 22, 1999 from unaffiliated third parties. The
$30,563,440 we paid for this property represents the total costs incurred by
the Boynton Commons Affiliates as of July 27, 1999 in connection with their
purchase, through Inland Boynton Investment, L.L.C and Inland Boynton
Acquisitions, L.L.C., of the general partnership interests in the Boynton
Commons Property Partnership. Such costs consist of the following paid by the
Boynton Commons Affiliates:
* Purchase Price.......................... $30,250,000
* Acquisition costs to third parties...... 67,165
* Financing costs to an Inland affiliate.. 137,767
* Financing costs to third parties........ 108,508
Total.......... $30,563,440
============
-2-
Our acquisition cost is approximately $145 per square foot of leasable space.
We paid a total of $6,262,193 to the Boynton Commons Affiliates, since the
outstanding balance of the first mortgage loan and certain prorations were
credited against the purchase price. That entire amount, plus an additional
$346,371 provided by the Boynton Commons Affiliates, was paid to Inland
Mortgage Investment Corporation, an Inland Affiliated Company, as payment in
full of two promissory notes evidencing loans made to the Boynton Commons
Affiliates in connection with their purchase in March 1999 of this property.
There may be additional expenses incurred by the Boynton Commons Affiliates
related to their acquisition of this property, which we will pay.
In evaluating this property as a potential acquisition, we considered a
variety of factors including location, demographics, tenant mix, price per
foot, occupancy and the fact that overall rental rates at the shopping center
are comparable to market rates. We believe that the shopping center is
located within a vibrant economic area. We did not consider any other factors
materially relevant to the decision to acquire this property.
We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.
We believe that this property is well located, has acceptable roadway access,
attracts high-quality tenants, is well maintained and has been professionally
managed. This property will be subject to competition from similar shopping
centers within its market area, and its economic performance could be affected
by changes in local economic conditions.
We purchased this property subject to a first mortgage and a collateral
assignment of rents and leases in favor of SouthTrust Bank, National
Association, which secures two promissory notes in the aggregate principal
amount of $24,200,000, which we reduced to $22,922,580 concurrently with the
acquisition. One promissory note is in the principal amount of $15,125,000,
requires monthly payments of interest only at the fixed rate of 7.21% per
annum and is due March 19, 2006. The other note which currently has an
outstanding principal balance of $7,797,580 requires monthly payments of
interest only at a floating rate per annum of 1.75% over a LIBOR related index
and is due March 19, 2000.
Boynton Commons, which is situated on approximately 23 acres and was built in
1998, consists of two one-story, multi-tenant retail buildings, one single
tenant stand alone building and three outlot buildings. As of July 27, 1999,
this property was 91% leased. Tenants leasing more than 10% of the total
square footage currently include The Sports Authority, a sporting goods store;
Bed, Bath & Beyond, a home furnishings store; Barnes & Noble, a display and
retail sale and/or rental of books, magazines and other media store, and
PetSmart, a pet and pet accessory retail store. The leases with these
tenants require the tenants to pay base annual rent on a monthly basis as
follows:
-3-
Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
The Sports
Authority 42,972 20.39 8.00 03/98 03/13
Option 1 10.00 04/13 03/18
Option 2 11.00 04/18 03/23
Option 3 12.00 04/23 03/28
Bed, Bath
& Beyond 37,559 17.82 10.50 to 05/98 01/14
11.50
Option 1 12.50 02/14 01/19
Option 2 13.50 02/19 01/24
Option 3 14.50 02/24 01/29
Barnes & Noble 27,000 12.81 15.00 to 10/97 02/13
16.25 to
17.50
Option 1 19.00 03/13 02/18
Option 2 21.00 03/18 02/23
Option 3 23.00 03/23 02/28
Petsmart 22,486 10.67 10.75 to 06/98 01/14
11.00 to
11.50
Option 1 12.25 02/14 01/19
Option 2 13.00 02/19 01/24
Option 3 13.75 02/24 01/29
Option 4 14.50 02/29 01/34
Option 5 15.25 02/34 01/39
For federal income tax purposes, our depreciable basis in this property will be
approximately $21,865,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years, respectively.
Real estate taxes for the year ended December, 1998 (the most recent tax year
for which information is generally available) were $190,685. Real estate taxes
for the year ended December, 1999 are expected to be approximately $400,000.
Since this property was under development during 1998, it is subject to
reassessment for real estate taxes for 1999 and subsequent years.
-4-
On July 27, 1999, a total of 192,188 square feet was leased to 13 tenants at
this property. The following tables set forth certain information with respect
to the leases with these tenants as of July 27, 1999:
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Barnes & Noble 27,000 02/13 3/5 yr. 405,000 15.00
Petsmart 22,486 01/14 5/5 yr. 241,732 10.75
The Sports
Authority 42,972 03/13 3/5 yr. 343,776 8.00
Bed, Bath & Beyond 37,559 01/14 3/5 yr. 394,370 10.50
Party City 12,000 01/09 2/5 yr. 174,000 14.50
Pak Mail Centers 1,096 11/03 1/3 yr./ 27,400 25.00
1/2 yr.
Father & Son
Restaurants 1,900 12/03 1/5 yr. 47,500 25.00
The Hasty Mortgage
Corporation 1,520 10/03 - 38,000 25.00
Gianna Christine
Salon & Day Spa 3,200 06/04 2/5 yr. 83,200 26.00
The Mens Warehouse 5,000 07/08 2/5 yr. 100,000 20.00
Old Navy 15,400 06/08 1/5 yr. 170,000 11.04
Walgreen Co. 15,930 08/58 - 254,880 16.00
Tony Roma's Famous
For Ribs 6,125 03/08 3/5 yr. 80,000 13.06
Vacant 18,584
(1) Each tenant also pays its proportionate share of real estate taxes,
insurance, management fees and common area maintenance costs. In addition,
Party City, The Hasty Mortgage Corporation, Gianna Christine Salon and Day
Spa, Old Navy, Bed, Bath & Beyond, Walgreens and Tony Roma's Famous For
Ribs pay, as additional rent, a percentage of gross sales in excess of a
prescribed amount.
-5-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 2,322,651 - - -
2000 - - - 2,370,712 - - -
2001 - - - 2,369,745 - - -
2002 - - - 2,378,433 - - -
2003 3 4,516 112,900 2,409,686 25.00 2.14 0.05
2004 1 3,200 83,200 2,276,824 26.00 1.52 0.04
2005 - - - 2,228,152 - - -
2006 - - - 2,228,152 - - -
2007 - - - 2,228,152 - - -
2008 3 26,525 350,000 2,093.542 13.20 12.58 0.17
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received an appraisal prepared in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute and the Appraisal
Foundation by an independent appraiser who is a member of the Appraisal
Institute. The appraisal reported a fair market value for Boynton Commons, as
of July 17, 1999, of $30,750,000. Appraisals are estimates of value and should
not be relied on as a measure of true worth or realizable value.
-6-
Item 7. Financial Statements and Exhibits
Index to Financial Statements
Page
Pro Forma Consolidated Balance Sheet (unaudited)
at March 31, 1999................................................. F- 1
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
at March 31, 1999................................................. F- 3
Pro Forma Consolidated Statement of Operations (unaudited)
of the Company for the three months ended March 31, 1999.......... F- 6
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the three months ended March 31, 1999......................... F- 8
Pro Forma Consolidated Statement of Operations (unaudited)
of the Company for the year ended December 31, 1998............... F-10
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-12
Boynton Commons Shopping Center:
Independent Auditors' Report........................................ F-16
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-17
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-18
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the three months ended March 31, 1999............. F-20
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the three months ended
March 31, 1999.................................................... F-21
-7-
SIGNATURES
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: August 4, 1999
-8-
Inland Retail Real Estate Trust, Inc.
Pro Forma Consolidated Balance Sheet
March 31, 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 March
31, 1999.
This unaudited Pro Forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been at March 31,
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
March 31, 1999
(unaudited)
Pro Forma
Adjustments
-------------
(A) Property Pro Forma
Historical Acquisitions as adjusted
------------ --------------- ------------
Assets
- ------
Net investment in
properties(B)......... $ - 60,500,848 60,500,848
Cash..................... 206,732 444,929 651,661
Escrowed funds (A)....... 978,514 - 978,514
Deferred Offering costs.. 1,359,424 - 1,359,424
Other assets (E)......... - 334,288 334,288
------------ -------------- ------------
Total assets............. $ 2,544,670 61,280,065 63,824,735
============ ============== ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate taxes - 113,192 113,192
Security deposits........ - 91,655 91,655
Mortgages payable (D).... - 45,735,605 45,735,605
Liability for
subscriptions received. 978,514 - 978,514
Accounts payable......... 4,732 - 4,732
Accrued interest payable. - 301,463 301,463
Other liabilities........ - 66,149 66,149
Due to Affiliates........ 1,359,424 - 1,359,424
Minority interest in
partnership (C)........ 2,000 - 2,000
------------ -------------- ------------
Total liabilities........ 2,344,670 46,308,064 48,652,734
------------ -------------- ------------
Common Stock............. 200 17,474 17,674
Additional paid in
capital (net of
Offering costs)........ 199,800 14,954,527 15,154,327
------------ -------------- ------------
Total Stockholders'
equity................. 200,000 14,972,001(F) 15,172,001
------------ -------------- ------------
Total liabilities and
Stockholders' equity... $ 2,544,670 61,280,065 63,824,735
============ ============== ============
See accompanying notes to pro forma consolidated balance sheet.
F-2
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 1999
(unaudited)
(A) The historical column represents our Consolidated Balance Sheet as of March
31, 1999. We were formed on September 3, 1998. As of March 31, 1999,
subscriptions for a total of 97,851 Shares had been received from the
public at $10 per Share resulting in $978,514 in Gross Offering Proceeds.
Subscriber funds are currently held in an interest-bearing escrow account
until proceeds equal to the Minimum Offering have been received. As of May
3, 1999, we had sold Shares in excess of the Minimum Offering, accordingly,
proceeds of the Offering 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. As of March 31, 1999,
the Advisor advanced approximately $1,359,000 to us for costs incurred with
the Offering.
F-3
<TABLE>
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 1999
(unaudited)
(continued)
(B) The pro forma adjustments reflect the acquisition of the following properties:
<CAPTION>
Merchant Boynton Total
Lake Walden Square Town Center Commons Property
Acquisition Acquisition Acquisition Acquisition Acquisition
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Net investment in
properties............. $14,538,984 5,742,042 9,656,381 30,563,441 60,500,848
Cash..................... - 96,462 - 348,467 444,929
Other assets (E)......... 278,396 55,892 - - 334,288
------------ ------------- ------------ ------------ ------------
Total assets............. $14,817,380 5,894,396 9,656,381 30,911,908 61,280,065
============ ============= ============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real
estate taxes........... 43,585 27,035 22,000 20,572 113,192
Security deposits........ 38,712 7,088 19,443 26,412 91,655
Mortgages payable (D).... 10,933,971 4,279,053 7,600,000 22,922,581 45,735,605
Accrued interest payable. 301,463 - - - 301,463
Other liabilities........ - - 66,149 - 66,149
------------ ------------- ------------ ------------ ------------
Total liabilities........ 11,317,731 4,313,176 7,707,592 22,959,565 46,308,064
------------ ------------- ------------ ------------ ------------
Common Stock............. 4,134 1,839 2,266 9,235 17,474
Additional paid in
capital (net of
Offering costs)........ 3,495,515 1,579,381 1,946,523 7,933,108 14,954,527
------------ ------------- ------------ ------------ ------------
Total Stockholders'
equity (F)............. 3,499,649 1,581,220 1,948,789 7,942,343 14,972,001
------------ ------------- ------------ ------------ ------------
Total liabilities and
Stockholders' equity... $14,817,380 5,894,396 9,656,381 30,911,908 61,280,065
============ ============= ============ ============ ============
</TABLE>
F-4
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Consolidated Balance Sheet
March 31, 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 in conjunction with the
acquisition of properties indicated in Note B. These mortgage loans with an
aggregate principal balance of approximately $45,000,000 are payable to
third parties at interest rates ranging from 7.0% to 7.6% 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 $17,674,000, net of offering costs of
$2,701,999 are reflected as received as of March 31, 1999. Offering costs
consist principally of registration costs, printing and selling costs,
including commissions.
F-5
Inland Retail Real Estate Trust, Inc.
Pro Forma Statement of Operations
For the three months ended March 31, 1999
(unaudited)
The following unaudited Pro Forma Statement of Operations is presented to
effect the acquisition of the properties indicated in Note B of the Notes to
the Pro Forma Statement of Operations as though they occurred on January 1,
1998.
This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the three months
ended March 31, 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 Statement of Operations
For the three months ended March 31, 1999
(unaudited)
Historical
------------
Company Pro Forma
(A) Adjustment Pro Forma
------------ ------------ -----------
Rental income.................... $ - 1,345,940 1,345,940
Operating expense and real
estate tax recoveries.......... - 351,752 351,752
------------ ------------ -----------
Total income..................... - 1,697,692 1,697,692
------------ ------------ -----------
Advisor asset management fee (C). - 151,277 151,277
Property operating expenses...... - 466,565 466,565
Management fee (G)............... - 76,913 76,913
Interest expense (H)............. - 823,389 823,389
Depreciation (D)................. - 417,972 417,972
------------ ------------ -----------
Total expenses................... - 1,936,116 1,936,116
-----------
Net loss applicable to
common shareholders (F)........ $ (238,424)
===========
Weighted average number of
shares of common stock
outstanding (E)................ 1,767,400
===========
Basic and diluted net loss
per weighted average
shares of common stock
outstanding (E)................ $ (.13)
===========
See accompanying notes to pro forma statement of operations.
F-7
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1999
(unaudited)
(A) Historical information is not applicable as we had no operations through
March 31, 1999.
(B) Total pro forma adjustments for acquisitions are as though they were
acquired January 1, 1998.
Lake Merchants Town Boynton Total
Walden Square Center Commons Pro Forma
---------- ----------- ----------- ----------- -----------
Rental income........ $ 445,882 145,500 185,358 569,200 1,345,940
Additional rental
income............. 113,183 52,274 23,771 162,524 351,752
---------- ----------- ----------- ----------- -----------
Total income......... 559,065 197,774 209,129 731,724 1,697,692
---------- ----------- ----------- ----------- -----------
Advisor asset
management fee (C). 36,373 14,355 24,140 76,409 151,277
Property operating
expenses........... 139,665 51,797 41,380 233,723 466,565
Management fee (G)... 25,803 10,803 7,379 32,928 76,913
Interest expense (H). 214,458 80,232 133,402 395,297 823,389
Depreciation (D)..... 111,969 48,102 60,843 197,058 417,972
---------- ----------- ----------- ----------- -----------
Total expenses....... 528,268 205,289 267,144 935,415 1,936,116
---------- ----------- ----------- ----------- -----------
Net income (loss).... 30,797 (7,515) (58,015) (203,691) (238,424)
========== =========== =========== =========== ===========
(C) The advisor asset management fee has been calculated as 1% of the cost of
acquisition of the properties, prorated for the 3 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
three months ended March 31, 1999 was calculated by estiamting 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 not included.
(G) Management fees are calculated as 4.5% of gross revenues.
F-8
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1999
(unaudited)
(H) As part of the acquisition 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 points over LIBOR
(currently 6.7%) to 7%.
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 points over LIBOR (currently 6.7%) and 7.21%,
respectively.
F-9
Inland Retail Real Estate Trust, Inc.
Pro Forma Statement of Operations
For the year ended December 31, 1998
(unaudited)
The following unaudited Pro Forma Statement of Operations is presented to
effect the acquisition of the properties indicated in Note B of the Notes to
the Pro Forma Statement of Operations as though they occurred on January 1,
1998 except for Town Center which was completed late in the fourth quarter of
1998 and significant operations had not yet begun.
This unaudited Pro Forma 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-10
Inland Retail Real Estate Trust, Inc.
Pro Forma Statement of Operations
For the year ended December 31, 1998
(unaudited)
Historical
-------------
Pro Forma
Company Adjustment
(A) (B) Pro Forma
------------- ----------- ------------
Rental income..................... $ - 3,855,282 3,855,282
Operating expense and real
estate tax recoveries........... - 743,310 743,310
------------- ----------- ------------
Total income...................... - 4,598,592 4,598,592
------------- ----------- ------------
Advisor asset management fee (E).. - 508,549 508,549
Property operating expenses....... - 839,375 839,375
Management fee (G)................ - 208,659 208,659
Interest expense (H).............. - 2,772,963 2,772,963
Depreciation (C).................. - 1,428,529 1,428,529
------------- ----------- ------------
Total expenses.................... - 5,758,075 5,758,075
------------
Net loss applicable to
common shareholders (F)......... $(1,159,483)
============
Weighted average number of
shares of common stock
outstanding (D)................. 1,767,400
============
Basic and diluted net loss
per weighted average
shares of common stock
outstanding (D)................. $ (.66)
============
See accompanying notes to pro forma statement of operations.
F-11
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1998
(unaudited)
(A) Historical information is not applicable as we had no operations through
December 31, 1998.
(B) Total pro forma adjustments for acquisitions are as though they were
acquired January 1, 1998.
Lake Merchants Boynton Total
Walden Square Commons Pro Forma
----------- ----------- ----------- -----------
Rental income............. $1,636,260 582,001 1,637,021 3,855,282
Additional rental income.. 307,229 173,038 263,043 743,310
----------- ----------- ----------- -----------
Total income.............. 1,943,489 755,039 1,900,064 4,598,592
----------- ----------- ----------- -----------
Advisor asset
management fee (E)...... 145,495 57,420 305,634 508,549
Property operating
expenses................ 381,443 169,316 288,616 839,375
Management fees (G)....... 87,975 35,181 85,503 208,659
Interest expense (H)...... 869,275 322,500 1,581,188 2,772,963
Depreciation (C).......... 447,882 192,416 788,231 1,428,529
----------- ----------- ----------- -----------
Total expenses............ 1,932,070 776,833 3,049,172 5,758,075
----------- ----------- ---------- -----------
Net income (loss)......... 11,419 (21,794) (1,149,108) (1,159,483)
=========== =========== =========== ===========
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
============ =========== ===========
F-12
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1998
(unaudited)
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)
============ =========== ===========
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)
============ =========== ===========
F-13
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma 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 not included.
(G) Management fees are calculated at 4.5% of gross revenues.
F-14
Inland Retail Real Estate Trust, Inc.
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1998
(unaudited)
(H) As part of the acquisition 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 points over LIBOR (currently 6.7%) and 7.21%,
respectively.
F-15
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 Boynton Commons 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.1 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 Boynton Commons 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 Boynton Commons Shopping Center for the year ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
March 18, 1999
F-16
Boynton Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $1,637,021
Operating expense and real estate
tax recoveries................................ 262,713
Other income.................................... 330
-----------
Total Gross Income.............................. 1,900,064
-----------
Direct operating expenses:
Real estate taxes............................... 198,598
Operating expenses.............................. 47,748
Management Fees................................. 49,111
Insurance....................................... 10,966
Utilities....................................... 31,304
Interest Expense................................ 1,515,721
-----------
Total direct operating expenses................. 1,853,448
-----------
Excess of gross income over
direct operating expenses..................... $ 46,616
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-17
Boynton Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Boynton Commons Shopping Center (Boynton Commons) is located in Boynton
Beach, Florida. Phases of the property were open in 1997, however, tenant
space was still under construction through October of 1998. It consists of
approximately 212,000 square feet of gross leasable area and was 89% leased
and occupied at December 31, 1998. Approximately 13% of Boynton Commons is
leased to one tenant representing approximately 24% of base rental income.
An Affiliate of Inland Retail Real Estate Trust, Inc. purchased Boynton
Commons from an unaffiliated third party (seller) on behalf of Inland
Retail Real Estate Trust, Inc. on March 19, 1999. Inland Retail Real
Estate Trust, Inc. will acquire Boynton Commons 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.1 to Form S-11 of Inland
Retail Real Estate Trust, Inc. and is not intended to be a complete
presentation of Boynton Commons' revenues and expenses. The Historical
Summary has been prepared on the accrual basis of accounting and requires
management of Boynton Commons 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
Boynton Commons leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Boynton Commons is reimbursed for common
area, real estate taxes and insurance costs. Certain leases contain
renewal options at 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 $168,760 for
the year ended December 31, 1998.
F-18
Boynton Commons 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 $ 2,546,237
2000 2,565,645
2001 2,576,560
2002 2,585,143
Thereafter 38,163,356
-----------
$48,436,941
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Boynton Commons. Costs
such as depreciation, amortization and professional fees are excluded from
the Historical Summary.
Boynton Commons is managed by an affiliate of the seller pursuant to the
terms of an management agreement for an annual fee of 3% of base rents.
Subsequent to the sale of Boynton Commons (note 1), the current management
agreement will cease. Any new management agreement may cause future
management fees to differ from the amounts reflected in the Historical
Summary.
Inland Retail Real Estate Trust, Inc. will assume the outstanding debt of
approximately $22,000,000 in connection with the acquisition.
Approximately $15,000,000 of this debt has a term of seven years and a
fixed rate of 7% payable in monthly installments of interest only. The
remaining $7,000,000 is payable in monthly installments of interest only at
a floating rate and is due in March 2000.
In connection with the acquisition of Boynton Commons by an Affiliate
(note 1), the original debt, noted above, was modified. The principal
balance was increased to approximately $22,900,000 and the fixed interest
rate was increased to 7.21%. The remaining terms were unchanged. Inland
Retail Real Estate Trust, Inc. is expected to assume this modified debt in
connection with their acquisition. The additional interest expense
associated with the modification, which occurred in March 1999, was
excluded from the Historical Summary.
F-19
Boynton Commons Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Three months ended March 31, 1999
(unaudited)
Gross income:
Base rental income.............................. $ 569,200
Operating expense and real estate
tax and insurance recoveries.................. 162,524
-----------
Total Gross Income.............................. 731,724
-----------
Direct operating expenses:
Operating expenses.............................. 133,109
Management Fees................................. 32,928
Real estate taxes............................... 94,098
Insurance....................................... 6,516
Interest Expense................................ 395,297
-----------
Total direct operating expenses................. 661,948
-----------
Excess of gross income over
direct operating expenses..................... $ 69,776
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-20
Boynton Commons Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Three months ended March 31, 1999
(unaudited)
1. Basis of Presentation
The Historical Summary of Gross Income and Direct Operating Expenses for the
three months ended March 31, 1999 has been prepared from operating
statements provided by the owners of the property during that period and
requires management of Boynton Commons 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. 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 points over LIBOR (currently 6.7%) and 7.21%,
respectively.
F-21
