Inland Retail Real Estate Trust, Inc.
Sticker Supplement
This Sticker Supplement No. 4 dated August 2, 1999 to our Prospectus
dated February 11, 1999 summarizes Supplement No. 4 which updates
information in the "Real Property Investments," "Management," "Investment
Objectives and Policies," "Prior Performance of our Affiliates,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Summary of the Organizational Documents," "Plan of
Distribution" and "Experts" sections of our Prospectus and also supplements
the financial statements and Prior Performance Tables (Appendix A) included
in the Prospectus. This Sticker Supplement No. 4 supersedes Sticker
Supplements Nos. 1, 2 and 3 dated May 10, June 10 and July 8, 1999,
respectively. Any word that is capitalized in this Sticker Supplement but
not defined has the same meaning as in our Prospectus.
Plan of Distribution
As of July 26, 1999, we had sold 1,832,476 shares resulting in gross
proceeds of $18,324,760. Inland Securities Corporation, an affiliate of our
Advisor, serves as dealer manager of this Offering and is entitled to
receive selling commissions and certain other fees, as discussed further in
our Prospectus. As of July 26, 1999, we have incurred $1,740,852 of
commissions and fees payable to Inland Securities Corporation, which will
result in our receipt of $16,583,908 of net proceeds from the sale of those
1,832,476 shares. An additional 5,134 shares have been sold pursuant to
our Distribution Reinvestment Program, for which we will receive additional
net proceeds of $48,775. We also pay an affiliate of our Advisor fees to
manage and lease our properties. As of June 29, 1999, we have incurred and
paid property management fees of $16,792. Our Advisor may also receive an
annual asset management fee of not more than 1% of our average invested
assets, paid quarterly. As of the end of the quarter ending March 31,
1999, we had not paid or incurred any asset management fees. We may pay
expenses associated with property acquisitions of up to .5% of the money
that we raise in this Offering but in no event will we pay acquisition
expenses on any individual property that exceeds 6% of its purchase price.
Acquisition expenses totaling $822,967 are included in the purchase prices
we paid for our properties purchased through July 26, 1999.
-1-
-2-
SUPPLEMENT NO. 4
DATED AUGUST 2, 1999
TO THE PROSPECTUS DATED FEBRUARY 11, 1999
OF INLAND RETAIL REAL ESTATE TRUST, INC.
We are providing this Supplement No. 4 to you in order to supplement our
Prospectus. This Supplement updates information in the "Real Property
Investments," "Management," Investment Objectives and Policies," "Prior
Performance of our Affiliates," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Summary of the Organizational
Documents," "Plan of Distribution" and "Experts" sections of our Prospectus
and also supplements the financial statements and Prior Performance Tables
(Appendix A) included in the Prospectus. This Supplement No. 4 expands upon,
supplements, modifies or supersedes certain information contained in the
Prospectus and must be read in conjunction with our Prospectus. This
Supplement No. 4 supersedes Supplements Nos. 1, 2 and 3 dated May 10, June 10
and July 8, 1999, respectively. Any word that is capitalized in this
Supplement but not defined has the same meaning as in our Prospectus.
Real Property Investments
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
============
-3-
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 $7,797,580 requires monthly payments of
interest only at a floating rate per annum of 1.75% over a LIBOR related index
and is due March 19, 2000.
Boynton Commons, which is situated on approximately 23 acres and was built in
1998, consists of two one-story, multi-tenant retail buildings, one single
tenant stand alone building and three outlot buildings. As of July 27, 1999,
this property was 91% leased. Tenants leasing more than 10% of the total
square footage currently include The Sports Authority, a sporting goods store;
Bed, Bath & Beyond, a home furnishings store; Barnes & Noble, a display and
retail sale and/or rental of books, magazines and other media store, and
PetSmart, a pet and pet accessory retail store. The leases with these
tenants require the tenants to pay base annual rent on a monthly basis as
follows:
-4-
Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) 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 $400,000.
Since this property was under development during 1998, it is subject to
reassessment for real estate taxes for 1999 and subsequent years.
-5-
On July 27, 1999, a total of 192,188 square feet was leased to 13 tenants at
this property. The following tables set forth certain information with respect
to the leases with these tenants as of July 27, 1999:
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Barnes & Noble 27,000 02/13 3/5 yr. 405,000 15.00
Petsmart 22,486 01/14 5/5 yr. 241,732 10.75
The Sports
Authority 42,972 03/13 3/5 yr. 343,776 8.00
Bed, Bath & Beyond 37,559 01/14 3/5 yr. 394,370 10.50
Party City 12,000 01/09 2/5 yr. 174,000 14.50
Pak Mail Centers 1,096 11/03 1/3 yr./ 27,400 25.00
1/2 yr.
Father & Son
Restaurants 1,900 12/03 1/5 yr. 47,500 25.00
The Hasty Mortgage
Corporation 1,520 10/03 - 38,000 25.00
Gianna Christine
Salon & Day Spa 3,200 06/04 2/5 yr. 83,200 26.00
The Mens Warehouse 5,000 07/08 2/5 yr. 100,000 20.00
Old Navy 15,400 06/08 1/5 yr. 170,000 11.04
Walgreen Co. 15,930 08/58 - 254,880 16.00
Tony Roma's Famous
For Ribs 6,125 03/08 3/5 yr. 80,000 13.06
Vacant 18,584
(1) Each tenant also pays its proportionate share of real estate taxes,
insurance, management fees and common area maintenance costs. In addition,
Party City, The Hasty Mortgage Corporation, Gianna Christine Salon and Day
Spa, Old Navy, Bed, Bath & Beyond, Walgreens and Tony Roma's Famous For
Ribs pay, as additional rent, a percentage of gross sales in excess of a
prescribed amount.
-6-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<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.
-7-
Town Center Commons, Kennesaw, Georgia
On July 1, 1999, we purchased approximately 8 acres improved with 72,108 gross
leasable square feet of an existing 159,758 square foot shopping center known
as Town Center Commons by acquiring the interests of Inland Southeast
Investment Corporation and Inland Southeast Acquisition Corp. (collectively,
the "Town Center Affiliates"), both of which are affiliates of our Advisor, in
Inland Southeast Town Center Limited Partnership (the "Town Center Property
Partnership"). The Town Center Property Partnership owns the entire fee simple
interest in only the 72,108 gross leasable square feet of Town Center Commons
we purchased and has no ownership interest in the other 87,650 square foot
portion of the shopping center. The portion of Town Center Commons in which we
have no ownership interest consists of an 80,000 square foot Galyan's
department store and a 7,650 square foot The Shane Company jewelry store in two
separate buildings. The portion of Town Center Commons that we own will be
referred to in this Supplement as "Our Portion of Town Center Commons" or "this
Property" and the entire shopping center will be referred to as "Town Center
Commons".
Town Center Commons is located west of I-75 on Ernest Barrett Parkway in
Kennesaw, Georgia, and is approximately 25 miles northwest of downtown Atlanta.
The Town Center Property Partnership purchased Our Portion of Town Center
Commons on April 13, 1999 from an unaffiliated third party. The $9,656,381 we
paid for this Property represents the total costs of the Town Center Affiliates
as of the date of our purchase of their interests. Such costs consists of the
following paid by the Town Center Affiliates:
* Purchase Price.......................... $9,494,000
* Acquisition costs to third parties...... 76,923
* Financing costs to an Inland affiliate.. 47,458
* Financing costs to third parties........ 38,000
Total.......... $9,656,381
===========
-8-
Our acquisition cost is approximately $134 per square foot of leasable space.
We paid a total of $1,919,737 to the Town Center Affiliates, since the
outstanding balance of the mortgage loans and certain prorations were credited
against the purchase price. Of such amount, $1,914,757 was paid to Inland
Mortgage Investment Corporation, an Inland Affiliated Company, as payment in
full of a promissory note evidencing a loan made to the Town Center Affiliates
in connection with the purchase in April 1999 of this Property.
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. The Company 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 two mortgages and a collateral assignment
of rents and leases in favor of SouthTrust Bank, N.A., which secure promissory
notes in the aggregate principal amount of $7,600,000, which we reduced to
$7,258,000 concurrently with the acquisition. One promissory note is in the
principal amount of $4,750,000, requires monthly payments of interest only at
the fixed rate of 7% per annum and is due April 13, 2006. Payment of all or
part of this note before maturity requires a prepayment premium initially equal
to 2% of the amount being prepaid, but declining to 1 1/2% during the sixth,
and 1% in the seventh, loan years. This other note requires monthly payments
of interest only at a floating rate per annum of 1.75% over a LIBOR related
index, is due April 13, 2000, and may be paid at any time prior to maturity
without penalty.
Our Portion of Town Center Commons, which was built in 1998, consists of two
one-story, multi-tenant retail buildings. As of July 1, 1999, this Property
was 96% leased. Tenants leasing more than 10% of the total square footage
currently include J.C. Penney Home Store, a home furnishings store, and Baptist
Book Store, a religious retail store. The leases with these tenants require
the tenants to pay base annual rent on a monthly basis as follows:
-9-
Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ---------- ---------- ----------- ----------- ---------
J.C. Penney Home
Store 42,728 59.26 10.50 to 11/98 10/08
11.50
Option 1 12.75 11/08 10/13
Option 2 14.00 11/13 10/18
Option 3 15.25 11/18 10/23
Baptist Book
Store 7,800 10.82 16.00 to 01/99 09/08
17.25
Option 1 18.57 10/08 09/13
Option 2 20.03 10/13 09/18
As of July 1, 1999, Town Center Commons continues to be managed by Trammell Crow
Company.
For federal income tax purposes, our depreciable basis in this Property will be
approximately $6,362,589. 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 1998 (the most recent tax year for which
information is generally available) were $44,436. Since this property was under
development during 1998, it is subject to reassessment for real estate taxes for
1999 and subsequent years.
On July 1, 1999, a total of 69,108 square feet was leased to 10 tenants at this
Property. The following tables set forth certain information with respect to
our leases at this Community Center with these tenants as of July 1, 1999:
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
J.C. Penney Home
Store 42,728 10/08 3/5 yr. 448,644 10.50
Baptist Book Store 7,800 09/08 2/5 yr. 124,800 16.00
Original Mattress
Factory 4,600 12/03 1/3 yr. 87,400 19.00
Bikes USA, Inc. 4,800 03/04 2/5 yr. 91,200 19.00
Nu Age Nutrition 1,040 03/04 - 19,760 19.00
Town Center Nails 1,040 03/03 - 19,760 19.00
Powertel 1,300 02/04 - 24,700 19.00
Master Portrait 1,300 03/04 1/5 yr. 24,700 19.00
Accustaff 1,500 02/04 - 28,500 19.00
Gondolier Pizza 3,000 04/04 2/5 yr. 57,000 19.00
Vacant 3,000
(1) Each tenant also pays its proportionate share of real estate taxes,
insurance, common area maintenance costs and management fees. In addition,
Baptist Book Store, Original Mattress Factory, Bikes USA, Inc., Nu Age
Nutrition, Town Center Nails, Powertel and Gondolier Pizza pay, as
additional rent, a percentage of gross sales in excess of a prescribed
amount.
-10-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 926,464 - - -
2000 - - - 930,164 - - -
2001 - - - 933,864 - - -
2002 - - - 940,754 - - -
2003 2 5,640 114,580 932,044 20.32 8.16 12.18
2004 6 12,940 256,800 690,222 19.85 18.72 27.55
2005 - - - 625,922 - - -
2006 - - - 625,922 - - -
2007 - - - 625,922 - - -
2008 2 50,528 625,922 510,389 12.39 73.11 100.00
(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 Our Portion of Town
Center Commons, as of June 3, 1999, of $9,750,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.
Merchants Square Shopping Center, Zephyrhills, Florida
On June 4, 1999, we purchased Merchants Square Shopping Center by acquiring the
interests of the Merchants Square Affiliated Partners in the Merchants Square
Property Partnership. This shopping center is located at the intersection of
U.S. 301 North and Pretty Pond Road in Zephyrhills, Florida and is described in
detail in our Prospectus. We purchased Merchants Square for $5,742,042, which
represents the total Affiliates' Acquisition Cost as of June 4, 1999. This
price represents approximately $76.72 per square foot of leasable space. A
total of $1,496,500 was paid to the Merchants Square Affiliated Partners, since
the outstanding balance of the first mortgage loan and certain prorations were
credited against the purchase price.
-11-
Merchants Square, built in 1993, is comprised of a one-story, multi-user
retail facility. Merchants Square contains 74,849 leasable square feet. As of
June 4, 1999, Merchants Square was 100% leased. In evaluating Merchants Square
as a potential acquisition, we considered a variety of factors including
location, demographics, tenant mix, price per square foot, occupancy and the
fact that overall rental rates are comparable to market rates. We believe that
Merchants Square is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to
Merchants Square over the next few years. However, if we were to make any
repairs or improvements, the tenants would be obligated to pay a substantial
portion of any monies spent pursuant to the provisions of their respective
leases.
Two tenants, Kash 'N Karry, a supermarket, and Fashion Bug, a clothing store,
each lease more than 10% of the total gross leasable area of the property. The
leases with these tenants require the tenants to pay base annual rent on a
monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Kash 'N Karry 47,955 64 6.70 Currently 05/27/13
Options (1) 6.70 05/28/13 05/27/43
Fashion Bug 9,040 12 8.00 Currently 01/31/04
Options (2) 8.50 to
9.50 02/01/04 01/31/19
(1) There are six successive five-year renewal options at the same base rent
per square foot per annum.
(2) There are three successive five-year renewal options. The base rent per
square foot increases $.50 per square foot for each option.
For federal income tax purposes, our depreciable basis in Merchants Square will
be approximately $4,750,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years,
respectively.
-12-
On June 4, 1999, a total of 74,849 square feet was leased to 13 tenants at
Merchants Square. The following tables set forth certain information with
respect to our leases with these 13 tenants as of June 4, 1999:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Kash N' Karry 47,955 05/13 6/5 yr. 321,299 6.70
Fashion Bug 9,040 01/04 3/5 yr. 72,320 8.00
Dollar Tree 3,320 06/00 4/4 yr. 33,001 9.94
Payless Shoe Source 2,800 03/03 2/5 yr. 26,600 9.50
Beef O'Bradys 2,030 06/02 - 21,912 10.79
L.G. Edwards
Insurance 2,000 05/03 - 23,500 11.75
Sally Beauty Supply 1,600 04/03 - 17,600 11.00
Cuts, Curls & Color 1,200 05/02 - 15,108 12.59
Dr. Baldridge 1,120 07/03 2/5 yr. 14,112 12.60
Postal Zone 1,197 01/01 2/3 yr. 11,970 10.00
Concire Centers 1,009 04/01 - 11,604 11.50
Nabers Jewelers 1,000 04/00 - 12,600 12.60
Bingham Realty 578 04/01 - 5,780 10.00
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 587,406 - - -
2000 2 4,320 45,601 562,608 10.56 5.77 7.76
2001 3 2,784 29,354 519,345 10.54 3.72 5.22
2002 2 3,230 37,122 492,733 11.49 4.32 7.15
2003 4 7,520 81,812 424,159 10.88 10.05 16.60
2004 1 9,040 72,320 327,326 8.00 12.08 17.05
2005 - - - 321,299 - - -
2006 - - - 321,299 - - -
2007 - - - 321,299 - - -
2008 - - - 321,299 - - -
(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 a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for Merchants Square, as of December
10, 1998, of $5,800,000. Appraisals are estimates of value and should not be
relied on as a measure of true worth or realizable value.
-13-
Lake Walden Square, Plant City, Florida
On May 3, 1999, we purchased Lake Walden Square by acquiring the interests of
the Lake Walden Affiliated Partners in the Lake Walden Property Partnership.
This shopping center is located at the northwest and southwest corners of
Alexander Road and State Route 39 in Plant City, Florida. We purchased Lake
Walden Square for $14,538,984, which represents the total Affiliates'
Acquisition Cost as of May 3, 1999. In addition, we paid transfer fees of
$10,500 to the first mortgage lender. This price represents approximately
$56.76 per square foot of leasable space.
Lake Walden Square, built in 1992, is comprised of two one-story multi-tenant
retail facilities. Lake Walden Square contains 256,155 leasable square feet.
As of May 3, 1999, Lake Walden Square was 93% leased. In evaluating Lake
Walden Square as a potential acquisition, we considered a variety of factors
including location, demographics, tenant mix, price per square foot, occupancy
and the fact that overall rental rates are comparable to market rates. We
believe that Lake Walden Square is located within a vibrant economic area.
Initially, we had planned on purchasing the Merchants Square Shopping Center,
described in our Prospectus, as our first acquisition. However, due to
restrictions of the first mortgage lender on the Lake Walden property, we had
to purchase Lake Walden Square prior to May 4, 1999.
We do not anticipate making any significant repairs and improvements to Lake
Walden Square over the next few years. However, if we were to make any repairs
or improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.
Three tenants, Kash N' Karry, a supermarket, KMart, a discount department store
and Carmike Cinemas, a movie theatre, each lease more than 10% of the total
gross leasable area of the property. The leases with these tenants require the
tenants to pay base annual rent on a monthly basis as follows:
Base Rent
Per Square
Foot Per
Approx. % of Total Annum Lease Term
Lessee GLA Leased GLA ($) Beginning To
- ----------- ----------- ----------- ------------ ------------ ---------
Kash N' Karry 46,300 18 6.75 Currently 03/31/12
Options (1) 6.75 04/01/12 03/31/42
KMart 91,266 36 4.20 Currently 03/31/17
Options (2) 4.20 04/01/17 05/31/67
Carmike Cinemas 25,899 10 8.31 Currently 03/31/07
Option 1 9.31 04/01/07 03/31/12
Option 2 9.81 04/01/12 03/31/17
Option 3 10.31 04/01/17 03/31/22
(1) There are six successive five-year renewal options at the same base
rent per square foot per annum.
(2) There are ten successive five-year renewal options at the same base
rent per square foot per annum.
-14-
For federal income tax purposes, our depreciable basis in Lake Walden Square
will be approximately $11,203,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 and 15 years,
respectively.
On May 3, 1999, a total of 237,070 square feet was leased to 29 tenants at Lake
Walden Square. The following tables set forth certain information with respect
to our leases with these 29 tenants as of May 3, 1999:
Approx. Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Kash N' Karry 46,300 03/12 6/5 yr. 312,525 6.75
KMart 91,266 03/17 10/5 yr. 383,317 4.20
Carmike Cinemas 25,899 03/07 3/5 yr. 215,220 8.31
Bookland 4,050 09/00 - 25,000 6.17
Amscot Insurance 1,400 06/01 1/5 yr. 14,000 10.00
Best Brands Plus 3,084 06/01 - 33,369 10.82
Mailboxes, Etc. 1,120 07/02 1/5 yr. 15,680 14.00
Crescent Jewelers 1,300 08/01 1/5 yr. 14,300 11.00
Queen Nails 1,300 12/99 - 14,066 10.82
Sally Beauty Supply 1,600 02/03 - 16,800 10.50
GTE Phone Mart 2,400 12/00 1/3 yr. 24,600 10.25
Simply Fashions 2,800 05/00 - 24,059 8.59
The Associates 1,600 07/03 1/5 yr. 14,400 9.00
Fantastic Sams 1,200 02/00 1/5 yr. 15,276 12.73
Aamco Transmissions 4,800 01/03 2/5 yr. 34,800 7.25
Domino's Pizza 1,295 03/02 2/5 yr. 11,007 8.50
Spec's Music and
Movies 6,000 02/02 1/5 yr. 72,000 12.00
Dr. Longabach 1,600 09/00 1/3 yr. 16,800 10.50
Hao-Hao Chinese
Restaurant 3,120 06/01 - 40,560 13.00
U.S. Army 1,600 07/01 - 12,000 7.50
Sam's Mens Shop 2,950 12/03 - 19,175 6.50
Tampa Tribune 6,277 02/03 2/3 yr. 31,385 5.00
Cici's Pizza 3,605 07/08 1/5 yr. 39,294 10.90
Dollar Tree 6,800 06/03 2/5 yr. 38,091 5.60
Home Choice 4,000 05/03 1/5 yr. 32,000 8.00
Advance America 1,600 11/01 1/3 yr. 16,000 10.00
Woody's Bar-B-Que 3,804 06/02 2/5 yr. 76,742 20.17
Boston Market 3,000 08/04 3/5 yr. 48,000 16.00
Checkers 1,300 07/22 - 42,986 33.07
Vacant 19,085
-15-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Approx. Base Total Per Square Building GLA Rent
GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring by Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) ($) ($)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 1,300 14,066 1,653,453 10.82 .55 .85
2000 4 12,050 105,735 1,615,661 8.77 5.08 6.39
2001 7 12,104 135,047 1,502,314 11.16 5.11 8.36
2002 4 12,219 179,388 1,323,883 14.68 5.15 11.94
2003 7 28,027 198,802 1,146,316 7.09 11.82 15.02
2004 1 3,000 57,005 1,056,248 19.00 1.27 4.97
2005 - - - 1,018,599 - - -
2006 - - - 1,020,139 - - -
2007 1 25,899 228,170 850,598 8.81 10.92 22.37
2008 1 3,605 43,260 777,164 12.00 1.52 5.09
(1) No assumptions were made regarding the releasing of expired leases. It is the opinion
of our management that the space will be released at market rates, at the time of releasing.
</TABLE>
We received an appraisal prepared by an independent appraiser who is a member
in good standing of the American Institute of Real Estate Appraisers which
reported a fair market value for Lake Walden Square, as of January 15, 1999, of
$14,923,000. Appraisals are estimates of value and should not be relied on as
a measure of true worth or realizable value.
Potential Property Acquisitions
We are currently considering a potential property acquisition. This property
has recently been acquired by affiliates of our Sponsor, with the intention to
keep this property available for acquisition by us until we receive sufficient
net proceeds from this Offering to be able to acquire it. If we purchase this
property from the affiliates, we will pay the affiliates an amount equal to
their acquisition cost. Our decision to acquire this property will generally
depend upon:
* our receipt of an acceptable appraisal and environmental report;
* no material adverse change occurring in the property, the tenants or in
the local economic conditions; and
* our receipt of sufficient net proceeds from this Offering to make such
acquisition.
-16-
Other properties may be identified in the future that we acquire before or
instead of this property. We cannot guarantee that we will complete this
proposed acquisition. A short description of the property being considered
follows:
Casselberry Commons Shopping Center, Casselberry, Florida
Casselberry Commons Shopping Center was constructed in 1973 and fully renovated
in 1998. It is a single-story retail center containing 227,664 leasable square
feet. The center has 39 tenant spaces. Tenants occupying more than 10,000
square feet each include Publix, Ross Dress for Less, Dockside Imports, Service
Merchandise Select, Beall's Outlet and Mae's Fabrics. National tenants include
Fashion Bug, Blockbuster Video, LensCrafters, Shoe World, Radio Shack, Sally
Beauty Supply, Dollar Tree, HCA Pharmacy and Burger King. The identified
tenants account for approximately 80% of the property's total leasable square
footage.
As of the date of this Supplement, the acquisition cost of this property to the
affiliate is approximately $17,683,000. This amount may increase by additional
costs incurred by the affiliate which have not yet been finally determined. We
expect these additional costs to be immaterial.
-17-
Prior Performance of Our Affiliates
Prior Investment Programs
During the 10-year period ending June 30, 1999, TIGI Affiliated Companies
have sponsored one REIT, six public real estate equity programs, one private
real estate equity program, and nine private placement mortgage and note
programs, which have in the aggregate raised in excess of $709,300,000 from
approximately 33,796 investors. During that 10-year period, those public real
estate equity programs raised $145,075,520 from 13,880 investors; the private
real estate equity program raised $2,275,000 from 85 investors; the private
placement mortgage and note programs raised $22,641,000 from 545 investors; and
IREC, a REIT sponsored by IREIC (one of the TIGI Affiliated Companies), has
raised $539,331,413 from approximately 19,286 investors. IREC has investment
objectives and policies similar to us and has invested principally in
Neighborhood Centers, except however, IREC invests principally in a
geographical area (a radius of 400 miles from Oak Brook, Illinois) different
than most of our Primary Geographical Area of Investment. See "-
- -Publicly Registered Real Estate Investment Trust--Inland Real Estate
Corporation" below in this Section. Our investment objectives and policies are
similar to those of several of the prior investment programs sponsored by TIGI
Affiliated Companies which have owned and operated retail properties. However,
the vast majority of the other investment programs sponsored by TIGI Affiliated
Companies were dissimilar from ours in that the programs owned apartment
properties, pre-development land and whole or partial interests in mortgage
loans.
The information in this Section and in the Prior Performance Tables
included in this Supplement as Appendix A shows relevant summary information
concerning real estate programs sponsored by the TIGI Affiliated Companies, the
purpose of which is to provide information on the prior performance of these
programs so that potential investors may evaluate the experience of the TIGI
Affiliated Companies in sponsoring such programs. The following discussion is
intended to briefly summarize the objectives and performance of the prior
programs and to disclose any material adverse business developments sustained
by them.
Summary Information
The table below provides certain summarized information concerning prior
programs sponsored by TIGI Affiliated Companies for the 10-year period ending
June 30, 1999, and is qualified in its entirety by reference to the foregoing
introductory discussion and the detailed information appearing in the Prior
Performance Tables in Appendix A of this Supplement. Investors should not
construe inclusion of the succeeding tables, which cover the 10-year period
ending June 30, 1999, as implying in any manner that we will have results
comparable to those reflected in the tables; because the yield and cash
available and other factors could be substantially different for our
Properties. Investors should note that by acquiring our Shares, they will not
be acquiring any interests in any prior programs.
-18-
<TABLE>
<CAPTION>
PRIOR PUBLIC PRIOR PRIVATE
PRIOR REAL ESTATE REAL ESTATE EQUITY
REIT EQUITY AND MORTGAGE AND NOTE
PROGRAM PROGRAMS PROGRAMS
-------------- --------------- ---------------------
<S> <C> <C> <C>
Number of programs sponsored......................... 1 6 10
Aggregate amount raised from investors............... $ 539,331,413 $ 145,075,520 $ 24,916,000
Approximate aggregate number of investors............ 19,286 13,880 630
Number of properties purchased....................... 100 77 7
Aggregate cost of properties (1)..................... $ 757,547,479 $ 119,292,939 $ 1,951,930
Number of mortgages/notes............................ 0 7 517
Principal amount of mortgages/notes.................. 0 $ 2,302,064 $ 22,584,000
Percentage of properties (based on cost) that were:
Commercial--
Retail........................................... 83.3% 1.9% 0.0%
Single-user retail net-lease..................... 16.7% 7.1% 0.0%
Nursing homes.................................... 0.0% 6.3% 0.0%
Offices.......................................... 0.0% 0.0% 0.0%
Industrial....................................... 0.0% 0.0% 0.0%
Health clubs..................................... 0.0% 3.8% 0.0%
Mini-storage..................................... 0.0% 0.0% 0.0%
Total commercial............................... 100.0% 19.1% 0.0%
Multi-family residential........................... 0.0% 3.4% 0.0%
Land............................................... 0.0% 77.5% 100.0%
Percentage of properties (based on cost) that were:
Newly constructed (within a year of acquisition)... 14.4% 0.0% 0.0%
Existing........................................... 85.6% 100.0% 0.0%
Construction....................................... 0.0% 0.0% 0.0%
Number of properties sold............................ 0 15 5
31.7%(2)
Number of properties exchanged....................... 0 0 0
Number of mortgages/notes repaid..................... 0 5 199
(1) Includes purchase price and acquisition fees and expenses.
(2) Based on costs of the properties sold and costs capitalized subsequent to acquisition at June 30, 1999,
not including portions of land parcels.
</TABLE>
-19-
-19-
Of the programs included in the above table, the REIT and two of the six
real estate equity programs have investment objectives similar to ours. Those
programs represent approximately 80% of the aggregate amount raised from
investors, approximately 64% of the aggregate number of investors,
approximately 58% of the properties purchased, and approximately 89% of the
aggregate cost of the properties.
During the three years prior to December 31, 1998, IREC purchased 79
commercial properties. Upon written request, any potential investor may
obtain, without charge, a copy of Table VI filed with the SEC in Part II of our
Registration Statement of which this Supplement is a part, which provides more
detailed information concerning these acquisitions. See "Additional
Information."
Publicly Registered Real Estate Investment Trust
Inland Real Estate Corporation ("IREC")--On October 14, 1994, IREC
commenced an initial public offering (the "Initial Offering") of 5,000,000
shares of common stock at $10 per share. As of July 24, 1996, IREC had received
subscriptions for a total of 5,000,000 shares, thereby completing the Initial
Offering. On July 24, 1996, IREC commenced an offering of an additional
10,000,000 shares of common stock (the "Second Offering") at $10 per share. As
of July 10, 1997, IREC had received subscriptions for a total of 10,000,000
shares, thereby completing the Second Offering. On July 14, 1997, IREC
commenced an offering of an additional 20,000,000 shares of common stock (the
"Third Offering") at $10 per share. As of March 19, 1998, IREC had received
subscriptions for a total of 20,000,000 shares, thereby completing the Third
Offering. On April 7, 1998, IREC commenced an offering of an additional
25,000,000 shares (the "Fourth Offering") at $11 per share. As of December 31,
1998, the Fourth Offering was terminated and IREC had received subscriptions
for a total of 16,642,397 shares from the Fourth Offering. In addition, as of
June 30, 1999, IREC had issued 2,797,862 shares of common stock through its
Distribution Reinvestment Program. As of June 30, 1999, IREC had repurchased
317,535 shares of common stock through its Share Repurchase Program. As a
result, IREC's gross offering proceeds totaled approximately $562,429,000 for
all of such offerings, net of shares repurchased through its Share Repurchase
Program, as of June 30, 1999. IREC's objective is to purchase Neighborhood
Centers and Community Centers located within an approximate 400-mile radius of
its headquarters in Oak Brook, Illinois, to provide, at a minimum, cash
distributions on a quarterly basis and to provide a hedge against inflation
through capital appreciation. IREC may also acquire single-user retail
properties throughout the United States. It is IREC's intention, whenever
possible, to acquire properties free and clear of permanent mortgage
indebtedness by paying the entire purchase price of each property in cash or
shares of IREC's stock, although, IREC does, in certain instances, utilize
borrowings to acquire properties. As of June 30, 1999, the properties owned by
IREC were generating sufficient cash flow to cover operating expenses plus pay
a monthly cash distribution of $0.89 per share.
IREC has placed financing totaling approximately $343,000,000 on 86 of its
98 properties as of June 30, 1999. IREC's 98 properties, a total investment of
approximately $757,547,000 at June 30, 1999, were purchased with proceeds
received from the above described offerings of shares of its common stock and
financings. Through June 30, 1999, cash distributions have totaled $76,977,822,
all of which were from operating cash flow. In the opinion of IREIC, IREC is
substantially meeting its investment objective for cash flow.
-20-
Publicly Registered Limited Partnerships
Inland Monthly Income Fund II, L.P. ("Monthly Income Fund II")--The
offering period for Monthly Income Fund II began August 4, 1988 and ended
August 4, 1990. The objectives were to invest in improved residential, retail,
industrial and other income-producing properties on an all-cash basis to
provide monthly cash distributions of at least 8% per annum through the first
five years of the partnership and to provide a hedge against inflation through
capital appreciation.
Monthly Income Fund II raised $25,323,569 from more than 2,100 investors
and purchased five properties, a net-leased Wholesale Club retail property in
Indiana, a net-leased health club in Ohio, a net-leased nursing center in
Illinois, a net-leased retail store in Arizona and the Euro-Fresh Market Plaza
(formerly Eagle Plaza), a Neighborhood Center in Illinois, for a total
acquisition cost of $21,224,542. Through June 30, 1999, cash distributions have
been maintained at or above an 8% level and on an accrual basis have totaled
$465.86 per $500 unit or $22,109,662, including $17,714,097 from operations and
an additional $4,395,565 which constitutes the net proceeds from the sale of
the Wholesale Club.
In January 1991, Monthly Income Fund II sold its Wholesale Club property
in Indiana for $4,400,000. Net sales proceeds of $4,395,565 were distributed to
investors in February 1991. The property was purchased by Monthly Income Fund
II in December 1988 for $3,427,278, which included acquisition fees of $275,013
and acquisition costs of $9,265. The gain on sale for financial reporting
purposes was $847,467, which is net of selling expenses and commissions.
In the opinion of IREIC, the partnership is meeting its investment
objective to provide a minimum 8% cash distribution and has, through an early
and profitable sale of the Wholesale Club, achieved capital appreciation on 16%
of the partnership's investment in properties.
Inland Real Estate Growth Fund II, L.P. ("Growth Fund II")--The offering
period for Growth Fund II began September 21, 1987 and ended September 21,
1989. The objectives were to invest in improved residential, retail, industrial
and other income-producing properties on a moderately leveraged basis for
capital appreciation through increases in property values, tax-sheltered
quarterly cash distributions and the build-up of equity through reduction of
mortgage indebtedness.
-21-
Growth Fund II raised $4,038,250 from 336 investors and purchased two
properties, a multi-family residential property in Illinois and a health club
in Ohio. These properties were purchased for a total acquisition cost of
$5,615,826. The health club is currently approximately 60% financed with 40%
equity. Cash distributions to limited partners through June 30, 1999 totaled
$1,171.71 per $1,000 unit or $4,654,412, including $983,641 from operations and
$3,670,771 as a return of capital from the sale of the multi-family residential
property in Illinois as 18 individual six-unit apartment buildings. All 18 of
the six-unit buildings were sold to third-party buyers on an installment basis
for from $245,334 to $250,000 per building or a total of $4,261,895 (net of
selling expenses). Growth Fund II's cost basis in the buildings was $4,112,195.
The partnership extended financing to buyers to allow buyers to make monthly
interest payments to Growth Fund II for a period of not more than seven to ten
years, at which time the balance of the purchase price would be due. However,
as of December 31, 1995, 13 of the installment sale loans had been prepaid in
full and five had been substantially pre-paid. In addition, since 1994 the
limited partners have continued to receive double digit returns on their
remaining invested capital. The remaining $80,000 owed on these loans, which
were secured by second mortgages, was paid in full on June 5, 1998. In the
opinion of IREIC, the sale of the multi-family property as individual six-unit
apartment buildings has resulted in modest capital appreciation within a short
holding period. IREIC is evaluating strategies to sell the partnership's
remaining asset (the health club in Ohio) and bring the partnership to a
profitable conclusion.
Inland Land Appreciation Fund, L.P. ("Land Fund I")--The offering period
for Land Fund I began October 12, 1988 and ended October 6, 1989. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale. Land Fund I raised $30,001,000
from 3,425 investors and purchased 25 land parcels, all in suburban counties
surrounding Chicago, Illinois, for an aggregate purchase price of $25,187,069.
As of June 30, 1999, Land Fund I has had multiple sales transactions involving
all or portions of 17 parcels which generated $20,042,063 in net sales
proceeds, including notes receivable of $7,202,935. Land Fund I's cost basis in
the land parcels sold was $14,928,847 resulting in a gain, net of selling
expenses and commissions, of $5,113,216 for financial reporting purposes. In
the opinion of IREIC, the partnership is currently meeting its investment
objectives and has, through completed sales transactions, realized significant
capital appreciation on the assets sold. Cash distributions to limited partners
through June 30, 1999 totaled $9,422,838, all from the sale of land parcels.
Inland Land Appreciation Fund II, L.P. ("Land Fund II")--The offering
period for Land Fund II began October 25, 1989 and ended October 24, 1991. The
objectives were to invest in pre-development land on an all-cash basis and
realize appreciation of such land upon resale.
-22-
Land Fund II raised $50,476,170 from 5,055 investors and purchased, with
the net proceeds available for investment, 27 land parcels and two buildings,
all in suburban counties surrounding Chicago, Illinois, for an aggregate
purchase price of $41,314,301. As of June 30, 1999, Land Fund II has had
multiple sales transactions involving all or portions of 11 parcels which
generated $20,481,400 in net sales proceeds, including notes receivable of
$2,750,000. Land Fund II's cost basis in the land parcels sold was $12,973,143
resulting in a gain, net of selling expenses and commissions, of $7,508,257 for
financial reporting purposes. In the opinion of IREIC, the partnership is
currently meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through June 30, 1999 totaled
$11,836,753, including $11,115,753 from sales and $721,000 from operations.
Inland Capital Fund, L.P. ("Land Fund III")--The offering period for Land
Fund III began December 13, 1991 and ended August 23, 1993. The objectives were
to invest in pre-development land on an all-cash basis and realize appreciation
of such land upon resale.
Land Fund III raised $32,399,282 from 2,683 investors and purchased, with
the net proceeds available for investment, 18 land parcels, one of which
included a house and several outbuildings, for an aggregate purchase price of
$25,945,989. As of June 30, 1999, Land Fund III has had multiple sales
transactions involving the house and portions of 8 parcels which generated
$9,534,612 in net sales proceeds, including notes receivable of $1,083,366.
Land Fund III's cost basis in the land parcels sold was $5,775,086 resulting in
a gain, net of selling expenses and commissions, of $3,759,526 for financial
reporting purposes. In the opinion of IREIC, the partnership is currently
meeting its investment objectives and has, through completed sales
transactions, realized significant capital appreciation on the assets sold.
Cash distributions to limited partners through June 30, 1999 totaled
$5,864,621, all from the sale of land parcels.
Inland Mortgage Investors Fund III ("Mortgage Fund III")--The offering
period for Mortgage Fund III began January 9, 1989 and ended January 9, 1991.
The objectives were to make or acquire loans secured by mortgages on improved
income-producing properties, to provide investors with quarterly cash
distributions of at least 8% per annum for the first five years of the
partnership and to maximize cash distributions over the life of the partnership
by participating in capital appreciation and increased cash flows of properties
securing the partnership's loans.
Mortgage Fund III raised $2,837,249 from 281 investors and originally
funded seven mortgages totaling $2,302,064 between October 1990 and June 1992.
On December 30, 1998, the partnership terminated. Cash distributions to limited
partners through December 30, 1998 totaled $3,601,917, including $874,292 from
operations, $306,874 in supplemental capital contributions from the general
partner in order to meet the 8% per annum distribution requirement and
$2,420,751 as a return of capital from the repayment of mortgage loans
receivable and prepayment penalties.
-23-
Private Partnerships
Since inception and through June 30, 1999 (including the programs
described below under "--Private Placement Real Estate Equity Program," and "--
Private Placement Mortgage and Note Programs," in this Section), Affiliates of
Inland have sponsored 514 private placement limited partnerships which have
raised more than $524,201,000 from approximately 17,000 investors and invested
in properties for an aggregate price of more than $1 billion in cash and notes.
Of the 522 properties purchased, 93% have been in Illinois. Approximately 90%
of the funds were invested in apartment buildings, 6% in shopping centers, 2%
in office buildings and 2% in other properties. Including sales to Affiliates,
305 partnerships have sold their original property investments. Officers and
employees of IREIC and its Affiliates invested more than $17,000,000 in these
private placement limited partnerships.
From 1990 and through June 30, 1999, investors in Inland's private
partnerships have received total distributions in excess of $200,759,000,
consisting of cash flow from partnership operations, interest earnings, sales
and refinancing proceeds and cash received during the course of property
exchanges. Following a proposal by the former corporate general partner, which
was an Affiliate of TIGI, investors in 301 private partnerships voted in 1990
to make IREIC the corporate general partner for those partnerships.
Beginning in December 1993 and continuing into the first quarter of 1994,
investors in 101 private limited partnerships for which IREIC is the general
partner received letters from IREIC informing them of the possible opportunity
to sell the 66 apartment properties owned by those partnerships to a to-be-
formed REIT (the "Apartment REIT") in which Affiliates of IREIC would receive
stock and cash and the limited partners would receive cash. In connection
therewith, the underwriters for the Apartment REIT subsequently advised IREIC
to sell to a third party its management and general partner's interests in
those remaining limited partnerships not selling their apartment properties to
the Apartment REIT (approximately 30% of the Inland-sponsored limited
partnerships owning apartment buildings). The prospective third-party buyers of
IREIC's interests in the remaining partnerships, however, would make no
assurance to support those partnerships financially. As a result, in a March
1994 letter from IREIC, investors were informed of IREIC's decision not to go
forward with the formation of the Apartment REIT. Following this decision, two
investors filed a complaint in April 1994 in the Circuit Court of Cook County,
Illinois, Chancery Division, purportedly on behalf of a class of other unnamed
investors, alleging that IREIC had breached its fiduciary responsibility to
those investors whose partnerships would have sold apartment properties to the
Apartment REIT. The complaint sought an accounting of information regarding the
Apartment REIT matter, an unspecified amount of damages and the removal of
IREIC as general partner of the partnerships that would have participated in
the sale of properties to the Apartment REIT. In August 1994, the court granted
IREIC's motion to dismiss, finding that plaintiffs lacked standing to bring
this case individually. Plaintiffs were granted leave to file an amended
complaint. Thereafter, in August 1994, six investors filed an amended
complaint, purportedly on behalf of a class of other investors, and
derivatively on behalf of six limited partnerships of which IREIC is the
general partner. The derivative counts sought damages from IREIC for alleged
breach of fiduciary duty and breach of contract, and assert a right to an
accounting. IREIC filed a motion to dismiss in response to the amended
complaint. The suit was dismissed in March 1995 with prejudice. The plaintiffs
filed an appeal in April 1996. After the parties briefed the issue, arguments
were heard by the Appellate Court in February 1997. In September 1997, the
Appellate Court affirmed the trial court decision in favor of IREIC.
-24-
Private Placement Real Estate Equity Program
Wisconsin Capital Land Fund, L.P., an Illinois limited partnership
("Wisconsin Land Fund"), was formed in October 1992. The objectives were to
invest in pre-development land in the Madison, Wisconsin area on an all-cash
basis and realize appreciation of such land upon resale. The offering period
for units in this privately offered partnership began in October 1992 and ended
on June 14, 1993 with the maximum amount, $2,275,000, raised. Seven parcels of
land in the Madison, Wisconsin, area were purchased with the proceeds of the
offering.
Parcel 5, which consists of 63 improved lots in the Village of Mount
Horeb, Wisconsin, has had 40 lot sales since 1995 for total gross sales
proceeds of $1,569,700. Twenty-three remaining lots continue to be marketed for
sale. On October 1, 1997, Parcel 6, located in Windsor, Wisconsin, was sold for
$566,597, which amount was 191% of the original parcel capital. Investors
received a $375,000 distribution from this sale.
On March 19, 1998, parcels 3 and 7 were sold for a total of $2,150,000, of
which $1,900,000 was returned in cash to investors. On January 5, 1999,
Parcels #1 and #4 were sold for $1,325,000 and investors received a $1,137,500
cash distribution. To date, investors have received $1,500 for every $1,000
invested.
As of June 30, 1999, the partnership's remaining assets consist of parcel
1 and the 23 remaining lots in parcel 5.
Intervest Midwest Real Estate Corporation, of which Barry L. Lazarus (our
President, Chief Operating Officer, Treasurer, Chief Financial Officer and an
Affiliated Director) is President, currently provides property zoning,
development and disposition services to this partnership. See "Management-
- -Directors and Executive Officers of the Company."
Private Placement Mortgage And Note Programs
During 1992 and in 1993, IREIC or its Affiliates sponsored nine private
placement securities offerings, including seven mortgage and note programs,
which are described below.
Triple Security Fund, L.P., an Illinois limited partnership, was formed in
May 1992. The principal investment objectives of the partnership were to invest
in participations in third-party mortgage loans owned by an Affiliate of IREIC
and thereby return investors' capital within five years, and to provide a 10%
annual return on invested capital during the life of the partnership. The
return of capital and the 10% annual return were guaranteed by IREIC. The
offering period for interests in this privately offered partnership began in
May 1992 and ended in June 1992 with the maximum amount of $3,000,000 raised.
All of the offering proceeds were used to invest in participations in 14
wraparound mortgage loans and first mortgage loans, secured by condominium,
multi-family residential and commercial properties located in the Chicago
metropolitan area. Limited partners received their first monthly cash
distribution in July 1992. Cash distributions to limited partners through
September 30, 1996 totaled $4,294,216, including $1,226,419 from operations,
subsidy income of $67,797 from IREIC, pursuant to the guarantee for that
program, and $3,000,000 was a return of capital resulting from a payoff by the
Affiliate. This partnership was completed in 1996.
-25-
10% Income Fund, L.P., an Illinois limited partnership offering
investments in promissory notes, was formed in May 1992. The offering period
for the purchase of notes began in May 1992 and ended in June 1992 with the
maximum amount of $2,000,000 raised. Notes with a term of five years and
providing a 10% annual return for the first four years and 10.5% in the fifth
year were issued by the partnership. The return of capital to noteholders and
the specified annual returns were guaranteed by IREIC. 10% Income Fund, L.P.
invested in loans made to an Affiliate of IREIC, which were secured by
collateral assignments of third-party mortgage loans owned by the Affiliate.
Noteholders received their first monthly interest distribution in July 1992.
Cash distributions to noteholders through November 30, 1996 totaled $2,878,335,
of which $861,051 was interest earnings, $17,284 was from working capital
reserves, and $2,000,000 was a return of capital resulting from a payoff by the
Affiliate. This partnership was completed in 1996.
9% Income Junior Mortgage Fund, L.P., an Illinois limited partnership, was
formed in July 1992. The principal investment objectives of the partnership
were to invest in third-party junior mortgage loans owned by an Affiliate of
Inland and thereby return investors' capital within six years, and to provide a
9% annual return on invested capital during the life of the partnership. The
return of capital and the 9% annual return were guaranteed by IREIC. The
offering period for interests in this privately offered partnership began in
July 1992 and ended in September 1992 with the maximum amount of $1,000,000
raised. All of the offering proceeds were used to invest in third-party junior
mortgage loans owned by the Affiliate, secured by condominium, multi-family
residential and commercial properties located in the Chicago metropolitan area.
Limited partners received their first monthly cash distribution in September
1992. Cash distributions through October 30, 1998 totaled $1,512,765.31 of
which $512,765.31 was interest earnings and $1,000,000 was a return of capital.
This partnership was completed in October of 1998.
Inland Employee Appreciation Fund, L.P., an Illinois limited partnership
offering investments in promissory notes, was formed in December 1992. The
offering period for the purchase of Notes began in December 1992 and ended in
February 1993 with the maximum amount of $400,000 raised. Notes were offered
only to Illinois residents who were employees of IREIC and its Affiliates.
Notes with a term of four years and providing 10% annual interest were issued
by the partnership. The return of capital to noteholders and the specified
annual return was guaranteed by IREIC. Inland Employee Appreciation Fund, L.P.
invested in a loan made to an Affiliate of IREIC, which was secured by
collateral assignments of third-party investor loans owned by the Affiliate.
Noteholders received their first monthly interest distribution in March 1993.
Cash distributions through May 31, 1996 totaled $502,198, of which $99,769 was
interest earnings and $2,429 was subsidy income from IREIC, pursuant to the
guarantee for that program. The balance of $400,000 was a return of capital.
This partnership was completed in 1996.
9% Monthly Cash Fund, L.P., an Illinois limited partnership offering
investments in promissory notes to accredited investors, was sponsored by IREIC
in February 1993. The offering period for this program began February 1, 1993
and ended on May 17, 1993, when the maximum amount of $4,000,000 was raised.
Notes maturing August 1, 1999 and providing a 9% annual return were issued by
the partnership. 9% Monthly Cash Fund, L.P. invested in loans made to an
Affiliate of IREIC secured by collateral assignments of third party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through June 30, 1999
totaled $2,230,982, all of which consisted of interest earnings.
-26-
9% Monthly Cash Fund II, L.P., an Illinois limited partnership offering
investments in promissory notes to accredited investors, with investment
objectives identical to those of 9% Monthly Cash Fund, L.P., was sponsored by
IREIC in April 1993. The offering period for this program began April 5, 1993
and ended July 23, 1993, with the maximum amount of $4,000,000 raised. Notes
maturing February 1, 2000 and providing a 9% annual return were issued by the
partnership. 9% Monthly Cash Fund II, L.P. has invested in a loan made to an
Affiliate of IREIC, secured by collateral assignments of third-party mortgage
loans owned by the Affiliate. The return of capital to noteholders and the 9%
annual return are guaranteed by IREIC. Cash distributions through June 30, 1999
totaled $2,176,093, all of which consisted of interest earnings.
IMC Note Issue #2 1993, offering investments in promissory notes was
sponsored by Inland Mortgage Corporation, an Illinois corporation and an
Affiliate of IREIC ("IMC"), in July 1993. The offering period for this program
began August 25, 1993 and closed on June 13, 1994 after raising $6,800,000.
Notes maturing December 31, 2003, providing for interest at the rate of 8% per
annum and 100% return of principal guaranteed by IREIC, were issued by IMC.
Proceeds of the offering have been used to invest in a mortgage loan secured by
an apartment property in Manchester, New Hampshire, owned by an Affiliate of
IREIC. Investors may also receive additional interest, dependent on the future
sale of the property. An initial distribution to investors of escrow interest,
totaling $13,685, was made in November 1993. Cash distributions through June
30, 1999 totaled $2,972,434, of which $2,952,978 was interest earnings and
$19,456 was a subsidy from IREIC pursuant to the guarantee for that program.
Inland Condominium Financing Fund, L.P., an Illinois limited partnership
offering investment in promissory notes, was sponsored by IREIC in December
1993. The offering period for this program began December 15, 1993 and closed
on June 30, 1994. This partnership offered notes in the principal amount of
$1,031,000 maturing July 1, 2001, with interest at the rate of 10% per annum
and 100% return of principal guaranteed by IREIC. The proceeds of the offering
were used to make unsecured loans to limited partnerships which are Affiliates
of IREIC, for the purposes of paying expenses relating to the conversion of
apartment properties owned by those partnerships to condominiums, and
conducting condominium unit sales and other partnership expenses. Cash
distributions began in March 1994. Distributions through November 17, 1997
totaled $1,411,617, of which $380,617 was interest earnings and $1,031,000 was
a return of capital. This partnership was completed in 1997.
Inland Junior Mortgage Fund, L.P., an Illinois limited partnership
offering private placement securities, was sponsored by an Affiliate of IREIC
in August 1988. The offering period for this program ended in May 1989 with
$410,000 raised. All of the proceeds available for investment were used to
purchase 82 second mortgages owned by Inland Mortgage Investment Corporation
("IMIC"), one of the TIGI Affiliated Companies, which were secured
predominantly by condominium units located in the Chicago metropolitan area. In
February 1996, 20 limited partners exercised their put option and IMIC bought
their interests. Cash distributions through January 28, 1997 totaled $541,156,
including $131,156 from interest earnings and $410,000 was a return of capital.
All capital has been returned and the partnership was completed in 1997.
-27-
Loan Modifications and Work-Outs
Between 1990 and December 31, 1997, 37 Inland-sponsored partnerships
owning 24 properties ceased making debt service payments to unaffiliated
lenders which held the underlying financing on the properties. These actions
were taken with the objective of reducing or restructuring the debt to levels
commensurate with the levels of performance of the operating properties. In the
case of six of these partnerships, namely 14 W. Elm Limited Partnership, 1445
North State Parkway Limited Partnership, 5600 Sheridan Limited Partnership,
5630 Sheridan Limited Partnership, 6030 Sheridan Limited Partnership and Oak
Brook Commons Limited Partnership, the original asset of each of these
partnerships was transferred to a new partnership which was 100% owned by the
old partnership. IREIC believed that the new partnerships were better
positioned to accomplish a work-out with the lender. In connection with the
transfers of three of these properties to the new partnerships discussed above,
the lender holding the first mortgages on these properties filed a separate
proceeding against the general partner and its Affiliates, claiming contractual
interference and other allegations. This complaint was withdrawn as part of a
final settlement reached with the lender in February 1993.
Each of these new partnerships filed for financial reorganization in
federal court. In addition, 1036 N. Dearborn Limited Partnership also filed for
financial reorganization in federal court. All of these filings for
reorganization were an extension of negotiations with the lenders, with the
objective of reducing or restructuring the debt on the properties owned by the
partnerships. In the case of the filing for reorganization by each of the new
partnerships owned by 1445 North State Parkway Limited Partnership, 5600
Sheridan Limited Partnership and 5630 Sheridan Limited Partnership, the
reorganization proceedings were dismissed after each lender approved a tax-
deferred exchange transaction between the new partnership and an unaffiliated
third party. The general partner of the 1036 North Dearborn Limited Partnership
was able to purchase the debt encumbering that property at a discount from the
lender and the filing for reorganization of that partnership was dismissed. The
1036 North Dearborn property was subsequently refinanced with a third-party
lender and then sold to a third party.
The new partnerships owned by the 14 W. Elm, 6030 Sheridan and Oak Brook
Commons Limited Partnerships participated with the general partner and its
affiliates and with 16 other affiliated limited partnerships, all of whose
properties were subject to first-mortgage loans from the same third-party
lender, in a settlement agreement with that lender. Under the terms of the
settlement agreement, the 16 other affiliated limited partnerships (none of
which were in default on their mortgage loans) provided additional security to
the lender with respect to each of their loans by transferring administration
of property tax escrow accounts to the lender. The transfer of the escrow
accounts had no financial impact on the 16 partnerships. Five of the 16 other
partnerships also obtained favorable loan modifications from the lender.
-28-
In the case of the new partnership owned by the 14 W. Elm Limited
Partnership, the lender cooperated in a tax-deferred exchange of the
partnership's real estate asset. That partnership assigned its interest in its
property, subject to the existing indebtedness, to an unaffiliated third party
in exchange for an assignment of the unaffiliated third party's interest in
another property, subject to indebtedness in a principal amount similar to that
on the 14 W. Elm property. This transaction was accomplished with the objective
of avoiding the creation of any current income tax liability to the partnership
or its limited partners. As a result of this tax-deferred exchange, the 14 W.
Elm Limited Partnership owns a net-lease commercial property secured by a long-
term lease with a creditworthy tenant. The debt service on the indebtedness
used to acquire the exchange property is in the form of fully amortizing
payments over the term of the store lease, with the net-lease payments received
from the tenant equal to the required debt service payments. The possibility of
cash flow distributions to the limited partners is, therefore, precluded.
However, the expectation exists for equity accumulation through the
amortization of the loan and, therefore, a distribution to the limited partners
upon the disposition of the exchange property. IREIC believes that the limited
partners of the 14 W. Elm Limited Partnership are in a better position to
realize a return of their capital investment through the ultimate disposition
of the exchange property.
In the case of the new partnership owned by the Oak Brook Commons Limited
Partnership, the lender acquired the property through foreclosure and the
general partner has supplied the Oak Brook Commons Limited Partnership with a
new property, an ownership interest in a retail store in Marshall, Minnesota,
leased on a Triple-Net Lease Basis by Wal-Mart Stores, Inc.
In the case of the new partnership owned by the 6030 Sheridan Limited
Partnership, the lender agreed to permit a tax-deferred exchange of the
partnership's property, similar to that completed by the 14 W. Elm Limited
Partnership and subsequently the lender sold its mortgage to an unaffiliated
party who then acquired the property. The new partnership acquired a
replacement property similar to that acquired by the 14 W. Elm Limited
Partnership, which property was then conveyed to the 6030 Sheridan Limited
Partnership.
Of the original partnerships discussed above, Mr. Daniel L. Goodwin, a
Director and Chairman and President of Inland, and a Director of IREIC, served
as individual general partner of all but the Oak Brook Commons Limited
Partnership, in which Mr. G. Joseph Cosenza, a Director and a Vice Chairman of
Inland, served as individual general partner. Prior to the filing for
reorganization, and as part of the strategy thereof, Mr. Cosenza relinquished
his position as individual general partner of the Oak Brook Commons Limited
Partnership and Mr. Goodwin did the same for all except the 1036 N. Dearborn
Limited Partnership, for which he continues to serve as individual general
partner. These actions were taken upon the advice of counsel to reduce the
chances of delay in the reorganization efforts. The corporate general partner
of each partnership has elected to continue the business of each of the
partnerships in which the individual general partner relinquished his position.
-29-
Four of the 37 Inland-sponsored partnerships described in the first
paragraph of this section owned four adjacent office buildings in Park Ridge,
Illinois. These four operating partnerships were, in turn, owned by 21 other
Inland-sponsored partnerships which had sold their original real estate assets
and reinvested a portion of the proceeds from those sales in ownership units in
the four operating partnerships. During 1991, the lenders which held the first
mortgages encumbering the four office buildings acquired the deeds to the
properties in lieu of foreclosure. The four operating partnerships were
subsequently liquidated. The general partner of the 21 partnerships which had
owned the four operating partnerships arranged for the transfer to each of the
21 partnerships of certain ownership interests in five net-lease commercial
properties having long-term leases with Creditworthy Tenants. The debt service
on the indebtedness used to acquire the commercial properties consists of
principal and interest payments which fully amortize the indebtedness over the
term of the store leases, with the net-lease payments received from the tenants
equal to the required debt service payments. The possibility of cash flow
distributions to the limited partners in the 21 partnerships is, therefore,
precluded. However, the expectation exists for equity accumulation through the
amortization of the loan and, therefore, a future distribution to the limited
partners upon the disposition of the commercial properties. The 21 partnerships
experienced minimal adverse tax consequences from the liquidation of the four
operating partnerships and their receipt of the ownership interests in the
commercial properties. IREIC believes that the limited partners of the 21
partnerships are now positioned to realize a return of their capital investment
through the ultimate disposition of the commercial properties.
In the case of the 900 DeWitt and the Hoffman Ridge Limited Partnerships,
two of the 37 limited partnerships mentioned in the first paragraph of this
section, tax-deferred exchanges of the partnerships' properties were
accomplished, in the same manner as described above. The partnerships acquired
net-lease commercial properties. Subsequent to the exchanges, the 900 DeWitt
and Hoffman Ridge properties were acquired by the first-mortgage lenders whose
loans were secured by those properties.
In the case of the Park Colony Limited Partnership, one of the 37 limited
partnerships mentioned in the first paragraph of this section, the partnership
defaulted on a loan secured by a second mortgage against the Park Colony
property. The lender which owned the second-mortgage loan purchased the
position of the lender which had funded the first mortgage loan secured by the
property. The lender then sold the debt, at a substantial discount, to an
Affiliate of the general partner of Park Colony Limited Partnership, and all
legal actions associated with the loan default were dismissed. The partnership
then refinanced the debt at the lower principal amount, retiring the debt owned
by the Affiliate. IREIC believes that this debt reduction is of significant
benefit to the partnership, which is now better positioned to realize its
investment objectives.
In 1990, the Inland New England Limited Partnership, acting as nominee for
14 Florida limited partnerships which own the Sunset Ridge Apartments in
Manchester, New Hampshire, ceased making payments on the bond financing for
that property, which bonds were issued by the New Hampshire Housing Finance
Authority. In August 1993, an Affiliate of the general partner for those
partnerships purchased the bonds and the interests of two savings and loan
associations which had acted as bond credit-enhancers, at a substantial
discount. The partnerships which own the property obtained refinancing funds to
pay off the bonds and the amounts due to the Affiliate under the credit-
enhancement instruments for approximately the discounted price paid by the
Affiliate.
-30-
In April 1993, the West Haven Limited Partnership ceased making payments
on the first mortgage loan for that partnership's property. The general partner
attempted to negotiate with the lender to modify the terms of the loan to a
level commensurate with the operating performance of the West Haven property,
but no agreement was reached. A tax-deferred exchange was accomplished and the
partnership acquired an interest in a net-lease commercial property. The West
Haven property was subsequently acquired by the lender whose loan was secured
by a first mortgage against the property.
In the case of the other partnerships referred to in the first paragraph
of this section, subsequent to the acquisition of net-leased commercial
properties via tax-deferred exchanges, the Townsgate, Riverdale, Northwoods and
Bridgeview properties were acquired by the first-mortgage lenders whose loans
were secured by the properties. The Covington Associates and Westbrooke Limited
Partnerships' tax-deferred exchange property, Townsgate II, was acquired by the
first mortgage lender and the two partnerships acquired net-lease commercial
properties via second tax-deferred exchanges. In the case of the Bensenville
Industrial Limited Partnership, subsequent to the acquisition of a replacement
net-lease commercial property, the Bensenville property was acquired by the
first-mortgage lender whose loan was secured by the property.
In addition to the above-described developments, the corporate general
partner of the Walton Place Limited Partnership and the Barrington Lakes
Limited Partnership settled litigation with the lenders for the properties
which resulted in the transfer of the properties and an agreement to make cash
settlements by the partnerships to the lenders. In each case, the litigation
resulted after the partnership ceased making debt service payments in an effort
to bring about a renegotiation of the terms of the financing. The lenders
agreed to permit a tax-deferred exchange of the partnerships' respective
properties.
In January 1995, the Timberlake Limited Partnership ceased making payments
on the first mortgage loan for that partnership's property. IREIC attempted to
negotiate with the lender to modify the terms of the loan to a level
commensurate with the operating performance of the Timberlake property, but no
agreement was reached. During August 1996, IREIC initiated a tax-deferred
exchange whereby the partnership acquired an interest in a net-lease commercial
property prior to the Timberlake property being acquired by the lender whose
loan was secured by a first mortgage against the property.
In October 1996, two limited partnerships owning contiguous apartment
buildings in south suburban Chicago ceased making payments on their respective
HUD-insured first mortgage loans. The Chateaux Versailles and Marsailles
Limited Partnerships, through their general partner, were attempting to
negotiate with HUD, as mortgagee, to modify the terms of the loans to levels
commensurate with the operating performance of the properties. As of June 30,
1999, an agreement has been reached with HUD and mortgage payments have been
resumed by the partnerships.
-31-
Effects of Property Exchanges on Investors
The Inland Organization has used a strategy of tax-deferred property
exchanges to mitigate the adverse effects of 1986 tax law changes and the
weakening of apartment markets in the late 1980s on Inland's tax-shelter
private partnerships and investors in those partnerships. The loss of deficit-
producing properties to foreclosure would otherwise have resulted in the loss
of investors' capital, as well as substantial income tax liability for those
investors. Through the exchange program, deficit-producing apartment properties
have been disposed of, net-leased retail properties have been acquired, and
most tax liability continues to be deferred. Gradually, through the
amortization of debt secured by the new, net-leased properties owned by these
partnerships, the partnerships and their investors are rebuilding equity which
may be realized upon the future sale or refinancing of these properties. One of
the primary investment objectives of these tax-shelter partnerships, the
deferral of tax liability, continues to be met to a significant degree.
However, no cash flow is being received by the investors in these partnerships.
In addition, the tax- deferred exchanges have extended the expected term of
these tax-shelter partnerships. If and when the net-leased properties are sold
or refinanced, there is no assurance that investors will realize any profit or
a complete return of capital. Because the duration of these partnerships has
been extended, when the net-leased properties are sold or refinanced, the
annual rate of appreciation realized by investors, if any, will be less than if
the tax law had not been changed and apartment markets had not declined in the
late 1980s.
Additional Information
Except for re-acquisitions of previously owned properties upon default by
the purchaser, the transfer of a defaulted loan, the tax-deferred property
exchanges and the disputes with lenders described herein, there have been no
further major adverse business developments or conditions experienced by these
prior partnerships which would be material to investors in our shares.
Upon written request, any potential investor may obtain, without charge,
the most recent Annual Report on Form 10-K filed with the SEC by any public
program sponsored by any of the Inland Affiliated Companies which has reported
to the SEC within the last 24 months. Copies of any exhibits to such Annual
Reports shall be provided, upon request, for a reasonable fee.
Summary Tables
The following summary tables set forth certain information concerning prior
programs discussed above through June 30, 1999.
Land Fund I, Land Fund II, Land Fund III, and Wisconsin Land Fund were
formulated as pure capital appreciation investments. No current return (i.e.:
from rents or interest) was contemplated or available as capital was invested
in non-income producing vacant land parcels. Distributions are received on an
irregular basis, only as a result of a sale of the vacant land parcels. These
distributions consist of both the return of the invested capital amount
allocated to the purchase of the parcel or parcels sold plus the profit on the
involved parcels as measured by the sale price (net of costs of the sale) minus
the fully loaded purchase price (allocated capital). The method of measuring
return on investment to date is on a sold parcel-by-parcel basis, as follows:
-32-
<TABLE>
<CAPTION>
FULLY LOADED AVERAGE ANNUAL
PURCHASE PRICE RETURN ON ALLOCATED
NET SALES (ALLOCATED NET PROFITS CAPITAL (GROSS
PRICES CAPITAL ON GROSS RETURN % RETURN %/AVERAGE
OF PARCELS OF PARCELS SOLD = PARCELS SOLD (NET PROFIT/ NUMBER OF YEARS OF
FUND SOLD TO DATE LESS TO DATE) TO DATE ALLOCATED CAPITAL) CAPITAL INVESTED)
- ------------------------- -------------- ---- ---------------- --- -------------- ------------------ ---------------------
<S> <C> <C> <C> <C> <C>
Land Fund I............. $20,042,063 $14,928,847 $ 5,113,216 34% 3.40%
Land Fund II............ 20,481,400 12,973,143 7,508,257 58% 6.40%
Land Fund III........... 9,534,612 5,775,086 3,759,526 65% 9.30%
Wisconsin Land Fund..... 4,041,597 1,908,945 1,700,045 89% 11.87%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE DISTRIBUTIONS TO LIMITED PARTNERS
----------------------------------------------------------- RETURN ON
CAPITAL = RETURN OF + RETURN ON INVESTMENT
RAISED TOTAL INVESTMENT INVESTMENT PER YEAR
------------- ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Monthly Income Fund II...... $ 25,323,569 $ 22,109,662 $ 4,395,565 $ 17,714,097 8.00%
Growth Fund II.............. 4,038,250 4,654,412 3,670,771 983,641 5.11%
Mortgage Fund III........... 2,837,249 3,601,917 2,420,751 1,181,166 6.25%
Triple Security Fund, L.P... 3,000,000 4,294,216 3,000,000 1,294,216 10.00%
Employee Appreciation
Fund, L.P.*............... 400,000 502,198 400,000 102,198 10.00%
Inland Junior Mortgage
Fund, L.P.*............... 410,000 541,156 410,000 131,156 6.97%
Inland Condominium
Financing Fund, L.P..... 1,031,000 1,411,617 1,031,000 380,617 10.00%
10% Income Fund, L.P........ 2,000,000 2,878,335 2,000,000 878,335 10.00%
9% Income Junior Mortgage
Fund, L.P.*............. 1,000,000 1,512,708 1,000,000 512,708 9.00%
9% Monthly Cash Fund, L.P... 4,000,000 2,230,982 0 2,230,982 9.00%
9% Monthly Cash Fund II, L.P 4,000,000 2,176,093 0 2,176,093 9.00%
IMC Note Issue #2 1993...... 6,800,000 2,972,434 0 2,972,434 8.00%
* Returns of Capital prior to Final Distribution.
</TABLE>
-33-
Management
Directors and Executive Officers of the Company
Due to unexpected requirements on her time, Kelly Tucek has resigned as our
Treasurer and Chief Financial Officer. Barry Lazarus, our President, Chief
Operating Officer and Affiliated Director, has been elected by our Board of
Directors to the additional offices of Treasurer and Chief Financial Officer.
Investment Objectives and Policies
Distributions
We have decided to begin paying distributions on a monthly basis.
Distributions were paid at the level of $.70 per share per annum through June
1999.
The Distribution level was increased to $.73 per share per annum, effective
July 1, 1999, beginning with the distribution to be paid August 7, 1999.
-34-
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, limitations on the area in which we may
acquire properties; risks associated with borrowings secured by properties;
competition for tenants and customers; federal, state or local regulations;
adverse changes in general economic or local conditions; competition for
property acquisitions with third parties that have greater financial resources
than we do; inability of lessees to meet financial obligations; uninsured
losses; risks of failing to qualify as a REIT; and potential conflicts of
interest between ourselves and our affiliates including the Advisor.
Liquidity and Capital Resources
We were formed on September 3, 1998 to acquire and manage a diversified
portfolio of real estate, primarily multi-tenant shopping centers and had not
commenced operations as of March 31, 1999. It is anticipated that we will
initially focus on acquiring properties in the southeastern states, primarily
Florida, Georgia, North Carolina and South Carolina. We may also acquire
single-user retail properties in locations throughout the United States,
certain of which may be sale and leaseback transactions, net leased to
creditworthy tenants. On February 11, 1999, we commenced the Offering of
50,000,000 shares at a price of $10 per Share and of 4,000,000 Shares at a
price of $9.50 per Share which may be distributed pursuant to the Distribution
Reinvestment Program. Inland Retail Real Estate Advisory Services, Inc. is our
Advisor. As of March 31, 1999, subscriptions for a total of 97,851 Shares had
been received from the public resulting in $978,514 in Gross Offering Proceeds.
In addition, we received $200,000 from the Advisor for 20,000 Shares issued to
the Advisor. Subscriber funds (other than the Advisor's capital contribution)
will be held in an interest-bearing escrow account with an unaffiliated escrow
agent until the Minimum Offering has been met and subscriptions are accepted.
The Advisor has guaranteed payment of all public offering expenses (excluding
selling commissions, the marketing contribution and the due diligence expense
allowance) in excess of 5.5% of the gross proceeds of the Offering (the "Gross
Offering Proceeds") or all organization and offering expenses (including such
selling expenses) which together exceeds 15% of the Gross Offering Proceeds.
The following programs are provided to facilitate investment in the Shares and
to provide limited liquidity for Stockholders until such time as a market for
the Shares develops:
The Distribution Reinvestment Program will allow Stockholders who purchase
Shares pursuant to the Offering to automatically reinvest distributions by
purchasing additional Shares. Such purchases will not be subject to selling
commissions or the Marketing Contribution and Due Diligence Expense Allowance
and will be sold at a price of $9.50 per Share.
-35-
The Share Repurchase Program will, subject to certain restrictions, provide
existing Stockholders with limited, interim liquidity by enabling them to sell
Shares back to us at a price of $9.05 per Share. Shares purchased by us will
not be available for resale.
Results of Operations
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. In addition, we have received the Advisor's capital
contribution of $200,000 for which it was issued 20,000 Shares. Subscriber
funds are held in an interest-bearing escrow account until proceeds equal to
the Minimum Offering have been received.
As of March 31, 1999, the Advisor advanced approximately $1,359,000 to us for
costs incurred with the Offering.
Year 2000 Issues
General
Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, we rely on computers and operating systems provided by
equipment manufacturers, and also on application software developed internally
and, to a limited extent, by outside software vendors. We have assessed our
vulnerability to the so-called "Year-2000 Issue" with respect to its equipment
and computer systems.
State of Readiness
We have identified the following three areas for "Year-2000" compliance
efforts:
Business Computer Systems: The majority of our information technology systems
were developed internally and include accounting, lease management, investment
portfolio tracking, and tax return preparation. We have rights to the source
code for these applications and employ programmers who are knowledgeable
regarding these systems. We have conducted tests of our internal systems to
determine year 2000 compliance, and these tests have demonstrated that we
should not experience any significant adverse effects to our business as a
result of the Year-2000 Issue. We do not anticipate any material costs
relating to our business computer systems regarding year 2000 compliance since
our critical hardware and software systems use four digits to represent the
applicable year. Therefore, we are not currently planning any independent
testing of our critical systems; however, should additional facts present
themselves that would make it prudent for us to have independent testing
conducted, we will do so. We do use various computers, so-called "PC's", that
may run software that may not use four digits to represent the applicable year.
We have tested the PC hardware to determine year 2000 compliance, and the
results of these tests have demonstrated that we should not experience any
significant adverse effects to our business as a result of the Year-2000 Issue.
It should be noted that such PC's are incidental to our critical systems.
-36-
Tenants and Suppliers: We have surveyed proposed tenants, suppliers and other
parties with whom we intend to do a significant amount of business to identify
our potential exposure in the event such parties are not year 2000 compliant.
The survey consists of a questionnaire sent to the significant tenants and
suppliers of the properties initially intended to be acquired by us. We are in
the process of reviewing the responses to such questionnaires. Since this
method involves parties over which we have no control, such as public utility
companies, it is difficult, at best, to judge the status of the outside
companies' year 2000 compliance. We will be working closely with all suppliers
of goods and services in an effort to minimize the impact of the failure of any
supplier to become year 2000 compliant by December 31, 1999. Currently, we are
not aware of any material impact on our business, operations or financial
condition due to year 2000 non-compliance by any one of our proposed tenants or
suppliers.
Non-Information Technology Systems: In the operation of our properties, we will
acquire equipment with embedded technology such as microcontrollers, which
operate heating, ventilation, and air conditioning systems, fire alarms,
security systems, telephones and other equipment utilizing time-sensitive
technology. We will evaluate our potential exposure and costs if such non-
information technology systems are not year 2000 compliant and expect to be
able to complete our assessment during the third quarter of 1999.
Year 2000 Costs
As of March 31, 1999, our Advisor and its Affiliates estimate that costs to
achieve year 2000 compliance will not exceed $100,000 for all such Affiliates.
However, as of March 31, 1999, our Advisor and its Affiliates anticipate that
only approximately 3% of these costs will be directly allocated to and paid by
us. The balance of the year 2000 compliance costs, approximately 97%, will be
paid by the Advisor and its Affiliates. Total year 2000 compliance costs
incurred by such Affiliates through March 31, 1999 are estimated at
approximately $5,000.
Year 2000 Risks
The most reasonable likely worst case scenario with respect to the year 2000
non-compliance of our business computer systems would be the inability to
access information which could result in the failure to issue financial
reports. The most reasonable likely worst case scenario with respect to year
2000 non-compliance of our tenants is failure to receive rental income which
could result in our being unable to meet cash requirements for monthly expenses
and distributions. However, we are permitted to borrow funds to meet
distribution requirements. The most reasonable likely worst case scenario with
respect to the year 2000 non-compliance of our suppliers is the failure to
supply necessary utilities; including, but not limited to heating, as a result
of a malfunctioning of non-information technology systems in some of our
properties.
Contingency Plan
We are in the process of formulating a contingency plan which will be developed
by September 1999. The contingency plan may include printing copies of all
computer records during December 1999 to ensure that such records are not lost
in the event that our internal computer systems become inoperative due to year
2000 non-compliance.
-37-
Summary of the Organizational Documents
Stockholders' Meetings
We have entered into an agreement with Inland Real Estate Investment
Corporation, our Sponsor, which provides that Inland Real Estate Investment
Corporation will pay for the reasonably estimated cost to prepare and mail a
notice to our stockholders of any special meeting of stockholders requested by
the stockholders. This will obviate the necessity of our stockholders or us
paying for such cost.
Plan of Distribution
As of July 26, 1999, we had sold 1,832,476 shares resulting in gross proceeds
of $18,324,760. Inland Securities Corporation, an affiliate of our Advisor,
serves as dealer manager of this Offering and is entitled to receive selling
commissions and certain other fees, as discussed further in our Prospectus. As
of July 26, 1999, we have incurred $1,740,852 of commissions and fees payable
to Inland Securities Corporation, which will result in our receipt of
$16,583,908 of net proceeds from the sale of those 1,832,476 shares. An
additional 5,134 shares have been sold pursuant to our Distribution
Reinvestment Program, for which we will receive additional net proceeds of
$48,775. We also pay an affiliate of our Advisor fees to manage and lease our
properties. As of June 30, 1999, we have incurred and paid property management
fees of $16,792. Our Advisor may also receive an annual asset management fee
of not more than 1% of our average invested assets, paid quarterly. As of the
end of the quarter ending March 31, 1999, we had not paid or incurred any asset
management fees. We may pay expenses associated with property acquisitions of
up to .5% of the money that we raise in this Offering but in no event will we
pay acquisition expenses on any individual property that exceeds 6% of its
purchase price. Acquisition expenses totaling $822,967 are included in the
purchase price we paid for our properties purchased through July 26, 1999.
-38-
Experts
The Historical Summary of Gross Income and Direct Operating Expenses of Lake
Walden Square for the year ended December 31, 1998, the Historical Summary of
Gross Income and Direct Operating Expenses of Merchants Square Shopping Center
for the year ended December 31, 1998, the Historical Summary of Gross Income
and Direct Operating Expenses of Town Center Commons for the period from
January 1, 1999 through March 31, 1999 and the Historical Summary of Gross
Income and Direct Operating Expenses of Boynton Commons Shopping Center for the
year ended December 31, 1998, have been included herein the Post-Effective
Amendment No. 1 to the Registration Statement on Form S-11, in reliance upon
the reports of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing. The consolidated Balance Sheet of Inland Retail Real Estate
Trust, Inc. as of September 18, 1998, the Historical Summary of Gross Income
and Direct Operating Expenses of Lake Walden Square for the year ended December
31, 1997, the Historical Summary of Gross Income and Direct Operating Expenses
of Lake Olympia Square for the year ended December 31, 1997, and the Historical
Summary of Gross Income and Direct Operating Expenses of Merchants Square
Shopping Center for the year ended December 31, 1997 have been incorporated by
reference herein, in reliance upon the reports of KPMG LLP, independent
certified public accountants, and upon the authority of said firm as experts
in accounting and auditing.
-39-
Index to Financial Statements
Page
Inland Retail Real Estate Trust, Inc.:
Consolidated Balance Sheet (unaudited) at March 31, 1999............ F- 1
Notes to Consolidated Financial Statements (unaudited)
at March 31, 1999................................................. F- 2
Pro Forma Consolidated Balance Sheet (unaudited)
at March 31, 1999................................................. F- 5
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
at March 31, 1999................................................. F- 7
Pro Forma Consolidated Statement of Operations (unaudited)
of the Company for the three months ended March 31, 1999.......... F-10
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the three months ended March 31, 1999......................... F-12
Pro Forma Consolidated Statement of Operations (unaudited)
of the Company for the year ended December 31, 1998............... F-14
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
for the year ended December 31, 1998.............................. F-16
Lake Walden Square:
Independent Auditors' Report........................................ F-20
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-21
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-22
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the three months ended March 31, 1999............. F-24
Notes to Historical Summary of Gross Income and Direct Operating
Expenses (unaudited) for the three months ended March 31, 1999.... F-25
Merchants Square Shopping Center:
Independent Auditors' Report........................................ F-26
Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998.............................. F-27
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998........... F-28
Historical Summary of Gross Income and Direct Operating Expenses
(unaudited) for the three months ended March 31, 1999............. F-30
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the three months
ended March 31, 1999.............................................. F-31
Town Center Commons:
Independent Auditors' Report........................................ F-32
Historical Summary of Gross Income and Direct Operating Expenses
for the period from January 1, 1999 through March 31, 1999........ F-33
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses for the period from January 1, 1999 through
March 31, 1999.................................................... F-34
Boynton Commons 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 three months ended March 31, 1999............. F-40
Notes to the Historical Summary of Gross Income and Direct
Operating Expenses (unaudited) for the three months
ended March 31, 1999.............................................. F-41
INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)
Consolidated Balance Sheet
March 31, 1999
(unaudited)
Assets
Cash and cash equivalents (Note 1)................ $ 206,732
Escrowed Funds (Note 1)........................... 978,514
Deferred offering costs (Note 1).................. 1,359,424
Total assets...................................... $ 2,544,670
============
Liabilities and Stockholders' Equity
Liabilities:
Liability for subscriptions received (Note 1)... $ 978,514
Accounts payable................................ 4,732
Due to Affiliates (Note 3)...................... 1,359,424
Minority interest in Partnership................ 2,000
Total liabilities............................. 2,344,670
Stockholders' Equity (Notes 1 and 2):
Preferred Stock, $.01 par value, 10,000,000
shares authorized, none outstanding............ -
Common stock, $.01 par value, 100,000,000 Shares
authorized; 20,000 issued and outstanding..... 200
Additional paid-in capital...................... 199,800
Total stockholders' equity.................... 200,000
Commitments and contingencies
Total liabilities and stockholders' equity........ $ 2,544,670
============
See accompanying notes to consolidated financial statements.
F-1
INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 1999
(unaudited)
(1) Organization and Basis of Accounting
Inland Retail Real Estate Trust, Inc. (the "Company") was formed on September
3, 1998 to acquire and manage a diversified portfolio of real estate, primarily
multi-tenant shopping centers and has not commenced operations. It is
anticipated that the Company will initially focus on acquiring Properties in
the southeastern states, primarily Florida, Georgia, North Carolina and South
Carolina. The Company may also acquire single-user retail properties in
locations throughout the United States, certain of which may be sale and
leaseback transactions, net leased to creditworthy tenants. Inland Retail Real
Estate Advisory Services, Inc. (the "Advisor"), an Affiliate of the Company, is
the advisor to the Company. On February 11, 1999, the Company commenced an
initial public offering ("Offering"), on a best efforts basis of 50,000,000
Shares of common stock ("Shares") at $10 per Share and 4,000,000 Shares at
$9.50 per Share which may be distributed pursuant to the Company's Distribution
Reinvestment Program ("DRP"). No Shares will be sold unless subscriptions for
at least 200,000 Shares (the "Minimum Offering") have been obtained within six
months after commencement of the Offering. As of March 31, 1999, the Company
had received subscriptions for a total of 97,851 Shares. As of March 31, 1999,
escrowed funds of $978,514 were reflected as escrowed deposits, along with the
corresponding liability for subscriptions received, in the accompanying
Consolidated Financial Statements. This does not include the $200,000 received
from the Advisor for its purchase of 20,000 Shares before the commencement of
the Offering.
The Company intends to qualify as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended, for federal income tax purposes
commencing with the tax year ending December 31, 1999. If the Company
qualifies for taxation as a REIT, the Company generally will not be subject to
federal income tax to the extent it distributes its REIT taxable income to its
stockholders. If the Company fails to qualify as a REIT in any taxable year,
the Company will be subject to federal income tax on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and federal income and excise taxes on its undistributed income.
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and are carried at cost, which
approximates market.
Offering costs will be offset against the Stockholders' equity accounts once
the Shares sold exceed the minimum number of Shares and the gross proceeds of
the Offering ("Gross Offering Proceeds") are released from escrow. Offering
costs consist principally of printing, selling and registration costs.
F-2
INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
(2) Basis of Presentation
The accompanying Consolidated Balance Sheet includes the accounts of the
Company, as well as 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 partner common units in the
operating partnership for which it paid $2,000 and which is reflected as a
minority interest in the accompanying Consolidated Balance Sheet. The effect
of all significant intercompany transactions have been eliminated.
(3) Transactions with Affiliates
As of March 31, 1999, the Company had incurred $1,359,424 of offering costs.
Pursuant to the terms of the Offering, the Advisor is required to pay
organizational and offering expenses (excluding sales commissions, the
marketing contribution and the due diligence expense allowance) in excess of
5.5% of the gross proceeds of the Offering or all organization and offering
expenses (including selling commissions) which together exceed 15% of Gross
Offering Proceeds. As of March 31, 1999, offering costs did exceed the 5.5%
and 15% limitations, however the Company anticipates that these costs will not
exceed these limitations upon completion of the Offering. Any excess amounts
at the completion of the Offering will be reimbursed by the Advisor.
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
Offering and to the administration of the Company. In addition, an Affiliate
of the Advisor is entitled to receive selling commissions, a marketing
contribution and a due diligence expense allowance from the Company in
connection with the Offering. As of March 31, 1999, such commissions,
marketing contribution and due diligence expense allowance incurred were
$92,958, none of which were paid.
The Advisor has contributed $200,000 to the capital of the Company for which it
received 20,000 Shares.
F-3
INLAND RETAIL REAL ESTATE TRUST, INC.
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
(4) Stock Option Plan and Soliciting Dealer Warrants
The Company adopted an Independent Director Stock Option Plan which, subject to
certain conditions, provides for the grant to each Independent Director of an
option to acquire 3,000 Shares following their becoming a Director and for the
grant of additional options to acquire 500 Shares on the date of each annual
Stockholders' meeting commencing with the annual meeting in 2000 if the
Independent Director is a member of the Board on such date. The options for
the initial 3,000 Shares to be granted shall be exercisable as follows: 1,000
Shares on the date of grant and 1,000 Shares on each of the first and second
anniversaries of the date of grant. The subsequent options will be exercisable
on the second anniversary of the date of grant. The initial options will be
exercisable at $9.05 per Share. The subsequent options will be exercisable at
the fair market value of a Share on the last business day preceding the annual
meeting of Stockholders, and shall be $9.05 per Share until the earlier of the
termination of the Offering or February 11, 2001. As of March 31, 1999, no
options had been issued.
In addition to sales commissions, Soliciting Dealers will also receive one
Soliciting Dealer Warrant for each 25 Shares sold by such Soliciting Dealer
during the Offering, subject to state and federal securities laws and subject
to the issuance of a maximum of 2,000,000 Soliciting Dealers Warrants to
purchase an equivalent number of Shares. The holder of a Soliciting Dealer
Warrant will be entitled to purchase one Share from the Company at a price of
$12 during the period commencing one year from the date of the first issuance
of any of the Soliciting Dealer Warrants and ending five years after February
11, 1999. As of March 31, 1999, no warrants had been issued.
(5) Subsequent Events
On April 30, 1999, the Company decided to begin paying distributions on a
monthly basis, with the first distribution to be paid June 7, 1999.
Distributions have been approved at an annual rate of $.70 per Share.
Through May 3, 1999, the Company had sold 413,513 Shares resulting in net
proceeds of $3,742,293. This amount is in excess of the Minimum Offering of
200,000 Shares. Accordingly, proceeds of the Offering which had been in escrow
were released to the Company on May 3, 1999.
Also on May 3, 1999, the Company purchased Lake Walden Square by acquiring the
interests of Lake Walden Affiliated Partners in the Lake Walden Property
Partnership. The Company purchased Lake Walden Square for $14,538,984. In
addition, the Company paid transfer fees of $10,500 to the first mortgage
lender. The property is located in Plant City, Florida and contains 256,155
square feet of leasable space. Its tenants lesing more than 10% of the total
gross leasable area are Kash N' Karry, K-Mart and Carmike Cinemas.
F-4
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-5
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-6
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-7
<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> <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-8
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-9
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-10
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-11
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-12
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-13
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-14
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-15
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-16
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-17
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-18
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-19
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 Walden 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc., as described in note 2. The presentation is not intended to be a
complete presentation of Lake Walden 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 Walden Square for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 2, 1999
F-20
Lake Walden Square
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $1,636,260
Operating expense and real estate
tax recoveries................................ 294,334
Percentage rent................................. 425
Other income.................................... 12,470
-----------
Total Gross Income.............................. 1,943,489
-----------
Direct operating expenses:
Operating expenses.............................. 173,592
Real estate taxes............................... 166,039
Utilities....................................... 30,914
Insurance....................................... 10,898
Management Fees................................. 87,975
Interest Expense................................ 782,075
-----------
Total direct operating expenses................. 1,251,493
-----------
Excess of gross income over
direct operating expenses..................... $ 691,996
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-21
Lake Walden Square
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Lake Walden Square (Lake Walden) is located in Plant City, Florida. It
consists of approximately 263,000 square feet of gross leasable area and
was 92% leased and occupied at December 31, 1998. Approximately 62% of
Lake Walden is leased to three tenants representing approximately 55% of
base rental income. An Affiliate of Inland Retail Real Estate Trust, Inc.
purchased Lake Walden from an unaffiliated third party (Seller) on behalf
of Inland Retail Real Estate Trust, Inc. on May 6, 1998. Inland Retail
Real Estate Trust, Inc. will acquire Lake Walden 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Lake
Walden Square's revenues and expenses. The Historical Summary has been
prepared on the accrual basis of accounting and requires management of Lake
Walden 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 Walden 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 Walden Square is reimbursed for common
area, real estate, insurance costs and management fees.
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 $7,627 for the
year ended December 31, 1998.
F-22
Lake Walden 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 $ 1,674,258
2000 1,623,155
2001 1,497,366
2002 1,314,614
2003 1,131,801
Thereafter 9,418,719
-----------
$16,659,913
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Lake Walden. Costs such as
depreciation, amortization, professional fees and loan assumption fees are
excluded from the Historical Summary.
The seller provided management services for Lake Walden for an annual fee
of 4% of gross revenues (as defined) through May 6, 1998. Subsequent to
the sale of Lake Walden 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 Walden Square of approximately $10,100,000 in
connection with the acquisition. The assumed debt, which originated
October 30, 1997 and matures on November 1, 2007, has an annual interest
rate of 7.63% and requires monthly principal and interest payments.
In addition, Inland Retail Real Estate Trust, Inc. will assume a second
mortgage debt of approximately $800,000 in connection with the acquisition.
Within a short time thereafter, the debt will subsequently be paid off by
Inland Retail Real Estate Trust, Inc. and accordingly, the related interest
expense is excluded from the Historical Summary.
F-23
Lake Walden Square
Historical Summary of Gross Income and Direct Operating Expenses
Three months ended March 31, 1999
(unaudited)
Gross income:
Base rental income.............................. $ 445,882
Operating expense and real estate
tax and insurance recoveries.................. 113,183
-----------
Total Gross Income.............................. 559,065
-----------
Direct operating expenses:
Operating expenses.............................. 93,683
Management fees................................. 25,803
Real estate taxes............................... 43,585
Insurance....................................... 2,397
Interest Expense................................ 214,458
-----------
Total direct operating expenses................. 379,926
-----------
Excess of gross income over
direct operating expenses..................... $ 179,139
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-24
Lake Walden Square
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 Lake Walden 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. Inland Retail Real Estate Trust, Inc. will assume 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 and matures November 1, 2007, has an annual interest rate
of 7.63% and requires monthly principal and interest payments.
In addition, as part of the acquisition, the Company will assume a second
mortgage debt of approximately $800,000 with an interest rate of 10.9%.
F-25
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 Merchants Square 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc., as described in note 2. The presentation is not intended to be a
complete presentation of Merchants Square 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 Merchants Square Shopping Center for the year ended December 31,
1998, in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 2, 1999
F-26
Merchants Square Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
Gross income:
Base rental income.............................. $ 582,001
Operating expense and real estate
tax recoveries................................ 171,468
Percentage rent................................. 576
Other income.................................... 994
-----------
Total Gross Income.............................. 755,039
-----------
Direct operating expenses:
Operating expenses.............................. 68,924
Real estate taxes............................... 90,572
Insurance....................................... 9,820
Management Fees................................. 35,181
Interest Expense................................ 72,305
-----------
Total direct operating expenses................. 276,802
-----------
Excess of gross income over
direct operating expenses..................... $ 478,237
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-27
Merchants Square Shopping Center
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. Business
Merchants Square Shopping Center (Merchants Square) is located in
Zephyrhills, Florida. It consists of 74,850 square feet of gross leasable
area and was 100% leased and occupied at December 31, 1998. Approximately
64% of Merchants Square is leased by one major tenant, Kash N' Karry,
representing approximately 55% of base rental income. An Affiliate of
Inland Retail Real Estate Trust, Inc. purchased Merchants Square from an
unaffiliated third party (Seller) on behalf of Inland Retail Real Estate
Trust, Inc. on October 9, 1998. Inland Retail Real Estate Trust, Inc. will
acquire Merchants Square from this affiliate at their cost upon receipt of
proceeds from 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Merchants
Square's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of Merchants
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
Merchants 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 Merchants Square is reimbursed for common
area, 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 $1,782 for the
year ended December 31, 1998.
F-28
Merchants Square 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 $ 564,443
2000 536,668
2001 500,796
2002 481,711
2003 418,129
Thereafter 3,004,744
-----------
$ 5,506,491
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Merchants Square. Costs
such as depreciation, amortization and professional fees are excluded from
the Historical Summary.
The Seller provided management services for Merchants Square for an annual
fee ranging from 4% to 6% of gross revenues (as defined) through October 9,
1998. Subsequent to the sale of Merchants Square 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 Merchant Square of approximately $4,300,000 in connection
with the acquisition. The assumed debt which originated October 9, 1998
and matures November 1, 2008, has an annual interest rate of 7.5% payable
monthly for the first 12 months which can be adjusted to an annual interest
rate of 7.25% subsequently upon payment of scheduled principal payments.
5. Pro Forma Adjustment (unaudited)
The interest expense associated with the assumed debt discussed in note 4,
would have been approximately $322,500 if the related debt had been in
existence since January 1, 1998.
F-29
Merchants Square Shopping Center
Historical Summary of Gross Income and Direct Operating Expenses
Three months ended March 31, 1999
(unaudited)
Gross income:
Base rental income.............................. $ 145,500
Operating expense and real estate
tax and insurance recoveries.................. 52,274
-----------
Total Gross Income.............................. 197,774
-----------
Direct operating expenses:
Operating expenses.............................. 22,734
Management Fees................................. 10,803
Real estate taxes............................... 27,035
Insurance....................................... 2,028
Interest Expense................................ 80,232
-----------
Total direct operating expenses................. 142,832
-----------
Excess of gross income over
direct operating expenses..................... $ 54,942
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-30
Merchants Square 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 Merchants Square 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. will assume 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 and matures November 1, 2008, has an annual interest rate of
7.5% payable monthly for the first 12 months which can be adjusted to an
annual interest rate of 7.25% subsequently upon payment of scheduled
principal payments.
F-31
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 Town Center Commons for the period
from January 1, 1999 through March 31, 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc., as described in note 2. The presentation is not intended to be a
complete presentation of Town Center Common'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 Town Center Commons for the period from January 1, 1999 through
March 31, 1999, in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 2, 1999
F-32
Town Center Commons
Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999
Gross income:
Base rental income.............................. $ 185,358
Operating expense and real estate
tax recoveries................................ 23,771
-----------
Total Gross Income.............................. 209,129
-----------
Direct operating expenses:
Operating expenses.............................. 15,522
Real estate taxes............................... 22,000
Utilities....................................... 1,053
Insurance....................................... 2,805
Management Fees................................. 7,379
-----------
Total direct operating expenses................. 48,759
-----------
Excess of gross income over
direct operating expenses..................... $ 160,370
===========
See accompanying notes to historical summary of gross income and direct
operating expenses.
F-33
Town Center Commons
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999
1. Business
Town Center Commons (Town Center) is located in Kennesaw, Georgia. It
consists of approximately 72,100 square feet of gross leasable area and was
96% leased and occupied at March 31, 1999. Approximately 59% of Town
Center is leased to one tenant, J.C. Penney Home Store, representing
approximately 63% of base rental income. In addition, Town Center is also
anchored by an 80,000 square foot Gaylans which owns the land and building.
An affiliate of Inland Retail Real Estate Trust, Inc. purchased Town Center
from an unaffiliated third party (Seller) on behalf of Inland Retail Real
Estate Trust, Inc. on April 13, 1999. Inland Retail Real Estate Trust,
Inc. will acquire Town Center from this affiliate at their cost upon
receipt of proceeds from an equity offering.
Town Center was under development throughout the majority of 1998 with
significant property operations commencing January 1, 1999. As such, the
period from January 1, 1999 through March 31, 1999 represents the operating
results of the property subsequent to development and are expected to
approximate 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 Current Report on Form 8-K/A of Inland Retail Real Estate
Trust, Inc. and is not intended to be a complete presentation of Town
Center's revenues and expenses. The Historical Summary has been prepared
on the accrual basis of accounting and requires management of Town Center
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
Town Center leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which Town Center 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 increased base rental income by $8,863 for the
three months ended March 31, 1999.
F-34
Town Center Commons
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the period from January 1, 1999 through March 31, 1999
Minimum rents to be received from tenants under operating leases in effect
at March 31, 1999 are as follows:
Year Amount
---- ------
1999 $ 719,058
2000 960,831
2001 960,831
2002 960,831
2003 945,498
Thereafter 2,955,083
-----------
$ 7,502,132
===========
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of Town Center. Costs such as
interest expense, depreciation, amortization and professional fees are
excluded from the Historical Summary.
Town Center is managed pursuant to the terms of a management agreement for
an annual fee of 4% to 6% of gross revenues (as defined). Subsequent to
the sale of Town Center (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.
As Town Center 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.
5. Pro Forma Adjustment (unaudited)
Inland Retail Real Estate Trust, Inc. will assume the outstanding mortgage
debts related to Town Center of approximately $7,600,000 in connection with
the acquisition. The assumed debts which originated April 13, 1999 and
mature April 13, 2000, have annual interest rates ranging from 175 points
over LIBOR (currently 6.7%) to 7%.
The interest expense associated with the assumed debt would have been
approximately $33,000 if the related debt had been in existence since
January 1, 1999.
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 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.
KPMG LLP
Chicago, Illinois
March 18, 1999
F-36
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-37
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-38
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-39
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-40
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-41
APPENDIX A
PRIOR PERFORMANCE TABLES
The following prior performance tables contain information concerning
public real estate limited partnerships sponsored by Affiliates of the Advisor
(collectively, the "Partnerships" or the "Programs", and individually. the
"Partnership" or the "Program"). This information has been summarized, in
part, in narrative form in this Supplement under "Prior Performance of Our
Affiliates." The purpose of the tables is to provide information on the
performance of those partnerships in evaluating the experience of the
Affiliates of the Advisor as sponsors of such programs. However, the
inclusion of these tables does not imply that we will make investments
comparable to those reflected in the tables or that investors in our Shares
will experience returns comparable to those experienced in the programs
referred to in these tables. Persons who purchase our Shares in the Company
will not thereby acquire any ownership in any of the partnerships to which
these tables relate. The tables consist of:
Table I Experience in Raising and Investing Funds
Table II Compensation to IREIC and Affiliates
Table III Operating Results of Prior Programs
Table IV Results of Completed Programs
Table V Sales or Disposals of Properties
Table VI Acquisition of Properties by Programs*
* Prospective investors in Inland Retail Real Estate Trust, Inc. may obtain
copies of Table VI by contacting the Advisor.
Table VI is included in Part II of the Registration Statement filed with
the SEC of which this Supplement is a part. Upon written request to us or the
Advisor, any prospective investor may obtain, without charge, a copy of Table
VI. See also "Additional Information" for information on examining at, or
obtaining copies from, offices of the SEC.
Upon written request, any potential investor may obtain, without charge,
the most recent Annual Report on Form 10-K filed with the SEC by any public
program sponsored by any of the Inland Affiliated Companies which has reported
to the SEC within the last 24 months. Copies of any exhibits to such Annual
Reports shall be provided, upon request, for a reasonable fee.
A-1
Except with respect to Inland Land Appreciation Fund, L.P., Inland Land
Appreciation Fund II, L.P., and Inland Capital Fund, L.P., the partnerships
presented in the tables are public real estate limited partnership formed
primarily to acquire, operate and sell existing residential and commercial real
properties. Generally, the investment objectives of those partnerships were as
follows:
(1) Capital appreciation; and
(2) Cash distributions for limited partners.
Our investment objectives are to: (i) provide regular Distributions to
Stockholders in amounts which may exceed our taxable income due to the non-cash
nature of depreciation expense and, to such extent, will constitute a tax-
deferred return of capital, but in no event less than 95% of our taxable
income, pursuant to the REIT Requirements; (ii) provide a hedge against
inflation by entering into leases which contain clauses for scheduled rent
escalations or participation in the growth of tenant sales, permitting us to
increase Distributions and provide capital appreciation; and (iii) preserve
Stockholders' capital.
A-2
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
Table I presents information on a dollar and percentage basis showing the
experience of Inland Real Estate Investment Corporation ("IREIC"), of which the
Advisor is a wholly owned subsidiary, in raising and investing funds in prior
partnerships where the offering closed in the three years prior to December 31,
1998. The Table particularly focuses upon the dollar amount available for
investment in properties expressed as a percentage of total dollars raised.
A-3
TABLE I-(Continued)
EXPERIENCE IN RAISING AND INVESTING FUNDS (A)
(000's omitted)
Inland Real Estate
Corporation
1 Program
Dollar amount offered (B)................. $ 647,000
Dollar amount raised...................... 539,331 100.00%
Less offering expenses:
Syndication fees (C).................... 51,109 9.48
Other fees (D).......................... 6,427 1.19
Organizational fees..................... 37 0.00
Reserves (E).............................. 2,815 0.00
Available for investment.................. $ 478,943 89.33%
========== =========
Acquisition costs:
Cash down payments (F).................. $ 644,632
Other cash expenditures capitalized..... 2,578
Total acquisition costs............... $ 647,210
==========
Percent leverage (G)...................... 44.65%
Date offerings commenced.................. (H)
Length of offering........................ (H)
Months to invest 90% of amount available
for investment (measured from beginning
of offering)............................ (H)
A-4
TABLE I-(Continued)
EXPERIENCE IN RAISING AND INVESTING FUNDS (A)
(000's omitted)
NOTES TO TABLE I
(A) The figures in this table are cumulative and are as of December 31, 1998.
The dollar amount raised represents the cash proceeds collected by the
program. The Table reflects payments made or to be made from investor
capital contributions upon receipt. The Table reflects experience for
Inland Real Estate Corporation ("IREC") , a REIT which closed in 1998.
(B) Does not reflect Shares offered for distribution to Stockholders
participating in the IREC's distribution reinvestment program.
(C) Syndication fees are paid by the program to an affiliate, Inland
Securities Corporation, or unaffiliated third parties commissions for the
sale of Shares. All of these syndication fees were utilized to pay
commissions and expenses of the offerings.
(D) Other fees are paid by the program to unaffiliated parties and consist
principally of printing, selling and registration costs.
(E) Generally, a working capital reserve is established to fund, among other
things, anticipated future cash flow deficits.
(F) Cash down payments include amounts paid at closing and projected amounts
to be paid from working capital reserves at mortgage balloon dates.
Actual amounts paid at the balloon dates will depend upon the operating
results of the partnerships.
(G) Represents mortgage financing at December 31, 1998 divided by the total
acquisition costs including such mortgage financing.
(H) On October 14, 1994, the program commenced an initial public offering, on
a best effort basis, ("Initial Offering") of 5,000,000 shares of common
stock ("Shares") at $10.00 per share. On July 24, 1996, the program
commenced an offering of an additional 10,000,000 Shares at $10.00 per
Share, on a best efforts basis, (the "Second Offering"). On July 14,
1997, the program commenced an offering of an additional 20,000,000
Shares at $10.00 per Share, on a best efforts basis, (the "Third
Offering"). On April 7, 1998, the program commenced an offering of an
additional 27,000,000 Shares at $11.00 per Share, on a best efforts
basis, (the "Fourth Offering"). In order to maximize flexibility in
evaluating strategic alternatives, the program's board of directors
decided to terminate the Fourth Offering on December 31, 1998. As of
December 31, 1998, the program had received subscriptions for a total of
16,642,397 Shares in the Fourth Offering. As of December 31, 1998,
substantially all proceeds available for investment from the offerings
were invested in real properties.
A-5
TABLE II
COMPENSATION TO IREIC AND AFFILIATES (A)
Table II summarizes the amount and type of compensation paid to IREIC and
its Affiliates in connection with the prior partnerships and program.
Some partnerships acquired their properties from Affiliates of the Advisor
which had purchased such properties from unaffiliated third parties.
A-6
TABLE II
COMPENSATION TO IREIC AND AFFILIATES (A)
(000's omitted)
Inland
Public Real Estate
Programs Corporation
6 Programs 1 Program
Date offering commenced......................... - 10/14/94
Dollar amount raised............................ $ 172,241 $ 539,331
============= ============
Amounts paid or payable to general partner or
affiliates from proceeds of offerings:
Selling commissions and underwriting fees... $ 5,885(B) 49,619(C)
Other offering expenses (D)................. 2,310 1,490
Acquisition cost and expense ............... 10,088(E) 661
============= ============
Dollar amount of cash available (deficiency)
from operations before deducting (adding)
payments to (from) general partner or
affiliates (F)................................ $ 16,025
=============
Amounts paid to (received from) general partner
or affiliates related to operations:
Property management fees (G)................ $ 845 4,129
Partnership subsidies received.............. 0 0
Accounting services......................... 228 115
Data processing service..................... 158 138
Legal services.............................. 239 14
Mortgage servicing fees..................... 0 130
Mortgage interest expense................... 0 206
Acquisition costs expensed.................. 0 431
Other administrative services............... 855 220
Property upgrades........................... 848 0
Property operating expenses................. 0 0
Dollar amount of property sales and refinancings
before payments to general partner and
affiliates (H):
Cash........................................ $ 15,529 0
Equity in notes and undistributed sales
proceeds.................................. 5,960 0
Dollar amounts paid or payable to general partner
or affiliates from sales and refinancings (I):
Sales commissions........................... $ 267 0
Property upgrade............................ 8 0
Mortgage brokerage fee...................... 0 0
Participation in cash distributions......... 0 0
A-7
TABLE II--(Continued)
COMPENSATION TO IREIC AND AFFILIATES
(000's omitted)
NOTES TO TABLE II
(A) The figures in this Table II relating to proceeds of the offerings are
cumulative and are as of December 31, 1998 and the figures relating to
cash available from operations are for the three years ending December
31, 1998. The dollar amount raised represents the cash proceeds
collected by the partnerships or program. Amounts paid or payable to
IREIC or affiliates from proceeds of the offerings represent payments
made or to be made to IREIC and affiliates from investor capital
contributions.
(B) The total amount of selling commissions paid to an affiliate includes
approximately $2,712,000, which was in turn paid to third party
soliciting dealers.
(C) The total amount of selling commissions paid to an affiliate includes
approximately $42,236,000, which was in turn paid to third party
soliciting dealers.
(D) Consists of legal, accounting, printing and other offering expenses,
including amounts to be paid to Inland Securities Corporation to be used
as incentive compensation to its regional marketing representatives and
amounts for reimbursement of the general partner for marketing, salaries
and direct expenses of its employees while directly engaged in
registering and marketing the Units and other marketing and organization
expenses.
(E) Represents initial cash down payments and future principal payments and
prepaid items and fees paid to IREIC and its affiliates in connection
with the acquisition of properties less amounts paid to unaffiliated
third parties to acquire such properties. Cash down payments include
amounts received at closing.
Public
Programs
6 Programs
Acquisition fees....................... $ 9,975
Reimbursement (at cost) for upgrades
and acquisition due diligence........ 113
Partnership down payments.............. 38,745
Inland down payments................... (38,745)
Acquisition cost and expense........... $ 10,088
=============
(F) See Note (B) to Table III.
A-8
TABLE II--(Continued)
COMPENSATION TO IREIC AND AFFILIATES
(000's omitted)
NOTES TO TABLE II
(G) An affiliate provides property management services for all properties
acquired by the partnerships or program. Management fees have not
exceeded 4.5% of the gross receipts from the properties managed. With
respect to Inland Capital Fund, L.P., Inland Land Appreciation Fund II,
L.P. and Inland Land Appreciation Fund, L.P., IREIC receives an annual
asset management fee equal to one-quarter of 1% of the original cost to
the partnership of undeveloped land, limited to a cumulative total over
the life of the partnership of 2% of the land's original cost to the
partnership.
(H) See Table V and Notes thereto regarding sales and disposals of
properties.
(I) Real estate sales commissions and participations in cash distributions
are paid or payable to IREIC and/or its affiliates in connection with the
sales of properties. Payments of all amounts shown are subordinated to
the receipt by the limited partners of their original capital investment.
See Table V and Notes thereto.
A-9
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
Table III presents operating results for programs, the offerings of which
closed during each of the five years ended prior to December 31, 1998. The
operating results consist of:
--The components of taxable income (loss);
--Taxable income or loss from operations and property sales;
--Cash available and source, before and after cash distributions to
investors; and
--Tax and distribution data per $1,000 invested.
A-10
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)
Inland Real Estate Corporation
1998 1997 1996 1995
Gross revenues................ $ 73,302 29,422 6,328 1,180
Profit on sale of properties.. 0 0 0 0
Less:
Operating expenses.......... 21,017 8,863 1,873 327
Interest expense............ 13,422 5,655 597 164
Program expenses............ 3,114 1,576 449 22
Depreciation & amortization. 11,663 4,681 957 170
Net income (loss)-GAAP basis.. $ 24,086 8,647 2,452 497
========= ========= ========= =========
Taxable income (loss) (A):
Total from operations......... 0 0 0 0
From gain on sale............. 0 0 0 0
========= ========= ========= =========
Cash available (deficiency)
from operations (B)......... 40,002 15,218 5,180 978
Cash available from sales (C). 0 0 0 0
Cash (deficiency) from
Financings.................. 166,352 43,926 25,670 0
Total cash available before
distributions and special
items....................... 206,354 59,144 30,850 978
A-11
TABLE III--(Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)
Inland Real Estate Corporation
1998 1997 1996 1995
Less distributions to investors:
From operations............. 33,297 11,899 3,286 607
From sales and refinancings. 0 0 0 0
From return of capital...... 0 0 0 0
From supplemental capital
contribution (return on
capital).................... 0 0 0 0
Less distributions to general
partner:
From operations............. 0 0 0 0
From sales and refinancings. 0 0 0 0
Cash available after
distributions before
special items............... 173,057 47,245 27,564 371
Special items:
Advances (repayments) from
(to) general partner or
affiliates................ 0 0 0 0
Repurchase of shares (D).... (1,317) (421) (30) (27)
Use of partnership reserves. 0 0 0 0
Use of cash available for
offering purposes......... 0 0 0 0
Cash available after
distributions and special
items....................... $171,740 46,824 27,534 344
========= ========= ========= =========
Tax data per $1,000 invested (A):
Federal income tax results:
Ordinary income (loss):
From operations........... 0 0 0 0
From recapture............ 0 0 0 0
Capital gain.............. 0 0 0 0
A-12
TABLE III--(Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)
Inland Real Estate Corporation
1998 1997 1996 1995
Distribution date per $1,000 invested:
Cash distributions to investors:
Source (on GAAP basis):
Investment income......... 88 86 82 78
Return of capital......... 0 0 0 0
Supplemental capital
contributions (return on
capital)................. 0 0 0 0
Source (on cash basis):
Sales..................... 0 0 0 0
Refinancings.............. 0 0 0 0
Operations (E)............ 88 86 82 78
Return of capital......... 0 0 0 0
Supplemental capital
contributions (return on
capital)................. 0 0 0 0
Percent of properties remaining
unsold (F).................. 100.00%
========
A-13
TABLE III--(Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(000's included)
NOTES TO TABLE III
(A) The Program qualified as a real estate investment trust ("REIT") under
the Code for federal income tax purposes commencing with the tax year
ending December 31, 1995. Since the Program qualified for taxation as a
REIT, the Program generally will not be subject to federal income tax to
the extent it distributes its REIT taxable income to its stockholders.
If the Program fails to qualify as a REIT in any taxable year, the
Program will be subject to federal income tax on its taxable income at
regular corporate tax rates. Even if the Program qualifies for taxation
as a REIT, the Program may be subject to certain state and local taxes on
its income and property and federal income and excise taxes on its
undistributed income.
(B) "Cash Available (Deficiency) from Operations," represents all cash
revenues and funds received by the partnerships, including but not
limited to operating income less operating expenses, and interest income.
These amounts do not include payments made by the partnerships from
offering proceeds nor do they include proceeds from sales or
refinancings. These amounts also exclude advances from or repayments to
IREIC and affiliates which are disclosed elsewhere in the table and
include principal payments on long-term debt. For example:
Inland Real Estate Corporation
1998 1997 1996 1995
Net cash provided by operating
activities per the Form 10-K
annual report or 10-Q
quarterly report............ $ 42,775 15,924 5,530 978
Principal payments on
long-term debt.............. (74) (67) - -
Payments for deferred loan
fees........................ (2,702) (639) (350) -
$ 40,002 15,218 5,180 978
========= ========= ========= =========
(C) See Table V and Notes thereto regarding sales and disposals of
properties.
A-14
TABLE III--(Continued)
OPERATING RESULTS OF PRIOR PROGRAMS
(000's included)
NOTES TO TABLE III
(D) The program established a unit repurchase program which provides
liquidity to investors. These funds were utilized by the program to
repurchase units, pursuant to the terms of the related prospectus.
(E) Distributions by the IREC to the extent of its current and accumulated
earnings and profits for federal income tax purposes are taxable to
stockholders as ordinary income. Distributions in excess of these
earnings and profits generally are treated as a non-taxable reduction of
the stockholder's basis in the shares to the extent thereof, and
thereafter as taxable gain (a return of capital). These Distributions in
excess of earnings and profits will have the effect of deferring taxation
of the amount of the Distribution until the sale of the stockholder's
shares.
1998 1997 1996 1995
% of Distribution representing:
Ordinary income............. 76.22 74.19 83.50 94.24
Return of Capital........... 23.78 25.81 16.50 5.76
100.00 100.00 100.00 100.00
(F) Percent of properties remaining unsold represents original total
acquisition costs of properties retained divided by original total
acquisition cost of all properties in the program, plus the total of
uninvested offering proceeds (if any).
A-15
TABLE IV
RESULTS OF COMPLETED PROGRAMS
(000's omitted, except for amounts presented per $1,000 invested)
Table IV is a summary of operating and disposition results of prior public
partnerships sponsored by Affiliates of the Advisor, which during the five
years ended prior to December 31, 1998 have sold their properties and either
hold notes with respect to such sales or have liquidated. One public
partnership, Inland Real Estate Growth Fund, L.P., has disposed of all its
properties during the five years ended prior to December 31, 1998.
Inland Real Estate
Program Name Growth Fund, L.P.
Dollar amount raised.................. 9,465
Number of properties purchased........ 2
Date of closing of offering........... 08/21/87
Date property sold.................... Various
Tax and distribution data per
$1,000 invested (A):
Federal income tax results:
Ordinary income (loss):
Operations...................... (1,245)
Recapture....................... 0
Capital Gain.................... 1,537
Deferred Gain:
Capital......................... 0
Ordinary........................ 0
Cash distributions to investors
(cash basis):
Sales........................... 1,093
Operations...................... 196
NOTES TO TABLE IV
(A) Data per $1,000 invested is presented as of December 31, 1998. See Table
V and Notes thereto regarding sales and disposals of properties.
A-16
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Table V presents information on the results of the sale or disposals of
public partnership properties during the three years ended prior to December
31, 1998. Since January 1, 1996, partnerships sponsored by Affiliates of the
Advisor had 27 sales transactions. The table provides certain information to
evaluate property performance over the holding period such as:
--Sales proceeds received by the partnerships in the form of cash down
payments at the time of sale after expenses of sale and secured notes
received at sale;
--Cash invested in properties;
--Cash flow (deficiency) generated by the property;
--Taxable gain (ordinary and total); and
--Terms of notes received at sale.
A-17
<TABLE>
TABLE V (Continued)
SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>
Selling Price, net of closing costs
Cash Selling
Received, Commissions Secured
net of paid or Mortgage Notes Net
Date Date of Closing payable to at Time Received Selling
Acquired Sale Costs(B) Inland of Sale at Sale(C) Price
<S> <C> <C> <C> <C> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 10/30/92 01/05/96 154 0 0 0 154
Land I 4.629 Acres of Parcel #24.... 05/23/90 04/01/96 53 0 0 0 53
Land II .87 Acres of Parcel #8...... 06/14/91 04/03/96 10 0 0 0 10
Land I 3.52 Acres of Parcel #1...... 01/19/89 12/24/96 501 0 0 0 501
Land I 10.53 Acres of Parcel #15.... 01/03/90 Var 96 533 0 0 0 533
Land II 8.25 Acres of Parcel #23.... 10/30/92 Var 96 1,527 0 0 0 1,527
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. 01/29/88 09/12/97 40 0 0 0 40
Land I 2.081 Acres of Parcel #13.... 11/07/89 09/18/97 26 0 0 0 26
Land I 81.216 Acres of Parcel #1.... 01/19/89 Var 97 31 0 (3,580)(G) 2,170(F) 5,781
Land I 5.468 Acres of Parcel #15.... 01/03/90 Var 97 491 0 0 0 491
Land II 12.6506 Acres of Parcel #7.. 04/22/91 Var 97 1,133 0 0 0 1,027
Land II 2.61 Acres of Parcel #23.... 10/30/92 Var 97 477 0 0 0 477
Capital Fund 8.6806 Ac. of Parcel #2 11/09/93 Var 97 686 0 0 0 686
Capital Fund 2.305 Ac. of Parcel #4. 03/30/94 Var 97 642 0 0 0 642
Land I Lots of Parcel #15........... 01/03/90 Var 98 645 0 0 1,968 2,613
Land I Lots of Parcel #21........... 03/08/90 Var 98 650 0 (450) 2,449 3,549
Land I 30 Acres of Parcel #16....... 01/29/90 Var 98 61 0 0 1,362 1,423
Land II Parcel #15.................. 09/04/91 Var 98 (6) 0 0 2,750 2,744
Land II Lots Parcel #23............. 10/30/92 Var 98 2,142 0 0 0 2,142
Land II Lots Parcel #7.............. 04/22/91 Var 98 1,402 0 0 0 1,402
Capital Fund Easement Parcel #5..... 04/01/94 Var 98 63 0 0 0 63
Capital Fund Lots Parcel #2......... 11/09/93 Var 98 143 0 0 0 143
Capital Fund Lots Parcel #6......... 05/11/94 Var 98 109 0 0 1,125 1,234
Capital Fund Lots Parcel #13........ 10/06/94 Var 98 1,290 0 0 0 1,290
Capital Fund Lots Parcel #4......... 03/30/94 Var 98 681 0 0 0 681
Capital Fund Lots Parcel #18........ 11/02/95 Var 98 1,410 0 0 0 1,410
Growth Fund I - Scottsdale Sierra... 12/31/85 05/06/98 7,255 0 (375) 0 7,630
</TABLE>
<TABLE>
TABLE V (Continued)
SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>
Cost of Properties including closing
costs and other cash expenditures
Original Partnership
Mortgage Capital
Financing Invested(D) Total
<S> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 0 60 60
Land I 4.629 Acres of Parcel #24.... 0 23 23
Land II .87 Acres of Parcel #8...... 0 10 10
Land I 3.52 Acres of Parcel #1...... 0 281 281
Land I 10.53 Acres of Parcel #15.... 0 265 265
Land II 8.25 Acres of Parcel #23.... 0 1,104 1,104
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. 0 25 25
Land I 2.081 Acres of Parcel #13.... 0 6 6
Land I 81.216 Acres of Parcel #1.... 0 5,668 5,668
Land I 5.468 Acres of Parcel #15.... 0 173 173
Land II 12.6506 Acres of Parcel #7.. 0 746 746
Land II 2.61 Acres of Parcel #23.... 0 352 352
Capital Fund 8.6806 Ac. of Parcel #2 0 255 255
Capital Fund 2.305 Ac. of Parcel #4. 0 70 70
Land I Lots of Parcel #15........... 0 2,366 2,366
Land I Lots of Parcel #21........... 0 2,358 2,358
Land I 30 Acres of Parcel #16....... 0 816 816
Land II Parcel #15.................. 0 1,043 1,043
Land II Lots Parcel #23............. 0 1,455 1,455
Land II Lots Parcel #7.............. 0 997 997
Capital Fund Easement Parcel #5..... 0 7 7
Capital Fund Lots Parcel #2......... 0 58 58
Capital Fund Lots Parcel #6......... 0 1,215 1,215
Capital Fund Lots Parcel #13........ 0 1,147 1,147
Capital Fund Lots Parcel #4......... 0 121 121
Capital Fund Lots Parcel #18........ 0 1,062 1,062
Growth Fund I - Scottsdale Sierra... 3,283 3,755 7,038
</TABLE>
A-18
<TABLE>
TABLE V (Continued)
SALES OR DISPOSALS OF PROPERTIES (A)
(000's omitted)
<CAPTION>
Excess
(deficiency)
of property
operating Amount of
cash subsidies Total
receipts included in Taxable Ordinary
over cash operating Gain Income Capital
expenditures(E) cash receipts from Sale from Sale Gain
<S> <C> <C> <C> <C> <C>
Land II 5.538 Acres of Parcel #22... 0 0 94 0 94
Land I 4.629 Acres of Parcel #24.... 0 0 30 0 30
Land II .87 Acres of Parcel #8...... 0 0 0 0 0
Land I 3.52 Acres of Parcel #1...... 0 0 220 0 220
Land I 10.53 Acres of Parcel #15.... 0 0 268 0 268
Land II 8.25 Acres of Parcel #23.... 0 0 423 0 423
Monthly Income Fund I-
Yorkville Living Center, Lot #11.. (23) 0 15 0 15
Land I 2.081 Acres of Parcel #13.... 0 0 20 0 20
Land I 81.216 Acres of Parcel #1.... 0 0 (193) 0 (193)
Land I 5.468 Acres of Parcel #15.... 0 0 309 0 309
Land II 12.6506 Acres of Parcel #7.. 0 0 387 0 387
Land II 2.61 Acres of Parcel #23.... 0 0 125 0 125
Capital Fund 8.6806 Ac. of Parcel #2 0 0 431 0 431
Capital Fund 2.305 Ac. of Parcel #4. 0 0 572 0 572
Land I Lots of Parcel #15........... 0 0 71 0 71
Land I Lots of Parcel #21........... 0 0 742 0 742
Land I 30 Acres of Parcel #16....... 0 0 1,058 0 1,058
Land II Parcel #15.................. 0 0 1,701 0 1,701
Land II Lots Parcel #23............. 0 0 521 0 521
Land II Lots Parcel #7.............. 0 0 297 0 297
Capital Fund Easement Parcel #5..... 0 0 57 0 57
Capital Fund Lots Parcel #2......... 0 0 78 0 78
Capital Fund Lots Parcel #6......... 0 0 11 0 11
Capital Fund Lots Parcel #13........ 0 0 144 0 144
Capital Fund Lots Parcel #4......... 0 0 561 0 561
Capital Fund Lots Parcel #18........ 0 0 348 0 348
Growth Fund I - Scottsdale Sierra... 822 0 4,356 0 4,356
</TABLE>
A-19
TABLE V - (Continued)
SALES OR DISPOSALS OF PROPERTIES
(000's omitted)
NOTES TO TABLE V
(A) The table includes all sales of properties by the partnerships during the
three years ended December 31, 1997. All sales have been made to parties
unaffiliated with the partnership.
(B) Consists of cash payments received from the buyers and the assumption of
certain liabilities by the buyers at the date of sale, less expenses of
sale.
(C) The stated principal amount of the notes is shown in the table under
"Secured Notes Received at Sale." All sales with notes received at sale
are being reported for tax purposes on the installment basis.
(D) Amounts represent the dollar amount raised from the offerings of limited
partnership units, less sales commissions and other offering expenses.
(E) Represents "Cash Available (Deficiency) from Operations (including
subsidies)" as adjusted for applicable "Fixed Asset Additions" through
the year of sale.
(F) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the Partnership received mortgage loans
receivable totaling $2,170,089, of which $575,000 accrued interest at 9%
per annum and had a maturity date of July 1, 1998 and was paid in full.
The remaining $1,595,089 accrues interest at 9% per annum and has a
maturity date of December 30, 2000.
(G) As a result of the sale of the remaining approximately 81 acres of Parcel
1 on December 29, 1997, the buyer assumed the current mortgage note held
by the Partnership which had a balance of $3,325,515 at that time.
A-20
