UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-15743
Inland Real Estate Growth Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3371418
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60521
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 630-218-8000
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-1-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
------
1996 1995
---- ----
Current assets:
Cash and cash equivalents (Note 1).............. $ 142,852 130,097
Rent and other receivables...................... 1,091 1,273
Prepaid expenses................................ 12,394 4,734
------------ ------------
Total current assets.......................... 156,337 136,104
------------ ------------
Investment property (including acquisition fees paid
to Affiliates of $463,000) (Notes 1 and 2):
Land............................................ 1,608,458 1,608,458
Buildings and improvements...................... 5,429,889 5,429,889
------------ ------------
7,038,347 7,038,347
Less accumulated depreciation................... 2,255,845 2,121,518
------------ ------------
Net investment property....................... 4,782,502 4,916,829
------------ ------------
Deferred financing costs (net of accumulated
amortization of $9,907 and $4,988 at September 30,
1996 and December 31, 1995, respectively)
(Note 1)....................................... 16,321 21,240
------------ ------------
Total assets...................................... $ 4,955,160 5,074,173
============ ============
See accompanying notes to financial statements.
-2-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital (Deficit)
-------------------------------------------
1996 1995
---- ----
Current liabilities:
Current portion of long-term debt............... $ 77,975 63,049
Accounts payable and accrued expenses........... 27,569 13,045
Accrued real estate taxes....................... 31,572 22,000
Prepaid rents................................... 6,480 2,173
Due to Affiliates (Note 2)...................... 473 2,786
------------ ------------
Total current liabilities..................... 144,069 103,053
Tenant security deposits.......................... 21,504 22,055
Long-term debt, less current portion (Note 1
and 3).......................................... 857,857 1,058,634
------------ ------------
Total liabilities............................. 1,023,430 1,183,742
------------ ------------
Partners' capital (deficit) (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 4,678 3,153
Cumulative cash distributions................. (14,105) (12,992)
------------ ------------
(8,927) (9,339)
------------ ------------
Limited Partners:
Units of $1,000. Authorized 16,000 Units,
9,246.62 Units outstanding (net of offering
costs of $1,379,705, of which $337,307 was
paid to Affiliates)......................... 7,874,967 7,874,967
Cumulative net income......................... 692,646 541,671
Cumulative cash distributions................. (4,626,956) (4,516,868)
------------ ------------
3,940,657 3,899,770
------------ ------------
Total Partners' capital..................... 3,931,730 3,890,431
------------ ------------
Total liabilities and Partners' capital........... $ 4,955,160 5,074,173
============ ============
See accompanying notes to financial statements.
-3-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and nine months ended September 30, 1996 and 1995
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Income:
Rental income.................... $ 232,254 215,839 776,333 707,541
Interest income.................. 1,679 1,031 4,582 4,756
Other income..................... 11,588 9,400 24,567 33,781
---------- ---------- ---------- ----------
245,521 226,270 805,482 746,078
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 2,326 4,522 6,844 11,268
Professional services to
non-affiliates................. - - 17,194 18,121
General and administrative
expenses to Affiliates......... 3,765 3,690 9,904 12,582
General and administrative
expenses to non-affiliates..... 1,303 1,502 4,792 3,868
Property operating expenses to
Affiliates..................... 11,197 9,240 36,181 33,094
Property operating expenses to
non-affiliates................. 151,484 192,431 378,844 443,536
Mortgage and other interest...... 18,661 22,215 59,977 69,416
Depreciation..................... 44,776 43,989 134,327 131,964
Amortization..................... 1,640 1,639 4,919 4,918
---------- ---------- ---------- ----------
235,152 279,228 652,982 728,767
---------- ---------- ---------- ----------
Net income (loss).................. $ 10,369 (52,958) 152,500 17,311
========== ========== ========== ==========
Net income (loss) allocated to:
General Partner.................. 104 (530) 1,525 173
Limited Partners................. 10,265 (52,428) 150,975 17,138
---------- ---------- ---------- ----------
Net income (loss).................. $ 10,369 (52,958) 152,500 17,311
========== ========== ========== ==========
See accompanying notes to financial statements.
-4-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and nine months ended September 30, 1996 and 1995
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Net income (loss) allocated to the one
General Partner Unit............. $ 104 (530) 1,525 173
========== ========== ========== ==========
Net income (loss) allocated to Limited
Partners per weighted average of
Limited Partnerships Units of
9,246.62......................... $ 1.11 (5.67) 16.33 1.85
========== ========== ========== ==========
See accompanying notes to financial statements.
-5-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995
(unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Net income...................................... $ 152,500 17,311
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 134,327 131,964
Amortization of loan fees..................... 4,919 4,918
Changes in assets and liabilities:
Rents and other receivables................. 182 692
Prepaid expenses............................ (7,660) (3,123)
Accounts payable and accrued expenses....... 24,096 42,003
Prepaid rents............................... 4,307 2,581
Due to Affiliates........................... (2,313) 1,680
Tenant security deposits.................... (551) 1,322
------------ ------------
Net cash provided by operating activities......... 309,807 199,348
------------ ------------
Cash flows from financing activities:
Principal payments of long-term debt............ (185,851) (341,420)
Cash distributions.............................. (111,201) (167,869)
------------ ------------
Net cash used in financing activities............. (297,052) (509,289)
------------ ------------
Net increase (decrease) in cash and
cash equivalents................................ 12,755 (309,941)
Cash and cash equivalents at beginning of period.. 130,097 388,432
------------ ------------
Cash and cash equivalents at end of period........ $ 142,852 78,491
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $ 59,977 69,407
============ ============
See accompanying notes to financial statements.
-6-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 1996
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1995, which are
included in the Partnership's 1995 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such audited
financial statements have been omitted from this Report.
(1) Organization and Basis of Accounting
Inland Real Estate Growth Fund, L.P. (the "Partnership"), is a limited
partnership formed in June 1985 pursuant to the Delaware Revised Uniform
Limited Partnership Act, to invest in income-producing multi-family residential
properties. On December 9, 1985, the Partnership commenced an Offering of
25,000 (decreased to 16,000 Units in 1986) Limited Partnership Units (the
"Units") pursuant to a Registration under the Securities Act of 1933. The
Partnership terminated its Offering period in August 1987 with a total of 9,465
Units sold, yielding gross offering proceeds of $9,465,000, of which $5,633,955
was invested in two properties, Country Club Apartments and Scottsdale Sierra
Apartments. All of the holders of these Units were admitted to the Partnership.
In January 1988, the Partnership repurchased a total of 90 Units ($90,000) from
certain investors who were deemed not eligible to be partners in this
Partnership under the Partnership Agreement. As of September 30, 1996, the
Partnership had repurchased 128 Units ($120,328) through the Unit Repurchase
Program from various Limited Partners. In addition, the General Partner has
repurchased 21.57 Units ($18,064) with its own funds from cash distributions
received through September 30, 1996. The Limited Partners of the Partnership
share in the benefits of ownership of the Partnership's real property
investments in proportion to the number of Units held. Inland Real Estate
Investment Corporation is the General Partner.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
-7-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
The investment properties are carried at the lower of aggregate cost or net
realizable value. Periodically, the Partnership will review its real estate
portfolio and if the investment property suffers an impairment in value which
is deemed to be other than temporary, the investment property would be reduced
to the net realizable value of the property. As of September 30, 1996, there
have been no such impairments. The Partnership uses the straight-line method of
depreciation with useful lives of thirty years and five years for buildings and
improvements and personal property, respectively. Maintenance and repair
expenses are charged to operations as incurred. Significant improvements are
capitalized and depreciated over their estimated useful lives.
Deferred financing costs are amortized on a straight-line basis over the terms
of the related loan.
The Partnership 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.
The carrying amount of cash and cash equivalents, rents and other receivables,
accounts payable and accrued expenses and accrued real estate taxes
approximates fair value because of the relative short maturity of these
instruments.
The Partnership believes that the interest rate associated with the long-term
debt approximates market interest rates for this type of debt instrument, and
as such, the carrying amount of the long-term debt approximates the fair value.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995. This
pronouncement is not expected to have a material effect on the financial
position or results of operations of the Partnership.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations. Interim periods are
not necessarily indicative of results to be expected for the year.
-8-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(2) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for
salaries and expenses of employees of the General Partner and its Affiliates
relating to the administration of the Partnership. Such costs are included in
professional services to Affiliates and general and administrative expenses to
Affiliates, of which $403 and $2,704 was unpaid as of September 30, 1996 and
December 31, 1995, respectively.
The Partnership's investment property is managed by an Affiliate of the General
Partner pursuant to a management agreement which provides for annual fees not
to exceed 4.5% of gross rental receipts. The Affiliate earned Property
Management Fees of $36,181 and $33,094 for the nine months ended September 30,
1996 and 1995, respectively. Such fees are included in property operating
expenses to Affiliates, of which $70 and $82 was unpaid as of September 30,
1996 and December 31, 1995, respectively.
In connection with the sales of Country Club condominium units, sales
commissions of $200,441, that have not been included in the costs of sale, may
be payable to an Affiliate of the General Partner to the extent that the
Limited Partners have received their Original Capital plus a return thereon as
specified in the Partnership Agreement. In the opinion of the General Partner,
it is unlikely that these sales commissions will be paid by the Partnership.
(3) Subsequent Events
In October 1996, the Partnership paid a distribution of $25,194 to the
Partners, of which $24,942 was distributed to the Limited Partners and $252 was
distributed to the General Partner.
-9-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On December 9, 1985, the Partnership commenced an Offering of 25,000 (decreased
to 16,000 in 1986 as described in Item 1 above) Limited Partnership Units
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The Offering terminated in August 1987 with a total of 9,465 Units sold
to the public at $1,000 per Unit resulting in $9,465,000 in gross offering
proceeds, which does not include the General Partner's contribution of $500.
All of the holders of these Units were admitted to the Partnership. Of the
$9,465,000 of gross offering proceeds, $5,633,955 was invested in two
properties, Country Club Apartments and Scottsdale Sierra Apartments. In
addition, proceeds from the Offering were used to pay debt service on certain
notes payable incurred with property acquisitions and to pay offering and
organization costs and distributions to Limited Partners. In January 1988, the
Partnership repurchased a total of 90 Units ($90,000) from certain investors
who were not deemed eligible to be partners in this Partnership under the terms
of the Partnership Agreement. As of September 30, 1996, the Partnership had
repurchased 128 Units ($120,328) through the Unit Repurchase Program from
various Limited Partners. In addition, the General Partner has repurchased
21.57 Units ($18,064) with its own funds from cash distributions received as of
September 30, 1996.
At September 30, 1996, the Partnership had cash and cash equivalents of
$142,852. The Partnership intends to use such funds to provide cash
distributions to partners, pay down the debt on the Scottsdale Sierra
Apartments and for working capital requirements.
The Partnership is generating sufficient cash flow to cover operating expenses
and debt service. To the extent that this source is insufficient to meet the
Partnership's needs, the Partnership may rely on advances from Affiliates of
the General Partner, other short-term financing, or may sell the remaining
property.
Results of Operations
The Partnership has one remaining investment property, Scottsdale Sierra
Apartments. Rental income increased approximately 10% for the nine months
ended September 30, 1996, as compared to the nine months ended September 30,
1995, due primarily to a firming of the Scottsdale rental market and higher per
unit rents. Repairs to the property decreased approximately 13% for the nine
months ended September 30, 1996, as compared to the nine months ended September
30, 1995, due to scheduled repairs and maintenance performed at the property
during 1995 that resulted in a higher operating expense for that period. This
decrease was partially offset by increases in swimming pool, insurance and
salaries expenses.
-10-
Other income decreased for the nine months ended September 30, 1996, as
compared to the nine months ended September 30, 1995, due to decreases in
damage and non-operating income at Scottsdale Sierra Apartments.
Professional services to Affiliates decreased for the three and nine months
ended September 30, 1996, as compared to the three and nine months ended
September 30, 1995, due primarily to a decrease in accounting services required
by the Partnership. Professional services to non-affiliates decreased for the
three and nine months ended September 30, 1996, as compared to the three and
nine months ended September 30, 1995, due to a decrease in outside accounting
fees.
General and administrative expenses to Affiliates decreased for the nine months
ended September 30, 1996, as compared to the nine months ended September 30,
1995, due to a decrease in investor service expenses. General and
administrative expenses to non-affiliates increased for the nine months ended
September 30, 1996, as compared to the nine months ended September 30, 1995,
due to an increase in filing fees.
Mortgage and other interest decreased for the three and nine months ended
September 30, 1996, as compared to the three and nine months ended September
30, 1995, due to the lower principal balance of the mortgage loan
collateralized by the Scottsdale Sierra Apartments which resulted from
principal paydowns on the debt.
The following is a list of approximate occupancy levels for the Partnership's
investment property as of the end of each quarter during 1995 and 1996:
1995 1996
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
Scottsdale Sierra
Apartments
Scottsdale, Arizona 98% 81% 86% 95% 97% 89% 82%
PART II - Other Information
Items 1 through 5 are omitted because of the absence of conditions under which
they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND REAL ESTATE GROWTH FUND, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: November 13, 1996
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: November 13, 1996
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1996
-12-
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