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, 1997
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #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 60523
(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, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 138,216 169,026
Rent and other receivables...................... 635 407
Prepaid expenses................................ 10,303 8,047
------------ ------------
Total current assets.............................. 149,154 177,480
------------ ------------
Property (including acquisition fees paid
to Affiliates of $463,000) (Notes 1 and 2):
Land............................................ 1,608,458 1,608,458
Buildings and improvements...................... 5,497,534 5,497,534
------------ ------------
7,105,992 7,105,992
Less accumulated depreciation................... 2,307,385 2,307,385
------------ ------------
Net investment property........................... 4,798,607 4,798,607
------------ ------------
Deferred financing costs (net of accumulated
amortization of $23,020 and $18,102 for 1997
and 1996, respectively) (Note 1)................ 9,764 14,682
------------ ------------
Total assets...................................... $ 4,957,525 4,990,769
============ ============
See accompanying notes to financial statements.
-2-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital (Deficit)
-------------------------------------------
1997 1996
Current liabilities: ---- ----
Current portion of long-term debt............... $ 98,840 79,495
Accounts payable and accrued expenses........... 12,788 10,834
Accrued real estate taxes....................... 13,038 21,048
Prepaid rents................................... 15,118 17,718
Due to Affiliates (Note 2)...................... 4,850 1,877
Tenant security deposits........................ 21,000 23,204
------------ ------------
Total current liabilities......................... 165,634 154,176
Long-term debt, less current portion (Note 1
and 3).......................................... 577,181 837,403
------------ ------------
Total liabilities................................. 742,815 991,579
------------ ------------
Partners' capital (deficit) (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 8,216 5,604
Cumulative cash distributions................. (14,813) (14,356)
------------ ------------
(6,097) (8,252)
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......................... 1,042,981 784,373
Cumulative cash distributions................. (4,697,141) (4,651,898)
------------ ------------
4,220,807 4,007,442
------------ ------------
Total Partners' capital........................... 4,214,710 3,999,190
------------ ------------
Total liabilities and Partners' capital........... $ 4,957,525 4,990,769
============ ============
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, 1997 and 1996
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Income:
Rental income.................... $ 215,658 232,254 770,777 776,333
Interest income.................. 1,663 1,679 4,117 4,582
Other income..................... 13,981 11,588 30,190 24,567
---------- ---------- ---------- ----------
231,302 245,521 805,084 805,482
Expenses: ---------- ---------- ---------- ----------
Professional services to
Affiliates..................... 2,801 2,326 7,711 6,844
Professional services to
non-affiliates................. - - 17,889 17,194
General and administrative
expenses to Affiliates......... 3,264 3,765 12,210 9,904
General and administrative
expenses to non-affiliates..... 842 1,303 4,305 4,792
Property operating expenses to
Affiliates..................... 10,894 11,197 35,823 36,181
Property operating expenses to
non-affiliates................. 127,945 151,484 416,057 378,844
Mortgage and other interest...... 13,723 18,661 44,951 59,977
Depreciation..................... - 44,776 - 134,327
Amortization..................... 1,640 1,640 4,918 4,919
---------- ---------- ---------- ----------
161,109 235,152 543,864 652,982
---------- ---------- ---------- ----------
Net income......................... $ 70,193 10,369 261,220 152,500
========== ========== ========== ==========
Net income allocated to:
General Partner.................. 702 104 2,612 1,525
Limited Partners................. 69,491 10,265 258,608 150,975
---------- ---------- ---------- ----------
Net income......................... $ 70,193 10,369 261,220 152,500
========== ========== ========== ==========
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, 1997 and 1996
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Net income allocated to the one
General Partner Unit............. $ 702 104 2,612 1,525
========== ========== ========== ==========
Net income allocated to Limited
Partners per weighted average of
Limited Partnerships Units of
9,246.62......................... $ 7.52 1.11 27.97 16.33
========== ========== ========== ==========
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, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 261,220 152,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. - 134,327
Amortization of loan fees..................... 4,918 4,919
Changes in assets and liabilities:
Rents and other receivables................. (228) 182
Prepaid expenses............................ (2,256) (7,660)
Accounts payable and accrued expenses....... (6,056) 24,096
Prepaid rents............................... (2,600) 4,307
Due to Affiliates........................... 2,973 (2,313)
Tenant security deposits.................... (2,204) (551)
------------ ------------
Net cash provided by operating activities......... 255,767 309,807
------------ ------------
Cash flows from financing activities:
Principal payments of long-term debt............ (240,877) (185,851)
Cash distributions.............................. (45,700) (111,201)
------------ ------------
Net cash used in financing activities............. (286,577) (297,052)
------------ ------------
Net increase (decrease) in cash and
cash equivalents................................ (30,810) 12,755
Cash and cash equivalents at beginning of period.. 169,026 130,097
------------ ------------
Cash and cash equivalents at end of period........ $ 138,216 142,852
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $ 44,951 59,977
============ ============
See accompanying notes to financial statements.
-6-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 1997
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1996, which are
included in the Partnership's 1996 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 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, 1997, 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, 1997. 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, 1997
(unaudited)
Statement of Financial Accounting Standards No. 121 ("SFAS 121") requires the
Partnership to record an impairment loss on its property to be held for
investment whenever its carrying value cannot be fully recovered through
estimated undiscounted future cash flows from their operations and sale. The
amount of the impairment loss to be recognized would be the difference between
the property's carrying value and the property's estimated fair value. The
Partnership's policy is to consider a property to be held for sale or
disposition when the Partnership has committed to sell such property and active
marketing activity has commenced or is expected to commence in the near term.
Effective December 31, 1996, the Partnership's investment property was held for
sale. In accordance with SFAS 121, any property identified as "held for sale or
disposition" is no longer depreciated. Adjustments for impairment loss for such
properties (subsequent to the date of adoption of SFAS 121) are made in each
period as necessary to report these properties at the lower of carrying value
or fair value less costs to sell. As of September 30, 1997, the Partnership has
not recognized any such impairment on its property.
The Partnership used 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 were being
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.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than 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, 1997
(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 and general and administrative expenses to Affiliates, of
which $4,850 and $1,786 was unpaid as of September 30, 1997 and December 31,
1996, respectively.
The Partnership's 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 $35,823 and $36,181 for the nine months ended September 30, 1997 and 1996,
respectively. Such fees are included in property operating expenses to
Affiliates, of which $91 was unpaid as of December 31, 1996.
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
On November 1, 1997, the Partnership paid an additional $50,000 as a principal
reduction of the long-term debt collateralized by the Scottsdale Sierra
Apartments.
-9-
Item 2. 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" and elsewhere in this quarterly report on
Form 10-Q constitute of "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 the Partnership's 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, federal, state or local regulations;
adverse changes in general economic or local conditions; inability of borrower
to meet financial obligations; uninsured losses; and potential conflicts of
interest between the Partnership and its Affiliates, including the General
Partner.
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, 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, 1997, 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, 1997.
At September 30, 1997, the Partnership had cash and cash equivalents of
$138,216. 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 the Partnership's cash flow 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.
-10-
Results of Operations
The Partnership has one remaining investment property, Scottsdale Sierra
Apartments. Rental and other income for the nine months ended September 30,
1997 was relatively comparable to the nine months ended September 30, 1996.
Property operating expenses to non-affiliates increased approximately 10% for
the nine months ended September 30, 1997, as compared to the nine months ended
September 30, 1996, due to increases in repair and maintenance, painting,
marketing, furniture rentals, supplies, utilities, insurance and real estate
taxes.
Mortgage and other interest decreased for the three and nine months ended
September 30, 1997, as compared to the three and nine months ended September
30, 1996, due to the lower principal balance of the mortgage loan
collateralized by the Scottsdale Sierra Apartments which resulted from
principal paydowns on the debt.
General and administrative expenses to Affiliates increased for the nine months
ended September 30, 1997, as compared to the nine months ended September 30,
1996, due to an increase in data processing and investor service expenses.
As of January 1, 1997, the Partnership had listed and is actively marketing
Scottsdale Sierra Apartments for sale at an amount in excess of its carrying
value and has suspended depreciation. As of the date of this report, the
Partnership is executing a contract to sell the Scottsdale Sierra Apartments
for an amount which exceeds the carrying value of the property.
The following is a list of approximate occupancy levels for the Partnership's
investment property as of the end of each quarter during 1996 and 1997:
1996 1997
------------------------ ------------------------
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 97% 89% 82% 84% 98% 85% 81%
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 12, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: November 12, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 12, 1997
-12-
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