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 June 30, 1998
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-
PART I - Financial Information
Item 1. Financial Statements
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
June 30, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 7,335,165 201,051
Rent and other receivables...................... 29,480 1,639
Other current assets............................ - 6,548
------------ ------------
Total current assets.............................. 7,364,645 209,238
------------ ------------
Property (including acquisition fees paid
to Affiliates of $463,000) (Notes 1, 2 and 3):
Land............................................ - 1,608,458
Buildings and improvements...................... - 5,497,534
------------ ------------
- 7,105,992
Less accumulated depreciation................... - 2,307,385
------------ ------------
Net investment property........................... - 4,798,607
------------ ------------
Deferred financing costs (net of accumulated
amortization of $32,784 and $24,659 at June 30,
1998 and December 31, 1997, respectively)
(Note 1)........................................ - 8,125
------------ ------------
Total assets...................................... $ 7,364,645 5,015,970
============ ============
See accompanying notes to financial statements.
-2-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital (Deficit)
-------------------------------------------
1998 1997
Current liabilities: ---- ----
Current portion of long-term debt............... $ - 104,836
Accounts payable and accrued expenses........... 5,512 14,078
Accrued real estate taxes....................... - 26,076
Prepaid rents................................... - 13,719
Due to Affiliates (Note 2)...................... 360 1,312
Tenant security deposits........................ - 21,609
------------ ------------
Total current liabilities......................... 5,872 181,630
Long-term debt, less current portion (Notes 1
and 3).......................................... - 496,539
------------ ------------
Total liabilities................................. 5,872 678,169
------------ ------------
Partners' capital (deficit) (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 11,339 9,447
Cumulative cash distributions................. (14,813) (14,813)
------------ ------------
(2,974) (4,866)
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......................... 4,183,920 1,164,840
Cumulative cash distributions................. (4,697,140) (4,697,140)
------------ ------------
7,361,747 4,342,667
------------ ------------
Total Partners' capital........................... 7,358,773 4,337,801
------------ ------------
Total liabilities and Partners' capital........... $ 7,364,645 5,015,970
============ ============
See accompanying notes to financial statements.
-3-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 1998 and 1997
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
Income:
Rental income.................... $ 106,559 262,132 398,581 555,119
Interest income.................. 61,381 1,429 63,482 2,454
Other income..................... 812 9,799 6,166 16,209
----------- --------- ----------- ---------
168,752 273,360 468,229 573,782
Expenses: ----------- --------- ----------- ---------
Professional services to
Affiliates..................... 3,074 1,842 6,074 4,910
Professional services to
non-affiliates................. 5,500 - 23,400 17,889
General and administrative
expenses to Affiliates......... 6,460 2,245 10,849 8,946
General and administrative
expenses to non-affiliates..... 1,940 2,091 2,622 3,463
Property operating expenses to
Affiliates..................... 6,303 12,038 19,509 24,929
Property operating expenses to
non-affiliates................. 78,842 141,106 195,411 288,112
Mortgage and other interest...... 2,889 14,906 13,081 31,228
Amortization..................... 6,486 1,638 8,125 3,278
----------- --------- ----------- ---------
111,494 175,866 279,071 382,755
----------- --------- ----------- ---------
Operating income................... 57,258 97,494 189,158 191,027
Gain on sale of investment property
(Note 3)......................... 2,831,814 - 2,831,814 -
----------- --------- ----------- ---------
Net income......................... $2,889,072 97,494 3,020,972 191,027
=========== ========= =========== =========
Net income allocated to:
General Partner.................. 573 975 1,892 1,910
Limited Partners................. 2,888,499 96,519 3,019,080 189,117
----------- --------- ----------- ---------
Net income......................... $2,889,072 97,494 3,020,972 191,027
=========== ========= =========== =========
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 six months ended June 30, 1998 and 1997
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
Net income from operations allocated
to the one General Partner Unit.. $ 573 975 1,892 1,910
=========== ========= =========== =========
Net income per Unit, basic and
diluted, allocated to Limited
partners per weighted average
Limited Partnership Units of
9,246.62:
Operating income................. 6.14 10.44 20.26 20.45
Gain on sale of investment
property....................... 306.25 - 306.25 -
----------- --------- ----------- ---------
$ 312.39 10.44 326.51 20.45
=========== ========= =========== =========
See accompanying notes to financial statements.
-5-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1998 and 1997
(unaudited)
1998 1997
---- ----
Cash flows from operating activities:
Net income...................................... $ 3,020,972 191,027
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (2,831,814) -
Amortization of loan fees..................... 8,125 3,278
Changes in assets and liabilities:
Rents and other receivables................. (27,841) (964)
Other current assets........................ 6,548 6,450
Accounts payable and accrued expenses....... (8,566) 14,068
Accrued real estate taxes................... (26,076) -
Prepaid rents............................... (13,719) (16,119)
Due to Affiliates........................... (952) 3,197
Tenant security deposits.................... (21,609) (1,804)
------------- ------------
Net cash provided by operating activities......... 105,068 199,133
------------- ------------
Cash flows from investing activities:
Proceeds from sale of investment property....... 7,630,421 -
------------- ------------
Net cash provided by investing activities......... 7,630,421 -
------------- ------------
Cash flows from financing activities:
Principal payments of long-term debt............ (601,375) (167,657)
Cash distributions.............................. - (45,700)
------------- ------------
Net cash used in financing activities............. (601,375) (213,357)
------------- ------------
Net increase (decrease) in cash and
cash equivalents................................ 7,134,114 (14,224)
Cash and cash equivalents at beginning of period.. 201,051 169,026
------------- ------------
Cash and cash equivalents at end of period........ $ 7,335,165 154,802
============= ============
See accompanying notes to financial statements.
-6-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the six months ended June 30, 1998 and 1997
(unaudited)
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $ 13,081 31,228
============= ============
Supplemental disclosure of non-cash investing activities:
Sale of investment property:
Reduction of investment in property............. $ 7,105,992 -
Reduction of accumulated depreciation relating
to investment property sold................... (2,307,385) -
Gain on sale.................................... 2,831,814 -
------------- ------------
Proceeds from sale of investment property......... $ 7,630,421 -
============= ============
See accompanying notes to financial statements.
-7-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
June 30, 1998
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1997, which are
included in the Partnership's 1997 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 June 30, 1998, 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 June 30, 1998. 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.
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.
Deferred financing costs were amortized on a straight-line basis over the terms
of the related loan.
-8-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1998
(unaudited)
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership for the year ended December 31, 1997 and has been
applied to all prior earnings periods presented in the financial statements.
The Partnership has no dilutive securities.
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.
(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 $360 and $1,312 was unpaid as of June 30, 1998 and December 31, 1997,
respectively.
The Partnership's property was managed by an Affiliate of the General Partner
pursuant to a management agreement which provided for annual fees not to exceed
4.5% of gross rental receipts. The Affiliate earned Property Management Fees of
$19,509 and $24,929 for the six months ended June 30, 1998 and 1997,
respectively. Such fees are included in property operating expenses to
Affiliates, all of which have been paid as of June 30, 1998.
(3) Sale of Investment Property
On May 6, 1998, the Partnership sold its remaining asset, Scottsdale Sierra
Apartments to an unaffiliated third-party for $7,800,000 on an all cash basis.
The property had a basis of $4,798,607, net of depreciation, resulting in a
gain of $2,831,814, net of closing costs. The balance on the related debt of
$374,624 was paid at closing.
-9-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1998
(unaudited)
(4) Subsequent Events
On July 10, 1998, the Partnership distributed $7,000,000 of net sales proceeds
resulting from the sale of Scottsdale Sierra Apartments. Of the $7,000,000,
$6,970,918 was distributed to the Limited Partners and $29,082 was distributed
to the General Partner. Remaining net sales proceeds will be distributed to the
Partners during the fourth quarter of 1998 after a final reconciliation of
property and Partnership expenses.
-10-
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, competition for tenants; 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 June 30, 1998, 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 June 30,
1998.
At June 30, 1998, the Partnership had cash and cash equivalents of $7,335,165.
The Partnership intends to use such funds to pay final expenses of the
Partnership and to provide cash distributions to Partners after a final
reconciliation of property and Partnership expenses.
-11-
Results of Operations
As of January 1, 1997, the Partnership listed and was actively marketing
Scottsdale Sierra Apartments for sale at an amount in excess of its carrying
value, and accordingly, suspended depreciation at that time. On May 6, 1998,
the Partnership sold its remaining asset, Scottsdale Sierra Apartments to an
unaffiliated third-party for $7,800,000 on an all cash basis. The property had
a basis of $4,798,607, net of depreciation, resulting in a gain of $2,831,814,
net of closing costs. The balance on the related debt of $374,624 was paid at
closing. Net sales proceeds of $7,000,000 were distributed to the Partners on
July 10, 1998. Remaining net sales proceeds will be distributed to the Partners
during the fourth quarter of 1998 after a final reconciliation of property and
Partnership expenses. This is expected to occur before December 31, 1998.
Rental and other income, property operating expenses to Affiliates and non-
affiliates and mortgage and other interest decreased for the three and six
months ended June 30, 1998, as compared to the three and six months ended June
30, 1997 due to the sale of the Scottsdale Sierra Apartments on May 6, 1998.
Interest income increased for the three and six months ended June 30, 1998, as
compared to the three and six months ended June 30, 1997, due to the
Partnership investing net sales proceeds received from the sale of the
Scottsdale Sierra Apartments before being distributed to the Partners.
Professional services to Affiliates and non-affiliates increased for the three
and six months ended June 30, 1998, as compared to the three and six months
ended June 30, 1997, due to the increase in legal and accounting services
required relating the the sale of the Scottsdale Sierra Apartments,
distribution of proceeds from the sale and services relating to the anticipated
completion of the Partnership.
General and administrative expenses to Affiliates increased for the three and
six months ended June 30, 1998, as compared to the three and six months ended
June 30, 1997, due primarily to increases in investor service expenses. General
and administrative expenses to non-affiliates decreased for the three and six
months ended June 30, 1998, as compared to the three and six months ended June
30, 1997, due to decreases in postage and printing expenses.
The following is a list of approximate occupancy levels for the Partnership's
investment property as of the end of each quarter during 1997 and 1998:
1997 1998
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% 85% 81% 91% 94% N/A
-12-
Year 2000 Compliance
The Partnership has reviewed its current computer systems and does not
anticipate any future problems relating to the year 2000.
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) Report on Form 8-K dated May 6, 1998
Item 2. Acquisition or Disposition of Assets
-13-
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: August 6, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 6, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: August 6, 1998
-14-
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