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 March 31, 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-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
March 31, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 119,873 201,051
Rent and other receivables...................... 1,776 1,639
Other current assets............................ 6,775 6,548
------------ ------------
Total current assets.............................. 128,424 209,238
------------ ------------
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 $26,298 and $24,659 for 1998
and 1997, respectively) (Note 1)................ 6,486 8,125
------------ ------------
Total assets...................................... $ 4,933,517 5,015,970
============ ============
See accompanying notes to financial statements.
-2-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital (Deficit)
-------------------------------------------
1998 1997
Current liabilities: ---- ----
Current portion of long-term debt............... $ 374,624 104,836
Accounts payable and accrued expenses........... 13,453 14,078
Accrued real estate taxes....................... 39,113 26,076
Prepaid rents................................... 10,016 13,719
Due to Affiliates (Note 6)...................... 4,951 1,312
Tenant security deposits........................ 21,659 21,609
------------ ------------
Total current liabilities......................... 463,816 181,630
Long-term debt, less current portion (Notes 1
and 3).......................................... - 496,539
------------ ------------
Total liabilities................................. 463,816 678,169
------------ ------------
Partners' capital (deficit) (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 10,766 9,447
Cumulative cash distributions................. (14,813) (14,813)
------------ ------------
(3,547) (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......................... 1,295,421 1,164,840
Cumulative cash distributions................. (4,697,140) (4,697,140)
------------ ------------
4,473,248 4,342,667
------------ ------------
Total Partners' capital........................... 4,469,701 4,337,801
------------ ------------
Total liabilities and Partners' capital........... $ 4,933,517 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 months ended March 31, 1998 and 1997
(unaudited)
1998 1997
---- ----
Income:
Rental income................................... $ 292,022 292,987
Interest income................................. 2,101 1,025
Other income.................................... 5,354 6,410
------------ ------------
299,477 300,422
Expenses: ------------ ------------
Professional services to Affiliates............. 3,000 3,068
Professional services to non-affiliates......... 17,900 17,889
General and administrative expenses to
Affiliates.................................... 4,389 6,701
General and administrative expenses to
non-affiliates................................ 682 1,372
Property operating expenses to Affiliates....... 13,206 12,891
Property operating expenses to non-affiliates... 116,569 147,006
Mortgage and other interest..................... 10,192 16,322
Amortization.................................... 1,639 1,640
------------ ------------
167,577 206,889
------------ ------------
Net income........................................ $ 131,900 93,533
============ ============
Net income allocated to:
General Partner................................. 1,319 935
Limited Partners................................ 130,581 92,598
------------ ------------
Net income........................................ $ 131,900 93,533
============ ============
Net income allocated to the one General
Partner Unit.................................... $ 1,319 935
============ ============
Net income per Unit, basic and diluted, allocated
to Limited Partners per weighted average Limited
Partnership Units of 9,246.62................... $ 14.12 10.01
============ ============
See accompanying notes to financial statements.
-4-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997
(unaudited)
1998 1997
---- ----
Cash flows from operating activities:
Net income...................................... $ 131,900 93,533
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of loan fees..................... 1,639 1,640
Changes in assets and liabilities:
Rents and other receivables................. (137) 340
Other current assets........................ (227) 4,252
Accounts payable and accrued expenses....... (625) 18,860
Accrued real estate taxes................... 13,037 10,524
Prepaid rents............................... (3,703) (9,937)
Due to Affiliates........................... 3,639 7,329
Tenant security deposits.................... 50 100
------------ ------------
Net cash provided by operating activities......... 145,573 126,641
------------ ------------
Cash flows from financing activities:
Principal payments of long-term debt............ (226,751) (120,620)
Cash distributions.............................. - (45,700)
------------ ------------
Net cash used in financing activities............. (226,751) (166,320)
------------ ------------
Net decrease in cash and cash equivalents......... (81,178) (39,679)
Cash and cash equivalents at beginning of period.. 201,051 169,026
------------ ------------
Cash and cash equivalents at end of period........ $ 119,873 129,347
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $ 10,192 16,322
============ ============
See accompanying notes to financial statements.
-5-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 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 March 31, 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 March 31, 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.
-6-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(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 January 1, 1997, 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 March 31, 1998, the Partnership has not
recognized any such impairment on its property. Reference is made to Note 3 for
discussion on the sale of the Partnership's investment 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.
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.
-7-
INLAND REAL ESTATE GROWTH FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(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 $4,951 and $1,312 was unpaid as of March 31, 1998 and December 31, 1997,
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 $13,206 and $12,891 for the three months ended March 31, 1998 and 1997,
respectively. Such fees are included in property operating expenses to
Affiliates, all of which have been paid as of March 31, 1998.
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 April 1, 1998, the Partnership paid an additional $100,000 as a principal
reduction of the long-term debt collateralized by the Scottsdale Sierra
Apartments.
On May 6, 1998, the Partnership sold its remaining asset, Scottsdale Sierra
Apartments to an unaffiliated third-party for $7,800,000. 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 will be distributed to the Limited Partners during
second or third quarter 1998 after a final reconciliation of property and
Partnership expenses.
-8-
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 March 31, 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 March 31,
1998.
At March 31, 1998, the Partnership had cash and cash equivalents of $119,873.
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.
-9-
On May 6, 1998, the Partnership sold its remaining asset, Scottsdale Sierra
Apartments to an unaffiliated third-party for $7,800,000. 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 will be distributed to the Limited Partners during
second or third quarter 1998 after a final reconciliation of property and
Partnership expenses.
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. 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 will be distributed to the Limited Partners during second or
third quarter 1998 after a final reconciliation of property and Partnership
expenses.
Rental and other income for the three months ended March 31, 1998 was
relatively comparable to the three months ended March 31, 1997. Property
operating expenses to non-affiliates decreased for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, due to
decreases in repair and maintenance, marketing and furniture rentals. This
decrease was partially offset by increases in salaries, security services and
real estate taxes.
Mortgage and other interest decreased for the three months ended March 31,
1998, as compared to the three months ended March 31, 1997, 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 decreased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due to decreases in data processing and investor service expenses.
General and administrative expenses to non-affiliates decreased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due primarily to a decrease in printing expenses.
-10-
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%
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 6(b) are omitted because of the absence of conditions under
which they are required.
-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: May 15, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 15, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 15, 1998
-12-
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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0
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