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 #0-16783
Inland Mortgage Investors Fund, L.P.-II
(Exact name of registrant as specified in its charter)
Delaware #36-3495248
(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 MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
------
1996 1995
---- ----
Cash and cash equivalents (Note 1)................ $ 159,171 251,654
Accrued interest receivable....................... 30,488 30,569
Mortgage loans receivable (Note 3)................ 2,766,494 3,378,455
------------ ------------
Total assets.................................. $ 2,956,153 3,660,678
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ - 859
Due to affiliates (Note 2)...................... 402 3,778
Unearned income (Note 1)........................ 2,478 5,745
------------ ------------
Total liabilities............................. 2,880 10,382
------------ ------------
Partners' capital (Notes 1, 2 and 4):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 248,365 246,371
Supplemental Capital Contribution............. 23,562 23,562
Supplemental distributions to Limited Partners (23,562) (23,562)
Cumulative cash distributions................. (244,958) (240,740)
------------ ------------
3,907 6,131
------------ ------------
Limited Partners:
Units of $500. Authorized 40,000
Units, 18,776.32 outstanding (net of
offering costs of $1,072,632, of which
$89,040 was paid to Affiliates)............. 8,315,526 8,315,526
Cumulative net income......................... 5,304,177 5,106,764
Supplemental Capital Contributions from
General Partner............................. 23,562 23,562
Cumulative cash distributions................. (10,693,899) (9,801,687)
------------ ------------
2,949,366 3,644,165
------------ ------------
Total Partners' capital....................... 2,953,273 3,650,296
------------ ------------
Total liabilities and Partners' capital........... $ 2,956,153 3,660,678
============ ============
See accompanying notes to financial statements.
-2-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(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:
Interest and fees on mortgage
loans receivable (Note 3)...... $ 66,153 89,665 220,276 278,705
Interest on investments.......... 4,213 6,794 13,328 17,542
Other income..................... 3,711 - 19,599 -
---------- ---------- ---------- ----------
74,077 96,459 253,203 296,247
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 1,535 3,773 6,865 10,900
Professional services to
non-affiliates................. - - 21,141 20,685
General and administrative
expenses to Affiliates......... 6,924 5,794 18,962 18,639
General and administrative
expenses to non-affiliates..... 2,907 980 6,828 4,892
---------- ---------- ---------- ----------
11,366 10,547 53,796 55,116
---------- ---------- ---------- ----------
Net income..................... $ 62,711 85,912 199,407 241,131
========== ========== ========== ==========
Net income allocated to:
General Partner.................. 627 - 1,994 8,564
Limited Partners................. 62,084 85,912 197,413 232,567
---------- ---------- ---------- ----------
Net income..................... $ 62,711 85,912 199,407 241,131
========== ========== ========== ==========
Net income allocated to the one
General Partner Unit............. $ 627 - 1,994 8,564
========== ========== ========== ==========
Net income allocated to Limited
Partners per Limited Partnership
Units of 18,776.32............... $ 3.31 4.58 10.51 12.39
========== ========== ========== ==========
See accompanying notes to financial statements.
-3-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(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...................................... $ 199,407 241,131
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in assets and liabilities:
Accrued interest receivable................. 81 5,842
Due from Affiliates......................... - (6,397)
Accounts payable............................ (859) 55
Due to Affiliates........................... (3,376) 2,250
Unearned income............................. (3,267) (1,285)
------------ ------------
Net cash provided by operating activities......... 191,986 241,596
------------ ------------
Cash flows from investing activities:
Principal payments collected.................... 611,961 240,697
------------ ------------
Net cash provided by investing activities......... 611,961 240,697
------------ ------------
Cash flows from financing activities:
Distributions paid.............................. (896,430) (512,814)
------------ ------------
Net cash used in financing activities............. (896,430) (512,814)
------------ ------------
Net decrease in cash and cash equivalents......... (92,483) (30,521)
Cash and cash equivalents at beginning of period.. 251,654 239,469
------------ ------------
Cash and cash equivalents at end of period........ $ 159,171 208,948
============ =============
Supplemental schedule of non-cash investing and financing activities:
Supplemental Capital Contribution receivable
from General Partner.......................... $ - 8,111
============ =============
Accrued distributions payable................... $ - 87,659
============ =============
See accompanying notes to financial statements.
-4-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(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 Mortgage Investors Fund, L.P.-II (the "Partnership"), was formed on
December 24, 1986 pursuant to the Delaware Revised Uniform Limited Partnership
Act to make or acquire loans collateralized by mortgages on improved, income
producing properties. On February 10, 1987, the Partnership commenced an
Offering of 40,000 Limited Partnership Units (the "Units") at $500 per Unit,
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The Offering terminated on August 10, 1988, with total sales of
18,776.32 Units, resulting in gross offering proceeds of $9,388,158, not
including the General Partner's contribution of $500 for one Unit. All of the
holders of these Units were admitted to the Partnership. 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.
Loan assumption fees received are deferred as unearned income and amortized
over the remaining life 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 fair value due to the short maturity of those
instruments.
The Partnership sold participations in mortgage receivables which may yield the
Partnership a return which is greater than the return based on the stated
interest rate of the instrument. The differential between the stated rate and
the interest rate paid to the participant is recognized as income over the term
of the mortgage loan.
-5-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
Interest income on mortgage loans receivable is accrued when earned. The
accrual of interest, on loans that are in default, is discontinued when, in the
opinion of the General Partner, the borrower has not complied with loan work-
out arrangements. Once a loan has been placed on a non-accrual status, all cash
received is applied against the outstanding loan balance until such time as the
borrower has demonstrated an ability to make payments under the terms of the
original or renegotiated loan agreement. The Partnership intends to pursue
collection of all amounts currently due from borrowers.
The fair value of the mortgage loans receivable and related mortgage interest
receivable is based upon contractual payments to be received and current market
interest rates for issuance of mortgage loans with similar terms and
maturities. The estimated fair value of the mortgage loans receivable at
September 30, 1996 approximates their carrying 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.
Disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by using available market
information and appropriate valuation methodologies.
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 to Affiliates and general and administrative expenses to
Affiliates, of which $402 and $3,778 remained unpaid at September 30, 1996 and
December 31, 1995, respectively.
-6-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
Inland Mortgage Servicing Corporation ("IMSC"), a subsidiary of the General
Partner, services the Partnership's mortgage loans receivable. Its services
include processing mortgage collections and escrow deposits and maintaining
related records. For these services, the Partnership is obligated to pay fees
at an annual rate equal to 1/4 of 1% of the outstanding mortgage receivables
balance of the Partnership. Such fees of $5,269 and $6,872 for the nine months
ended September 30, 1996 and 1995, respectively, have been incurred and paid to
IMSC and are included in general and administrative expenses to Affiliates.
The General Partner is required to make Supplemental Capital Contributions, if
necessary, from time to time in sufficient amounts to allow the Partnership to
make distributions to the Limited Partners amounting to at least 7% per annum
on their Invested Capital. The cumulative amount of such Supplemental Capital
Contributions is $23,562, all of which has been received from the General
Partner.
(3) Mortgage Loans Receivable
Mortgage loans receivable are collateralized by first mortgages and wrap
mortgages on multi-family residential properties located in Chicago, Illinois
or its surrounding metropolitan area, except for the Evanston, Illinois loan
which is a multi-use retail and office building and the Richton Park loan which
is a shopping mall. As additional collateral, the Partnership holds
assignments of rents and leases or personal guarantees of the borrowers.
Generally, the mortgage notes are payable in equal monthly installments based
on 20 or 30 year amortization periods.
In April 1996, the Partnership received a complete prepayment of the loan
collateralized by the properties located at 1881, 1885 and 1889 Edgebrook.
Proceeds from the prepayment, including principal, accrued interest and a
prepayment penalty totaled $556,220 and were distributed to the Limited
Partners in April 1996.
In May, June and July 1996, the borrower on the loan collateralized by the
property located at 7432 Washington made partial paydowns on the mortgage. The
Partnership received a total of $43,629, its proportionate share of the total
paydowns.
(4) Subsequent Events
In October 1996, the Partnership paid a distribution of $90,518 to the Limited
Partners, which included $22,324 of repayment proceeds and the remainder was
net interest income.
In October 1996, the Partnership received $16,682 in Supplemental Capital
Contributions from the General Partner.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
On February 10, 1987, the Partnership commenced an Offering of 40,000 Limited
Partnership Units (the "Units") at $500 per Unit, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering
terminated on August 10, 1988, with total sales of 18,776.32 Units, resulting
in gross offering proceeds of $9,388,158, which does not include the General
Partner's contribution of $500 for one Unit. The Partnership funded fifteen
loans between December 1987 and June 1992 utilizing $8,131,884 of capital
proceeds collected, net of participations. As of September 30, 1996,
cumulative distributions to Limited Partners totaled $10,693,899. Mortgage
receivables totaling $6,315,563 have been repaid by borrowers, of which
$966,160 was re-lent, $5,343,066 was repayment proceeds and principal
amortization distributed to Limited Partners and $6,337 was added to working
capital reserve.
At September 30, 1996, the Partnership had cash and cash equivalents
aggregating $159,171, which will be utilized for future distributions to
partners and for working capital requirements. The source of future liquidity
and distributions is to be through cash generated by earnings from the
Partnership's mortgage investments and through the repayment of such
investments. To the extent that these sources are insufficient to meet the
minimum 7% annualized distribution to investors, as well as any other financial
needs, the Partnership may rely on Supplemental Capital Contributions from the
General Partner, advances from Affiliates of the General Partner or other
short-term financing.
At September 30, 1996, the Partnership had five mortgage loans receivable
totaling $2,766,494. The maturity dates range from October 1997 to July 2001.
When and as the Partnership receives Repayment Proceeds as a result of the sale
or repayment of a loan, the Repayment Proceeds which are available for
distribution will be distributed to the Limited Partners. When the loans are
repaid, cash flows from operating activities will decrease as a result of the
decrease in interest income earned by the Partnership.
Results of Operations
The maturity dates of the five remaining mortgage loans receivable range from
October 1997 to July 2001. As the loans are repaid by the borrowers and
Repayment Proceeds are distributed to the Limited Partners, interest income
will decrease accordingly.
-8-
Interest income on mortgage loans receivable 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 payoff of the loan collateralized by the
property located at 9716-18 and 9806-12 Mayline in July 1995, the prepayment of
the loan collateralized by the properties located at 1881, 1885 and 1889
Edgebrook in April 1996 and the partial paydowns of the loan collateralized by
the property located at 7432 Washington in the second and third quarters of
1995 and 1996. This decrease was partially offset as interest rates on
approximately 65% of the mortgage loan receivable portfolio adjusted upward in
late 1995 and early 1996 reflecting market conditions.
Other income for the three and nine months ended September 30, 1996 includes
late charges collected on mortgage loans receivable and a prepayment penalty
received from the payoff of the Edgebrook mortgage loan receivable.
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 to a decrease in accounting services required by the
Partnership.
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
-9-
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 MORTGAGE INVESTORS FUND, L.P.-II
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: November 13, 1996
/S/ MARK ZALATORIS
By: Mark Zalatoris
Vice President
Date: November 13, 1996
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1996
-10-
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