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, 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 #0-16783
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 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 MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
---- ----
Cash and cash equivalents (Note 1)................ $ 153,719 177,482
Accrued interest receivable....................... 31,280 33,951
Mortgage loans receivable (Note 3)................ 2,695,084 2,741,460
------------ ------------
Total assets.................................. $ 2,880,083 2,952,893
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ 1,531 -
Due to affiliates (Note 2)...................... 3,892 1,690
Unearned income (Note 1)........................ 1,617 2,191
------------ ------------
Total liabilities............................. 7,040 3,881
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 250,046 249,061
Supplemental Capital Contribution............. 61,721 40,244
Supplemental distributions to Limited Partners (61,721) (40,244)
Cumulative cash distributions................. (244,958) (244,958)
------------ ------------
5,588 4,603
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......................... 5,470,620 5,373,056
Supplemental Capital Contributions from
General Partner............................. 61,721 40,244
Cumulative cash distributions................. (10,980,412) (10,784,417)
------------ ------------
2,867,455 2,944,409
------------ ------------
Total Partners' capital....................... 2,873,043 2,949,012
------------ ------------
Total liabilities and Partners' capital........... $ 2,880,083 2,952,893
============ ============
See accompanying notes to financial statements.
-2-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 1997 and 1996
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
Income: ---- ---- ---- ----
Interest and fees on mortgage
loans receivable (Note 3) $ 69,782 69,617 132,870 154,123
Interest on investments.......... 3,296 4,965 6,882 9,115
Other income..................... 3,715 12,956 8,266 15,888
---------- ---------- ---------- ----------
76,793 87,538 148,018 179,126
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 1,373 2,389 3,744 5,330
Professional services to
non-affiliates................. 2,878 3,141 21,748 21,141
General and administrative
expenses to Affiliates......... 5,366 4,580 19,050 12,038
General and administrative
expenses to non-affiliates..... 2,201 2,534 4,927 3,921
---------- ---------- ---------- ----------
11,818 12,644 49,469 42,430
---------- ---------- ---------- ----------
Net income..................... $ 64,975 74,894 98,549 136,696
========== ========== ========== ==========
Net income allocated to:
General Partner.................. 649 749 985 1,367
Limited Partners................. 64,326 74,145 97,564 135,329
---------- ---------- ---------- ----------
Net income..................... $ 64,975 74,894 98,549 136,696
========== ========== ========== ==========
Net income allocated to the one
General Partner Unit............. $ 649 749 985 1,367
========== ========== ========== ==========
Net income allocated to Limited
Partners per Limited Partnership
Units of 18,776.32............... $ 3.43 3.95 5.20 7.21
========== ========== ========== ==========
See accompanying notes to financial statements.
-3-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 98,549 136,696
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in assets and liabilities:
Accrued interest receivable................. 2,671 132
Accounts payable............................ 1,531 (709)
Due to Affiliates........................... 2,202 (3,153)
Unearned income............................. (574) (857)
------------ ------------
Net cash provided by operating activities......... 104,379 132,109
------------ ------------
Cash flows from investing activities:
Principal payments collected.................... 46,376 589,637
------------ ------------
Net cash provided by investing activities......... 46,376 589,637
------------ ------------
Cash flows from financing activities:
Supplemental capital contribution............... 21,477 -
Distributions paid.............................. (195,995) (789,996)
------------ ------------
Net cash used in financing activities............. (174,518) (789,996)
------------ ------------
Net decrease in cash and cash equivalents......... (23,763) (68,250)
Cash and cash equivalents at beginning of period.. 177,482 251,654
------------ ------------
Cash and cash equivalents at end of period........ $ 153,719 183,404
============ ============
See accompanying notes to financial statements.
-4-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Notes to Financial Statements
June 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 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. 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 an
original maturity of three months or less to be cash equivalents.
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)
June 30, 1997
(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 General Partner evaluates the
collectibility of the mortgage loans on a quarterly basis. This evaluation
includes determining the valuation of the underlying operating property subject
to the mortgage. Should a portion of the principal of the mortgage loan be
considered unrecoverable either through collection or foreclosure, a provision
would be made to reduce the carrying amount of the mortgage loans. The
Partnership intends to pursue collection of all amounts currently due from the
borrowers.
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 to Affiliates and general and administrative expenses to
Affiliates, of which $3,892 and $1,690 remained unpaid at June 30, 1997 and
December 31, 1996, respectively.
-6-
INLAND MORTGAGE INVESTORS FUND, L.P.-II
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(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 $3,361 and $3,536 for the six months
ended June 30, 1997 and 1996, 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 at June 30, 1997 is $61,721.
(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 the first quarter 1997, 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 $28,029, its proportionate share of the total
paydowns.
(4) Subsequent Events
In July 1997, the Partnership paid a distribution of $75,456, all of which was
distributed to Limited Partners, including $9,292 of repayment proceeds and
$66,164 of operating cash flow.
-7-
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 "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 February 10, 1987, the Partnership commenced an Offering of 40,000 Limited
Partnership Units, pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933. The Offering terminated on August 10, 1988, with a
total of 18,776.32 Units being sold to the public at $500 per Unit resulting in
$9,388,158 gross offering proceeds, which were received by the Partnership,
which does not include the General Partner's $500 contribution. The
Partnership funded fifteen loans between December 1987 and June 1992 utilizing
$8,131,884 of capital proceeds collected, net of participations. As of June
30, 1997, cumulative distributions to Limited Partners totaled $10,980,412. A
total of $6,409,297 of mortgage receivables has been repaid by borrowers, of
which $966,160 was reloaned and $5,436,800 was repayment proceeds and principal
amortization distributed to Limited Partners and $6,337 was added to working
capital reserve.
At June 30, 1997, the Partnership had cash and cash equivalents aggregating
$153,719, 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
cash flow is 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 June 30, 1997, the Partnership had five mortgage loans receivable totaling
$2,695,084. 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.
-8-
Results of Operations
Interest and fee income on mortgage loans receivable decreased for the six
months ended June 30, 1997, as compared to the six months ended June 30, 1996,
due to the 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,
third and fourth quarters of 1996 and first quarter of 1997.
Other income decreased for the three and six months ended June 30, 1997, as
compared to the three and six months ended June 30, 1996, due to higher late
charges collected in 1996 on mortgage loans receivable and a one time
prepayment penalty received from the payoff of the Edgebrook mortgage loan
receivable in the second quarter 1996.
General and administrative expenses to Affiliates increased for the three and
six months ended June 30, 1997, as compared to the three and six months ended
June 30, 1996, due to an increase in data processing and investor services.
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: August 11, 1997
/S/ MARK ZALATORIS
By: Mark Zalatoris
Vice President
Date: August 11, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: August 11, 1997
-10-
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