<PAGE> 1
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, 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 #0-16790
Inland's Monthly Income Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3525989
(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
-- --
<PAGE> 2
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
June 30, 1996 and December 31, 1995
(unaudited)
Assets
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1).............. $ 398,586 440,767
Accounts and rents receivable................... 68,064 53,005
Mortgage interest receivable.................... 63,589 62,115
Current portion of mortgage loans receivable.... 73,803 70,546
Current portion of deferred rent receivable..... 12,502 6,879
Other assets.................................... - 3,550
------------ ---------
Total current assets.......................... 616,544 636,862
------------ ---------
Investment properties (including acquisition
fees paid to Affiliates of $1,738,621)
(Notes 1 and 4):
Land............................................ 2,697,394 2,697,394
Buildings and improvements...................... 15,592,680 15,592,680
Tenant improvements............................. 707,502 707,502
------------ -----------
18,997,576 18,997,576
Less accumulated depreciation................... 4,238,246 3,978,010
------------ -----------
Net investment properties..................... 14,759,330 15,019,566
------------ -----------
Other assets:
Mortgage loans receivable, less current portion. 8,533,613 8,571,225
Deferred loan fees (net of accumulated
amortization of $20,447 and $18,133 at
June 30, 1996 and December 31, 1995,
respectively) (Note 1)........................ 25,841 28,155
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $158,712 and $148,197 at
June 30, 1996 and December 31, 1995,
respectively) (Note 1)........................ 185,675 196,190
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 450,157 453,113
------------ ----------
Total other assets............................ 9,195,286 9,248,683
------------ ----------
Total assets...................................... $24,571,160 24,905,111
============ ============
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE> 3
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses........... $ 14,076 27,035
Accrued real estate taxes....................... 119,326 117,803
Distributions payable (Note 5).................. 192,380 199,337
Due to Affiliates (Note 4)...................... 2,585 9,218
Deposits held for others........................ 107,824 117,369
Current portion of long-term debt (Note 3)...... 35,072 33,410
Current portion of deferred gain on sale of
investment property........................... 21,731 20,799
----------- -----------
Total current liabilities..................... 492,994 524,971
----------- -----------
Deferred loan fees (Note 1)....................... 73,593 77,922
Long-term debt, less current portion (Note 3)..... 1,548,634 1,566,596
Deferred gain on sale of investment property,
less current portion............................ 2,515,554 2,526,885
----------- -----------
Total liabilities............................... 4,630,775 4,696,374
----------- -----------
Partners' capital (Notes 1, 4 and 5):
General Partner:
Capital contribution.......................... 500 500
Supplemental Capital Contributions............ 2,095,863 2,095,863
Supplemental capital distributions to
Limited Partners............................ (2,095,863) (2,095,863)
Cumulative net loss........................... (36,743) (36,743)
----------- -----------
(36,243) (36,243)
----------- -----------
Limited Partners:
Units of $500. Authorized 60,000 Units,
59,286 Units outstanding (net of offering
costs of $3,289,242, of which $388,902 was
paid to Affiliates)......................... 26,353,582 26,353,582
Supplemental Capital Contributions from
General Partner............................. 2,095,863 2,095,863
Cumulative net income......................... 11,571,747 10,673,002
Cumulative distributions...................... (20,044,564) (18,877,467)
----------- -----------
19,976,628 20,244,980
----------- -----------
Total Partners' capital....................... 19,940,385 20,208,737
----------- -----------
Total liabilities and Partners' capital........... $24,571,160 24,905,111
============ ============
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE> 4
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
------------ ----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income (Notes 1 and 2).... $ 492,191 549,716 982,501 1,166,651
Additional rental income......... 11,947 13,101 31,574 40,965
Interest income.................. 192,335 173,273 384,280 297,194
Other income..................... 3,539 15,171 3,539 37,030
---------- ---------- ----------- -----------
700,012 751,261 1,401,894 1,541,840
---------- ---------- ----------- -----------
Expenses:
Professional services to
Affiliates..................... 3,090 5,522 6,681 13,132
Professional services to
non-affiliates................. (1,545) - 27,305 27,350
General and administrative
expenses to Affiliates......... 5,642 8,500 17,470 19,198
General and administrative
expenses to non-affiliates..... 4,934 4,514 18,499 14,346
Property operating expenses to
Affiliates..................... 7,542 10,932 14,909 24,209
Property operating expenses to
non-affiliates................. 32,256 112,018 78,079 299,680
Interest expense to
non-affiliates................. 38,670 39,440 77,540 79,061
Depreciation..................... 130,118 138,336 260,236 291,057
Amortization..................... 6,414 6,609 12,829 13,317
--------- --------- ---------- ----------
227,121 325,871 513,548 781,350
--------- --------- ---------- ----------
Operating income................. 472,891 425,390 888,346 760,490
Gain on sale of investment
property....................... 5,199 116,547 10,399 154,638
--------- --------- ---------- ----------
Net income................... $ 478,090 541,937 898,745 915,128
========== ========== ========= ==========
Net income allocated to:
General Partner.................. - - - -
Limited Partners................. 478,090 541,937 898,745 915,128
--------- --------- ---------- ----------
Net income..................... $ 478,090 541,937 898,745 915,128
========== ========== ========= =========
Net income per weighted average
Limited Partner Unit of 59,286... $ 8.06 9.14 15.16 15.44
=========== ========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE> 5
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 898,745 915,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (10,399) (154,638)
Depreciation.................................. 260,236 291,057
Amortization.................................. 12,829 13,317
Deferred rent receivable...................... (2,667) (18,196)
Changes in assets and liabilities:
Accounts and rents receivable............... (15,059) (532)
Mortgage interest recievable................ (1,474) (27,013)
Other current assets........................ 3,550 (3,899)
Accounts payable and accrued expenses....... (12,959) (48,147)
Accrued real estate taxes................... 1,523 83,916
Due to Affiliates........................... (6,633) (319)
Other current liabilities................... - 532
Deferred loan fees.......................... (4,329) 29,640
----------- ----------
Net cash provided by operating activities......... 1,123,363 1,080,846
----------- ----------
Cash flows from investing activities:
Proceeds from sale of investment property....... - 383,762
Principal payments received on mortgage
loans receivable.............................. 34,355 20,369
Capital expenditures............................ - (12,752)
----------- ----------
Net cash provided by investing activities......... 34,355 391,379
----------- ----------
Cash flows from financing activities:
Cash distributions.............................. (1,174,054) (1,182,467)
Deposits held for others........................ (9,545) 11,656
Principal payments of long-term debt............ (16,300) (14,791)
----------- ----------
Net cash used in financing activities............. (1,199,899) (1,185,602)
----------- ----------
Net increase (decrease) in cash and cash
equivalents..................................... (42,181) 286,623
Cash and cash equivalents at beginning of period.. 440,767 783,288
------------ ------------
Cash and cash equivalents at end of period........ $ 398,586 1,069,911
============ ============
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE> 6
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Supplemental disclosure of non-cash investing activities:
<S> <C> <C>
Cash paid for interest.......................... $ 77,672 79,514
============ ============
Sale of investment property:
Mortgage loans receivable....................... - (3,548,210)
Reduction of investment in property............. - 3,450,436
Reduction of accumulated depreciation related
to investment property sold................... - (761,022)
Gain on sale.................................... - 154,638
Deferred gain on sale........................... - 1,087,920
------------- ------------
Proceeds from sale of investment property..... $ - 383,762
============ ============
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE> 7
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
June 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's Monthly Income Fund, L.P. (the "Partnership"), was formed on March 26,
1987 pursuant to the Delaware Revised Uniform Limited Partnership Act, to
invest in improved residential, retail, industrial and other income producing
properties. On August 3, 1987, the Partnership commenced an Offering of 50,000
(subject to an increase up to 60,000) Limited Partnership Units ("Units")
pursuant to a Registration Statement under the Securities Act of 1933. The
Offering terminated on August 3, 1988, with total sales of 59,999 Units at $500
per Unit, resulting in gross offering proceeds of $29,999,500, not including
the General Partner's contribution of $500. All of the holders of these Units
were admitted to the Partnership. The Partnership has repurchased 713 Units
for $356,676 from various Limited Partners through the Unit Repurchase Program.
There are no funds remaining for the repurchase of Units through this program.
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 principals requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
The Partnership's policy is to reduce the cost basis of investment properties,
including deferred leasing fees and deferred rent receivable, to its estimated
net realizable value when the investment properties are judged to have suffered
an impairment in value that is other than temporary. Estimated net realizable
value is measured by the recoverability of the Partnership's investment through
expected future cash flows on an undiscounted basis. Net realizable value is
inherently subjective and is based on management's best estimate of current
conditions and assumptions about expected future conditions, including lease-up
periods, rental rates, interest rates and capitalization rates. As of June 30,
1996, no reduction to the cost basis of the investment properties has been
recorded as the estimated net realizable value of the investment properties
exceeds their costs basis.
Offering costs have been offset against the Limited Partners' capital accounts.
-7-
<PAGE> 8
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1996
(unaudited)
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements................ 30 to 40
Furniture and fixtures.................... 5 to 12
Tenant improvements....................... lease term
</TABLE>
Maintenance and repair expenses are charged to operations as incurred.
Significant improvements are capitalized and depreciated over their estimated
useful lives.
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 these instruments.
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. However, considerable
judgment is necessarily required in interpreting market data to develop
estimates of fair value.
The fair value estimates presented herein are based on information available to
management as of June 30, 1996, but may not necessarily be indicative of the
amounts that the Partnership could realize in a current market exchange. The
use of different assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented herein.
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 mortgage loans receivable at June 30,
1996 approximates carrying value.
-8-
<PAGE> 9
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1996
(unaudited)
The fair value of the mortgage loan payable is based upon contractual payments
to be made and interest rates that are currently available to the Partnership
for the issuance of debt with similar terms and remaining maturities. The
estimated fair value of the mortgage loan payable at June 30, 1996 approximates
carrying value.
Deferred leasing fees are amortized on a straight-line basis over the term of
the related lease. Deferred loan fees are amortized on a straight-line basis
over the term of the related loan.
Loan fees relating to the mortgage loans receivable are deferred and amortized
as yield adjustments on a straight-line basis over the life of the related
mortgage loan receivable which approximates the effective interest rate method.
Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned and the cash rent due under
the provisions of the lease agreements is recorded as deferred rent receivable.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995. This
pronouncement is not expected to have a material effect on the financial
position or results of operations of 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 for the periods
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.
(2) Deferred Rent Receivable
Certain tenant leases contain provisions providing for stepped rent increases.
Generally accepted accounting principles require that rental income be recorded
for the period of occupancy using the effective monthly rent, which is the
average monthly rent for the entire period of occupancy during the term of the
lease. The accompanying financial statements includes $2,667 and $18,196 for
1996 and 1995, respectively, of rental income for the period of occupancy for
which stepped rent increases apply and $462,659 and $459,992 in related
accounts receivable as of June 30, 1996 and December 31, 1995, respectively.
These amounts will be collected over the terms of the related leases as
scheduled rent payments are made.
-9-
<PAGE> 10
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1996
(unaudited)
(3) Long-Term Debt
On February 26, 1992, the Partnership obtained a $1,700,000 loan collateralized
by the Rantoul Wal-Mart to replace the line of credit obtained for the purpose
of upgrading the McHenry Shopping Center. The loan bears an interest rate of
9.75% and requires monthly principal and interest payments of $15,662 through
March 2002, when all unpaid principal and interest is due. The Partnership
paid a $17,000 loan fee to the lender and incurred $29,288 of other costs
associated with funding the loan.
(4) 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 $2,585 and $9,218 remained unpaid at June 30, 1996 and
December 31, 1995, respectively.
An Affiliate of the General Partner is entitled to receive Property Management
Fees for management and leasing services. The Partnership has incurred
property management fees of $14,909 and $24,209 for the six months ended June
30, 1996 and 1995, respectively, all of which has been paid.
(5) Subsequent Events
During July 1996, the Partnership paid a distribution of $192,380 to the
Limited Partners.
-10-
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On August 3, 1987, the Partnership commenced an Offering of 50,000 (increased
to 60,000) Limited Partnership Units pursuant to a Registration Statement on
Form S-11 under the Securities Act of 1933. The Offering terminated on August
3, 1988, with total sales of 59,999 Units at $500 per Unit, resulting in gross
offering proceeds of $29,999,500, not including the General Partner, of which
$25,831,542 had been invested in seven properties. In addition, proceeds were
used to repay advances from the General Partner, pay offering and organization
costs and make distributions to the Limited Partners.
At June 30, 1996, the Partnership had cash and cash equivalents of $398,586.
The Partnership intends to use such funds for distributions and working capital
requirements.
To the extent that cash flow is insufficient to meet the required minimum 8%
annualized return 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, other short-term
financing, or may sell one or more of the properties.
Results of Operations
As of June 30, 1996, the Partnership owns six operating properties. Five of
these properties were leased on a "triple-net" basis which means that all
expenses of the property are passed through to the tenant. The Partnership
also owns a shopping center, McHenry Plaza. The leases of the shopping center
provide that the Partnership be responsible for maintenance of the structure
and the parking lot and the tenants are required to reimburse the Partnership
for portions of insurance, real estate taxes and common area maintenance.
Overall rental income for the Partnership decreased for the three and six
months ended June 30, 1996, as compared to the three and six months ended June
30, 1995, primarily due to the sales program at Schaumburg Terrace. However,
this decrease was partially offset by an increase in interest income earned by
the Partnership on the related financing extended by the Partnership to the
purchasers. In addition, rental income decreased slightly at McHenry Plaza for
the three and six months ended June 30, 1996, as compared to the three and six
months ended June 30, 1995, due to tenants representing 24% of the center
vacating their spaces.
Professional services to Affiliates decreased for the three and six months
ended June 30, 1996, as compared to the three and six months ended June 30,
1995, due to decreases in accounting and legal services to required by the
Partnership.
General and administrative expenses to Affiliates decreased for the three and
six months ended June 30, 1996, as compared to the three and six months ended
June 30, 1995, due to decreases in postage, data processing, investor services
and mortgage servicing fees. General and administrative expenses to non-
affiliates increased for the three and six months ended June 30, 1996, as
compared to the three and six months ended June 30, 1995, due to an increase in
the Illinois Replacement Tax owed by the Partnership in 1996.
-11-
<PAGE> 12
The sale of the Schaumburg Terrace condominium complex resulted in decreases in
depreciation and property operating expenses to Affiliates and non-affiliates
for the three and six months ended June 30, 1996, as compared to the three and
six months ended June 30, 1995.
The gain on the sale of investment property is the result of deferred gain from
the Schaumburg Terrace condominium sales being recognized as cash is received
on the related financing extended by the Partnership to the individual
purchasers.
The following is a list of approximate occupancy levels for the Partnership's
investment properties as of the end of each quarter during 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------------------------- ----------------------------
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
----------
<S> <C> <C> <C> <C> <C> <C>
McHenry Plaza 84% 84% 86% 86% 62% 62%
McHenry, Illinois
Douglas Living &
Retirement Center 100% 100% 100% 100% 100% 100%
Mattoon, Illinois
Hillside Living Center 100% 100% 100% 100% 100% 100%
Yorkville, Illinois
Scandinavian Health Spa 100% 100% 100% 100% 100% 100%
Westlake, Ohio
Schaumburg Terrace 86%* 100%* N/A N/A N/A N/A
Schaumburg, Illinois
Rantoul Wal-Mart 100% 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 100% 100% 100% 100% 100% 100%
Duncan, Oklahoma
</TABLE>
* Represents occupancy of the remaining condominium units owned by the
Partnership at the end of the quarter.
PART II
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
-12-
<PAGE> 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'S MONTHLY INCOME FUND, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: August 12, 1996
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 12, 1996
/S/ CYNTHIA M. HASSETT
By: Cynthia M. Hassett
Principal Financial Officer and
Principal Accounting Officer
Date: August 12, 1996
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 398,586
<SECURITIES> 0
<RECEIVABLES> 217,958
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 616,544
<PP&E> 18,997,576
<DEPRECIATION> 4,238,246
<TOTAL-ASSETS> 24,571,160
<CURRENT-LIABILITIES> 492,994
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19,940,385
<TOTAL-LIABILITY-AND-EQUITY> 24,571,160
<SALES> 10,399
<TOTAL-REVENUES> 1,401,894
<CGS> 0
<TOTAL-COSTS> 92,988
<OTHER-EXPENSES> 82,784
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,540
<INCOME-PRETAX> 898,745
<INCOME-TAX> 0
<INCOME-CONTINUING> 898,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898,745
<EPS-PRIMARY> 15.16
<EPS-DILUTED> 15.16
</TABLE>
