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 #0-16790
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
-1-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
------
1996 1995
---- ----
Current assets:
Cash and cash equivalents (Note 1).............. $ 345,470 440,767
Accounts and rents receivable................... 56,566 53,005
Mortgage interest receivable.................... 66,878 62,115
Current portion of mortgage loans receivable.... 75,733 70,546
Current portion of deferred rent receivable..... 12,502 6,879
Other assets.................................... 6,350 3,550
------------ ------------
Total current assets.......................... 563,499 636,862
------------ ------------
Investment properties (including acquisition fees
paid to Affiliates of $1,738,621) (Note 1):
Land............................................ 2,697,394 2,697,394
Buildings and improvements...................... 15,592,680 15,592,680
Tenant improvements............................. 730,172 707,502
------------ ------------
19,020,246 18,997,576
Less accumulated depreciation................... 4,368,363 3,978,010
------------ ------------
Net investment properties..................... 14,651,883 15,019,566
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 8,514,191 8,571,225
Deferred loan fees (net of accumulated
amortization of $21,604 and $18,133 at
September 30, 1996 and December 31, 1995,
respectively) (Note 1)........................ 24,684 28,155
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $163,969 and $148,197 at
September 30, 1996 and December 31, 1995,
respectively) (Note 1)........................ 180,418 196,190
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 450,344 453,113
------------ ------------
Total other assets............................ 9,169,637 9,248,683
------------ ------------
Total assets...................................... $24,385,019 24,905,111
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1996 1995
---- ----
Current liabilities:
Accounts payable and accrued expenses........... $ 17,592 27,035
Accrued real estate taxes....................... 45,134 117,803
Distributions payable (Note 6).................. 192,380 199,337
Due to Affiliates (Note 4)...................... 402 9,218
Deposits held for others........................ 77,048 117,369
Current portion of long-term debt (Note 3)...... 35,934 33,410
Current portion of deferred gain on sale of
investment property (Note 5).................. 20,799 20,799
------------ ------------
Total current liabilities..................... 389,289 524,971
------------ ------------
Deferred loan fees (Note 1)....................... 71,429 77,922
Long-term debt, less current portion (Note 3)..... 1,539,321 1,566,596
Deferred gain on sale of investment property,
less current portion (Note 5)................... 2,511,286 2,526,885
------------ ------------
Total liabilities............................... 4,511,325 4,696,374
------------ ------------
Partners' capital (Notes 1 and 6):
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......................... 12,095,016 10,673,002
Cumulative distributions...................... (20,634,524) (18,877,467)
------------ ------------
19,909,937 20,244,980
------------ ------------
Total Partners' capital....................... 19,873,694 20,208,737
------------ ------------
Total liabilities and Partners' capital........... $24,385,019 24,905,111
============ ============
See accompanying notes to financial statements.
-3-
INLAND'S MONTHLY INCOME FUND, L.P.
(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:
Rental income (Notes 1 and 2).... $ 486,125 509,155 1,468,626 1,675,806
Additional rental income......... 2,975 9,855 34,549 50,820
Interest income.................. 188,197 202,028 576,016 499,222
Other income..................... - 73 - 37,103
---------- ---------- --------- ----------
677,297 721,111 2,079,191 2,262,951
---------- ---------- --------- ----------
Expenses:
Professional services to
Affiliates..................... 2,710 6,387 9,391 19,519
Professional services to
non-affiliates................. - - 27,305 27,350
General and administrative
expenses to Affiliates......... 8,911 9,819 26,381 29,017
General and administrative
expenses to non-affiliates..... 2,453 2,615 20,952 16,961
Property operating expenses to
Affiliates..................... 7,083 7,539 21,992 31,748
Property operating expenses to
non-affiliates................. (36,926) (16,496) 41,153 283,184
Interest expense to
non-affiliates................. 38,466 39,254 116,006 118,315
Depreciation..................... 130,117 130,118 390,353 421,175
Amortization..................... 6,414 6,415 19,243 19,732
---------- ---------- --------- ----------
159,228 185,651 672,776 967,001
---------- ---------- --------- ----------
Operating income................. 518,069 535,460 1,406,415 1,295,950
Gain on sale of investment
property....................... 5,200 13,578 15,599 168,216
---------- ---------- --------- ----------
Net income................... $ 523,269 549,038 1,422,014 1,464,166
========== ========== ========= ==========
Net income allocated to:
General Partner.................. - - - -
Limited Partners................. 523,269 549,038 1,422,014 1,464,166
---------- ---------- --------- ----------
Net income..................... $ 523,269 549,038 1,422,014 1,464,166
========== ========== ========= ==========
Net income per weighted average
Limited Partner Unit of 59,286... $ 8.83 9.26 23.99 24.70
========== ========== ========= ==========
See accompanying notes to financial statements.
-4-
INLAND'S MONTHLY INCOME FUND, L.P.
(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...................................... $ 1,422,014 1,464,166
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (15,599) (168,216)
Depreciation.................................. 390,353 421,175
Amortization.................................. 19,243 19,732
Deferred rent receivable...................... (2,854) (26,099)
Changes in assets and liabilities:
Accounts and rents receivable............... (3,561) (11,666)
Mortgage interest receivable................ (4,763) (33,783)
Other current assets........................ (2,800) (6,893)
Accounts payable and accrued expenses....... (9,443) (59,924)
Accrued real estate taxes................... (72,669) (16,109)
Due to Affiliates........................... (8,816) 2,485
Other current liabilities................... - (5,118)
Deferred loan fees.......................... (6,493) 27,476
------------ ------------
Net cash provided by operating activities......... 1,704,612 1,607,226
------------ ------------
Cash flows from investing activities:
Proceeds from sale of investment property....... - 409,383
Principal payments received on mortgage
loans receivable.............................. 51,847 36,153
Capital expenditures............................ (22,670) (14,509)
------------ ------------
Net cash provided by investing activities......... 29,177 431,027
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (1,764,014) (1,780,199)
Deposits held for others........................ (40,321) (37,058)
Principal payments of long-term debt............ (24,751) (22,460)
------------ ------------
Net cash used in financing activities............. (1,829,086) (1,839,717)
------------ ------------
Net increase (decrease) in cash and cash
equivalents..................................... (95,297) 198,536
Cash and cash equivalents at beginning of period.. 440,767 783,288
------------ ------------
Cash and cash equivalents at end of period........ $ 345,470 981,824
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the nine months ended September 30, 1996 and 1995
(unaudited)
1996 1995
---- ----
Supplemental disclosure of non-cash investing activities:
Cash paid for interest.......................... $ 116,207 118,497
============ ============
Sale of investment property:
Mortgage loans receivable....................... - (3,789,704)
Reduction of investment in property............. - 3,683,157
Reduction of accumulated depreciation related
to investment property sold................... - (812,990)
Gain on sale.................................... - 168,216
Deferred gain on sale........................... - 1,160,704
------------ ------------
Proceeds from sale of investment property..... $ - 409,383
============ ============
See accompanying notes to financial statements.
-6-
INLAND'S MONTHLY INCOME FUND, L.P.
(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'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
September 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-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
Years
-----
Buildings and improvements................ 30 to 40
Furniture and fixtures.................... 5 to 12
Tenant improvements....................... lease term
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 in 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 September 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 September
30, 1996 approximates carrying value.
-8-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 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 September 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 $2,854 and $26,099 for
1996 and 1995, respectively, of rental income for the period of occupancy for
which stepped rent increases apply and $462,846 and $459,992 in related
accounts receivable as of September 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-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 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 $402 and $9,218 remained unpaid at September 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 $21,992 and $31,748 for the nine months ended
September 30, 1996 and 1995, respectively, all of which has been paid.
(5) Sale of Schaumburg Terrace Apartment Complex, Schaumburg, Illinois
As of December 31, 1995, the Partnership sold the thirty-eight six-unit
buildings comprising the Schaumburg Terrace apartment complex to unaffiliated
third parties through a condominium sales program. The Partnership provided
financing to the purchasers of thirty-seven of the thirty-eight buildings
totaling $8,701,439. The principal balances of the thirty-seven loans range
from $210,640 to $255,891 and require monthly principal and interest payments
of $67,763 with an interest rate of 8.625% per annum for ten years (based on a
thirty year amortization). Deferred gain will be recognized over the life of
the related mortgage loans as principal payments are received. As of September
30, 1996, the balance of the deferred gain was $2,532,085.
(6) Subsequent Events
During October 1996, the Partnership paid a distribution of $192,380 to the
Limited Partners.
-10-
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 September 30, 1996, the Partnership had cash and cash equivalents of
$345,470. 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 September 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 and other income, property operating expenses to Affiliates and
non-affiliates and depreciation decreased for the three and nine months ended
September 30, 1996, as compared to the three and nine months ended September
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 at McHenry Plaza for the
three and nine months ended September 30, 1996, as compared to the three and
nine months ended September 30, 1995, due to tenants representing 24% of the
center vacating their spaces.
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 decreases in accounting and legal services required
by the Partnership.
General and administrative expenses 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 decreases in postage, data processing,
investor services and mortgage servicing fees. General and administrative
expenses to non-affiliates increased for the nine months ended September 30,
1996, as compared to the nine months ended September 30, 1995, due to an
increase in the Illinois Replacement Tax owed by the Partnership in 1996.
-11-
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:
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
McHenry Plaza 84% 84% 86% 86% 62% 62% 62%
McHenry, Illinois
Douglas Living &
Retirement Center 100% 100% 100% 100% 100% 100% 100%
Mattoon, Illinois
Hillside Living Center 100% 100% 100% 100% 100% 100% 100%
Yorkville, Illinois
Scandinavian Health Spa 100% 100% 100% 100% 100% 100% 100%
Westlake, Ohio
Schaumburg Terrace 86%* 100%* N/A N/A N/A N/A N/A
Schaumburg, Illinois
Rantoul Wal-Mart 100% 100% 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 100% 100% 100% 100% 100% 100% 100%
Duncan, Oklahoma
* Represents occupancy of the remaining condominium units owned by the
Partnership at the end of the quarter.
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
-12-
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: November 13, 1996
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: November 13, 1996
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1996
-13-
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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<OTHER-SE> 19873694
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