<PAGE>
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, 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: 708-218-8000
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-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
March 31, 1996 and December 31, 1995
(unaudited)
Assets
------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1).............. $ 467,694 440,767
Accounts and rents receivable................... 64,313 53,005
Mortgage interest receivable.................... 63,718 62,115
Current portion of mortgage loans receivable.... 72,234 70,546
Current portion of deferred rent receivable..... 12,500 6,879
Other assets.................................... 1,493 3,550
----------- ----------
Total current assets.......................... 681,952 636,862
----------- ----------
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................... 4,108,128 3,978,010
----------- ----------
Net investment properties..................... 14,889,448 15,019,566
----------- ----------
Other assets:
Mortgage loans receivable, less current portion. 8,552,620 8,571,225
Deferred loan fees (net of accumulated
amortization of $19,289 and $18,133 at
March 31, 1996 and December 31, 1995,
respectively) (Note 1)........................ 26,998 28,155
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $153,455 and $148,197 at
March 31, 1996 and December 31, 1995,
respectively) (Note 1)........................ 190,932 196,190
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 448,557 453,113
----------- ----------
Total other assets............................ 9,219,107 9,248,683
----------- ----------
Total assets...................................... $24,790,507 24,905,111
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital
---------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses........... $ 51,745 27,035
Accrued real estate taxes....................... 132,293 117,803
Distributions payable (Note 5).................. 198,790 199,337
Due to Affiliates (Note 4)...................... 17,697 9,218
Deposits held for others........................ 133,942 117,369
Current portion of long-term debt (Note 3)...... 34,231 33,410
Current portion of deferred gain on sale of
investment property........................... 21,266 20,799
----------- ----------
Total current liabilities..................... 589,964 524,971
----------- ----------
Deferred loan fees (Note 1)....................... 75,758 77,922
Long-term debt, less current portion (Note 3)..... 1,557,724 1,566,596
Deferred gain on sale of investment property,
less current portion............................ 2,521,218 2,526,885
----------- ----------
Total liabilities............................... 4,744,664 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......................... 11,093,657 10,673,002
Cumulative distributions...................... (19,461,016) (18,877,467)
----------- ----------
20,082,086 20,244,980
----------- ----------
Total Partners' capital....................... 20,045,843 20,208,737
----------- ----------
Total liabilities and Partners' capital........... $24,790,507 24,905,111
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income:
Rental income (Notes 1 and 2)................... $ 490,310 616,935
Additional rental income........................ 19,627 27,864
Interest income................................. 191,945 123,921
Other income.................................... - 21,859
----------- ----------
701,882 790,579
----------- ----------
Expenses:
Professional services to Affiliates............. 3,591 7,610
Professional services to non-affiliates......... 28,850 27,350
General and administrative expenses to
Affiliates.................................... 11,828 10,698
General and administrative expenses to
non-affiliates................................ 13,565 9,832
Property operating expenses to Affiliates....... 7,367 13,277
Property operating expenses to non-affiliates... 45,823 187,662
Interest expense to non-affiliates.............. 38,870 39,621
Depreciation.................................... 130,118 152,721
Amortization.................................... 6,415 6,708
----------- ----------
286,427 455,479
----------- ----------
Operating income.................................. 415,455 335,100
Gain on sale of investment property............... 5,200 38,091
----------- ----------
Net income...................................... $ 420,655 373,191
=========== ==========
Net income allocated to:
General Partner................................. - -
Limited Partners................................ 420,655 373,191
----------- ----------
Net income...................................... $ 420,655 373,191
=========== ==========
Net income allocated to the one
General Partner Unit............................ $ - -
=========== ==========
Net income allocated to Limited Partners per
weighted average of Limited Partnership Units
of 59,286....................................... $ 7.10 6.29
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 420,655 373,191
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (5,200) (38,091)
Depreciation.................................. 130,118 152,721
Amortization.................................. 6,415 6,708
Changes in assets and liabilities:
Accounts and rents receivable............... (11,308) (17,850)
Mortgage interest receivable................ (1,603) (6,809)
Other current assets........................ 2,057 (5,257)
Deferred rent receivable.................... (1,065) (10,582)
Accounts payable and accrued expenses....... 24,710 (26,034)
Accrued real estate taxes................... 14,490 55,580
Due to Affiliates........................... 8,479 14,684
Other current liabilities................... - 755
Deferred loan fees.......................... (2,164) 17,433
----------- ----------
Net cash provided by operating activities......... 585,584 516,449
----------- ----------
Cash flows from investing activities:
Proceeds from sale of investment property....... - 87,609
Principal payments received on mortgage
loans receivable.............................. 16,917 8,765
Capital expenditures............................ - (4,636)
----------- ----------
Net cash provided by investing activities......... 16,917 91,738
----------- ----------
Cash flows from financing activities:
Cash distributions.............................. (584,096) (584,734)
Deposits held for others........................ 16,573 19,772
Principal payments of long-term debt............ (8,051) (7,306)
----------- ----------
Net cash used in financing activities............. (575,574) (572,268)
----------- ----------
Net increase in cash and cash equivalents......... 26,927 35,919
Cash and cash equivalents at beginning of period.. 440,767 783,288
----------- ----------
Cash and cash equivalents at end of period........ $ 467,694 819,207
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the three months ended March 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash paid for interest............................ $ 38,935 39,796
=========== ===========
Supplemental disclosure of non-cash investing activities:
Sale of investment property:
Mortgage loans receivable....................... - (964,872)
Reduction of investment in property............. - 918,223
Reduction of accumulated depreciation related
to investment property sold................... - (199,652)
Gain on sale.................................... - 35,505
Deferred gain on sale........................... - 298,405
----------- -----------
Proceeds from sale of investment property..... $ - 87,609
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 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 March 31,
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>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 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 March 31, 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 March 31,
1996 approximates carrying value.
-8-
<PAGE>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 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 March 31, 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 $1,065 and $10,582 for
1996 and 1995, respectively, of rental income for the period of occupancy for
which stepped rent increases apply and $461,057 and $459,992 in related
accounts receivable as of March 31, 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>
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 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 $17,697 and $9,218 remained unpaid at March 31, 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 $7,367 and $13,277 for the three months ended March 31, 1996
and 1995, respectively, all of which has been paid.
(5) Subsequent Events
During April 1996, the Partnership paid a distribution of $198,790 to the
Limited Partners.
-10-
<PAGE>
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 March 31, 1996, the Partnership had cash and cash equivalents of $467,694.
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 March 31, 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 months ended
March 31, 1996, as compared to the three months ended March 31, 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
months ended March 31, 1996, as compared to the three months ended March 31,
1995, due to tenants representing 24% of the center vacating their spaces.
Professional services to Affiliates decreased for the three months ended March
31, 1996, as compared to the three months ended March 31, 1995, due to
decreases in accounting and legal services to required by the Partnership.
General and administrative expenses to Affiliates increased for the three
months ended March 31, 1996, as compared to the three months ended March 31,
1995, primarily due to an increase in postage. General and administrative
expenses to non-affiliates increased for the three months ended March 31, 1996,
as compared to the three months ended March 31, 1995, due to an increase in the
Illinois Replacement Tax owed by the Partnership in 1996.
-11-
<PAGE>
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 months ended March 31, 1996, as compared to the three months
ended March 31, 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> <C> <C>
McHenry Plaza 84% 84% 86% 86% 62%
McHenry, Illinois
Douglas Living &
Retirement Center 100% 100% 100% 100% 100%
Mattoon, Illinois
Hillside Living Center 100% 100% 100% 100% 100%
Yorkville, Illinois
Scandinavian Health Spa 100% 100% 100% 100% 100%
Westlake, Ohio
Schaumburg Terrace 86%* 100%* N/A N/A N/A
Schaumburg, Illinois
Rantoul Wal-Mart 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 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>
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: May 13, 1996
/S/ CYNTHIA M. HASSETT
By: Cynthia M. Hassett
Principal Financial Officer and
Principal Accounting Officer
Date: May 13, 1996
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 467,694
<SECURITIES> 0
<RECEIVABLES> 214,258
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 681,952
<PP&E> 18,997,576
<DEPRECIATION> 4,108,128
<TOTAL-ASSETS> 24,790,507
<CURRENT-LIABILITIES> 589,964
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 20,045,843
<TOTAL-LIABILITY-AND-EQUITY> 24,790,507
<SALES> 5,200
<TOTAL-REVENUES> 701,882
<CGS> 0
<TOTAL-COSTS> 53,190
<OTHER-EXPENSES> 64,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,870
<INCOME-PRETAX> 420,655
<INCOME-TAX> 0
<INCOME-CONTINUING> 420,655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420,655
<EPS-PRIMARY> 7.10
<EPS-DILUTED> 7.10
</TABLE>
