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, 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 #0-16790
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
March 31, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 390,087 357,749
Accounts and rents receivable................... 62,641 69,819
Mortgage interest receivable.................... 63,291 70,259
Current portion of mortgage loans receivable.... 78,757 77,430
Current portion of deferred rent receivable..... 12,503 12,503
Other assets.................................... 1,727 4,013
------------ ------------
Total current assets.......................... 609,006 591,773
------------ ------------
Investment properties (including acquisition
fees paid to Affiliates of $1,738,621)
(Notes 1 and 3):
Land............................................ 2,697,394 2,697,394
Buildings and improvements...................... 15,592,680 15,592,680
Tenant improvements............................. 749,447 749,447
------------ ------------
19,039,521 19,039,521
Less accumulated depreciation................... 4,626,413 4,496,365
------------ ------------
Net investment properties..................... 14,413,108 14,543,156
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 8,474,075 8,494,670
Deferred loan fees (net of accumulated
amortization of $23,918 and $22,761 at
March 31, 1997 and December 31, 1996,
respectively) (Note 1)........................ 22,370 23,527
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $174,484 and $169,227 at
March 31, 1997 and December 31, 1996,
respectively) (Note 1)........................ 169,903 175,160
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 429,826 448,027
------------ ------------
Total other assets............................ 9,096,174 9,141,384
------------ ------------
Total assets...................................... $24,118,288 24,276,313
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1997 1996
Current liabilities: ---- ----
Accounts payable and accrued expenses........... $ 43,667 22,211
Accrued real estate taxes....................... 74,553 59,114
Distributions payable (Note 4).................. 198,824 198,790
Due to Affiliates (Note 3)...................... 20,157 2,752
Deposits held for others........................ 127,156 99,250
Current portion of long-term debt............... 37,722 36,817
Current portion of deferred gain on sale of
investment property........................... 22,666 20,799
------------ ------------
Total current liabilities..................... 524,745 439,733
Unearned income (Note 1).......................... 136,134 69,264
Long-term debt, less current portion.............. 1,520,002 1,529,779
Deferred gain on sale of investment property,
less current portion............................ 2,498,553 2,506,086
------------ ------------
Total liabilities............................... 4,679,434 4,544,862
------------ ------------
Partners' capital (Notes 1, 3 and 4):
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......................... 12,903,087 12,542,734
Cumulative distributions...................... (21,877,435) (21,224,485)
------------ ------------
19,475,097 19,767,694
------------ ------------
Total Partners' capital....................... 19,438,854 19,731,451
------------ ------------
Total liabilities and Partners' capital........... $24,118,288 24,276,313
============ ============
See accompanying notes to financial statements.
-3-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
Income: ---- ----
Rental income (Notes 1 and 2)................... $ 475,176 490,310
Additional rental income........................ 10,897 19,627
Interest income................................. 189,212 191,945
Other income.................................... 1,325 -
------------ ------------
676,610 701,882
------------ ------------
Expenses:
Professional services to Affiliates............. 3,736 3,591
Professional services to non-affiliates......... 25,615 28,850
General and administrative expenses to
Affiliates.................................... 11,572 11,828
General and administrative expenses to
non-affiliates................................ 16,659 13,565
Property operating expenses to Affiliates....... 8,104 7,367
Property operating expenses to non-affiliates... 81,733 45,823
Interest expense to non-affiliates.............. 38,042 38,870
Depreciation.................................... 130,048 130,118
Amortization.................................... 6,414 6,415
------------ ------------
321,923 286,427
------------ ------------
Operating income.................................. 354,687 415,455
Gain on sale of investment property............... 5,666 5,200
------------ ------------
Net income........................................ $ 360,353 420,655
============ ============
Net income allocated to:
General Partner................................. - -
Limited Partners................................ 360,353 420,655
------------ ------------
Net income........................................ $ 360,353 420,655
============ ============
Net income allocated to Limited Partners per
weighted average of Limited Partnership Units
of 59,286....................................... $ 6.08 7.10
============ ============
See accompanying notes to financial statements.
-4-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 360,353 420,655
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (5,666) (5,200)
Depreciation.................................. 130,048 130,118
Amortization.................................. 6,414 6,415
Changes in assets and liabilities:
Accounts and rents receivable............... 7,178 (11,308)
Mortgage interest receivable................ 6,968 (1,603)
Other current assets........................ 2,286 2,057
Deferred rent receivable.................... 18,201 (1,065)
Accounts payable and accrued expenses....... 21,456 24,710
Accrued real estate taxes................... 15,439 14,490
Due to Affiliates........................... 17,405 8,479
Unearned income............................. 66,870 (2,164)
------------ ------------
Net cash provided by operating activities......... 646,952 585,584
------------ ------------
Cash flows from investing activities:
Principal payments received on mortgage
loans receivable.............................. 19,268 16,917
------------ ------------
Net cash provided by investing activities......... 19,268 16,917
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (652,916) (584,096)
Deposits held for others........................ 27,906 16,573
Principal payments of long-term debt............ (8,872) (8,051)
------------ ------------
Net cash used in financing activities............. (633,882) (575,574)
------------ ------------
Net increase in cash and cash equivalents......... 32,338 26,927
Cash and cash equivalents at beginning of period.. 357,749 440,767
------------ ------------
Cash and cash equivalents at end of period........ $ 390,087 467,694
============ ============
Cash paid for interest............................ $ 38,114 38,935
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 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'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 a total of
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 adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS
121 requires that the Partnership record an impairment loss on its property to
be held for investment whenever its carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's estimated
fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.
Offering costs have been offset against the Limited Partners' capital accounts.
-6-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1997
(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 market.
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.
Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned on the straight-line basis
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.
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 on a straight-line basis. The accompanying
financial statements include a decrease of $18,201 and an increase of $1,065
for 1997 and 1996, respectively, of rental income for the period of occupancy
for which stepped rent increases apply and $442,329 and $460,530 in related
deferred rent receivable as of March 31, 1997 and December 31, 1996,
respectively. These amounts will be collected over the terms of the related
leases as scheduled rent payments are made. Deferred rent receivable of
$16,341 was written off against rental income for the three months ended March
31, 1997 due to modifications of a lease at McHenry Plaza Shopping Center.
-7-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(3) 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 and general and administrative expenses to Affiliates, of
which $17,883 and $2,752 was unpaid at March 31, 1997 and December 31, 1996,
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 $8,104 and $7,367 for the three months ended March
31, 1997 and 1996, respectively, of which $2,274 was unpaid at March 31, 1997.
(4) Subsequent Events
During April 1997, the Partnership paid a distribution of $198,824 to the
Limited Partners.
-8-
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 of "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 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 a total of 59,999 Units being sold to the public at $500 per
Unit, resulting in $29,999,500 gross offering proceeds, 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, 1997, the Partnership had cash and cash equivalents of $390,087.
The Partnership intends to use such funds for distributions and working capital
requirements.
The properties owned by the Partnership, along with the interest received on
the Schaumburg Terrace mortgage receivables, are generating cash flow in excess
of the 8% annualized distributions to the Limited Partners (paid monthly), in
addition to covering all the operating expenses of the Partnership. To the
extent that the cash flow is insufficient to meet the Partnership's 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, 1997, 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 and additional rental income decreased for the three
months ended March 31, 1997, as compared to the three months ended March 31,
1996, primarily due to the write off of deferred rent receivable relating to a
lease modification at McHenry Plaza Shopping Center.
Professional services to non-affiliates decreased for the three months ended
March 31, 1997, as compared to the three months ended March 31, 1996, due to
decreases in accounting and other professional services required by the
Partnership.
-9-
General and administrative expenses to non-affiliates increased for the three
months ended March 31, 1997, as compared to the three months ended March 31,
1996, due to increases in postage, supplies and printing expenses.
Property operating expenses to non-affiliates increased for the three months
ended March 31, 1997, as compared to the three months ended March 31, 1996, due
to the increase in utilities, insurance, real estate taxes and repair and
maintenance in regards to new tenants at McHenry Plaza.
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 1996 and 1997:
1996 1997
------------------------ ------------------------
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 62% 62% 62% 69% 72%*
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
Rantoul Wal-Mart 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 100% 100% 100% 100% 100%
Duncan, Oklahoma
* As of the date of this report, McHenry Plaza Shopping Center's approximate
occupancy level has increased to 79% from the addition of three new tenants
aggregating 4,021 square feet.
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
-10-
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 14, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 14, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 14, 1997
-11-
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