UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-16790
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 60523
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 630-218-8000
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
-1-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 197,689 357,749
Accounts and rents receivable................... 44,955 69,819
Mortgage interest receivable.................... 69,950 70,259
Current portion of mortgage loans receivable.... 81,165 77,430
Current portion of deferred rent receivable..... 12,503 12,503
Other assets.................................... 6,816 4,013
------------ ------------
Total current assets.......................... 413,078 591,773
------------ ------------
Investment properties (including acquisition fees
paid to Affiliates of $1,738,621) (Note 1):
Land............................................ 2,697,394 2,697,394
Buildings and improvements...................... 15,619,180 15,592,680
Tenant improvements............................. 749,447 749,447
------------ ------------
19,066,021 19,039,521
Less accumulated depreciation................... 4,756,461 4,496,365
------------ ------------
Net investment properties..................... 14,309,560 14,543,156
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 8,216,831 8,494,670
Mortgage loans in substantive foreclosure
(Note 4)....................................... 236,530 -
Deferred loan fees (net of accumulated
amortization of $25,076 and $22,761 at
June 30, 1997 and December 31, 1996,
respectively) (Note 1)........................ 21,212 23,527
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $179,742 and $169,227 at
June 30, 1997 and December 31, 1996,
respectively) (Note 1)........................ 164,645 175,160
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 431,008 448,027
------------ ------------
Total other assets............................ 9,070,226 9,141,384
------------ ------------
Total assets...................................... $23,792,864 24,276,313
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1997 1996
Current liabilities: ---- ----
Accounts payable and accrued expenses........... $ 22,657 22,211
Accrued real estate taxes....................... 59,031 59,114
Distributions payable (Note 5).................. 192,411 198,790
Due to Affiliates (Note 3)...................... 358 2,752
Deposits held for others........................ 95,227 99,250
Current portion of long-term debt............... 38,649 36,817
Current portion of deferred gain on sale of
investment property........................... 22,666 20,799
------------ ------------
Total current liabilities..................... 430,999 439,733
Deferred loan fees (Note 1)....................... 64,935 69,264
Long-term debt, less current portion.............. 1,509,986 1,529,779
Deferred gain on sale of investment property,
less current portion............................ 2,492,886 2,506,086
------------ ------------
Total liabilities............................... 4,498,806 4,544,862
------------ ------------
Partners' capital (Notes 1 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......................... 13,341,936 12,542,734
Cumulative distributions...................... (22,461,080) (21,224,485)
------------ ------------
19,330,301 19,767,694
------------ ------------
Total Partners' capital....................... 19,294,058 19,731,451
------------ ------------
Total liabilities and Partners' capital........... $23,792,864 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 and six months ended June 30, 1997 and 1996
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
Income: ---- ---- ---- ----
Rental income (Notes 1 and 2).... $ 489,367 492,191 964,543 982,501
Additional rental income......... 6,618 11,947 17,515 31,574
Interest income.................. 187,536 192,335 376,748 384,280
Other income..................... - 3,539 1,325 3,539
---------- ---------- --------- ---------
683,521 700,012 1,360,131 1,401,894
Expenses: ---------- ---------- --------- ---------
Professional services to
Affiliates..................... 3,070 3,090 6,806 6,681
Professional services to
non-affiliates................. 7,309 (1,545) 32,924 27,305
General and administrative
expenses to Affiliates......... 6,045 5,642 17,617 17,470
General and administrative
expenses to non-affiliates..... 3,846 4,934 20,505 18,499
Property operating expenses to
Affiliates..................... 7,840 7,542 15,944 14,909
Property operating expenses to
non-affiliates................. 47,942 32,256 129,675 78,079
Interest expense to
non-affiliates................. 37,823 38,670 75,865 77,540
Depreciation..................... 130,048 130,118 260,096 260,236
Amortization..................... 6,416 6,414 12,830 12,829
---------- ---------- --------- ---------
250,339 227,121 572,262 513,548
---------- ---------- --------- ---------
Operating income................. 433,182 472,891 787,869 888,346
Gain on sale of investment
property....................... 5,667 5,199 11,333 10,399
---------- ---------- --------- ---------
Net income......................... $ 438,849 478,090 799,202 898,745
========== ========== ========= =========
Net income allocated to:
General Partner.................. - - - -
Limited Partners................. 438,849 478,090 799,202 898,745
---------- ---------- --------- ---------
Net income......................... $ 438,849 478,090 799,202 898,745
========== ========== ========= =========
Net income per weighted average
Limited Partner Units of
59,285.65........................ $ 7.40 8.06 13.48 15.16
========== ========== ========= =========
See accompanying notes to financial statements.
-4-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 799,202 898,745
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (11,333) (10,399)
Depreciation.................................. 260,096 260,236
Amortization.................................. 12,830 12,829
Changes in assets and liabilities:
Accounts and rents receivable............... 24,864 (15,059)
Mortgage interest receivable................ 309 (1,474)
Other current assets........................ (2,803) 3,550
Deferred rent receivable.................... 17,019 (2,667)
Accounts payable and accrued expenses....... 446 (12,959)
Accrued real estate taxes................... (83) 1,523
Due to Affiliates........................... (2,394) (6,633)
Deferred loan fees.......................... (4,329) (4,329)
------------ ------------
Net cash provided by operating activities......... 1,093,824 1,123,363
------------ ------------
Cash flows from investing activities:
Capital expenditures............................ (26,500) -
Principal payments received on mortgage
loans receivable.............................. 37,574 34,355
------------ ------------
Net cash provided by investing activities......... 11,074 34,355
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (1,242,974) (1,174,054)
Deposits held for others........................ (4,023) (9,545)
Principal payments of long-term debt............ (17,961) (16,300)
------------ ------------
Net cash used in financing activities............. (1,264,958) (1,199,899)
------------ ------------
Net decrease in cash and cash equivalents......... (160,060) (42,181)
Cash and cash equivalents at beginning of period.. 357,749 440,767
------------ ------------
Cash and cash equivalents at end of period........ $ 197,689 398,586
============ ============
Supplemental disclosure of non-cash investing activities:
Cash paid for interest.......................... $ 76,010 77,672
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
June 30, 1997
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1996, which are
included in the Partnership's 1996 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such audited
financial statements have been omitted from this Report.
(1) Organization and Basis of Accounting
Inland'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)
June 30, 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 $17,019 and an increase of $2,667
for 1997 and 1996, respectively, of rental income for the period of occupancy
for which stepped rent increases apply and $443,511 and $460,530 in related
deferred rent receivable as of June 30, 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 six months ended June 30,
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)
June 30, 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 $358 and $2,752 was unpaid at June 30, 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 and
paid property management fees of $15,944 and $14,909 for the six months ended
June 30, 1997 and 1996, respectively.
(4) Mortgage Loans in Substantive Foreclosure
As of June 27, 1997, the Partnership became mortgagee-in-possession of one of
the thirty-seven mortgage loans receivable totaling $236,530 which represents
approximately 3% of the total mortgage loans receivable. The property is one
of the thirty-eight six-unit condominium buildings comprising the Schaumburg
Terrace condominium complex which were sold during 1994 and 1995. The
Partnership has begun foreclosure proceedings to gain title to the property at
which time it will be marketed for resale.
(5) Subsequent Events
During July 1997, the Partnership paid a distribution of $192,411 to the
Limited Partners.
As of July 1, 1997, the Partnership became mortgagee-in-possession of another
of the thirty-seven mortgage loans receivable totaling $235,977 which
represents approximately 3% of the total mortgage loans receivable. This
property is also one of the thirty-eight six-unit condominium buildings
comprising the Schaumburg Terrace condominium complex which were sold during
1994 and 1995. The Partnership has begun foreclosure proceedings to gain title
to the property at which time it will be marketed for resale.
-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 June 30, 1997, the Partnership had cash and cash equivalents of $197,689.
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 sufficient cash
flow to meet 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 June 30, 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 and
six months ended June 30, 1997, as compared to the three and six months ended
June 30, 1996, due to the write off of deferred rent receivable relating to a
lease modification and changes in occupancy at McHenry Plaza Shopping Center.
Although two spaces totaling 5,490 square feet vacated during the six months
ended June 30, 1997, two spaces totaling 2,452 square feet were rented and
occupied during that same time.
-9-
Interest income decreased for the three and six months ended June 30, 1997, as
compared to the three and six months ended June 30, 1996, due to a decrease in
cash available to be used for short-term investments.
Professional services to non-affiliates increased for the three and six months
ended June 30, 1997, as compared to the three and six months ended June 30,
1996, due to an increase in outside legal services relating to the Schaumburg
Terrace mortgage loan receivable default by one of the purchasers of the six-
unit condominium buildings.
General and administrative expenses to Affiliates increased for the three and
six months ended June 30, 1997, as compared to the three and six months ended
June 30, 1996, due to increases in mortgage servicing fees and postage. This
increase was partially offset by decreases in data processing and investor
services expenses. General and administrative expenses to non-affiliates
increased for the six months ended June 30, 1997, as compared to the six months
ended June 30, 1996, due to increases in supplies and printing expenses.
Property operating expenses to non-affiliates increased for the three and six
months ended June 30, 1997, as compared to the three and six months ended June
30, 1996, due to the increase in various expense items, such as utilities,
supplies, insurance and repair and maintenance, relating to vacant and
retenanted spaces at McHenry Plaza Shopping Center.
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 13/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
McHenry Plaza 62% 62% 62% 69% 72% 68%
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
Rantoul Wal-Mart 100% 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 100% 100% 100% 100% 100% 100%
Duncan, Oklahoma
-10-
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
-11-
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 11, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 11, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: August 11, 1997
-12-
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 197689
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