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, 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
September 30, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 240,237 357,749
Accounts and rents receivable................... 41,494 69,819
Mortgage interest receivable.................... 73,382 70,259
Current portion of mortgage loans receivable.... 83,281 77,430
Current portion of deferred rent receivable..... 11,222 12,503
Other assets.................................... 10,363 4,013
------------ ------------
Total current assets.......................... 459,979 591,773
------------ ------------
Investment properties (including acquisition fees
paid to Affiliates of $1,736,163 and
$1,738,621 at September 30, 1997 and December
31, 1996, respectively) (Note 1):
Land............................................ 2,672,620 2,697,394
Buildings and improvements...................... 15,619,180 15,592,680
Tenant improvements............................. 749,447 749,447
------------ ------------
19,041,247 19,039,521
Less accumulated depreciation................... 4,886,508 4,496,365
------------ ------------
Net investment properties..................... 14,154,739 14,543,156
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 7,959,690 8,494,670
Mortgage loans in substantive foreclosure
(Note 4)....................................... 472,507 -
Deferred loan fees (net of accumulated
amortization of $26,233 and $22,761 at
September 30, 1997 and December 31, 1996,
respectively) (Note 1)........................ 20,055 23,527
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $184,999 and $169,227 at
September 30, 1997 and December 31, 1996,
respectively) (Note 1)........................ 159,388 175,160
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 435,016 448,027
------------ ------------
Total other assets............................ 9,046,656 9,141,384
------------ ------------
Total assets...................................... $23,661,374 24,276,313
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1997 1996
Current liabilities: ---- ----
Accounts payable and accrued expenses........... $ 18,122 22,211
Accrued real estate taxes....................... 45,644 59,114
Distributions payable (Note 5).................. 192,411 198,790
Due to Affiliates (Note 3)...................... 12,402 2,752
Deposits held for others........................ 74,243 99,250
Current portion of long-term debt............... 39,599 36,817
Current portion of deferred gain on sale of
investment property........................... 22,666 20,799
------------ ------------
Total current liabilities..................... 405,087 439,733
Deferred loan fees (Note 1)....................... 62,771 69,264
Long-term debt, less current portion.............. 1,499,721 1,529,779
Deferred gain on sale of investment property,
less current portion............................ 2,487,220 2,506,086
------------ ------------
Total liabilities............................... 4,454,799 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......................... 13,844,511 12,542,734
Cumulative distributions...................... (23,051,138) (21,224,485)
------------ ------------
19,242,818 19,767,694
------------ ------------
Total Partners' capital....................... 19,206,575 19,731,451
------------ ------------
Total liabilities and Partners' capital........... $23,661,374 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 nine months ended September 30, 1997 and 1996
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
Income: ---- ---- ---- ----
Rental income (Notes 1 and 2).... $ 506,877 486,125 1,471,420 1,468,626
Additional rental income......... 16,225 2,975 33,740 34,549
Interest income.................. 186,985 188,197 563,733 576,016
Other income..................... - - 1,325 -
---------- ---------- ---------- ----------
710,087 677,297 2,070,218 2,079,191
Expenses: ---------- ---------- ---------- ----------
Professional services to
Affiliates..................... 3,500 2,710 10,306 9,391
Professional services to
non-affiliates................. (4,409) - 28,515 27,305
General and administrative
expenses to Affiliates......... 9,539 8,911 27,156 26,381
General and administrative
expenses to non-affiliates..... 1,394 2,453 21,899 20,952
Property operating expenses to
Affiliates..................... 8,389 7,083 24,333 21,992
Property operating expenses to
non-affiliates................. 35,513 (36,926) 165,188 41,153
Interest expense to
non-affiliates................. 37,596 38,466 113,461 116,006
Depreciation..................... 130,047 130,117 390,143 390,353
Amortization..................... 6,414 6,414 19,244 19,243
---------- ---------- ---------- ----------
227,983 159,228 800,245 672,776
---------- ---------- ---------- ----------
Operating income................... 482,104 518,069 1,269,973 1,406,415
Gain on sale of investment
property......................... 20,471 5,200 31,804 15,599
---------- ---------- ---------- ----------
Net income......................... $ 502,575 523,269 1,301,777 1,422,014
========== ========== ========= ==========
Net income allocated to:
General Partner.................. - - - -
Limited Partners................. 502,575 523,269 1,301,777 1,422,014
---------- ---------- ---------- ----------
Net income......................... $ 502,575 523,269 1,301,777 1,422,014
========== ========== ========= ==========
Net income per weighted average
Limited Partner Units of 59,286.. $ 8.48 8.83 21.96 23.99
========== ========== ========= ==========
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, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 1,301,777 1,422,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (31,804) (15,599)
Depreciation.................................. 390,143 390,353
Amortization.................................. 19,244 19,243
Changes in assets and liabilities:
Accounts and rents receivable............... 28,325 (3,561)
Mortgage interest receivable................ (3,123) (4,763)
Other current assets........................ (6,350) (2,800)
Deferred rent receivable.................... 14,292 (2,854)
Accounts payable and accrued expenses....... (4,089) (9,443)
Accrued real estate taxes................... (13,470) (72,669)
Due to Affiliates........................... 9,650 (8,816)
Deferred loan fees.......................... (6,493) (6,493)
------------ ------------
Net cash provided by operating activities......... 1,698,102 1,704,612
------------ ------------
Cash flows from investing activities:
Proceeds from sale of investment property....... 39,579 -
Principal payments received on mortgage
loans receivable.............................. 56,622 51,847
Capital expenditures............................ (26,500) (22,670)
------------ ------------
Net cash provided by investing activities......... 69,701 29,177
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (1,833,032) (1,764,014)
Deposits held for others........................ (25,007) (40,321)
Principal payments of long-term debt............ (27,276) (24,751)
------------ ------------
Net cash used in financing activities............. (1,885,315) (1,829,086)
------------ ------------
Net decrease in cash and cash equivalents......... (117,512) (95,297)
Cash and cash equivalents at beginning of period.. 357,749 440,767
------------ ------------
Cash and cash equivalents at end of period........ $ 240,237 345,470
============ ============
Supplemental disclosure of non-cash investing activities:
Cash paid for interest.......................... $ 113,683 116,207
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
September 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.
Statement of Financial Accounting Standards No. 121 ("SFAS 121") requires the
Partnership to 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. As of September 30, 1997, the
Partnership has not recognized any such impairment.
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)
September 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 $14,292 and an increase of $2,854
for 1997 and 1996, respectively, of rental income for the period of occupancy
for which stepped rent increases apply and $446,238 and $460,530 in related
deferred rent receivable as of September 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 nine months ended
September 30, 1997, due to the restructuring of a lease at McHenry Plaza
Shopping Center.
-7-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 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 $12,402 and $2,752 was unpaid at September 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 $24,333 and $21,992 for the nine months ended
September 30, 1997 and 1996, respectively.
(4) Mortgage Loans in Substantive Foreclosure
On June 27, 1997 and July 1, 1997, the Partnership became mortgagee-in-
possession of two of the thirty-seven mortgage loans receivable totaling
$236,530 and $235,977, respectively, representing approximately 6% of the total
mortgage loans receivable. The properties are two 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 properties at which time they will be marketed
for sale.
(5) Subsequent Events
During October 1997, the Partnership paid a distribution of $192,411 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 September 30, 1997, the Partnership had cash and cash equivalents of
$240,237. 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 September 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.
-9-
Rental and additional income increased for the three months ended September 30,
1997, as compared to the three months ended September 30, 1996, due to an
increase in occupancy at McHenry Plaza. As of September 30, 1997, there were
two vacant spaces at McHenry Plaza for 6,030 square feet.
Interest income decreased for the three and nine months ended September 30,
1997, as compared to the three and nine months ended September 30, 1996, due to
a decrease in cash available to be used for short-term investments.
Professional services to Affiliates increased for the three and nine months
ended September 30, 1997, as compared to the three and nine months ended
September 30, 1996, due to an increase in accounting services required by the
Partnership. Professional services to non-affiliates increased for the nine
months ended September 30, 1997, as compared to the nine months ended September
30, 1996, due to an increase in accounting fees.
General and administrative expenses to Affiliates increased for the three and
nine months ended September 30, 1997, as compared to the three and nine months
ended September 30, 1996, due to an increase in 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 three and nine months ended September 30, 1997, as compared to the three
and nine months ended September 30, 1996, due to increases in supplies and
printing expenses.
Property operating expenses to Affiliates increased for the three and nine
months ended September 30, 1997, as compared to the three and nine months ended
September 30, 1996, due to improved occupancy and an increase in net rent
collections at McHenry Plaza resulting in higher management fees paid.
Property operating expenses to non-affiliates increased for the three and nine
months ended September 30, 1997, as compared to the three and nine months ended
September 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. Also, in 1996, real
estate tax reductions relating to prior years for the Schaumburg Terrace
Apartment complex were received and recorded as a reduction in property
operating expenses to non-affiliates for the three and nine months ended
September 30, 1996, producing an abnormal and non-recurring variance between
1996 and 1997 and makes the comparison illogical.
The gain on the sale of investment property recorded for the three and nine
months ended September 30, 1997 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
and the sale of .344 acre of land adjacent to the Hillside Living Center.
-10-
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% 68% 89%
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
Rantoul Wal-Mart 100% 100% 100% 100% 100% 100% 100%
Rantoul, Illinois
Duncan Wal-Mart 100% 100% 100% 100% 100% 100% 100%
Duncan, Oklahoma
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: November 12, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: November 12, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 12, 1997
-12-
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