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, 1998
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, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 1,389,346 1,090,891
Accounts and rents receivable................... 66,177 37,386
Mortgage interest receivable.................... 60,625 60,734
Current portion of mortgage loans receivable.... 78,342 77,301
Current portion of deferred rent receivable..... 5,459 9,301
Other assets.................................... 414 3,092
------------ ------------
Total current assets.............................. 1,600,363 1,278,705
------------ ------------
Investment properties (including acquisition fees
paid to Affiliates of $1,738,621) (Note 1):
Land............................................ 2,672,620 2,672,620
Buildings and improvements...................... 15,592,680 15,592,680
Tenant improvements............................. 775,947 775,947
------------ ------------
19,041,247 19,041,247
Less accumulated depreciation................... 5,271,057 5,019,205
------------ ------------
Net investment properties......................... 13,770,190 14,022,042
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 7,446,693 7,709,989
Deferred loan fees (net of accumulated
amortization of $29,704 and $27,390 at
June 30, 1998 and December 31, 1997,
respectively) (Note 1)........................ 16,584 18,898
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $200,772 and $190,257 at
June 30, 1998 and December 31, 1997,
respectively) (Note 1)........................ 143,615 154,130
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 415,313 426,526
------------ ------------
Total other assets................................ 8,022,205 8,309,543
------------ ------------
Total assets...................................... $23,392,758 23,610,290
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1998 1997
Current liabilities: ---- ----
Accounts payable and accrued expenses........... $ 22,149 16,971
Accrued real estate taxes....................... 60,640 60,358
Distributions payable (Note 5).................. 192,411 198,824
Due to Affiliates (Note 3)...................... 2,296 2,011
Deposits held for others........................ 128,613 102,885
Current portion of long-term debt............... 42,590 40,572
Current portion of deferred gain on sale of
investment property........................... 20,123 20,732
------------ ------------
Total current liabilities......................... 468,822 442,353
Unearned income (Note 1).......................... 91,251 55,653
Long-term debt, less current portion.............. 1,467,394 1,489,207
Deferred gain on sale of investment property,
less current portion............................ 2,194,675 2,269,408
------------ ------------
Total liabilities................................. 4,222,142 4,256,621
------------ ------------
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......................... 15,559,485 14,581,662
Cumulative distributions...................... (24,802,071) (23,641,195)
------------ ------------
19,206,859 19,389,912
------------ ------------
Total Partners' capital........................... 19,170,616 19,353,669
------------ ------------
Total liabilities and Partners' capital........... $23,392,758 23,610,290
============ ============
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, 1998 and 1997
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
Income: ---- ---- ---- ----
Rental income (Notes 1 and 2).... $ 517,799 489,367 1,042,201 964,543
Additional rental income......... 13,126 6,618 29,283 17,515
Interest income.................. 183,361 187,536 366,078 376,748
Other income..................... 2,251 - 2,251 1,325
---------- ---------- --------- ---------
716,537 683,521 1,439,813 1,360,131
Expenses: ---------- ---------- --------- ---------
Professional services to
Affiliates..................... 3,420 3,070 6,620 6,806
Professional services to
non-affiliates................. - 7,309 29,350 32,924
General and administrative
expenses to Affiliates......... 9,219 6,045 17,929 17,617
General and administrative
expenses to non-affiliates..... 5,690 3,846 21,209 20,505
Property operating expenses to
Affiliates..................... 8,982 7,840 17,868 15,944
Property operating expenses to
non-affiliates................. 43,497 47,942 105,657 129,675
Interest expense to
non-affiliates................. 36,888 37,823 74,018 75,865
Depreciation..................... 125,926 130,048 251,852 260,096
Amortization..................... 6,415 6,416 12,829 12,830
---------- ---------- --------- ---------
240,037 250,339 537,332 572,262
---------- ---------- --------- ---------
Operating income................... 476,500 433,182 902,481 787,869
Gain on sale of investment property 70,159 5,667 75,342 11,333
---------- ---------- --------- ---------
Net income......................... $ 546,659 438,849 977,823 799,202
========== ========== ========= =========
Net income allocated to:
General Partner.................. - - - -
Limited Partners................. 546,659 438,849 977,832 799,202
---------- ---------- --------- ---------
Net income......................... $ 546,659 438,849 977,832 799,202
========== ========== ========= =========
Net income per weighted average
Limited Partner Units of
59,285.65........................ $ 9.22 7.40 16.49 13.48
========== ========== ========= =========
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, 1998 and 1997
(unaudited)
1998 1997
---- ----
Cash flows from operating activities:
Net income...................................... $ 977,823 799,202
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (75,342) (11,333)
Depreciation.................................. 251,852 260,096
Amortization.................................. 12,829 12,830
Changes in assets and liabilities:
Accounts and rents receivable............... (28,791) 24,864
Mortgage interest receivable................ 109 309
Other current assets........................ 2,678 (2,803)
Deferred rent receivable.................... 15,055 17,019
Accounts payable and accrued expenses....... 5,178 446
Accrued real estate taxes................... 282 (83)
Due to Affiliates........................... 285 (2,394)
Unearned income............................. 35,598 (4,329)
------------ ------------
Net cash provided by operating activities......... 1,197,556 1,093,824
------------ ------------
Cash flows from investing activities:
Capital expenditures............................ - (26,500)
Principal payments received on mortgage
loans receivable.............................. 262,255 37,574
------------ ------------
Net cash provided by investing activities......... 262,255 11,074
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (1,167,289) (1,242,974)
Deposits held for others........................ 25,728 (4,023)
Principal payments of long-term debt............ (19,795) (17,961)
------------ ------------
Net cash used in financing activities............. (1,161,356) (1,264,958)
Net increase (decrease) in cash and ------------ ------------
cash equivalents................................ 298,455 (160,060)
Cash and cash equivalents at beginning of period.. 1,090,891 357,749
------------ ------------
Cash and cash equivalents at end of period........ $ 1,389,346 197,689
============ ============
Supplemental disclosure of non-cash investing activities:
Cash paid for interest............................ $ 74,178 76,010
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
June 30, 1998
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1997, which are
included in the Partnership's 1997 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. Inland Real Estate Investment Corporation is
the General Partner. 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. 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 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 June 30, 1998, 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)
June 30, 1998
(unaudited)
Depreciation expense is computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 30 to 40 years, while
furniture and fixtures are based upon estimated useful lives of 5 to 12 years.
Repair and maintenance expenses are charged to operations as incurred.
Significant improvements are capitalized and depreciated over their estimated
useful lives. Tenant improvements are depreciated over the related lease term.
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. For the periods ended June 30, 1998 and December
31, 1997, included in cash and cash equivalents is approximately $118,500 and
$94,000, respectively, for the payment of real estate taxes for Douglas and
Hillside Living Centers.
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership for the year ended December 31, 1997 and has been
applied to all prior earnings periods presented in the financial statements.
The Partnership has no dilutive securities.
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 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.
-7-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1998
(unaudited)
(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 decreases of $15,055 and $17,019 for 1998 and
1997, respectively, of rental income for the period of occupancy for which
stepped rent increases apply and $420,772 and $435,827 in related deferred rent
receivable as of June 30, 1998 and December 31, 1997, 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 year ended December 31, 1997, due to the
restructuring of a lease at McHenry Plaza Shopping Center.
(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 $1,459 and $2,011 was unpaid at June 30, 1998 and December 31, 1997,
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 $17,868 and $15,944 for the six months ended June
30, 1998 and 1997, respectively, of which $837 was unpaid as of June 30, 1998.
(4) Subsequent Events
During July 1998, 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, competition for tenants; 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 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 have been admitted to
the Partnership. The Partnership acquired seven properties utilizing
$25,831,542 of capital proceeds collected. During 1994 and 1995, the
Partnership sold the thirty-eight six-unit condominium buildings comprising the
Schaumburg Terrace condominium complex. Also, the Partnership sold one of the
three lots adjacent to the Hillside Living Center during September 1997. As of
June 30, 1998, cumulative distributions to Limited Partners totaled
$24,802,071, including $2,095,863 of Supplemental Capital Contributions from
the General Partner, which represents distributable cash flow from the
properties. The Partnership 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.
As of June 30, 1998, the Partnership had cash and cash equivalents of
$1,389,346, which includes approximately $118,500 for the payment of real
estate taxes for Douglas and Hillside Living Centers. Since December 1997, the
Partnership received prepayments on four of the thirty-seven mortgage loans
receivable on the six-unit condominium buildings comprising the Schaumburg
Terrace condominium complex. Repayment proceeds from these prepayments totaling
$934,875 is also included in cash and cash equivalents at June 30, 1998. 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.
-9-
Results of Operations
As of June 30, 1998, 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. Since
December 1997, the Partnership received prepayments on four of the thirty-seven
mortgage loans receivable on the six-unit condominium buildings comprising the
Schaumburg Terrace condominium complex which the Partnership had sold during
1994 and 1995.
Rental and additional income increased for the three and six months ended June
30, 1998, as compared to the three and six months ended June 30, 1997, due to
an increase in occupancy at McHenry Plaza. and the write off of deferred rent
receivable relating to lease modifications for the six months ended June 30,
1997, resulting in an increase in rental income for the six months ended June
30, 1998. As of June 30, 1998, approximately 10,749 square feet, representing
19% of the total space at the center, remains to be leased. The General
Partner continues to pursue additional leases for this remaining space.
Professional services to non-affiliates decreased for the three and six months
ended June 30, 1998, as compared to the three and six months ended June 30,
1997, due to a decrease in legal services.
Property operating expenses to non-affiliates decreased for the three and six
months ended June 30, 1998, as compared to the three and six months ended June
30, 1997, due to a decrease in repair and maintenance expenses at McHenry Plaza
Shopping Center.
The gain on the sale of investment property recorded for the three and six
months ended June 30, 1998 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.
-10-
The following is a list of approximate occupancy levels for the Partnership's
investment properties as of the end of each quarter during 1997 and 1998:
1997 1998
------------------------ ------------------------
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 72% 68% 89% 68% 81% 81%
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
Year 2000 Compliance
The Partnership has reviewed its current computer systems and does not
anticipate any future problems relating to the year 2000.
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, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 11, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: August 11, 1998
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1389346
<SECURITIES> 0
<RECEIVABLES> 210603
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1600363
<PP&E> 19041247
<DEPRECIATION> 5271057
<TOTAL-ASSETS> 23392758
<CURRENT-LIABILITIES> 468822
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19170616
<TOTAL-LIABILITY-AND-EQUITY> 23392758
<SALES> 75342
<TOTAL-REVENUES> 1515155
<CGS> 0
<TOTAL-COSTS> 123525
<OTHER-EXPENSES> 339789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74018
<INCOME-PRETAX> 977823
<INCOME-TAX> 0
<INCOME-CONTINUING> 977823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 977823
<EPS-PRIMARY> 16.49
<EPS-DILUTED> 16.49
</TABLE>
