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, 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
March 31, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 1,167,681 1,090,891
Accounts and rents receivable................... 55,891 37,386
Mortgage interest receivable.................... 60,287 60,734
Current portion of mortgage loans receivable.... 78,796 77,301
Current portion of deferred rent receivable..... 7,380 9,301
Other assets.................................... 10,291 3,092
------------ ------------
Total current assets.............................. 1,380,326 1,278,705
------------ ------------
Investment properties (including acquisition
fees paid to Affiliates of $1,738,621)
(Notes 1 and 3):
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................... 5,145,131 5,019,205
------------ ------------
Net investment properties......................... 13,896,116 14,022,042
------------ ------------
Other assets:
Mortgage loans receivable, less current portion. 7,689,710 7,709,989
Deferred loan fees (net of accumulated
amortization of $28,547 and $27,390 at
March 31, 1998 and December 31, 1997,
respectively) (Note 1)........................ 17,741 18,898
Deferred leasing fees (including $219,451
paid to Affiliates) (net of accumulated
amortization of $195,514 and $190,257 at
March 31, 1998 and December 31, 1997,
respectively) (Note 1)........................ 148,873 154,130
Deferred rent receivable, less current portion
(Notes 1 and 2)............................... 421,732 426,526
------------ ------------
Total other assets................................ 8,278,056 8,309,543
------------ ------------
Total assets...................................... $23,554,498 23,610,290
============ ============
See accompanying notes to financial statements.
-2-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1998 1997
Current liabilities: ---- ----
Accounts payable and accrued expenses........... $ 26,353 16,971
Accrued real estate taxes....................... 76,162 60,358
Distributions payable (Note 4).................. 198,824 198,824
Due to Affiliates (Note 3)...................... 10,496 2,011
Deposits held for others........................ 131,666 102,885
Current portion of long-term debt............... 41,569 40,572
Current portion of deferred gain on sale of
investment property........................... 20,732 20,732
------------ ------------
Total current liabilities......................... 505,802 442,353
Unearned income (Note 1).......................... 98,437 55,653
Long-term debt, less current portion.............. 1,478,433 1,489,207
Deferred gain on sale of investment property,
less current portion............................ 2,264,225 2,269,408
------------ ------------
Total liabilities................................. 4,346,897 4,256,621
------------ ------------
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,
59,285.65 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......................... 15,012,826 14,581,662
Cumulative distributions...................... (24,218,427) (23,641,195)
------------ ------------
19,243,844 19,389,912
------------ ------------
Total Partners' capital........................... 19,207,601 19,353,669
------------ ------------
Total liabilities and Partners' capital........... $23,554,498 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 months ended March 31, 1998 and 1997
(unaudited)
1998 1997
Income: ---- ----
Rental income (Notes 1 and 2)................... $ 524,402 475,176
Additional rental income........................ 16,157 10,897
Interest income................................. 182,717 189,212
Other income.................................... - 1,325
------------ ------------
723,276 676,610
------------ ------------
Expenses:
Professional services to Affiliates............. 3,200 3,736
Professional services to non-affiliates......... 29,350 25,615
General and administrative expenses to
Affiliates.................................... 8,710 11,572
General and administrative expenses to
non-affiliates................................ 15,519 16,659
Property operating expenses to Affiliates....... 8,886 8,104
Property operating expenses to non-affiliates... 62,160 81,733
Interest expense to non-affiliates.............. 37,130 38,042
Depreciation.................................... 125,926 130,048
Amortization.................................... 6,414 6,414
------------ ------------
297,295 321,923
------------ ------------
Operating income.................................. 425,981 354,687
Gain on sale of investment property............... 5,183 5,666
------------ ------------
Net income........................................ $ 431,164 360,353
============ ============
Net income allocated to:
General Partner................................. - -
Limited Partners................................ 431,164 360,353
------------ ------------
Net income........................................ $ 431,164 360,353
============ ============
Net income per Unit, basic and diluted, allocated
to Limited Partners per weighted average Limited
Partnership Units of 59,285.65.................. $ 7.27 6.08
============ ============
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, 1998 and 1997
(unaudited)
1998 1997
---- ----
Cash flows from operating activities:
Net income...................................... $ 431,164 360,353
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investment property........... (5,183) (5,666)
Depreciation.................................. 125,926 130,048
Amortization.................................. 6,414 6,414
Changes in assets and liabilities:
Accounts and rents receivable............... (18,505) 7,178
Mortgage interest receivable................ 447 6,968
Other current assets........................ (7,199) 2,286
Deferred rent receivable.................... 6,715 18,201
Accounts payable and accrued expenses....... 9,382 21,456
Accrued real estate taxes................... 15,804 15,439
Due to Affiliates........................... 8,485 17,405
Unearned income............................. 42,784 66,870
------------ ------------
Net cash provided by operating activities......... 616,234 646,952
------------ ------------
Cash flows from investing activities:
Principal payments received on mortgage
loans receivable.............................. 18,784 19,268
------------ ------------
Net cash provided by investing activities......... 18,784 19,268
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (577,232) (652,916)
Deposits held for others........................ 28,781 27,906
Principal payments of long-term debt............ (9,777) (8,872)
------------ ------------
Net cash used in financing activities............. (558,228) (633,882)
------------ ------------
Net increase in cash and cash equivalents......... 76,790 32,338
Cash and cash equivalents at beginning of period.. 1,090,891 357,749
------------ ------------
Cash and cash equivalents at end of period........ $ 1,167,681 390,087
============ ============
Cash paid for interest............................ $ 37,209 38,114
============ ============
See accompanying notes to financial statements.
-5-
INLAND'S MONTHLY INCOME FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 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 March 31, 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)
March 31, 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 March 31, 1998 and December
31, 1997, included in cash and cash equivalents is approximately $122,700 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)
March 31, 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 $6,715 and $18,201 for 1998 and 1997,
respectively, of rental income for the period of occupancy for which stepped
rent increases apply and $429,112 and $435,827 in related deferred rent
receivable as of March 31, 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 $10,496 and $2,011 was unpaid at March 31, 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 and
paid property management fees of $8,886 and $8,104 for the three months ended
March 31, 1998 and 1997, respectively.
(4) Subsequent Events
During April 1998, the Partnership paid a distribution of $198,824 to the
Limited Partners.
During May 1998, the Partnership received prepayment on one of the remaining
thirty-four mortgage loans receivable on the six-unit condominium buildings
comprising the Schaumburg Terrace condominium complex. Repayment proceeds from
this prepayment total $225,075 and, accordingly, the Partnership recorded
$65,128 of gain. The remaining deferred gain of $2,219,829 will be recognized
over the life of the related mortgage loans as principal payments are received.
-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
March 31, 1998, cumulative distributions to Limited Partners totaled
$24,218,427, 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 March 31, 1998, the Partnership had cash and cash equivalents of
$1,167,681, which includes approximately $122,700 for the payment of real
estate taxes for Douglas and Hillside Living Centers. During December 1997, the
Partnership received prepayments on three 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
$709,800 is also included in cash and cash equivalents at March 31, 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 March 31, 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.
During 1997, the Partnership received prepayments on three 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 months ended March 31,
1998, as compared to the three months ended March 31, 1997, due to an increase
in occupancy at McHenry Plaza and the write off of deferred rent receivable
relating to lease modifications for the three months ended March 31, 1997,
resulting in an increase in rental income for the three months ended March 31,
1998. As of March 31, 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 increased for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997, due to an
increase in accounting fees. This increase was partially offset by a decrease
in legal services.
General and administrative expenses to Affiliates decreased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due to a decrease in mortgage servicing fees and postage expenses.
General and administrative expenses to non-affiliates decreased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due to a decreases in printing expenses. This decrease was partially
offset by an increase in the Illinois Replacement Tax paid in 1998.
Property operating expenses to non-affiliates decreased for the three months
ended March 31, 1998, as compared to the three months ended March 31, 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 months ended
March 31, 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%
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
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 6 (b) are omitted because of the absence of conditions under
which they are required.
-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: May 15, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 15, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 15, 1998
-12-
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