<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For The Fiscal Year Ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file #0-16780
Inland Real Estate Growth Fund II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3547165
(State of organization) (I.R.S. Employer Identification Number)
2901 Butterfield Road, Oak Brook, Illinois 60521
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 708-218-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
(Title of class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. Not applicable.
The Prospectus of the Registrant dated September 21, 1987, as supplemented to
date and filed pursuant to Rule 424(b) and 424(c) under the Securities Act of
1933 is incorporated by reference in Parts I, II and III of this Annual Report
on Form 10-K.
-1-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
TABLE OF CONTENTS
Part I Page
Item 1. Business ...................................................... 3
Item 2. Properties .................................................... 4
Item 3. Legal Proceedings ............................................. 4
Item 4. Submission of Matters to a Vote of Security Holders ........... 4
Part II
Item 5. Market for the Partnership's Limited Partnership Units and
Related Security Holder Matters ............................... 5
Item 6. Selected Financial Data ....................................... 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 7
Item 8. Financial Statements and Supplementary Data ................... 10
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ...................................... 25
Part III
Item 10. Directors and Executive Officers of the Registrant ............ 25
Item 11. Executive Compensation ........................................ 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management .................................................... 31
Item 13. Certain Relationships and Related Transactions ................ 31
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K ...................................................... 32
SIGNATURES .............................................................. 33
-2-
<PAGE>
PART I
Item 1. Business
The Registrant, Inland Real Estate Growth Fund II, L.P. (the "Partnership"), was
formed in June 1987, pursuant to the Delaware Revised Uniform Limited
Partnership Act, to invest in improved residential, retail, industrial and other
income producing properties. On September 21, 1987, the Partnership commenced
an Offering of 25,000 Limited Partnership Units (the "Units") pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933. The
Partnership terminated the Offering on September 21, 1989. A total of 4,038.25
Units were sold to the public at $1,000 per Unit, yielding gross offering
proceeds of $4,038,250, not including the General Partner's contribution, of
which $3,077,513 was invested in two properties. In addition, offering proceeds
were used to repay advances from the General Partner, pay offering and
organization costs and make distributions to the Limited Partners. All of the
holders of these Units have been admitted to the Partnership. As of December
31, 1995, the Partnership has repurchased through the Unit Repurchase Program a
total of 34 units ($33,993) from various Limited Partners. The Limited Partners
of the Partnership share in their portion of benefits of ownership of the
Partnership's real property investments according to the number of Units held.
Inland Real Estate Investment Corporation is the General Partner.
The Partnership is engaged solely in the business of real estate investment. A
presentation of information about industry segments is not applicable and would
not be material to an understanding of the Partnership's business taken as a
whole.
The Partnership has made real property investments as set forth in the following
table:
Name of Number Purchase Type of
property and location of Units Date Ownership(a)
- --------------------------- -------- ----------- ---------------------
Wellington Place Apartments 108 04/19/88 Fee ownership of land
Carol Stream, Illinois (Sold 1991) and improvements
Scandinavian Health Club N/A 04/21/89 Fee ownership of land
Columbus, Ohio and improvements
(a) Reference is made to Notes (2) and (3) of the Notes to Financial Statements
filed with this Annual Report for the current outstanding principal balance
and a description of the mortgage indebtedness secured by the Partnership's
real property investment.
-3-
<PAGE>
As of December 31, 1991, the Partnership had sold all of the eighteen buildings
comprising the Wellington Place apartment complex for a total gross sales price
of approximately $4,472,000. Of the total gross sales proceeds, $80,000 remains
to be received through installment contracts receivable with final balloon
payment due June 30, 1998. Reference is made to Note (2) of the Notes to
Financial Statements filed with this Annual Report for a description of the
remaining installment contracts receivable.
The Partnership's remaining real property investment is located in Columbus,
Ohio and is subject to competition from similar types of properties in the
vicinity in which it is located. This property is fully leased to Scandinavian
Health Club. The Partnership has no real property investments located outside
the United States. The Partnership does not segregate revenues or assets by
geographic region, and such a presentation is not applicable and would not be
material to an understanding of the Partnership's business taken as a whole.
The Partnership had no employees during 1995.
The terms of transactions between the Partnership and Affiliates of the General
Partner of the Partnership are set forth in Item 11 and Note (5) of the Notes to
Financial Statements (Item 8 of this Annual Report) to which reference is hereby
made.
Item 2. Properties
The Partnership owns directly the properties referred to under Item 1 above to
which reference is hereby made for a description of the properties.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during 1995.
-4-
<PAGE>
PART II
Item 5. Market for the Partnership's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1995, there were 333 holders of Units of the Partnership.
There is no public market for Units nor is it anticipated that any public market
for Units will develop. Reference is made to Item 6 below for a discussion of
cash distributions made to the Limited Partners.
Although the Partnership has established a Unit Repurchase Program, funds for
repurchase of Units are limited. Reference is made to "Unit Repurchase Program"
on page 18 of the Prospectus of the Partnership dated September 21, 1987,
incorporated herein by reference. The Partnership has approximately $13,000
restricted for the repurchase of Units at December 31, 1995.
Item 6. Selected Financial Data
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
For the years ended December 31, 1995, 1994, 1993, 1992 and 1991
(not covered by Independent Auditors' Report)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets........... $1,566,598 1,605,345 2,102,637 5,782,317 6,603,003
=========== ========== ========== ========== ==========
Long-term debt(c)...... $ - 935,998 949,279 2,289,201 979,881
=========== ========== ========== ========== ==========
Total income........... $ 222,952 242,879 538,846 674,159 807,010
=========== ========== ========== ========== ==========
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating income....... $ 44,837 78,526 292,863 327,313 121,613
Gain on sale of
investment property.. - 31,118 503,529 2,671 69,590
----------- ---------- ---------- ---------- ----------
Net income............. $ 44,837 109,644 796,392 329,984 191,203
=========== ========== ========== ========== ==========
Net income allocated
to the one General
Partner Unit:
Operating income....... 448 785 2,929 3,273 1,216
Gain on sale of
investment property.. - 311 5,035 27 696
----------- ---------- ---------- ---------- ----------
$ 448 1,096 7,964 3,300 1,912
=========== ========== ========== ========== ==========
Net income allocated
per Limited
Partnership Unit (b):
Operating income....... 11.09 19.41 72.41 80.92 29.99
Gain on sale of
investment property.. - 7.69 124.49 .66 17.16
----------- ---------- ---------- ---------- ----------
$ 11.09 27.10 196.90 81.58 47.15
=========== ========== ========== ========== ==========
Cash distributions
to Limited Partners.. $ 69,690 553,096 2,453,208 960,285 150,784
=========== ========== ========== ========== ==========
Cash distributions
to Limited Partners
per Unit (b)......... $ 17.40 138.13 612.65 239.82 37.56
=========== ========== ========== ========== ==========
Weighted Average of
Limited Partnership
Units outstanding.... 4,004.25 4,004.25 4,004.25 4,004.25 4,014.25
=========== ========== ========== ========== ==========
</TABLE>
(a) The above selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Annual
Report.
(b) The net income and cash distribution per Limited Partner Unit data are
based upon the weighted average number of such Units.
(c) Reference is made to Notes (2) and (3) of the Notes to Financial
Statements filed with this Annual Report for further discussion of long-
term debt.
-6-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
On September 21, 1987, the Partnership commenced an Offering of 25,000 Limited
Partnership Units pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933. The Offering terminated on September 21, 1989 with a
total of 4,038.25 Units being sold to the public at $1,000 per Unit resulting in
$4,038,250 in gross offering proceeds, not including the General Partner's
contribution, of which $3,077,513 was invested in two properties (as described
in Note (2) of the Notes to Financial Statements filed with this Annual Report).
In addition, proceeds were used to repay advances from the General Partner, pay
offering and organization costs and make distributions to the Limited Partners.
As of December 31, 1995, the Partnership has repurchased 34 Units ($33,993) from
various Limited Partners through the Unit Repurchase Program.
At December 31, 1995, the Partnership had cash and cash equivalents of $106,980
which includes approximately $12,500 restricted for the repurchase of Units
through the Unit Repurchase Program. The Partnership intends to use available
cash for working capital requirements and cash distributions.
As of December 31, 1991, the Partnership had sold all of the eighteen buildings
comprising the Wellington Place apartment complex for a total gross sales price
of approximately $4,472,000. Reference is made to Note (2) of the Notes to
Financial Statements filed with this Annual Report for a description of the sale
of buildings in this complex during 1991 and the prepayments of the related
installment contracts receivable.
During 1995, the remaining property owned by the Partnership was generating
sufficient cash flow to cover operating expenses, pay debt service and make
distributions to Partners. To the extent that these sources are insufficient to
meet the Partnership's needs, the Partnership may rely on advances from
Affiliates of the General Partner, other short-term financing or may sell this
property.
The General Partner has agreed to make, if necessary, a Supplemental Capital
Contribution. The Supplemental Capital Contribution shall be in an amount which
will enable the Partnership to pay a liquidating distribution to the Limited
Partners equal to their Adjusted Invested Capital plus a noncompounded Minimum
Return of 2% per annum on their Invested Capital. After consideration of the
Supplemental Capital Contribution, the Partnership believes that it has
sufficient funds to satisfy its obligations.
Results of Operations
As of December 31, 1991, the Partnership had sold all of the eighteen buildings
comprising the Wellington Place apartment complex. The remaining property owned
by the Partnership, a health club, is leased until October 2001 to Scandinavian
Health Spa Inc., a wholly owned subsidiary of Bally's Health and Tennis
Corporation on a "triple-net" basis, which means that in addition to paying base
rent, the tenant is also responsible for the payment of insurance, taxes and
maintenance. The General Partner does not anticipate an early termination of
this lease.
-7-
<PAGE>
The mortgage loan collateralized by the Scandinavian Health Club property
balloons in May 1996. The General Partner has been and continues to pursue the
following parallel strategies regarding this balloon:
(1) An extension from the current first mortgage holder is being
negotiated.
(2) An early lease extension from the tenant is being negotiated which
would lengthen the lease term from the existing 5 1/2 years to a total
of 10 years, which may aid in obtaining an extension of the debt or
new first mortgage.
(3) Quotes from third party lenders have been obtained to refinance the
debt.
The gain on the sale of investment properties is the result of the installment
sales of the eighteen buildings comprising the Wellington Place apartment
complex. The total gain from these sales of $616,858 will be recognized as cash
is received over the life of the related installment contracts.
Interest income decreased for the years ended December 31, 1995 and 1994, as
compared to the year ended December 31, 1993, due to the prepayments of the
installment contracts receivable. As of December 31, 1993, the Partnership had
received complete prepayments on seventeen of the eighteen installment contracts
receivable originally due in 2001, amounting to $3,609,589, which included
prepayment penalties of $10,830, less credit to the borrowers for prepaid
interest. Additionally the Partnership provided a single borrower with five
second mortgages in the amount of $16,000 each, which require interest-only
payments at the rate of 10% per annum with a final balloon payment due June 30,
1998, collateralized by five of the buildings previously sold. During 1994, the
Partnership received a complete prepayment on the remaining original installment
contract receivable.
As a result of these prepayments, $31,118 and $503,529 of gain was recognized in
1994 and 1993, respectively. Proceeds totaling $1,330,510 from these prepayments
were used to retire the remaining nine underlying first mortgages on this
property.
Other income for the year ended December 31, 1993 includes prepayment penalty
income relating to the prepayments of the installment contracts receivable.
The increase in mortgage interest for the year ended December 31, 1995, as
compared to the year ended December 31, 1994, is due to an increase in the
adjustable rate mortgage on the health club property from 7.375% to 9.625% in
May 1995.
The decrease in mortgage interest for the year ended December 31, 1994, compared
to the year ended December 31, 1993, is due to several factors. The adjustable
interest rate on the health club debt decreased from 7.75% to 6.5% in May 1993
and then increased to 7.375% in May 1994. In November 1992, the Partnership had
paid off one of the Wellington Place loans with a balance of $149,086 at the
time of prepayment. The remaining nine loans were paid off in June 1993.
-8-
<PAGE>
The decrease in professional services to non-affiliates for the year ended
December 31, 1995, as compared to the year ended December 31, 1994, is due to a
decrease in accounting fees.
The decrease in professional services to Affiliates for the year ended December
31, 1994, as compared to the year ended December 31, 1993, is due to a decrease
in legal fees. The increase in professional services to non-affiliates for the
year ended December 31, 1994, as compared to the year ended December 31, 1993,
is due to an increase in accounting fees.
The increase in general and administrative expenses to Affiliates for the year
ended December 31, 1995, as compared to the year ended December 31, 1994, is due
to an increase in services rendered to address the loan that is maturing on the
Scandinavian Health Club, postage expense and mortgage servicing fees.
The decrease in general and administrative expenses to non-affiliates for the
year ended December 31, 1995, as compared to the year ended December 31, 1994,
is due to a decrease in the Illinois Replacement tax.
Inflation
The health club's triple-net lease offsets any inflationary effect on the
property operating expenses relating to that property.
Continued inflation may cause capital appreciation of the Partnership's
investment property over a period of time as rental rates and replacement cost
of this property continue to increase.
Impact of Accounting Pronouncements Not Yet Adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995.
This pronouncement is not expected to have a material effect on the financial
position or results of operations of the Partnership.
-9-
<PAGE>
Item 8. Financial Statements and Supplementary Data
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Index Page
----- ----
Independent Auditors' Report............................................. 11
Financial Statements:
Balance Sheets, December 31, 1995 and 1994............................. 12
Statements of Operations, for the years ended
December 31, 1995, 1994 and 1993..................................... 14
Statements of Partners' Capital, for the years ended
December 31, 1995, 1994 and 1993..................................... 16
Statements of Cash Flows, for the years ended
December 31, 1995, 1994 and 1993..................................... 17
Notes to Financial Statements.......................................... 19
Schedules not filed:
All schedules have been omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.
-10-
<PAGE>
Independent Auditors' Report
The Partners
Inland Real Estate Growth Fund II, L.P.
We have audited the financial statements of Inland Real Estate Growth Fund II,
L.P. (a limited partnership) as listed in the accompanying index. These
financial statements are the responsibility of the General Partner of the
Partnership. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partner of the Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Inland Real Estate Growth Fund
II, L.P. as of December 31, 1995 and 1994 and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
January 19, 1996
-11-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets
------
1995 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents including amounts
held by property manager (Note 1)............. $ 106,980 107,020
Accrued interest receivable..................... 41 55
---------- ----------
Total current assets.......................... 107,021 107,075
---------- ----------
Investment property (including acquisition
fees paid to Affiliates of $59,500 at
December 31, 1995 and 1994 (Notes 1, 2 and 3):
Land............................................ 438,389 438,389
Building and improvements....................... 1,096,872 1,096,872
---------- ----------
1,535,261 1,535,261
Less accumulated depreciation................... 246,990 210,428
---------- ----------
Total investment property, net of
accumulated depreciation.................... 1,288,271 1,324,833
---------- ----------
Installment contracts receivable (Note 2)......... 80,000 80,000
Accrued rents receivable (Notes l and 6).......... 74,812 70,250
Deferred loan costs (net of accumulated
amortization of $47,018 and $42,991 at
December 31, 1995 and 1994, respectively)
(Note 1)........................................ 1,170 5,197
Deferred leasing fees to Affiliates (net of
accumulated amortization of $10,662 and $7,996
at December 31, 1995 and 1994, respectively)
(Note 1)........................................ 15,324 17,990
---------- ----------
Total assets...................................... $1,566,598 1,605,345
========== ==========
</TABLE>
See accompanying notes to financial statements.
-12-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Liabilities and Partners' Capital
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses........... $ 926 424
Current portion of long-term debt
(Notes 2 and 3)............................... 938,503 14,439
Accrued interest payable........................ 7,528 5,841
Due to Affiliates (Note 5)...................... 2,606 175
---------- ----------
Total current liabilities..................... 949,563 20,879
---------- ----------
Commission payable to Affiliates (Note 5)......... 135,000 135,000
Long-term debt, less current portion
(Notes 2 and 3)................................. - 935,998
---------- ----------
Total liabilities............................. 1,084,563 1,091,877
---------- ----------
Deferred gain on sale of investment property
(Note 2)........................................ 9,950 9,950
Partners' capital (Notes 1, 4 and 5):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 14,480 14,032
Cumulative cash distributions................. (8,711) (2,131)
---------- ----------
6,269 12,401
---------- ----------
Limited Partners:
Units of $1,000. Authorized 25,000 Units,
4,004.25 Units outstanding at December 31,
1995 and 1994 (net of offering costs of
$462,849, of which $59,476 was paid to
Affiliates)................................. 3,541,408 3,541,408
Cumulative net income......................... 1,433,589 1,389,200
Cumulative cash distributions................. (4,509,181) (4,439,491)
---------- ----------
465,816 491,117
---------- ----------
Total Partners' capital..................... 472,085 503,518
Commitments and contingencies (Notes 3, 5, and 6)
---------- ----------
Total liabilities and Partners' capital........... $1,566,598 1,605,345
========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income:
Rental income (Note 6)............ $206,644 206,644 206,644
Interest income................... 11,677 31,954 318,927
Other income...................... 4,631 4,281 13,275
-------- -------- --------
222,952 242,879 538,846
-------- -------- --------
Expenses:
Professional services to
Affiliates...................... 12,065 12,955 14,612
Professional services to
non-affiliates.................. 15,885 18,940 15,583
General and administrative
expenses to Affiliates.......... 15,337 10,643 10,894
General and administrative
expenses to non-affiliates...... 4,311 8,273 11,912
Property operating expenses
to Affiliates................... 2,020 2,020 2,010
Property operating expenses
to non-affiliates............... 1,533 507 465
Mortgage interest................. 83,709 67,760 129,475
Depreciation...................... 36,562 36,562 36,562
Amortization...................... 6,693 6,693 24,470
-------- -------- --------
178,115 164,353 245,983
-------- -------- --------
Operating income.................... 44,837 78,526 292,863
Gain on sale of investment property
(Note 2).......................... - 31,118 503,529
-------- -------- --------
Net income.................... $ 44,837 109,644 796,392
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
-14-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net income allocated to (Note 4):
General Partner................... $ 448 1,096 7,964
Limited Partners.................. 44,389 108,548 788,428
-------- -------- --------
Net income.................... $ 44,837 109,644 796,392
======== ======== ========
Net income allocated to the one
General Partner Unit:
Operating income.................. 448 785 2,929
Gain on sale of investment
property........................ - 311 5,035
-------- -------- --------
$ 448 1,096 7,964
======== ======== ========
Net income allocated to Limited
Partners per weighted average of
Limited Partnership Units (4,004.25
Units for 1995, 1994 and 1993):
Operating income.................. 11.09 19.41 72.41
Gain on sale of investment
property........................ - 7.69 124.49
-------- -------- --------
$ 11.09 27.10 196.90
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
-15-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
-------- ---------- ----------
<S> <C> <C> <C>
Balance January 1, 1993............. $ 4,962 2,600,445 2,605,407
Net income (Note 4)................. 7,964 788,428 796,392
Cash distributions ($612.65 per
weighted average Limited
Partnership Units of 4,004.25).... (850) (2,453,208) (2,454,058)
-------- ---------- ----------
Balance December 31, 1993........... 12,076 935,665 947,741
Net income (Note 4)................. 1,096 108,548 109,644
Cash distributions ($138.13 per
weighted average Limited
Partnership Units of 4,004.25).... (771) (553,096) (553,867)
-------- ---------- ----------
Balance December 31, 1994........... 12,401 491,117 503,518
Net income (Note 4)................. 448 44,389 44,837
Cash distributions ($17.40 per
weighted average Limited
Partnership Units of 4,004.25).... (6,580) (69,690) (76,270)
-------- ---------- ----------
Balance December 31, 1995........... $ 6,269 465,816 472,085
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
-16-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................ $ 44,837 109,644 796,392
Adjustments to reconcile net income
to net cash provided by
operating activities:
Gain on sale of investment
property........................ - (31,118) (503,529)
Depreciation...................... 36,562 36,562 36,562
Amortization...................... 6,693 6,693 24,470
Accrued rents receivable.......... (4,562) (4,562) (4,562)
Changes in assets and liabilities:
Accrued interest receivable..... 14 181 (102)
Escrow deposits................. - - 13,510
Accounts payable and accrued
expenses...................... 502 15 (4,705)
Accrued interest payable........ 1,687 616 (11,978)
Real estate tax deposits held
for others.................... - (5,432) (87,611)
Due to Affiliates............... 2,431 (425) (13,979)
Unearned income................ - (2,484) (46,955)
-------- -------- --------
Net cash provided by operating
activities........................ 88,164 109,690 197,513
-------- -------- --------
Cash flows from investing activities:
Principal payments collected...... - 220,408 3,669,190
-------- -------- --------
Net cash provided by investing
activities........................ - 220,408 3,669,190
-------- -------- --------
</TABLE>
See accompanying notes to financial statements.
-17-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Principal payments of long-term
debt............................ $ (11,934) (14,241) (1,353,257)
Distributions..................... (76,270) (553,867) (2,454,058)
--------- --------- -----------
Net cash used in financing
activities........................ (88,204) (568,108) (3,807,315)
--------- --------- -----------
Net increase (decrease) in cash and
cash equivalents.................. (40) (238,010) 59,388
Cash and cash equivalents at
beginning of year................. 107,020 345,030 285,642
--------- --------- -----------
Cash and cash equivalents at
end of year....................... $ 106,980 107,020 345,030
========= ========= ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other
interest........................ $ 82,022 67,144 141,453
========= ========= ===========
</TABLE>
See accompanying notes to financial statements.
-18-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 1995, 1994 and 1993
(1) Organization and Basis of Accounting
Inland Real Estate Growth Fund II, L.P. (the "Partnership"), was formed in June
1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to
invest in improved residential, retail, industrial and other income producing
properties. On September 21, 1987, the Partnership commenced an Offering of
25,000 Limited Partnership Units (the "Units") pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Partnership
terminated the Offering on September 21, 1989. A total of 4,038.25 Units were
sold to the public at $1,000 per Unit, yielding gross offering proceeds of
$4,038,250, not including the General Partner's contribution. All of the holders
of these Units have been admitted to the Partnership. As of December 31, 1995,
the Partnership has repurchased a total of 34 units ($33,993) from various
Limited Partners. At December 31, 1995, included in cash and cash equivalents,
is approximately $13,000 restricted for use by the Unit Repurchase Program. The
Limited Partners of the Partnership share in their portion of benefits of
ownership of the Partnership's real property investment according 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 principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
Deferred loan costs are amortized on a straight-line basis over the life of the
loan. Deferred leasing fees are amortized on a straight-line basis over the term
of the related lease.
Installment contracts receivable origination fees received were deferred as
unearned income and amortized as yield adjustments on a straight-line basis over
the life of the related installment contracts receivable.
The investment properties are carried at the lower of aggregate cost or net
realizable value. Periodically, the Partnership will review its real estate
portfolio and if the investment property suffers an impairment in value which is
deemed to be other than temporary, the investment property would be reduced to
the net realizable value of the property. As of December 31, 1995, there have
been no such impairments. The Partnership uses the straight-line method of
depreciation with a useful life of thirty years for buildings and improvements.
Maintenance and repair expenses are charged to operations as incurred.
Significant improvements are capitalized and depreciated over their estimated
useful lives.
-19-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Rental income is recognized on a straight-line basis over the term of the lease.
The excess of rental income earned over the cash rent due under the provisions
of the lease agreement is recorded as accrued rent receivable.
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
The carrying amount of cash and cash equivalents, rents and other receivables,
accounts payable and accrued expenses and accrued real estate taxes approximates
fair value because of the relative short maturity of these instruments.
The principal balance of the Partnership's mortgage loan collateralized by the
Scandinavian Health Club property is due May 1996. The Partnership believes that
it is not practicable to value this debt instrument.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
The Partnership's records are maintained on the accrual basis of accounting in
accordance with generally accepted accounting principles ("GAAP"). The Federal
income tax return has been prepared from such records after making appropriate
adjustments to reflect the Partnership's accounts as adjusted for Federal income
tax reporting purposes. Such adjustments are not recorded on the records of the
Partnership. The net effect of these items is summarized as follows:
1995 1994
----------------------- -----------------------
Tax Tax
GAAP Basis GAAP Basis
Basis (unaudited) Basis (unaudited)
---------- ----------- --------- -----------
Total assets.............. $1,566,598 1,977,931 1,605,345 2,020,295
Partner's capital:
General Partner......... 6,269 5,752 12,401 11,919
Limited Partners........ 465,816 877,199 491,117 906,083
Net income:
General Partner......... 448 413 1,096 167
Limited Partners........ 44,389 40,806 108,548 16,585
Net income per Limited
Partnership Unit........ 11.09 10.19 27.10 4.14
-20-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995. This
pronouncement is not expected to have a material effect on the financial
position or results of operations of the Partnership.
(2) Investment Properties
(a) Wellington Place, Carol Stream, Illinois
During 1991, the Partnership sold all of the eighteen buildings comprising the
Wellington Place apartment complex to unaffiliated third parties. The
Partnership had recorded wrap around installment contracts receivable of
$3,988,999 as a result of these sales, with interest rates ranging from 10.5% to
10.9% due over seven to ten years. At the time of the sale, these receivables
were subject to existing mortgage notes amounting to $1,505,558. The gain of
$616,858 was to be recognized as cash was received over the life of the related
installment contracts.
The Partnership has received complete prepayments on all of the eighteen
installment contracts receivable amounting to $3,609,589, which included
prepayment penalties of $10,830, less credit to the borrowers for prepaid
interest. In conjunction with five of the prepayments, the Partnership provided
a single borrower with five second mortgages, in the amount of $16,000 each,
which require interest-only payments at the rate of 10% per annum with a final
balloon payment due June 30, 1998, collateralized by five of the buildings
previously sold.
(b) Scandinavian Health Club, Columbus, Ohio
On April 21, 1989, the Partnership purchased an existing 20,000 square-foot
health and racquet club known as Scandinavian Health Club located in Columbus,
Ohio. The property was purchased from an unaffiliated party. The total costs
were $1,529,171, which included the purchase price of $1,442,000, acquisition
costs of $87,171, including the acquisition fee paid to the General Partner of
$59,500 and closing costs.
At closing, the Partnership obtained a $1,000,000 loan on the property from an
unaffiliated lender. The loan has a current interest rate of 7.375% and requires
monthly principal and interest payments of $7,004. The interest rate adjusts
annually to 3% over the one-year Treasury constant maturity average and payments
are adjusted concurrently with the interest rates. The principal balance is due
in May 1996. The Partnership paid a $20,000 loan fee to the lender and incurred
$8,188 of other costs associated with funding the loan. At December 31, 1995,
the principal balance outstanding was $938,503.
-21-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
The General Partner has been and continues to pursue the following parallel
strategies regarding the May 1996 balloon on the mortgage loan collateralized by
the Scandinavian Health Club property:
(1) An extension from the current first mortgage holder is being
negotiated.
(2) An early lease extension from the tenant is being negotiated which
would lengthen the lease term from the existing 5 1/2 years to a total
of 10 years, which may aid in obtaining an extension of the debt or
new first mortgage.
(3) Quotes from third party lenders have been obtained to refinance the
debt.
An Affiliate of the General Partner receives a management fee pursuant to a
management agreement of a percentage of gross receipts. In 1992, the Partnership
was billed $25,986 for leasing fees pertaining to this property, all of which
has been paid.
(3) Long Term Debt
As of December 31, 1995, the required future principal payments on the
Partnership's long-term debt are as follows:
1996.......................................... $ 938,503
(4) Partnership Agreement
Pursuant to the terms of the Partnership Agreement, net profits or losses of the
Partnership from operations are generally allocated 99% to the Limited Partners
and 1% to the General Partner. Gains from the sale or other disposition of the
Partnership's properties will generally be allocated to the General and Limited
Partners in relation to the distributions of proceeds from such transactions.
Cash available for distribution from operations will be distributed 99% to the
Limited Partners and 1% to the General Partner. Net sale or refinancing proceeds
will generally be distributed first to the Limited Partners up to an amount
equal to their Invested Capital plus any deficiency in a 10% cumulative annual
return. Next, to the General Partner in an amount equal to any Supplemental
Capital Contributions, as defined, made by it. Any remaining proceeds will be
distributed 80% to the Limited Partners and 20% to the General Partner.
-22-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
The General Partner has agreed to make, if necessary, a Supplemental Capital
Contribution. The Supplemental Capital Contribution shall be in an amount which
will enable the Partnership to pay a liquidating distribution to the Limited
Partners equal to their Adjusted Invested Capital plus a noncompounded Minimum
Return of 2% per annum on their Invested Capital. After consideration of the
Supplemental Capital Contribution, the Partnership believes that it has
sufficient funds to satisfy its obligations.
(5) 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, of which $2,606 and $175
remained unpaid at December 31, 1995 and 1994, respectively.
In connection with the sales at Wellington Place apartment complex, the
Partnership has recorded $135,000 of sales commissions payable to Affiliates of
the General Partner. Such commissions will be deferred until the Limited
Partners have received their Original Capital plus a return as specified in the
Partnership Agreement.
(6) Leases
At December 31, 1995, the Partnership's principal asset consists of a health
club which is occupied by one tenant, Scandinavian Health Spa Inc. which is a
wholly owned subsidiary of Bally's Health and Tennis Corporation, under a triple
net lease which requires that in addition to paying base rent, the tenant is
also responsible for the payment of insurance, taxes and maintenance.
The property is subject to a lease which expires in October 2001 and required an
initial base rent per annum of $183,710. The rent increased to $202,082 in
October 1991 and will increase to $222,288 in October 1996. The General Partner
does not anticipate an early termination of this lease.
The Partnership has determined that the lease relating to this property is
properly classified as an operating lease; therefore, rental income is reported
when earned and the cost of the property, excluding the cost of land, is
depreciated over the estimated useful life.
-23-
<PAGE>
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
Minimum lease payments to be received in the future for the health club lease
are as follows:
1996............................................. $ 207,132
1997............................................. 222,288
1998............................................. 222,288
1999............................................. 222,288
2000............................................. 222,288
Thereafter (lease expires October 2001).......... 166,716
----------
Total............................................ $1,263,000
==========
The lease contains provisions providing for stepped rent increases. Generally
accepted accounting principles require that rental income be recorded for the
period of occupancy using the effective monthly rent, which is the average
monthly rent for the entire period of occupancy during the term of the lease.
The accompanying financial statements include $4,562 in 1995, 1994 and 1993, of
rental income for the period of occupancy for which stepped rent increases apply
and $74,812 and $70,250 in related accrued rents receivable as of December 31,
1995 and 1994, respectively. Those amounts are expected to be collected over the
terms of the related lease as scheduled rent payments are made.
(7) Subsequent Events
During January 1996, the Partnership paid a distribution of $17,000, of which
$150 was distributed to the General Partner and $16,850 was distributed to the
Limited Partners. The Limited Partners distribution included $2,000 of repayment
proceeds and $14,850 of operating cash flow.
-24-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting or financial disclosure during 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership, Inland Real Estate Investment
Corporation, was organized in 1984 for the purpose of acting as general partner
of limited partnerships formed to acquire, own and operate real properties. The
General Partner is a wholly-owned subsidiary of The Inland Group, Inc. In 1990,
Inland Real Estate Investment Corporation became the replacement General Partner
for an additional 301 privately-owned real estate limited partnerships
syndicated by Affiliates. The General Partner has responsibility for all aspects
of the Partnership's operations. The relationship of the General Partner to its
Affiliates is described under the caption "Conflicts of Interest" at pages 11 to
13 of the Prospectus, a copy of which description is hereby incorporated herein
by reference.
Officers and Directors
The officers, directors, and key employees of The Inland Group, Inc. and its
Affiliates ("Inland") that are likely to provide services to the Partnership are
as follows:
Functional Title
----------------
Daniel L. Goodwin....... Chairman and Chief Executive Officer
Robert H. Baum.......... Executive Vice President-General Counsel
G. Joseph Cosenza....... Senior Vice President-Acquisitions
Robert D. Parks......... Senior Vice President-Investments
Norbert J. Treonis...... Senior Vice President-Property Management
Catherine L. Lynch...... Treasurer
Paul J. Wheeler......... Vice President-Personal Financial Services Group
Roberta S. Matlin....... Assistant Vice President-Investments
Mark Zalatoris.......... Assistant Vice President-Due Diligence
Patricia A. Challenger.. Vice President-Asset Management
Cynthia M. Hassett...... Assistant Vice President-Partnership Accounting
Venton J. Carlston...... Assistant Controller
-25-
<PAGE>
DANIEL L. GOODWIN (age 52) is Chairman of the Board of Directors of The
Inland Group, Inc., a billion-dollar real estate and financial organization
located in Oak Brook, Illinois. Among Inland's subsidiaries is the largest
property management firm in Illinois and one of the largest commercial real
estate and mortgage banking firms in the Midwest.
Mr. Goodwin has served as Director of the Avenue Bank of Oak Park and as a
Director of the Continental Bank of Oakbrook Terrace. He was also Chairman of
the Bank Holding Company of American National Bank of DuPage. Currently he is
the President of Inland Mortgage Investment Corporation.
Mr. Goodwin has been in the housing industry for more than 25 years, and has
demonstrated a lifelong interest in housing-related issues. He is a licensed
real estate broker and a member of the National Association of Realtors. He has
developed thousands of housing units in the Midwest, New England, Florida, and
the Southwest. He is also the author of a nationally recognized reference book
for the management of residential properties.
Mr. Goodwin serves on the Board of the Illinois State Affordable Housing Trust
Fund for the past 6 years. He is an advisor for the Office of Housing
Coordination Services of the State of Illinois, and a member of the Seniors
Housing Committee of the National Multi-Housing Council. Recently, Governor
Edgar appointed him Chairman of the Housing Production Committee for the
Illinois State Affordable Housing Conference. He also served as a member of the
Cook County Commissioner's Economic Housing Development Committee, and he was
the Chairman of the DuPage County Affordable Housing Task Force. The 1992
Catholic Charities Award was presented to Mr. Goodwin for his work in addressing
affordable housing needs. The City of Hope designated him as the 1980's Man of
the Year for the Illinois construction industry. In 1989, the Chicago
Metropolitan Coalition on Aging presented Mr. Goodwin with an award in
recognition of his efforts in making housing more affordable to Chicago's Senior
Citizens. On May 4, 1995, PADS, Inc. (Public Action to Deliver Shelter)
presented Mr. Goodwin with an award, recognizing The Inland Group as the leading
corporate provider of transitional housing for the homeless people of DuPage
County.
Mr. Goodwin is a product of Chicago-area schools, and obtained his Bachelor's
and Master's Degrees from Illinois Universities. Following graduation, he taught
for five years in Chicago Public Schools. His commitment to education has
continued through his work with the Better Boys Foundation's Pilot Elementary
School in Chicago, and the development of the Inland Vocational Training Center
for the Handicapped located at Little City in Palatine, Illinois. He personally
established an endowment which funds a perpetual scholarship program for inner-
city disadvantaged youth. In 1990 he received the Northeastern Illinois
University President's Meritorious Service Award. Mr. Goodwin holds a Master's
Degree in Education from Northern Illinois University, and in 1986, he was
awarded an Honorary Doctorate from Northeastern Illinois University College of
Education. He served as a member of the Board of Governors of Illinois State
Colleges and Universities, and he is currently a trustee of Illinois Benedictine
College. He was elected Chairman of Northeastern Illinois University Board of
Trustees in January 1996.
-26-
<PAGE>
Mr. Goodwin served as a member of Governor Jim Edgar's Transition Team. In 1988
he received the Outstanding Business Leader Award from the Oak Brook Jaycees. He
also serves as the Chairman of the Illinois Speaker of the House of
Representatives Club, and has been the General Chairman of the National Football
League Players Association Mackey Awards for the benefit of inner-city youth. In
March 1994, he won the Excellence in Business Award from the DuPage Area
Association of Business and Industry. Additionally, he was honored by Little
Friends on May 17, 1995 for rescuing their Parent-Handicapped Infant Program
when they lost their lease last year, and on June 9, he received the 1995 March
of Dimes Birth Defects Foundation Life Achievement Award.
ROBERT H. BAUM (age 52) has been with Inland since 1968 and is one of the
four original principals. Mr. Baum is Vice Chairman and Executive Vice President
- -General Counsel of The Inland Group, Inc. In his capacity as General Counsel,
Mr. Baum is responsible for the supervision of the legal activities of The
Inland Group, Inc. and its affiliates. This responsibility includes the
supervision of The Inland Law Department and serving as liaison with all outside
counsel. Mr. Baum has served as a member of the North American Securities
Administrators Association Real Estate Advisory Committee and as a member of the
Securities Advisory Committee to the Secretary of State of Illinois. He is a
member of the American Corporation Counsel Association, as well as a member of
several bar associations. Mr. Baum has been admitted to practice before the
Supreme Courts of the United States and the State of Illinois, as well as the
bars of several federal courts of appeals and federal district courts. He
received his B.S. Degree from the University of Wisconsin and his J.D. Degree
from Northwestern University School of Law. Mr. Baum has served as a director of
American National Bank of DuPage and is a member of the Governing Council of
Wellness House, a charitable organization that provides emotional support for
cancer patients and their families.
G. JOSEPH COSENZA (age 52) joined Inland in 1968. Mr. Cosenza, is a
director, Vice Chairman and Chief Executive Officer of the Inland Group Inc. Mr.
Cosenza oversees, coordinates and directs Inland's many enterprises and, in
addition, immediately supervises a staff of five persons who engage in property
acquisition. Mr. Cosenza has been a consultant to other real estate entities and
lending institutions on property appraisal methods. Mr. Cosenza received his
B.A. degree from Northeastern Illinois University and his M.S. degree from
Northern Illinois University. From 1967 to 1968, Mr. Cosenza taught at the
LaGrange School District in Hodgkins, and from 1968 to 1972, he served as
Assistant Principal and teacher in the Wheeling School District. He has been a
licensed real estate broker since 1968 and an active member of various national
and local real estate associations, including the National Association of
Realtors and the Urban Land Institute. Mr. Cosenza has also been Chairman of the
Board of American National Bank of DuPage and part owner of American National
Bank of DuPage and Burbank State Bank, and has served on the Board of Directors
of Continental Bank of Oakbrook Terrace.
-27-
<PAGE>
ROBERT D. PARKS (age 52) joined Inland in 1968. He is Director of The Inland
Group, Inc. and is President, Chairman and Chief Executive Officer of Inland
Real Estate Investment Corporation and is Director of Inland Securities
Corporation. Mr. Parks is responsible for the ongoing administration of existing
partnerships, corporate budgeting and administration for Inland Real Estate
Investment Corporation. He oversees and coordinates the marketing of all limited
partnership interests nationwide and has overall responsibility for the
portfolio management of all partnership investments and investor relations. Mr.
Parks received his B.A. degree from Northeastern Illinois University and M.A.
degree from the University of Chicago. He is a registered Direct Participation
Program Principal with the National Association of Securities Dealers, Inc., and
a licensed real estate broker. He is a member of the Real Estate Investment
Association and a member of NAREIT.
NORBERT J. TREONIS (age 45) joined Inland in 1975 and is currently a
director of The Inland Group, Inc. and Chairman and Chief Executive Officer of
Inland Property Management Group, Inc. He serves on the board of directors of
all Inland subsidiaries involved in property management and construction,
including Mid-America Property Management Corporation, Inland Commercial
Property Management, Inc., Community Property Management, Inc. and Metropolitan
Construction Services, Inc. Mr. Treonis is responsible for the overall
management and leasing of all Inland apartment units. In addition, he is
Executive Vice President of Inland Real Estate Acquisitions, Inc. and has been
involved in the acquisition of thousands of apartment units. Mr. Treonis is a
licensed real estate broker and has served as a board member of American
National Bank of DuPage, the National Apartment Association, The Chicagoland
Apartment Association and The Apartment Building Owners and Managers Association
of Illinois.
CATHERINE L. LYNCH (age 37) joined Inland in 1989 and is the Treasurer of
Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing
the Corporate Accounting Department. Prior to joining Inland, Ms. Lynch worked
in the field of public accounting for KPMG Peat Marwick since 1980. She received
her B.S. degree in Accounting from Illinois State University. Ms. Lynch is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants. She is registered with the National Association of
Securities Dealers as a Financial Operations Principal.
PAUL J. WHEELER (age 43) joined Inland in 1982 and is currently the
President of Inland Property Sales, Inc. and President of Inland Securities
Corporation, Inland's broker/dealer. Mr. Wheeler received his B.A. degree in
Economics from DePauw University and an M.B.A. in Finance/Accounting from
Northwestern University. Mr. Wheeler is a Certified Public Accountant, a
licensed real estate broker and is registered with the National Association of
Securities Dealers, Inc. as a General Securities Principal. For three years
prior to joining Inland, Mr. Wheeler was Vice President/Finance at the real
estate brokerage firm of Quinlan & Tyson, Inc.
-28-
<PAGE>
ROBERTA S. MATLIN (age 51) joined Inland in 1984 as Director of Investor
Administration and currently serves as Senior Vice President-Investments. Prior
to that, Ms. Matlin spent 11 years with the Chicago Region of the Social
Security Administration of the United States Department of Health and Human
Services. As Senior Vice President-Investments, she directs the day-to-day
internal operations of the General Partner. Ms. Matlin received her B.A. degree
from the University of Illinois. She is registered with the National Association
of Securities Dealers, Inc. as a General Securities Principal.
MARK ZALATORIS (age 38) joined Inland in 1985 and currently serves as Vice
President of Inland Real Estate Investment Corporation. His responsibilities
include the coordination of due diligence activities by selling broker/dealers
and is also involved with limited partnership asset management including the
mortgage funds. Mr. Zalatoris is a graduate of the University of Illinois where
he received a Bachelors degree in Finance and a Masters degree in Accounting and
Taxation. He is a Certified Public Accountant and holds a General Securities
License with Inland Securities Corporation.
PATRICIA A. CHALLENGER (age 43) joined Inland in 1985. Ms. Challenger serves
as Senior Vice President of Inland Real Estate Investment Corporation in the
area of Asset Management. As head of the Asset Management Department, she
develops operating and disposition strategies for all investment-owned
properties. Ms. Challenger received her bachelor's degree from George Washington
University and her master's from Virginia Tech University. Ms. Challenger was
selected and served from 1980-1984 as Presidential Management Intern, where she
was part of a special government-wide task force to eliminate waste, fraud and
abuse in government contracting and also served as Senior Contract Specialist
responsible for capital improvements in 109 government properties. Ms.
Challenger is a licensed real estate salesperson, NASD registered securities
sales representative and is a member of the Urban Land Institute.
CYNTHIA M. HASSETT (age 37) joined Inland in 1983 and is a Vice President of
Inland Real Estate Investment Corporation. Ms. Hassett is responsible for the
Investment Accounting Department which includes all public partnership
accounting functions along with quarterly and annual SEC filings. Prior to
joining Inland, Ms. Hassett was on the audit staff of Altschuler, Melvoin and
Glasser since 1980. She received her B.S. degree in Accounting from Illinois
State University. Ms. Hassett is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants.
VENTON J. CARLSTON (age 38) joined Inland in 1985 and is the Assistant
Controller of Inland Real Estate Investment Corporation where he supervises the
corporate bookkeeping staff and is responsible for financial statement
preparation and budgeting for Inland Real Estate Investment Corporation and its
subsidiaries. Prior to joining Inland, Mr. Carlston was a partnership accountant
with JMB Realty. He received his B.S. degree in Accounting from Southern
Illinois University. Mr. Carlston is a Certified Public Accountant and a member
of the American Institute of Certified Public Accountants and the Illinois CPA
Society. He is registered with the National Association of Securities Dealers,
Inc. as a Financial Operations Principal.
-29-
<PAGE>
Item 11. Executive Compensation
The General Partner is entitled to receive a share of cash distributions, when
and as cash distributions are made to the Limited Partners, and a share of
profits or losses as described under the caption "Cash Distributions" on page 44
and "Allocation of Profits or Losses" on page 43 of the Prospectus, and on pages
A-7 to A-10 of the Partnership Agreement, included as an exhibit to the
Prospectus. Reference is also made to Note (4) of the Notes to Financial
Statements filed with this Annual Report for a description of such distributions
and allocations. The General Partner received a share of Partnership income and
losses in 1995, 1994, and 1993. Such losses may benefit the General Partner to
the extent that such losses may be offset against taxable income from the
Partnership or other sources.
The Partnership is permitted to engage in various transactions involving
Affiliates of the General Partner of the Partnership, as described under the
captions "Compensation and Fees" on pages 8 to 10 and "Conflicts of Interest" on
pages 10 to 13 of the Prospectus, and on pages A-12 through A-22 of the
Partnership Agreement, included as an exhibit to the Prospectus. The
relationship of the General Partner (and its directors and officers) to its
Affiliates is set forth above in Item 10.
In connection with the sales at Wellington Place, the Partnership has recorded
$135,000 of sales commissions payable to Affiliates of the General Partner. Such
commissions will be deferred until the Limited Partners have received their
Original Capital plus a return as specified in the Partnership Agreement.
The General Partner of the Partnership and its Affiliates may be reimbursed for
their out-of-pocket expenses relating to the administration of the Partnership.
In 1995, the General Partner of the Partnership was due reimbursement for such
expenses in the amount of $27,402, of which $2,606 was unpaid at December 31,
1995.
An Affiliate of the General Partner earned management fees of $2,020 in 1995, in
connection with managing the Partnership's investment property, all of which was
paid at December 31, 1995.
-30-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of the Partnership.
(b) The officers and directors of the General Partner of the Partnership
own, as a group, the following Units of the Partnership:
Amount and Nature
of Beneficial Percent
Title of Class Ownership of Class
-------------- ----------------- ------------
Limited Partnership One Unit directly less than 1%
Units
No officer or director of the General Partner of the Partnership
possesses a right to acquire beneficial ownership of Units of the
Partnership.
All of the outstanding shares of the General Partner of the Partnership
are owned by an Affiliate of its officers and directors as set forth
above in Item 10.
(c) There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships with the
General Partner, Affiliates or their management other than those described in
Items 10 and 11 above. Reference is made to Note (5) of the Notes to Financial
Statements (Item 8 of this annual report) for information regarding related
party transactions.
-31-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The financial statements listed in the index on page 10 of this Annual
Report are filed as part of this Annual Report.
(b) Exhibits. The following documents are filed as part of this Report:
3 Amended and Restated Agreement of Limited Partnership and certificate
of Limited Partnership included as Exhibits A and B to the Prospectus
dated September 21, 1988, as supplemented, are incorporated herein by
reference thereto.
4 Form of Certificate of Ownership representing interest in the
registrant filed as Exhibit 4 to Registration Statement on S-11, File
No. 33-15334, is incorporated herein by reference thereto.
28 Prospectus dated September 21, 1988, as supplemented, included in
Post-Effective Amendment No. 4 to Form S-11 Registration Statement,
File No. 33-15334, is incorporated herein by reference thereto.
(c) Financial Statement Schedules
All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
(d) Reports on Form 8-K:
None
No Annual Report or proxy material for the year 1995 has been sent to the
Partners of the Partnership. An Annual Report will be sent to the Partners
subsequent to this filing and the Partnership will furnish copies of such report
to the Commission when it is sent to the Partners.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 REAL ESTATE GROWTH FUND II, L.P.
Inland Real Estate Investment Corporation
General Partner
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
By: Inland Real Estate Investment Corporation
General Partner
By: Robert D. Parks
Chairman of the Board
and Chief Executive Officer
Date: March 28, 1996
By: Patricia A. Challenger
Senior Vice President
Date: March 28, 1996
By: Cynthia M. Hassett
Principal Financial Officer
and Principal Accounting Officer
Date: March 28, 1996
By: Daniel L. Goodwin
Director
Date: March 28, 1996
By: Robert H. Baum
Director
Date: March 28, 1996
-33-
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