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Previous: ALARIS MEDICAL INC, 10-Q, EX-27.1, 2000-08-10 |
Next: INLAND REAL ESTATE GROWTH FUND II LP, 10-Q, EX-27, 2000-08-10 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2000
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 #0-16780
Inland Real Estate Growth Fund II, L.P.
(Exact name of registrant as specified in its charter)
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Delaware |
#36-3547165 |
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(State or other jurisdiction of incorporation or organization |
(I.R.S. Employer Identification Number) |
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2901 Butterfield Road, Oak Brook, Illinois |
60523 |
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(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
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Balance Sheets
June 30, 2000 and December 31, 1999
(unaudited)
Assets
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2000 |
1999 |
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Current assets: |
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Cash and cash equivalents (including amounts held by property manager (Note 1) |
$ |
51,552 |
287,520 |
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Accrued interest receivable |
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175 |
465 |
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Total current assets |
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51,727 |
287,985 |
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Investment property (including acquisition fees paid to Affiliates of $59,500) (Notes 1 and 2): |
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Land |
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438,388 |
438,388 |
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Building and improvements |
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1,096,872 |
1,096,872 |
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1,535,260 |
1,535,260 |
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Less accumulated depreciation |
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411,053 |
392,772 |
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Total investment property, net of accumulated depreciation |
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1,124,207 |
1,142,488 |
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Accrued rents receivable (Notes 1 and 3) |
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24,599 |
32,424 |
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Deferred leasing fees to Affiliates (net of accumulated amortization of $22,653 and $21,321 at June 30, 2000 and December 31, 1999, respectively) (Note 1) |
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3,332 |
4,664 |
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Total assets |
$ |
1,203,865 |
1,467,561 |
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========== |
========== |
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See accompanying notes to financial statements
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 2000 and December 31, 1999
(unaudited)
Liabilities and Partners' Capital
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2000 |
1999 |
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Current liabilities: |
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Current portion of long-term debt (Note 4) |
$ |
500,000 |
786,081 |
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Due to Affiliates (Note 2) |
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1,286 |
878 |
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Total current liabilities |
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501,286 |
786,959 |
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Commission payable to Affiliates (Note 2) |
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135,000 |
135,000 |
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Total liabilities |
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636,286 |
921,959 |
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Partners' capital (Notes 1 and 2): |
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General Partner: |
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Capital contribution |
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500 |
500 |
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Cumulative net income |
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16,969 |
16,749 |
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Cumulative cash distributions |
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(9,939) |
(9,939) |
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7,530 |
7,310 |
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Limited Partners: |
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Units of $1,000. Authorized 25,000 Units, 3,921.25 Units outstanding at June 30, 2000 and December 31,1999 (net of offering costs of $462,824, of which $59,476 was paid to Affiliates) |
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3,534,495 |
3,534,495 |
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Cumulative net income |
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1,679,966 |
1,658,209 |
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Cumulative cash distributions |
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(4,654,412) |
(4,654,412) |
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560,049 |
538,292 |
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Total Partners' capital |
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567,579 |
545,602 |
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Total liabilities and Partners' capital |
$ |
1,203,865 |
1,467,561 |
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========== |
========== |
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 2000 and 1999
(unaudited)
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Three months |
Three months |
Six months |
Six months |
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ended |
ended |
ended |
ended |
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June 30, 2000 |
June 30, 1999 |
June 30, 2000 |
June 30, 1999 |
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Income: |
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Rental income (Note 3) |
$ |
51,661 |
51,661 |
103,322 |
103,322 |
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Interest income |
1,998 |
2,364 |
6,209 |
4,655 |
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53,659 |
54,025 |
109,531 |
107,977 |
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Expenses: |
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Professional services to Affiliates |
400 |
1,991 |
1,409 |
2,410 |
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Professional services to non-affiliates |
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2,750 |
5,510 |
19,350 |
19,510 |
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General and administrative expenses to Affiliates |
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3,012 |
5,891 |
9,232 |
12,085 |
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General and administrative expenses to non-affiliates |
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1,479 |
1,509 |
4,233 |
8,746 |
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Property operating expenses to Affiliates |
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556 |
556 |
1,112 |
1,112 |
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Mortgage interest to non-affiliates |
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- |
- |
- |
5,543 |
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Mortgage interest to Affiliates |
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14,038 |
18,618 |
32,605 |
30,485 |
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Depreciation |
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9,141 |
- |
18,281 |
- |
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Amortization |
|
666 |
666 |
1,332 |
2,278 |
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32,042 |
34,741 |
87,554 |
82,169 |
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Net income |
$ |
21,617 |
19,284 |
21,977 |
25,808 |
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========= |
========= |
========= |
========= |
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Net income allocated to: |
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General Partner |
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216 |
193 |
220 |
258 |
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Limited Partners |
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21,401 |
19,091 |
21,757 |
25,550 |
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Net income |
$ |
21,617 |
19,284 |
21,977 |
25,808 |
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========= |
========= |
========= |
========= |
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Net income allocated to the one General Partner Unit |
$ |
216 |
193 |
220 |
258 |
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========= |
========= |
========= |
========= |
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Net income per 3,921.25 and 4,004.25 weighted average Limited Partner Units for 2000 and 1999, respectively |
$ |
5.46 |
4.77 |
5.55 |
6.38 |
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========= |
========= |
========= |
========= |
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 2000 and 1999
(unaudited)
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2000 |
1999 |
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Cash flows from operating activities: |
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Net income |
$ |
21,977 |
25,808 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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18,281 |
- |
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Amortization |
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1,332 |
2,278 |
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Changes in assets and liabilities: |
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Accrued rents receivable |
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7,825 |
7,825 |
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Accrued interest and other receivable |
|
290 |
92 |
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Accrued interest payable |
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- |
6,138 |
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Due to Affiliates |
|
408 |
1,228 |
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Net cash provided by operating activities |
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50,113 |
43,369 |
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Cash flows from financing activities: |
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Proceeds from note payable to Affiliates |
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- |
786,081 |
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Principal payments of long-term debt |
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(286,081) |
(780,288) |
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Net cash provided by (used in) financing activities |
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(286,081) |
5,793 |
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Net increase (decrease) in cash and cash equivalents |
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(235,968) |
49,162 |
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Cash and cash equivalents at beginning of period |
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287,520 |
185,913 |
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Cash and cash equivalents at end of period |
$ |
51,552 |
235,075 |
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========== |
========== |
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Supplemental disclosure of cash flow information: |
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Cash paid for mortgage and other interest |
$ |
32,605 |
29,890 |
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========== |
========== |
See accompanying notes to financial statements.
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
June 30, 2000
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited financial statements for the fiscal year ended December 31, 1999, which are included in the Partnership's 1999 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 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 $500. All of the holders of these Units were admitted to the Partnership. As of June 30, 2000, the Partnership has repurchased a total of 117 Units ($40,906) from various Limited Partners. At June 30, 2000, included in cash and cash equivalents, is approximately $8,700 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.
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. Interim periods are not necessarily indicative of results to be expected for the year.
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 2000
(unaudited)
Statement of Financial Accounting Standards No. 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 its 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 Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to sell such property and active marketing activity has commenced. Effective September 23, 1998, the Partnership's investment property was held for sale and the Partnership listed and was actively marketing the Scandinavian Health Club property for sale at an amount in excess of its carrying value. The listing agreement expired on January 31, 1999, however, the property was included in a sealed bid auction in June 1999. The sole acceptable contract received from the sealed bid auction was terminated by the potential purchaser on July 28, 1999. In accordance with SFAS 121, any property identified as "held for sale or disposition" is no longer depreciated. The Partnership which had ceased depreciation as of September 23, 1998, began depreciation of the property as of July 28, 1999 and all previously unrecognized depreciation was recorded as of December 31, 1999. Adjustments for impairment loss for such a property are made in each period as necessary to report the property at the lower of carrying value or fair value less cost to sell. As of June 30, 2000, the Partnership believes no such impairment exists on its property.
(2) 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 $1,286 and $878 remained unpaid at June 30, 2000 and December 31, 1999, respectively.
In connection with the sales at Wellington Place apartment complex during 1991, 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.
An Affiliate of the General Partner is entitled to receive Property Management Fees for management and leasing services. Management fees of $1,112 for both the six months ended June 30, 2000 and 1999, have been incurred and paid to an Affiliate and are included in the Partnership's property operating expenses to Affiliates.
INLAND REAL ESTATE GROWTH FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 2000
(unaudited)
(3) Accrued Rents Receivable
The health club 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 a decrease of $7,825 in both 1999 and 1998, of rental income for the period of occupancy for which stepped rent increases apply and $24,599 and $32,424 in related accounts receivable as of June 30, 2000 and December 31, 1999, respectively. Those amounts are expected to be collected over the terms of the related leases as scheduled rent payments are made.
(4) Note Payable to Affiliate
As of February 1, 1999, the General Partner of the Partnership advanced funds on a short-term basis to the Partnership to pay off its mortgage payable balance of $780,288 plus accrued interest through the maturity date. The note payable to the General Partner of $786,081 has a current interest rate of 9.5% and requires monthly interest only payments. A final balloon payment of all outstanding principal and all accrued and unpaid interest, if any, was due on December 31, 1999 and was extended to December 31, 2000. This note may be extended at the Partnership's option. On May 1, 2000, the Partnership made a $286,081 principal paydown on this note payable.
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 "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Partnership's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, federal, state or local regulations; adverse changes in general economic or local conditions; inability of borrower to meet financial obligations; uninsured losses; and potential conflicts of interest between the Partnership and its Affiliates, including the General Partner.
Liquidity and Capital Resources
On 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. 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 June 30, 2000, the Partnership has repurchased 117 Units ($40,906) from various Limited Partners through the Unit Repurchase Program.
At June 30, 2000, the Partnership had cash and cash equivalents of $51,552, which includes approximately $8,700 restricted for the repurchase of Units through the Unit Repurchase Program. The Partnership intends to use available cash to paydown debt, for working capital requirements and cash distributions. The Partnership's property is generating sufficient cash flow to cover operating expenses and debt service. To the extent that this source is 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 September 23, 1998, the Partnership listed and was actively marketing the Scandinavian Health Club property for sale at an amount in excess of its carrying value. The listing agreement expired on January 31, 1999, however, the property was included in a sealed bid auction in June 1999. The sole acceptable contract received from the sealed bid auction was terminated by the potential purchaser on July 28, 1999. The Partnership which had ceased depreciation as of September 23, 1998, began depreciation of the property as of July 28, 1999 and all previously unrecognized depreciation was recorded as of December 31, 1999. The Company intends to continue to seek a purchaser and to sell the property at an amount in excess of its book value.
The increase in mortgage interest to Affiliates and the decrease in mortgage interest to non-affiliates for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999, is the result of the refinancing of the mortgage payable. As of February 1, 1999, the General Partner of the Partnership advanced funds on a short-term basis to the Partnership to pay off its mortgage payable balance of $780,288 plus accrued interest through the maturity date. The note payable to the General Partner of $786,081 has a current interest rate of 9.5% and requires monthly interest only payments. A final balloon payment of all outstanding principal and all accrued and unpaid interest, if any, is due on December 31, 2000. This note may be extended at the Partnership's option. On May 1, 2000, in order to reduce interest expense, the Partnership made a $286,081 principal paydown on this note payable.
The decrease in general and administrative expenses to non-affiliates for the three months ended June 30, 2000, as compared to the three months ended June 30, 1999, is due to a decrease in the Illinois Replacement Tax.
PART II - Other Information
Items 1 through 6 (b) are omitted because of the absence of conditions under which they are required.
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.
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INLAND REAL ESTATE GROWTH FUND II, L.P. |
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By: |
Inland Real Estate Investment Corporation General Partner |
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/S/ ROBERT D. PARKS |
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By: |
Robert D. Parks |
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Chairman |
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Date: |
August 9, 2000 |
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/S. PATRICIA A. DELROSSO |
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By: |
Patricia A. DelRosso |
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Senior Vice President |
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Date: |
August 9, 2000 |
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/S/ KELLY TUCEK |
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By: |
Kelly Tucek |
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Principal Financial Officer and |
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Principal Accounting Officer |
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Date: |
August 9, 2000 |
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