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, 1997
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-18431
Inland Land Appreciation Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3544798
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60523
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 630-218-8000
N/A
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-1-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
June 30, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
---- ----
Current assets:
Cash and cash equivalents (Note 1).............. $ 4,313 89,672
Accounts and accrued interest receivable........ 23,233 -
Other current assets............................ 4,343 2,330
------------ ------------
Total current assets.............................. 31,889 92,002
Other assets...................................... 19,915 19,915
Investments in land and improvements, at cost
(including acquisition fees paid to Affiliates
of $1,462,051 and $1,464,852 at June 30, 1997
and December 31, 1996, respectively) (Notes 1,
2 and 3)........................................ 29,786,183 28,676,326
------------ ------------
Total assets...................................... $29,837,987 28,788,243
============ ============
See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1997 1996
---- ----
Current liabilities:
Accounts payable................................ $ 235,251 82,373
Accrued real estate taxes....................... 46,591 48,117
Due to Affiliates (Notes 2 and 6)............... 432,470 149,376
Notes payable to Affiliate (Note 6)............. 3,418,543 2,801,635
Unearned income................................. 10,165 23,239
------------ ------------
Total current liabilities......................... 4,143,020 3,104,740
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 165,996 167,675
Cumulative cash distributions................. (153,743) (153,743)
------------ ------------
12,753 14,432
Limited Partners: ------------ ------------
Units of $1,000. Authorized 30,001 Units,
29,629.25 and 29,659.25 Units outstanding
at June 30, 1997 and December 31, 1996,
respectively (net of offering costs
of $3,768,113, of which $1,069,764 was
paid to Affiliates)......................... 25,900,396 25,926,243
Cumulative net income......................... 3,928,359 3,889,232
Cumulative cash distributions................. (4,146,541) (4,146,404)
------------ ------------
25,682,214 25,669,071
------------ ------------
Total Partners' capital........................... 25,694,967 25,683,503
------------ ------------
Total liabilities and Partners' capital........... $29,837,987 28,788,243
============ ============
See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 1997 and 1996
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
Income: ---- ---- ---- ----
Land sales (Notes 1 and 3)....... $ - 52,811 301,557 59,117
Rental income (Note 4)........... 63,423 35,538 121,786 92,897
Interest income.................. - 1,533 148 8,497
Other income..................... 5,000 - 5,000 30
---------- ---------- ---------- ----------
68,423 89,882 428,491 160,541
---------- ---------- ---------- ----------
Expenses:
Cost of land sold................ - 22,785 96,237 22,785
Professional services to
Affiliates..................... 6,272 3,004 25,500 13,564
Professional services to
non-affiliates................. 20,007 3,884 46,313 27,464
General and administrative
expenses to Affiliates......... 7,047 4,894 15,483 13,462
General and administrative
expenses to non-affiliates..... 5,039 7,031 15,718 10,797
Marketing expenses to Affiliates. 28,257 (5,188) 75,287 27,052
Marketing expenses to
non-affiliates................. 32,819 6,213 61,044 18,561
Land operating expenses to
Affiliates..................... 14,111 14,671 28,240 28,927
Land operating expenses to
non-affiliates................. 13,697 10,712 27,221 23,723
---------- ---------- ---------- ----------
127,249 68,006 391,043 186,335
---------- ---------- ---------- ----------
Net income (loss).................. $ (58,826) 21,876 37,448 (25,794)
========== ========== ========== ==========
See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and six months ended June 30, 1997 and 1996
(unaudited)
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Net income (loss) allocated to:
General Partner.................. $ (589) (81) (1,679) (621)
Limited Partners................. (58,237) 21,957 39,127 (25,173)
---------- ---------- ---------- ----------
Net income (loss).................. $ (58,826) 21,876 37,448 (25,794)
========== ========== ========== ==========
Net income (loss) allocated to the
one General Partner Unit......... $ (589) (81) (1,679) (621)
========== ========== ========== ==========
Net income (loss) per weighted
average Limited Partnership Units
(29,639.13 and 29,774.18 for the
three months ended June 30, 1997
and 1996, and 29,649.13 and
29,783.21 for the six months
ended June 30, 1997 and 1996,
respectively).................... $ (1.96) .73 1.32 (.85)
========== ========== ========== ==========
See accompanying notes to financial statements.
-5-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
(unaudited)
1997 1996
Cash flows from operating activities: ---- ----
Net income (loss)............................... $ 37,448 (25,794)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Gain on sale of land.......................... (205,320) (36,332)
Changes in assets and liabilities:
Accounts and accrued interest receivable.... (23,233) (9,672)
Other current assets........................ (2,013) 331
Accounts payable............................ 152,878 (83,690)
Accrued real estate taxes.................. (1,526) (3,046)
Due to Affiliates........................... 283,094 (10,817)
Unearned income............................. (13,074) 9,289
Net cash provided by (used in) operating ------------ ------------
activities...................................... 228,254 (159,731)
------------ ------------
Cash flows from investing activities:
Additions to investments in land................ (1,206,094) (803,086)
Principal payments collected on mortgage
loans receivable.............................. - 37,952
Proceeds from disposition of investment in land. 301,557 52,810
------------ ------------
Net cash used in investing activities............. (904,537) (712,324)
------------ ------------
Cash flows from financing activities:
Repurchase of Limited Partnership Units......... (25,847) (27,567)
Proceeds from notes payable to Affiliate, net... 616,908 320,279
Cash distributions.............................. (137) (9)
------------ ------------
Net cash provided by financing activities......... 590,924 292,703
------------ ------------
Net decrease in cash and cash equivalents......... (85,359) (579,352)
Cash and cash equivalents at beginning of period.. 89,672 626,942
------------ ------------
Cash and cash equivalents at end of period........ $ 4,313 47,590
============ ============
See accompanying notes to financial statements.
-6-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
June 30, 1997
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1996, which are
included in the Partnership's 1996 Annual Report, as certain footnote
disclosures which would duplicate those contained in such audited financial
statements have been omitted from this Report.
(1) Organization and Basis of Accounting
The Registrant, Inland Land Appreciation Fund, L.P. (the "Partnership"), was
formed in October 1987, pursuant to the Delaware Revised Uniform Limited
Partnership Act, to invest in undeveloped land on an all-cash basis and realize
appreciation of such land upon resale. On October 12, 1988, the Partnership
commenced an Offering of 10,000 (subject to increase to 30,000) Limited
Partnership Units ("Units") pursuant to a Registration Statement on Form S-11
under the Securities Act of 1933. Inland Real Estate Investment Corporation is
the General Partner. The Offering terminated on October 6, 1989, with total
sales of 30,000 Units, at $1,000 per Unit, not including the General Partner or
the Initial Limited Partner. All of the holders of these Units have been
admitted to this Partnership. 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. As of June 30, 1997, the
Partnership has repurchased a total of 371.75 Units for $332,490 from various
Limited Partners through the Unit Repurchase Program. Under this program
Limited Partners may under certain circumstances have their Units repurchased
for an amount equal to their Invested Capital.
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.
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents and are carried at
cost, which approximates market.
-7-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
The Partnership adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS
121 requires that the Partnership record an impairment loss on its property to
be held for investment whenever its carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's estimated
fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.
Except as described in footnote (b) to Note 3 of these notes, the Partnership
uses the area method of allocation, which approximates the relative sales
method of allocation, whereby a per acre price is used as the standard
allocation method for land purchases and sales. The total cost of the parcel
is divided by the total number of acres to arrive at a per acre price.
The Partnership is required to pay a withholding tax to the Internal Revenue
Service with respect to a Partner's allocable share of the Partnership's
taxable net income, if the Partner is a foreign person. The Partnership will
first pay the withholding tax from the distributions to any foreign partner,
and to the extent that the tax exceeds the amount of distributions withheld, or
if there have been no distributions to withhold, the excess will be accounted
for as a distribution to the foreign partner. Withholding tax payments are made
every April, June, September and December.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the partners rather than the Partnership.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations for the periods
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.
(2) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for
salaries and expenses of employees of the General Partner and its Affiliates
relating to the administration of the Partnership. Such costs are included in
professional services and general and administrative expenses to Affiliates, of
which $60,631 and $40,569 were unpaid as of June 30, 1997 and December 31,
1996, respectively.
-8-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
The General Partner is entitled to receive Asset Management Fees equal to one-
quarter of 1% of the original cost to the Partnership of undeveloped land
annually, limited to a cumulative total over the life of the Partnership of 2%
of the land's original cost to the Partnership. Such fees of $28,240 and
$28,927 have been incurred for the six months ended June 30, 1997 and 1996,
respectively, and are included in land operating expenses to Affiliates, of
which $28,240 and $14,066 were unpaid as of June 30, 1997 and December 31,
1996, respectively.
An Affiliate of the General Partner performed sales marketing and advertising
services for the Partnership and was reimbursed (as set forth under terms of
the Partnership Agreement) for direct costs. Such costs of $75,287 and $27,052
have been incurred and are included in marketing expenses to Affiliates for the
six months ended June 30, 1997 and 1996, respectively, of which $105,307 and
$30,091 were unpaid as of June 30, 1997 and December 31, 1996, respectively.
An Affiliate of the General Partner performed property upgrades, rezoning,
annexation and other activities to prepare the Partnership's land investments
for sale and was reimbursed (as set forth under terms of the Partnership
Agreement) for salaries and direct costs. The Affiliate did not recognize a
profit on any project. Such costs of $7,715 have been incurred for the six
months ended June 30, 1997 and are included in investments in land, of which
$72,365 and $58,347 were unpaid as of June 30, 1997 and December 31, 1996,
respectively.
-9-
<TABLE>
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investments in Land and Improvements
<CAPTION>
Total
Gross Initial Costs Costs Remaining Current
Acres Purchase/ -------------------------------------- Capitalized Costs of Costs of Year Gain
Location: Purchased Sales Original Acquisition Total Subsequent to Property Parcels at on Sale
Parcel County (Sold) Date Costs Costs Costs Acquisition Sold 6/30/97 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Kendall 84.7360 01/19/89 $ 423,680 61,625 485,305 4,190,903 280,587 4,395,621 -
(3.52) 12/24/96
2 McHenry 223.4121 01/19/89 650,000 95,014 745,014 20,871 611,505 154,380 -
(183.3759) 12/27/90
3 Kendall 20.0000 02/09/89 189,000 13,305 202,305 - 202,305 - -
(20.0000) 05/08/90
4 Kendall 69.2760 04/18/89 508,196 38,126 546,322 29,559 235,275 340,606 -
(.4860) 02/28/91
(27.5750) 08/25/95
5 Kendall (a) 372.2230 05/03/89 2,532,227 135,943 2,668,170 25,839 160,313 2,533,696 -
(Option) 04/06/90
6 Kendall (b) 78.3900 06/21/89 416,783 31,691 448,474 167,729 - 616,203 -
7 Kendall (b) 77.0490 06/21/89 84,754 8,163 92,917 152,430 - 245,347 -
8 Kendall (b) 5.0000 06/21/89 60,000 5,113 65,113 - 65,113 - -
(5.0000) 10/06/89
9 McHenry (b) 51.0300 08/07/89 586,845 22,482 609,327 745 - 610,072 -
10 McHenry (b) 123.9400 08/07/89 91,939 7,224 99,163 600 99,763 - -
(123.9400) 12/06/89
11 McHenry (b) 30.5920 08/07/89 321,216 22,641 343,857 5,539 - 349,396 -
12 Kendall 90.2710 10/31/89 907,389 41,908 949,297 529 7,456 942,370 -
(.7090) 04/26/91
13 McHenry 92.7800 11/07/89 251,306 19,188 270,494 3,092 - 273,586 -
14 McHenry 76.2020 11/07/89 419,111 23,402 442,513 42,853 - 485,366 -
15 Lake 84.5564 01/03/90 1,056,955 85,283 1,142,238 1,386,956 360,751 2,168,443 205,320
(10.5300) Var 1996
(3.1980) Var 1997 ------------ ------------ ------------ -------------- ------------ ------------- -----------
Subtotal 8,499,401 611,108 9,110,509 6,027,645 2,023,068 13,115,086 205,320
</TABLE>
-10-
<TABLE>
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investments in Land and Improvements (continued)
<CAPTION>
Total
Gross Initial Costs Costs Remaining Current
Acres Purchase/ -------------------------------------- Capitalized Costs of Costs of Year Gain
Location: Purchased Sales Original Acquisition Total Subsequent to Property Parcels at on Sale
Parcel County (Sold) Date Costs Costs Costs Acquisition Sold 6/30/97 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subtotal 8,499,401 611,108 9,110,509 6,027,645 2,023,068 13,115,086 205,320
16 Kane/Kendall 72.4187 01/29/90 1,273,537 55,333 1,328,870 69,469 - 1,398,339 -
17 McHenry 99.9240 01/29/90 739,635 61,038 800,673 250,032 - 1,050,705 -
18 McHenry 71.4870 01/29/90 496,116 26,259 522,375 19,440 11,109 530,706 -
(1.0000) Var 1990
(.5200) 03/11/93
19 McHenry 63.6915 02/23/90 490,158 29,158 519,316 6,961 - 526,277 -
20 Kane 224.1480 02/28/90 2,749,800 183,092 2,932,892 327,635 3,651 3,256,876 -
(.2790) 10/17/91
21 Kendall 172.4950 03/08/90 1,327,459 75,822 1,403,281 584,871 - 1,988,152 -
22 McHenry 254.5250 04/11/90 2,608,881 136,559 2,745,440 28,377 - 2,773,817 -
23 Kendall 140.0210 05/08/90 1,480,000 116,240 1,596,240 570,956 1,196,909 970,287 -
(4.4100) Var 1993
(35.8800) Var 1994
(3.4400) Var 1995
24 Kendall 298.4830 05/23/90 1,359,774 98,921 1,458,695 18,681 83,663 1,393,713 -
(12.4570) 05/25/90
(4.6290) 04/01/96
25 Kane 225.0000 06/01/90 2,600,000 168,778 2,768,778 13,447 - 2,782,225 -
------------ ------------ ------------ -------------- ------------ ------------- ------------
$23,624,761 1,562,308 25,187,069 7,917,514 3,318,400 28,786,183 205,320
============ ============ ============ ============== ============ ============= ============
</TABLE>
-11-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
(3) Investments in Land and Improvements (continued)
(a) Included in the purchase agreement of Parcel 5 was a condition that
required the Partnership to buy an option to purchase an additional 243
acres immediately to the west of this parcel. The sale transaction relates
to the sale of this option.
(b) The Partnership purchased from two third parties, two sets of three
contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11).
The General Partner believes that the total value of this land will be
maximized if it is treated and marketed to buyers as six separate parcels
and closed the transactions as six separate purchases to facilitate this.
Parcels 6, 7 and 8 will be treated as one parcel and Parcels 9, 10 and 11
will be treated as one parcel for purposes of computing Parcel Capital (as
defined) and distributions to the Partners.
(c) Reconciliation of real estate owned:
1997 1996
---- ----
Balance at January 1,............ $28,676,326 24,846,973
Additions during period.......... 1,206,094 4,397,239
Sales during period.............. 96,237 567,886
------------ ------------
Balance at end of period......... $29,786,183 28,676,326
============ ============
(4) Farm Rental Income
The Partnership has determined that all leases relating to the farm parcels are
operating leases. Accordingly, rental income is reported when earned.
As of June 30, 1997, the Partnership had farm leases of generally one year in
duration, for approximately 2,110 acres of the approximately 2,661 acres owned.
-12-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
(5) Notes Payable to Affiliate
On May 1, 1996, the Partnership obtained a line of credit from the General
Partner, Inland Real Estate Investment Corporation, in the aggregate amount of
$1,000,000 to be used specifically for the pre-development improvements on
Parcel 15. The Partnership is required to pay a 1% loan fee to the General
Partner as money is funded. The note accrues interest at 10.9%, and required a
principal paydown of $150,000 on October 1, 1996, and thereafter Net Sales
Proceeds from Parcel 15 are being applied first to paydown the note. This note
had an original maturity date of May 1, 1997. As of June 30, 1997, the balance
of this note was $321,456. For the six months ended June 30, 1997, interest of
$19,734 was capitalized, of which $16,429 and $3,942 was unpaid as of June 30,
1997 and December 31, 1996, respectively. For the six months ended June 30,
1997, loan fees paid to the General Partner totaled $215, all of which have
been paid and included in investment in land and improvements.
On June 1, 1996, the Partnership obtained a line of credit from the General
Partner, Inland Real Estate Investment Corporation, in the aggregate amount of
$3,000,000 to be used specifically for the pre-development improvements on
Parcel 1. The Partnership is required to pay a 1% loan fee to the General
Partner as money is funded. The note accrues interest at 10.9%, and Net Sales
Proceeds from Parcel 1 are being applied first to paydown the note. This note
had an original maturity date of May 1, 1997. As of June 30, 1997, the balance
of this note was $2,442,687. For the six months ended June 30, 1997, interest
of $127,669 was capitalized, of which $127,669 and $0 was unpaid as of June 30,
1997 and December 31, 1996, respectively. For the six months ended June 30,
1997, loan fees paid to the General Partner totaled $3,953, all of which have
been paid and included in investment in land and improvements.
On May 1, 1997, the two above notes payable to the General Partner matured and
were subsequently extended to August 1, 1997 at the same interest rate. Loan
extension fees of $5,898 and $436 for Parcels 1 and 15, respectively, were
paid.
On May 12, 1997, the Partnership obtained a line of credit from the General
Partner, Inland Real Estate Investment Corporation, in the aggregate amount of
$744,000 to be used specifically for the pre-development improvements on Parcel
21. The note accrues interest at 9.625% and has a maturity date of May 12,
1998. Interest-only payments on this note are due quarterly and the loan may be
prepaid at any time without penalty. As of June 30, 1997, the balance of this
note was $259,000. For the six months ended June 30, 1997, interest of $3,462
was capitalized, of which $3,462 and $0 was unpaid as of June 30, 1997 and
December 31, 1996, respectively.
Additionally, Inland Real Estate Investment Corporation loaned the Partnership
$395,400 for Partnership operations. The note accrues interest at 10%. For the
six months ended June 30, 1997, interest of $19,374 was capitalized, of which
$18,367 and $2,361 was unpaid as of June 30, 1997 and December 31, 1996,
respectively.
-13-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
(6) Subsequent Events
On July 7, 1997, the Partnership paid a distribution of $1,849,826 to the
Limited Partners. This distribution was from net sales proceeds previously
held on sales from Parcels 1, 4, 12, 15, 20, 23, and 24.
On August 1, 1997, the two notes payable to the General Partner collateralized
by Parcels 1 and 15 matured and were subsequently extended to November 1, 1997
at the same interest rate. Loan extension fees of $6,632 and $444 were paid for
Parcels 1 and 15, respectively.
-14-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this quarterly report on
Form 10-Q constitute of "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Partnership's actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, federal, state or local regulations;
adverse changes in general economic or local conditions; inability of borrower
to meet financial obligations; uninsured losses; and potential conflicts of
interest between the Partnership and its Affiliates, including the General
Partner.
Liquidity and Capital Resources
On October 12, 1988, the Partnership commenced an Offering of 10,000 (subject
to increase to 30,000) Limited Partnership Units pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. On October 6, 1989,
the Offering terminated with a total of 30,000 Units sold to the public at
$1,000 per Unit resulting in $30,000,000 in gross offering proceeds, which does
not include the Initial Limited Partner and the General Partner. All of the
holders of these Units have been admitted to the Partnership. 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.
The Partnership used $25,187,069 of gross offering proceeds to purchase on an
all-cash basis twenty-five parcels of undeveloped land and an option to
purchase undeveloped land. These investments include the payment of the
purchase price, acquisition fees and acquisition costs of such properties.
Fourteen of the parcels were purchased during 1989 and eleven during 1990. As
of March 31, 1997, the Partnership has had multiple sales transactions, through
which it has disposed of approximately 441 acres of the approximately 3,102
acres originally owned. As of June 30, 1997, cumulative distributions to the
Limited Partners have totaled $4,146,541 (which represents a return of Invested
Capital, as defined in the Partnership Agreement) and $153,743 to the General
Partner. Through June 30, 1997, the Partnership has used $7,917,514 of working
capital reserve for rezoning and other activities. Such amounts have been
capitalized and are included in investments in land.
The Partnership's capital needs and resources will vary depending upon a number
of factors, including the extent to which the Partnership conducts rezoning and
other activities relating to utility access, the installation of roads,
subdivision and/or annexation of land to a municipality, changes in real estate
taxes affecting the Partnership's land, and the amount of revenue received from
leasing. As of June 30, 1997, the Partnership owns, in whole or in part,
twenty-two of its twenty-five original parcels, the majority of which are
leased to local farmers and are generating sufficient cash flow from farm
leases to cover property taxes and insurance.
-15-
At June 30, 1997, the Partnership had cash and cash equivalents of $4,313. The
Unit Repurchase Program has approximately $60,600 remaining for the repurchase
of Units. There are currently no requests for repurchase, but the Partnership
plans to replenish cash available for this program through future parcel sales.
The Partnership has increased its parcel sales effort in anticipation of rising
land values.
Net sales proceeds totaling $1,849,826 from Parcels 1, 4, 12, 15, 20, 23, and
24 were previously retained and used to fund pre-development activity on
certain of the Partnership's land investments. In July 1997, the Partnership
replenished these net sales proceeds by obtaining a loan from the General
Partner. This note accrues interest at 10% and will be repaid with future net
sales proceeds as parcels are sold. On July 7, 1997, the Partnership
distributed these net sales proceeds of $1,849,826 to the Limited Partners
resulting in cumulative distributions of $5,996,367.
The Partnership plans to enhance the value of its land through pre-development
activities such as rezoning annexation and land planning. The Partnership has
already been successful in, or is in the process of pre-development activity on
a majority of the Partnership's land investments. Parcel 1, zoned with a
preliminary plan approved by the Village of Oswego, has improvements underway
and sites are being marketed. Of the 199 single-family lots, 75 lots are under
contract with a homebuilder, of which the first 15 lots closed on December 24,
1996 (see Note 3 of the Notes to Financial Statements.) Parcels 4, 6 and 7 have
completed improvements for an industrial park and sites are being marketed.
Parcel 15, zoned and annexed to the Village of Hawthorn Woods, also has
improvements underway and sites are being marketed. Of the forty lots, nine
lots were sold to individuals during 1996 and 1997 (see Note 3 of the Notes to
Financial Statements.) Parcels 16, 21 and 23 have been zoned with development
and sales marketing underway.
Results of Operations
As of June 30, 1997, the Partnership owned twenty-two parcels of land
consisting of approximately 2,661 acres. Of the 2,661 acres owned,
approximately 2,110 acres are tillable, leased to local farmers and generate
sufficient cash flow to cover property taxes, insurance and other miscellaneous
expenses. Income from the sale of investments in land and the cost of
investments in land sold recorded for the six months ended June 30, 1997 is a
result of the sale of three additional lots of Parcel 15. Income from the sale
of investments in land and the cost of investments in land sold recorded for
the three and six months ended June 30, 1996 is a result of the prepayment of a
mortgage loan receivable and recognition of deferred gain relating to the 1994
lot sales of Parcel 23. The increase in rental income for the three and six
months ended June 30, 1997, as compared to three and six months ended June 30,
1996, is primarily due to the under-accrual of rental income in 1996.
Interest income decreased for the three and six months ended June 30, 1997, as
compared to the three and six months ended June 30, 1996, due primarily to the
Partnership utilizing its working capital reserve to fund pre-development
activity on the Partnership's land investments.
Professional services to Affiliates increased for the three and six months
ended June 30, 1997, as compared to the three and six months ended June 30,
1996, due to increases in legal and accounting services related to the increase
in sales activity within the Partnership. Professional services to non-
affiliates increased for the three and six months ended June 30, 1997, as
compared to the three and six months ended June 30, 1996, due to an increase in
outside legal services.
-16-
General and administrative expenses to Affiliates increased for the three and
six months ended June 30, 1997, as compared to the three and six months ended
June 30, 1996, due primarily to increases in investor services expenses.
General and administrative expenses to non-affiliates increased for the six
months ended June 30, 1997, as compared to the six months ended June 30, 1996,
due to increases in postage and the Illinois Replacement Tax paid in 1997.
Marketing expenses to Affiliates increased for the three and six months ended
June 30, 1997, as compared to the three and six months ended June 30, 1996, due
to increases in expenses relating to marketing and advertising the
Partnership's land investments for sale. Marketing expenses to non-affiliates
increased for the three and six months ended June 30, 1997, as compared to the
three and six months ended June 30, 1996, due to an increase in advertising and
travel expenses relating to marketing the land portfolio to prospective
purchasers.
Land operating expenses to non-affiliates increased for the three and six
months ended June 30, 1997, as compared to the three and six months ended June
30, 1996, due to an increase in maintenance and real estate tax expenses of the
Partnership's land investments.
PART II - Other Information
Items 1 through 5 are omitted because of the absence of conditions under which
they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INLAND LAND APPRECIATION FUND, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: August 11, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 11, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: August 11, 1997
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4313
<SECURITIES> 0
<RECEIVABLES> 23233
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31889
<PP&E> 29786183
<DEPRECIATION> 0
<TOTAL-ASSETS> 29837987
<CURRENT-LIABILITIES> 4143020
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25694967
<TOTAL-LIABILITY-AND-EQUITY> 29837987
<SALES> 301557
<TOTAL-REVENUES> 428491
<CGS> 96237
<TOTAL-COSTS> 55461
<OTHER-EXPENSES> 239345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 37448
<INCOME-TAX> 0
<INCOME-CONTINUING> 37448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37448
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
