UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1998
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-18431
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
March 31, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
---- ----
Current assets:
Cash and cash equivalents (Note 1).............. $ 1,323 15,502
Accounts and accrued interest receivable
(Note 5)...................................... 60,185 1,361
Current portion of mortgage loans
receivable (Note 5)........................... 575,000 575,000
Other current assets............................ 1,214 2,241
------------ ------------
Total current assets.............................. 637,722 594,104
Other assets...................................... 19,915 19,915
Mortgage loans receivable, less current
portion (Note 5)................................ 1,595,089 1,595,089
Investments in land and improvements, at cost
(including acquisition fees paid to Affiliates
of $1,428,449 and $1,430,329 at March 31, 1998
and December 31, 1997, respectively (Notes 1,
2 and 3)........................................ 26,055,926 25,848,790
------------ ------------
Total assets...................................... $28,308,652 28,057,898
============ ============
See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1998 1997
---- ----
Current liabilities:
Accounts payable................................ $ 16,976 25,185
Accrued real estate taxes....................... 59,153 47,889
Due to Affiliates (Note 2)...................... 649,830 595,655
Notes payable to Affiliate (Note 6)............. 3,328,304 3,283,471
Unearned income................................. 41,140 19,278
------------ ------------
Total current liabilities......................... 4,095,403 3,971,478
Deferred gain on sale (Note 5).................... 106,905 106,905
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 165,845 165,949
Cumulative cash distributions................. (153,743) (153,743)
------------ ------------
12,602 12,706
Limited Partners: ------------ ------------
Units of $1,000. Authorized 30,001 Units,
29,629.25 Units outstanding (net of offering
costs of $3,768,113, of which $1,069,764
was paid to Affiliates)..................... 25,900,396 25,900,396
Cumulative net income......................... 4,189,565 4,062,632
Cumulative cash distributions................. (5,996,219) (5,996,219)
------------ ------------
24,093,742 23,966,809
------------ ------------
Total Partners' capital........................... 24,106,344 23,979,515
------------ ------------
Total liabilities and Partners' capital........... $28,308,652 28,057,898
============ ============
See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 1998 and 1997
(unaudited)
1998 1997
Income: ---- ----
Land sales (Notes 1 and 3)...................... $ 228,480 301,557
Rental income (Note 4).......................... 59,432 58,363
Interest income................................. 49,763 148
Other income.................................... 1,000 -
------------ ------------
338,675 360,068
------------ ------------
Expenses:
Cost of land sold............................... 91,233 96,237
Professional services to Affiliates............. 11,300 19,228
Professional services to non-affiliates......... 28,769 26,306
General and administrative expenses to
Affiliates.................................... 7,902 8,436
General and administrative expenses to
non-affiliates................................ 3,910 10,679
Marketing expenses to Affiliates................ 27,327 47,030
Marketing expenses to non-affiliates............ 7,429 28,225
Land operating expenses to Affiliates........... 13,786 14,129
Land operating expenses to non-affiliates....... 20,190 13,524
------------ ------------
211,846 263,794
------------ ------------
Net income........................................ $ 126,829 96,274
============ ============
Net income (loss) allocated to:
General Partner................................. (104) (1,090)
Limited Partners................................ 126,933 97,364
------------ ------------
Net income........................................ $ 126,829 96,274
============ ============
Net loss allocated to the one General
Partner Unit.................................... $ (104) (1,090)
============ ============
Net income per Unit, basic and diluted, allocated
to Limited Partners per weighted average Limited
Partner Units (29,629.24 and 29,659.24 for the
three months ended March 31, 1998 and 1997,
respectively)................................... $ 4.28 3.28
============ ============
See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1998 and 1997
(unaudited)
1998 1997
Cash flows from operating activities: ---- ----
Net income...................................... $ 126,829 96,274
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of land.......................... (137,247) (205,320)
Changes in assets and liabilities:
Accounts and accrued interest receivable.... (58,824) (11,233)
Other current assets........................ 1,027 1,143
Accounts payable............................ (8,209) 45,028
Accrued real estate taxes.................. 11,264 12,158
Due to Affiliates........................... 54,175 134,730
Unearned income............................. 21,862 16,997
------------ ------------
Net cash provided by operating activities......... 10,877 89,777
------------ ------------
Cash flows from investing activities:
Additions to investments in land
and improvements.............................. (298,370) (632,933)
Proceeds from disposition of investments in
land and improvements......................... 228,481 301,557
------------ ------------
Net cash used in investing activities............. (69,889) (331,376)
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. - (111)
Proceeds from notes payable to Affiliate, net... 44,833 153,029
------------ ------------
Net cash provided by financing activities......... 44,833 152,918
------------ ------------
Net decrease in cash and cash equivalents......... (14,179) (88,681)
Cash and cash equivalents at beginning of period.. 15,502 89,672
------------ ------------
Cash and cash equivalents at end of period........ $ 1,323 991
============ ============
See accompanying notes to financial statements.
-5-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 1998
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1997, which are
included in the Partnership's 1997 Annual Report, as certain footnote
disclosures which would 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 March 31, 1998, 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.
-6-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(unaudited)
Statement of Financial Accounting Standards No. 121 ("SFAS 121") requires the
Partnership to record an impairment loss on its property to be held for
investment whenever its carrying value cannot be fully recovered through
estimated undiscounted future cash flows from their operations and sale. The
amount of the impairment loss to be recognized would be the difference between
the property's carrying value and the property's estimated fair value. As of
March 31, 1998, the Partnership has not recognized any such impairment.
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.
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership for the year ended December 31, 1997 and has been
applied to all prior earnings periods presented in the financial statements.
The Partnership has no dilutive securities.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the partners rather than the Partnership.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations for the periods
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.
-7-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(unaudited)
(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 $103,876 and $90,278 were unpaid as of March 31, 1998 and December 31,
1997, respectively.
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 $13,786 and
$14,129 have been incurred for the three months ended March 31, 1998 and 1997,
respectively, and are included in land operating expenses to Affiliates, of
which $69,065 and $55,279 were unpaid as of March 31, 1998 and December 31,
1997, respectively.
An Affiliate of the General Partner performed 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 $27,327 and $47,030
have been incurred and are included in marketing expenses to Affiliates for the
three months ended March 31, 1998 and 1997, respectively, of which $116,769 and
$151,908 were unpaid as of March 31, 1998 and December 31, 1997, 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 are included in investments in land, of
which $118,436 and $113,878 were unpaid as of March 30, 1998 and December 31,
1997, respectively.
-8-
<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 3/31/98 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 5,462,589 5,947,894 - -
(3.5200) 12/24/96
(.3520) 11/25/97
(80.8640) 12/29/97
2 McHenry 223.4121 01/19/89 650,000 95,014 745,014 21,538 611,505 155,047 -
(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 54,301 235,275 365,348 -
(.4860) 02/28/91
(27.5750) 08/25/95
5 Kendall 372.2230 05/03/89 2,532,227 135,943 2,668,170 26,288 160,313 2,534,145 -
(a) (Option) 04/06/90
6 Kendall 78.3900 06/21/89 416,783 31,691 448,474 192,110 - 640,584 -
(b)
7 Kendall 77.0490 06/21/89 84,754 8,163 92,917 177,281 - 270,198 -
(b)
8 Kendall 5.0000 06/21/89 60,000 5,113 65,113 - 65,113 - -
(b) (5.0000) 10/06/89
9 McHenry 51.0300 08/07/89 586,845 22,482 609,327 1,893 - 611,220 -
(b)
10 McHenry 123.9400 08/07/89 91,939 7,224 99,163 600 99,763 - -
(b) (123.9400) 12/06/89
11 McHenry 30.5920 08/07/89 321,216 22,641 343,857 6,292 - 350,149 -
(b)
12 Kendall 90.2710 10/31/89 907,389 41,908 949,297 1,034 7,456 942,875 -
(.7090) 04/26/91
13 McHenry 92.7800 11/07/89 251,306 19,188 270,494 4,105 6,136 268,463 -
(2.0810) 09/18/97
14 McHenry 76.2020 11/07/89 419,111 23,402 442,513 43,470 - 485,983 -
15 Lake 84.5564 01/03/90 1,056,955 85,283 1,142,238 1,622,125 505,330 2,259,033 125,032
(10.5300) Var 1996
(5.4680) Var 1997
(1.0960) Var 1998
------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal $ 8,499,401 611,108 9,110,509 7,613,626 7,841,090 8,883,045 125,032
-9-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investments in Land and Improvements (continued)
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 3/31/98 Recognized
- ------ --------- ---------- ---------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal $ 8,499,401 611,108 9,110,509 7,613,626 7,841,090 8,883,045 125,032
16 Kane/Kendall 72.4187 01/29/90 1,273,537 55,333 1,328,870 121,955 - 1,450,825 -
17 McHenry 99.9240 01/29/90 739,635 61,038 800,673 315,469 - 1,116,142 -
18 McHenry 71.4870 01/29/90 496,116 26,259 522,375 20,442 11,109 531,708 -
(1.0000) Var 1990
(.5200) 03/11/93
19 McHenry 63.6915 02/23/90 490,158 29,158 519,316 7,646 - 526,962 -
20 Kane 224.1480 02/28/90 2,749,800 183,092 2,932,892 365,985 3,651 3,295,226 -
(.2790) 10/17/91
21 Kendall 172.4950 03/08/90 1,327,459 75,822 1,403,281 934,735 23,509 2,314,507 12,215
(1.7968) 03/27/98
22 McHenry 254.5250 04/11/90 2,608,881 136,559 2,745,440 30,760 - 2,776,200 -
23 Kendall 140.0210 05/08/90 1,480,000 116,240 1,596,240 585,627 1,196,909 984,958 -
(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 19,093 83,663 1,394,125 -
(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 13,450 - 2,782,228 -
------------ ------------ ------------ -------------- ------------ ------------ ----------
$23,624,761 1,562,308 25,187,069 10,028,788 9,159,931 26,055,926 137,247
============ ============ ============ ============== ============ ============ ==========
</TABLE>
-10-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(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 investments in land and improvements owned:
1998 1997
------------ ------------
Balance at January 1,............ $25,848,790 28,676,326
Additions during period.......... 298,370 3,018,999
Sales during period.............. (91,234) (5,846,535)
------------ ------------
Balance at end of period......... $26,055,926 25,848,790
============ ============
(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 March 31, 1998, the Partnership had farm leases of generally one year in
duration, for approximately 2,070 acres of the approximately 2,572 acres owned.
-11-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(unaudited)
(5) Mortgage Loans Receivable
As a result of the sale of the remaining approximately 81 acres of Parcel 1 for
a sales price of $5,750,000 on December 29, 1997, the purchaser assumed the
note payable to an Affiliate on this parcel totaling $3,325,515 and the
interest payable to the Affiliate of $254,396. The Partnership received
mortgage loans receivable totaling $2,170,089 and recorded deferred gain on
sale of $106,905. The deferred gain will be recognized over the life of the
related mortgage loans receivable as principal payments are received. Of the
$2,170,089 mortgage loan receivable received, $575,000 accrues interest at 9%
per annum and has a maturity date of July 1, 1998, at which time all accrued
interest, as well as principal, is due. As of March 31, 1998, accrued interest
totaled $13,186. The remaining $1,595,089 accrues interest at 9% per annum and
has a maturity date of December 30, 2000, at which time all accrued interest,
as well as principal, is due. As of March 31, 1998, accrued interest totaled
$36,578.
(6) 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, but had been extended to January
1, 1999 at the same interest rate. As of March 31, 1998, the balance of this
note was $152,293. For the three months ended March 31, 1998, interest of
$5,315 was capitalized, of which $335 and $20,292 was unpaid as of March 31,
1998 and December 31, 1997, respectively. For the three months ended March 31,
1998, loan fees incurred and paid to the General Partner totaled $324 and are
included in investment in land and improvements.
-12-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(unaudited)
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 March 31, 1998, the balance of this
note was $565,611. For the three months ended March 31, 1998, interest of
$14,421 was capitalized, of which $43,591 and $29,170 was unpaid as of March
31, 1998 and December 31, 1997, respectively.
As of March 31, 1998, Inland Real Estate Investment Corporation has made loans
to the Partnership totaling $2,610,400. Net sales proceeds totaling $1,849,815
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. The remainder of funds loaned to the
Partnership were for Partnership operations. The note accrues interest at 10%
per annum and has a maturity date of January 1, 1999. For the three months
ended March 31, 1998, interest of $62,907 was capitalized, of which $197,758
and $134,850 was unpaid as of March 31, 1998 and December 31, 1997,
respectively.
-13-
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, 1998, the Partnership has had multiple sales transactions, through
which it has disposed of approximately 530 acres of the approximately 3,102
acres originally owned. As of March 31, 1998, cumulative distributions to the
Limited Partners have totaled $5,996,219 (which represents a return of Invested
Capital, as defined in the Partnership Agreement) and $153,743 to the General
Partner. Through March 31, 1998, the Partnership has used $10,028,788 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 March 31, 1998, the Partnership owns, in whole or in part,
twenty-one 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.
-14-
At March 31, 1998, the Partnership had cash and cash equivalents of $1,323.
The Unit Repurchase Program has approximately $63,100 allocated 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 to the Limited Partners resulting in
cumulative distributions of $5,996,219.
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. Parcels 4, 6 and 7 have
completed one phase of 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 total forty
lots, eleven lots were sold to individuals during 1996 and 1997 and two
additional lots were sold to individuals during 1998 (see Note 3 of the Notes
to Financial Statements.) Parcels 16, 21 and 23 have been zoned with
development and sales marketing underway. Of the total ninety-six lots at
Parcel 21, one lots was sold to an individual during March 1998 and two
additional lots were sold to individuals during April 1998 (see Note 3 of the
Notes to Financial Statements. The Partnership sold the remaining acres of
Parcel 1 on December 29, 1997 to an unaffiliated third-party (see Note 3 of the
Notes to Financial Statements.)
Results of Operations
As of March 31, 1998, the Partnership owned twenty-one parcels of land
consisting of approximately 2,572 acres. Of the 2,572 acres owned,
approximately 2,070 acres are tillable, leased to local farmers and generate
sufficient cash flow to cover property taxes, insurance and other miscellaneous
expenses. Land sales income and cost of land sold for the three months ended
March 31, 1998 is a result of the sale of two additional lots of Parcel 15 and
the sale of one lot of Parcel 21. The increase in rental income for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, is due to the annual increase in lease amounts from tenants. This
increase is partially offset by a decrease in tillable acres due to land sales
and pre-development activity on the Partnership's land investments.
As a result of the sale of the remaining approximately 81 acres of Parcel 1 for
a sales price of $5,750,000 on December 29, 1997, the purchaser assumed the
note payable to an Affiliate on this parcel totaling $3,325,515 and the
interest payable to the Affiliate of $254,396. The Partnership received
mortgage loans receivable totaling $2,170,089 and recorded deferred gain on
sale of $106,905. The deferred gain will be recognized over the life of the
related mortgage loans receivable as principal payments are received. See Note
5 of the Notes to Financial Statements for further discussion of the terms of
the mortgage loans receivable received from this sale.
-15-
Interest income increased for the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997, due primarily as a result of
the interest income earned on the mortgage loans receivable the Partnership
received from the sale of the remaining approximately 81 acres of Parcel 1 on
December 29, 1997. See Note 5 of the Notes to Financial Statements for further
discussion of the terms of the mortgage loans receivable received from this
sale.
Professional services to Affiliates decreased for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, due primarily
to a decrease in legal services required by the Partnership. Professional
services to non-affiliates increased for the three months ended March 31, 1998,
as compared to the three months ended March 31, 1997, due to an increase in
accounting fees.
General and administrative expenses to Affiliates decreased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due to decreases in postage and data processing expenses. This decrease
was partially offset by an increase in investor services expenses. General and
administrative expenses to non-affiliates decreased for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997, due to
decreases in printing and state tax expenses.
Marketing expenses to Affiliates decreased for the three months ended March 31,
1998, as compared to the three months ended March 31, 1997, due to the
identification of such costs which are specific to a particular parcel, and
accordingly, have been capitalized and are included in investments in land.
Marketing expenses to non-affiliates decreased for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, due to a
decrease in advertising and travel expenses relating to marketing the land
portfolio to prospective purchasers.
Land operating expenses to non-affiliates increased for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997, due to an
increase in maintenance expenses of the Partnership's land investments.
Year 2000 Compliance
The Partnership has reviewed its current computer systems and does not
anticipate any future problems relating to the year 2000.
PART II - Other Information
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
-16-
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: May 15, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 15, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 15, 1998
-17-
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<PERIOD-END> MAR-31-1998
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