<PAGE>
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 September 30, 1995
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 #0-17593
Inland Monthly Income Fund II, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3587209
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60521
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 708-218-8000
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 ____
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<PAGE>
PART I
Item 1. Financial Statements
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Balance Sheets
September 30, 1995 and December 31, 1994
(unaudited)
Assets
------
1995 1994
----------- -----------
Current assets:
Cash and cash equivalents (Note 1).............. $ 1,051,665 1,043,893
Accounts and rents receivable................... 191,245 168,705
Current portion of deferred rent receivable
(Note 2)...................................... 3,296 19,280
Other assets.................................... 2,129 354
----------- -----------
Total current assets.......................... 1,248,335 1,232,232
----------- -----------
Investment properties (including acquisition fees
paid to Affiliates of $1,430,682)(Notes 1
and 3):
Land.......................................... 3,998,149 3,998,149
Buildings and improvements.................... 13,814,185 13,814,185
----------- -----------
17,812,334 17,812,334
Less accumulated depreciation............... 2,646,794 2,323,104
----------- -----------
Net investment properties..................... 15,165,540 15,489,230
----------- -----------
Other assets:
Deferred leasing fees to Affiliates (net of
accumulated amortization of $84,205 and
$70,635 at September 30, 1995 and December 31,
1994, respectively) (Notes 1 and 3)........... 143,527 157,097
Deferred rent receivable (Note 2)............... 396,589 364,166
----------- -----------
Total other assets............................ 540,116 521,263
----------- -----------
Total assets...................................... $16,953,991 17,242,725
=========== ===========
See accompanying notes to financial statements.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1995 and December 31, 1994
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1995 1994
----------- -----------
Current liabilities:
Accounts payable................................ $ 5,206 34,654
Accrued real estate taxes....................... 224,473 172,194
Distributions payable (Note 4).................. 135,900 140,426
Due to Affiliates (Note 3)...................... 2,934 680
Deposits held for others........................ 402,303 352,147
Other current liabilities....................... 26,925 51,925
----------- -----------
Total current liabilities..................... 797,741 752,026
Commission payable to Affiliates (Note 3)......... 132,000 132,000
----------- -----------
Total liabilities................................. 929,741 884,026
----------- -----------
Partners' capital (Notes 1, 3 and 4):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 73,985 77,222
----------- -----------
74,485 77,722
----------- -----------
Limited Partners:
Units of $500. Authorized 80,000 Units,
50,095.50 Units outstanding (net of
offering costs of $3,148,734, of which
$653,165 was paid to Affiliates)............ 21,916,510 21,916,510
Cumulative net income......................... 9,895,973 8,940,582
Cumulative distributions...................... (15,862,718) (14,576,115)
----------- -----------
15,949,765 16,280,977
----------- -----------
Total Partners' capital..................... 16,024,250 16,358,699
----------- -----------
Total liabilities and Partners' capital........... $16,953,991 17,242,725
=========== ===========
See accompanying notes to financial statements.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Statements of Operations
For the three and nine months ended September 30, 1995 and 1994
(unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
----------------- --------------------
1995 1994 1995 1994
-------- ------- --------- ---------
<S> <C> <C> <C> <C>
Income:
Rental income (Notes 1 and 2).... $479,401 483,952 1,437,075 1,452,857
Additional rental income......... 36,725 43,500 111,341 115,866
Interest income.................. 8,369 5,220 25,238 14,969
Other income..................... -- 3,488 1,709 3,591
-------- ------- --------- ---------
524,495 536,160 1,575,363 1,587,283
-------- ------- --------- ---------
Expenses:
Professional services to
Affiliates..................... 4,620 1,706 15,253 15,556
Professional services to
non-affiliates................. -- -- 24,550 23,765
General and administrative
expenses to Affiliates......... 7,972 8,139 26,762 30,240
General and administrative
expenses to non-affiliates..... 1,951 2,214 11,604 12,663
Property operating expenses to
Affiliates..................... 6,956 10,779 22,394 26,912
Property operating expenses to
non-affiliates................. 57,814 61,728 185,386 173,758
Depreciation..................... 107,897 107,898 323,690 323,690
Amortization..................... 4,524 4,523 13,570 13,569
-------- ------- --------- ---------
191,734 196,987 623,209 620,153
-------- ------- --------- ---------
Net income......................... $332,761 339,173 952,154 967,130
======== ======= ========= =========
Net income (loss) allocated to:
General Partner.................. (1,079) (1,079) (3,237) (3,237)
Limited Partners................. 333,840 340,252 955,391 970,367
-------- ------- --------- ---------
Net income......................... $332,761 339,173 952,154 967,130
======== ======= ========= =========
Net loss allocated to the one
General Partner Unit............. $ (1,079) (1,079) (3,237) (3,237)
======== ======= ========= =========
Net income per weighted average
Limited Partner Unit (50,095.50
for 1995 and 1994)............... $ 6.66 6.79 19.07 19.37
======== ======= ========= =========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For nine months ended September 30, 1995 and 1994
(unaudited)
1995 1994
----------- -----------
Cash flows from operating activities:
Net income...................................... $ 952,154 967,130
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation.................................. 323,690 323,690
Amortization.................................. 13,570 13,569
Deferred rent receivable...................... (16,439) (1,217)
Changes in assets and liabilities:
Accounts and rents receivable............... (22,540) 8,579
Other assets................................ (1,775) (902)
Accounts payable............................ (29,448) 11,136
Accrued real estate taxes................... 52,279 (33,993)
Due to Affiliates........................... 2,254 1,193
Other current liabilities................... (25,000) (1,657)
----------- -----------
Net cash provided by operating activities......... 1,248,745 1,287,528
----------- -----------
Cash flows from financing activities:
Deposits held for others........................ 50,156 (53,291)
Cash distributions.............................. (1,291,129) (1,344,538)
----------- -----------
Net cash used in financing activities............. (1,240,973) (1,397,829)
----------- -----------
Net increase (decrease) in cash
and cash equivalents............................ 7,772 (110,301)
Cash and cash equivalents at beginning of period.. 1,043,893 1,062,624
----------- -----------
Cash and cash equivalents at end of period........ $ 1,051,665 952,323
============ ============
See accompanying notes to financial statements.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 1995
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1994, which are
included in the Partnership's 1994 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 Monthly Income Fund II, L.P. (the "Partnership") was organized on June
20, 1988 by filing a Certificate of Limited Partnership under the Revised
Uniform Limited Partnership Act of the State of Delaware. On August 4, 1988, the
Partnership commenced an Offering of 50,000 (subject to increase to 80,000)
Limited Partnership Units pursuant to a Registration under the Securities Act of
1933. The Offering terminated on August 4, 1990, with total sales of 50,647.14
Units at $500 per Unit, resulting in gross offering proceeds of $25,323,569, not
including the General Partner's contribution of $500. All of the holders of
these Units have been admitted to the Partnership. Inland Real Estate Investment
Corporation is the General Partner. As of September 30, 1995, the Partnership
had repurchased 551.64 Units for $260,285 from various Limited Partners through
the Unit Repurchase Program. There are no funds remaining for the repurchase of
Units through this program.
Offering costs have been offset against the Limited Partners' capital accounts.
The investment properties are recorded at cost. Depreciation expense is computed
using the straight-line method. Buildings and improvements are based upon
estimated useful lives of 30 to 40 years, while furniture and fixtures are based
upon estimated useful lives of 5 to 12 years. Maintenance and repair expenses
are charged to operations as incurred. Significant improvements are capitalized
and depreciated over their estimated useful lives.
Deferred leasing fees are amortized on a straight-line basis over the term of
the related lease.
Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned and the cash rent due under
the provisions of the lease agreements is recorded as deferred rent receivable.
The Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1995
(unaudited)
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 the results
to be expected for the year.
(2) Deferred Rent Receivable
Certain tenant leases contain provisions providing for stepped rent increases.
Generally accepted accounting principles require that rental income be recorded
for the period of occupancy 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 increases of $16,439 and
$1,217 for 1995 and 1994, respectively, of rental income for the period of
occupancy for which stepped rent increases apply and $399,885 and $383,446 in
related accounts receivable as of September 30, 1995 and December 31, 1994,
respectively. These amounts will be collected over the terms of the related
leases as scheduled rent payments are made.
(3) Transactions with Affiliates
The General Partner and its Affiliates are entitled to reimbursement for
salaries and expenses of employees of the General Partner and its Affiliates
relating to the administration of the Partnership. Such costs are included in
professional services to Affiliates and general and administrative expenses to
Affiliates, of which $2,934 and $680 was unpaid as of September 30, 1995 and
December 31, 1994, respectively.
An Affiliate of the General Partner earned Property Management Fees of $22,394
and $25,050 for the nine months ended September 30, 1995 and 1994, respectively,
in connection with managing the Partnership's properties. Such costs are
included in property operating expenses to Affiliates, all of which have been
paid. In addition, an Affiliate of the General Partner performed property
maintenance on the Partnership's investment properties and was reimbursed (as
set forth under terms of the Partnership Agreement) for direct costs. Such costs
of $1,862 for the nine months ended September 30, 1994 are included in property
operating expenses to Affiliates, all of which have been paid.
In connection with the sale of The Wholesale Club on January 8, 1991, the
Partnership recorded $132,000 of sales commission payable to an Affiliate of the
General Partner. Such commission has been deferred until the Limited Partners
receive their Original Capital plus a return as specified in the Partnership
Agreement.
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<PAGE>
INLAND MONTHLY INCOME FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1995
(unaudited)
Through the Partnership's participation in an insurance program, claims from the
Partnership's properties, as well as properties owned by other limited
partnerships syndicated by Affiliates, were managed through a loss reserve
trust. In June 1995, this program was terminated. As of September 30, 1995, the
Partnership paid $428 to the loss reserve trust for K mart.
(4) Subsequent Events
During October 1995, the Partnership paid a distribution of $135,900 to the
Limited Partners.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On August 4, 1988, the Partnership commenced an Offering of 50,000 (subject to
increase to 80,000) Limited Partnership Units pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering terminated
on August 4, 1990, with total sales of 50,647.14 Units at $500 per Unit,
resulting in gross offering proceeds of $25,323,569, not including the General
Partner's contribution of $500. The Partnership had acquired five properties
utilizing $21,224,542 of capital proceeds collected. On January 8, 1991, the
Partnership sold one of its properties, The Wholesale Club. As of September 30,
1995, the Partnership has repurchased 551.64 Units for $260,285 from various
Limited Partners through the Unit Repurchase Program. There are no funds
remaining for the repurchase of Units through this program.
As of September 30, 1995, the Partnership had cash and cash equivalents of
$1,051,665, which includes $391,441 held in escrow for the payment of real
estate taxes for Colonial Manor Living Center. The Partnership intends to use
such remaining funds for distributions and for working capital requirements.
The properties owned by the Partnership are generating cash flow in excess of
the 8% annualized distributions to the Limited Partners (paid monthly), in
addition to covering all the operating expenses of the Partnership. In 1994, the
Partnership distributed $103,339 in addition to the 8% annualized return to
investors from 1993 excess cash flow. In May 1995, the Partnership distributed
$50,000 in addition to the 8% annualized return to investors from 1994 excess
cash flow.
During August 1995, Certified Grocers Midwest, Inc. ("Certified") vacated the
anchor store of Water Tower Market Plaza in Palatine, Illinois. Eagle Foods had
assigned the lease on February 4, 1994 to Certified, which occupied the store
since March 1, 1994. Under the original lease, as well as the assignment of the
lease, Eagle Foods has guaranteed payments until November 1998.
Results of Operations
At September 30, 1995, the Partnership owned four operating properties. Two out
of the Partnership's four operating properties, Scandinavian Health Spa and
Colonial Manor Living Center, are leased on a "triple-net" basis which means
that all expenses of the property are passed through to the tenant. The leases
of the other two properties owned by the Partnership, K mart and Water Tower
Market Plaza, provide that the Partnership be responsible for maintenance of the
structure and the parking lot and the tenants are required to reimburse the
Partnership for portions of insurance, real estate taxes and common area
maintenance. The Partnership sold one of its properties, The Wholesale Club, on
January 8, 1991.
Interest income increased for the three and nine months ended September 30,
1995, as compared to the three and nine months ended September 30, 1994, due to
an increase in interest rates.
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<PAGE>
General and administrative expenses to Affiliates decreased for the three and
nine months ended September 30, 1995, as compared to the three and nine months
ended September 30, 1994, due primarily to a decrease in data processing
expense.
Property operating expenses to Affiliates decreased for the three and nine
months ended September 30, 1995, as compared to the three and nine months ended
September 30, 1994, due to a decrease in property management fees and property
maintenance performed by Affiliates of the General Partner. Property operating
expenses to non-affiliates increased for the three and nine months ended
September 30, 1995, as compared to the three and nine months ended September 30,
1994, due to increases in repair and maintenance, marketing and real estate
taxes at Water Tower Market Plaza.
The following is a list of approximate occupancy levels for the Partnership's
investment properties as of the end of each quarter during 1994 and 1995:
1994 1995
----------------------- -----------------------
at at at at at at at at
Properties 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---------- ---- ---- ---- ----- ---- ---- ---- -----
Scandinavian Health Spa 100% 100% 100% 100% 100% 100% 100%
Broadview Heights, Ohio
Colonial Manor 100% 100% 100% 100% 100% 100% 100%
LaGrange, Illinois
K mart 100% 100% 100% 100% 100% 100% 100%
Chandler, Arizona
Water Tower Market Plaza 97% 97% 93% 89% 91% 89% 89%*
Palatine, Illinois
*Certified vacated Water Tower Market Plaza in August 1995. This occupancy
reflects the payment of guaranteed rental income received under the original
lease. (See Liquidity and Capital Resources.)
PART II
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
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<PAGE>
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 MONTHLY INCOME FUND II, L.P.
By: Inland Real Estate Investment Corporation
General Partner
By: Robert D. Parks
Chairman
Date: November 13, 1995
By: Cynthia M. Hassett
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1995
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,051,665
<SECURITIES> 0
<RECEIVABLES> 591,130
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,248,335
<PP&E> 17,812,334
<DEPRECIATION> 2,646,794
<TOTAL-ASSETS> 16,953,991
<CURRENT-LIABILITIES> 797,741
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 16,024,250
<TOTAL-LIABILITY-AND-EQUITY> 16,953,991
<SALES> 0
<TOTAL-REVENUES> 1,575,363
<CGS> 0
<TOTAL-COSTS> 207,780
<OTHER-EXPENSES> 415,429
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 952,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 952,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 952,154
<EPS-PRIMARY> 19.07
<EPS-DILUTED> 19.07
</TABLE>
