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, 1996
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 #0-18456
Inland Mortgage Investors Fund III, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3604866
(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: 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 MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
------
1996 1995
---- ----
Cash and cash equivalents (Note 1)................ $ 169,771 68,800
Accrued interest receivable....................... 10,226 10,366
Mortgage loans receivable (Note 3)................ 1,101,297 1,215,249
------------ ------------
Total assets...................................... $ 1,281,294 1,294,415
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable................................ $ - 1,106
Distributions payable........................... 15,849 20,588
Due to Affiliates (Note 2)...................... 1,141 2,158
------------ ------------
Total liabilities............................. 16,990 23,852
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Supplemental Capital Contributions............ 306,874 306,874
Supplemental distributions to Limited Partners (306,874) (306,874)
Cumulative net income......................... 19,174 16,623
Cumulative distributions...................... (14,109) (11,558)
------------ ------------
5,565 5,565
------------ ------------
Limited Partners:
Units of $500. Authorized 40,000 Units,
5,674.50 Units outstanding at September 30,
1996 and December 31, 1995 (net of offering
costs of $422,642, of which $115,754 was
paid to Affiliates)......................... 2,414,607 2,414,607
Supplemental Capital Contributions from
General Partner............................. 306,874 306,874
Cumulative net income......................... 770,002 722,864
Cumulative distributions...................... (2,232,744) (2,179,347)
------------ ------------
1,258,739 1,264,998
------------ ------------
Total Partners' capital....................... 1,264,304 1,270,563
------------ ------------
Total liabilities and Partners' capital........... $ 1,281,294 1,294,415
============ ============
See accompanying notes to financial statements.
-2-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Operations
For the three and nine months ended September 30, 1996 and 1995
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
Income:
Interest on mortgage loans
receivable (Note 3)............ $ 28,112 32,763 89,150 121,088
Interest on investments.......... 2,031 1,455 3,375 2,777
---------- ---------- ---------- ----------
30,143 34,218 92,525 123,865
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 909 2,971 4,839 8,443
Professional services to
non-affiliates................. 740 - 22,380 19,514
General and administrative
expenses to Affiliates......... 4,267 3,756 11,356 12,175
General and administrative
expenses to non-affiliates..... 1,259 998 4,261 3,507
---------- ---------- ---------- ----------
7,175 7,725 42,836 43,639
---------- ---------- ---------- ----------
Net income................... $ 22,968 26,493 49,689 80,226
========== ========== ========== ==========
Net income allocated to:
General Partner.................. 709 1,063 2,551 4,345
Limited Partners................. 22,259 25,430 47,138 75,881
---------- ---------- ---------- ----------
Net income....................... $ 22,968 26,493 49,689 80,226
========== ========== ========== ==========
Net income allocated to the one
General Partner Unit............. $ 709 1,063 2,551 4,345
========== ========== ========== ==========
Net income allocated to Limited
Partners per Limited Partnership
Units of 5,674.50................ $ 3.93 4.48 8.31 13.37
========== ========== ========== ==========
See accompanying notes to financial statements.
-3-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995
(unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Net income...................................... $ 49,689 80,226
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in assets and liabilities:
Accrued interest receivable................. 140 4,349
Accounts payable............................ (1,106) 171
Due to Affiliates........................... (1,017) 8,107
------------ ------------
Net cash provided by operating activities......... 47,706 92,853
------------ ------------
Cash flows from investing activities:
Principal payments collected.................... 113,952 544,904
------------ ------------
Net cash provided by investing activities......... 113,952 544,904
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (60,687) (665,396)
------------ ------------
Net cash used in financing activities............. (60,687) (665,396)
------------ ------------
Net increase (decrease) in cash
and cash equivalents............................ 100,971 (27,639)
Cash and cash equivalents at beginning of period.. 68,800 99,103
------------ ------------
Cash and cash equivalents at end of period........ $ 169,771 71,464
============ ============
Supplemental schedule of non-cash investing and
financing activities:
Accrued distributions payable..................... $ 15,849 22,758
============ ============
See accompanying notes to financial statements.
-4-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 1996
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1995, which are
included in the Partnership's 1995 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 Mortgage Investors Fund III, L.P. (the "Partnership"), was formed in
September 1988 pursuant to the Delaware Revised Uniform Limited Partnership Act
to make or acquire loans collateralized by mortgages on improved, income
producing properties. On January 9, 1989, the Partnership commenced an
Offering of 40,000 (subject to an increase up to 50,000) Limited Partnership
Units ("Units") pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933. The Offering terminated January 9, 1991, with total
sales of 5,674.50 Units, resulting in gross offering proceeds of $2,837,249,
not including the General Partner's contribution of $500 for one Unit. All of
the holders of these Units were admitted to the Partnership. Inland Real
Estate Investment Corporation is the General Partner.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
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 fair value due to the short maturity of those
instruments.
Interest income on mortgage loans receivable is accrued when earned. The
accrual of interest, on loans that are in default, is discontinued when, in the
opinion of the General Partner, the borrower has not complied with loan work-
out arrangements. Once a loan has been placed on a non-accrual status, all
cash received is applied against the outstanding loan balance until such time
as the borrower has demonstrated an ability to make payments under the terms of
the original or renegotiated loan agreement. The Partnership intends to pursue
collection of all amounts currently due from the borrowers.
The fair value of the mortgage loans receivable and related mortgage interest
receivable is based upon contractual payments to be received and current market
interest rates for issuance of mortgage loans with similar terms and
maturities. The estimated fair value of the mortgage loans receivable at
September 30, 1996 approximates their carrying value.
-5-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
Disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by using available market
information and appropriate valuation methodologies.
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.
(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 to Affiliates and general and administrative expenses to
Affiliates, of which $1,141 and $2,158 remained unpaid at September 30, 1996
and December 31, 1995, respectively.
The General Partner was required to make Supplemental Capital Contributions, if
necessary, from time to time in sufficient amounts to allow the Partnership to
make cumulative return to the Limited Partners amounting to at least 8% per
annum on their Invested Capital through January 9, 1994. The cumulative amount
of such Supplemental Capital Contributions is $306,874, all of which has been
paid.
The Partnership has arranged for Inland Mortgage Servicing Corporation
("IMSC"), a subsidiary of the General Partner, to service the Partnership's
mortgage loans receivable. The services include processing mortgage
collections and escrow deposits and maintaining related records. For these
services, the Partnership is obligated to pay fees at an annual rate equal to
1/4 of 1% of the outstanding mortgage loans receivable of the Partnership.
Such fees of $2,210 and $3,069 for the nine months ended September 30, 1996 and
1995, respectively, have been incurred and paid to IMSC and are included in
general and administrative expenses to Affiliates.
-6-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(3) Mortgage Loans Receivable
Mortgage loans receivable are collateralized by first mortgages on improved,
income producing properties located in the Chicago metropolitan area. As
additional collateral, the Partnership holds assignments of rents and leases or
personal guarantees of the borrowers. Generally, the mortgage notes are
payable in equal monthly installments based on 20 or 30 year amortization
periods.
In May, June and July 1996, the borrower on the loan collateralized by the
property located at 7432 Washington made partial paydowns on the mortgage loan
receivable. The Partnership received $109,071, its proportionate share of the
total paydowns.
(4) Subsequent Events
In October 1996, the Partnership paid a distribution of $15,849 to the
Partners, of which $15,140 was distributed to the Limited Partners, including
$1,668 of principal amortization and $13,472 of net interest income; and $709
was distributed to the General Partner.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On January 9, 1989, the Partnership commenced an Offering of 40,000 (subject to
an increase to 50,000) Limited Partnership Units pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering
terminated on January 9, 1991 with total sales of 5,674.50 Units being sold to
the public at $500 per Unit resulting in $2,837,249 gross offering proceeds
which were received by the Partnership, not including the General Partner's
contribution for one Unit of $500. The Partnership funded seven loans between
October 1990 and June 1992 utilizing $2,302,064 of capital proceeds collected.
As of September 30, 1996, cumulative distributions to the Limited Partners
totaled $2,232,744, including $1,113,391 of repayment proceeds and principal
amortization, $51,147 from working capital reserves, $761,332 from operations
and $306,874 in Supplemental Capital Contributions from the General Partner.
As of September 30, 1996, the Partnership had cash and cash equivalents of
$169,771. The Partnership intends to use such remaining funds to pay
distributions and for working capital requirements.
The mortgage loans receivable of the Partnership are generating sufficient cash
flow to cover the operating expenses of the Partnership. To the extent that
cash flow was insufficient to meet the minimum 8% annualized return to
investors through January 9, 1994, as well as any other financial needs, the
Partnership received Supplemental Capital Contributions from the General
Partner. The sources of future liquidity and distributions to the Limited and
General Partners are expected to be from the collection of interest and
repayment of principal of the Partnership's mortgage loan investments. To the
extent that these sources are insufficient to meet the Partnership's needs, the
Partnership may rely on advances from Affiliates of the General Partner, other
short-term financing, or may liquidate certain mortgage loans or other assets.
At September 30, 1996, the Partnership had three mortgage loans receivable
totaling $1,101,297. The maturity dates range from October 2000 to April 2002.
When and as the Partnership receives Repayment Proceeds as a result of the sale
or repayment of a loan, the Repayment Proceeds which are available for
distribution will be distributed to the Limited Partners. When the loans are
repaid, cash flows from operating activities will decrease as a result of the
decrease in interest income earned by the Partnership.
Results of Operations
The maturity dates of the three remaining mortgage loans receivable range from
October 2000 to April 2002. As the loans are repaid by the borrowers and
Repayment Proceeds are distributed to the Limited Partners, interest income
will decrease accordingly.
-8-
The decrease in interest on mortgage loans receivable for the three and nine
months ended September 30, 1996, as compared to the three and nine months ended
September 30, 1995, is due to the payoff of the loan collateralized by the
property located at 9617-18 and 9806-12 Mayline in July 1995 and the partial
paydowns of the loan collateralized by the property located at 7432 Washington
in the second and third quarters of 1995 and the second and third quarters of
1996.
Professional services to Affiliates decreased for the three and nine months
ended September 30, 1996, as compared to the three and nine months ended
September 30, 1995, due to a decrease in accounting fees.
The decrease in general and administrative expenses to Affiliates for the three
and nine months ended September 30, 1996, as compared to the three and nine
months ended September 30, 1995, is due to decreases in postage, data
processing expense and mortgage servicing fees.
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
-9-
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 MORTGAGE INVESTORS FUND III, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: November 13, 1996
/S/ MARK ZALATORIS
By: Mark Zalatoris
Vice President
Date: November 13, 1996
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1996
-10-
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