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, 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 #0-18456
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 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 MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Balance Sheets
September 30, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
---- ----
Cash and cash equivalents (Note 1)................ $ 62,200 219,645
Accrued interest receivable....................... 8,391 9,499
Mortgage loans receivable (Note 3)................ 983,609 1,059,086
------------ ------------
Total assets...................................... $ 1,054,200 1,288,230
============ ============
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Distributions payable........................... $ 13,714 171,208
Due to Affiliates (Note 2)...................... 4,671 1,290
------------ ------------
Total liabilities............................. 18,385 172,498
------------ ------------
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......................... 22,253 20,170
Cumulative distributions...................... (17,188) (15,105)
------------ ------------
5,565 5,565
Limited Partners: ------------ ------------
Units of $500. Authorized 40,000 Units,
5,674.50 Units outstanding at September 30,
1997 and December 31, 1996 (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......................... 826,783 791,642
Cumulative distributions...................... (2,518,014) (2,402,956)
------------ ------------
1,030,250 1,110,167
------------ ------------
Total Partners' capital....................... 1,035,815 1,115,732
------------ ------------
Total liabilities and Partners' capital........... $ 1,054,200 1,288,230
============ ============
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, 1997 and 1996
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Income:
Interest on mortgage loans
receivable (Note 3)............ $ 24,971 28,112 77,001 89,150
Interest on investments.......... 655 2,031 3,283 3,375
---------- ---------- ---------- ----------
25,626 30,143 80,284 92,525
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 1,508 909 4,016 4,839
Professional services to
non-affiliates................. 1,503 740 20,529 22,380
General and administrative
expenses to Affiliates......... 3,864 4,267 15,538 11,356
General and administrative
expenses to non-affiliates..... 806 1,259 2,977 4,261
---------- ---------- ---------- ----------
7,681 7,175 43,060 42,836
---------- ---------- ---------- ----------
Net income................... $ 17,945 22,968 37,224 49,689
========== ========== ========== ==========
Net income allocated to:
General Partner.................. 593 709 2,083 2,551
Limited Partners................. 17,352 22,259 35,141 47,138
---------- ---------- ---------- ----------
Net income....................... $ 17,945 22,968 37,224 49,689
========== ========== ========== ==========
Net income allocated to the one
General Partner Unit............. $ 593 709 2,083 2,551
========== ========== ========== ==========
Net income allocated to Limited
Partners per Limited Partnership
Units of 5,674.50................ $ 3.06 3.92 6.19 8.31
========== ========== ========== ==========
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, 1997 and 1996
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income...................................... $ 37,224 49,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in assets and liabilities:
Accrued interest receivable................. 1,108 140
Accounts payable............................ - (1,106)
Due to Affiliates........................... 3,381 (1,017)
------------ ------------
Net cash provided by operating activities......... 41,713 47,706
------------ ------------
Cash flows from investing activities:
Principal payments collected.................... 75,477 113,952
------------ ------------
Net cash provided by investing activities......... 75,477 113,952
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. (274,635) (60,687)
------------ ------------
Net cash used in financing activities............. (274,635) (60,687)
------------ ------------
Net increase (decrease) in cash
and cash equivalents............................ (157,445) 100,971
Cash and cash equivalents at beginning of period.. 219,645 68,800
------------ ------------
Cash and cash equivalents at end of period........ $ 62,200 169,771
============ ============
Supplemental schedule of non-cash investing and
financing activities:
Accrued distributions payable..................... $ 13,714 15,849
============ ============
See accompanying notes to financial statements.
-4-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
September 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 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 generally located in or near Chicago and other
metropolitan areas. 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 $2,837,749,
which includes the General Partner's $500 contribution. All of the holders of
these Units were admitted to the Partnership. The Limited Partners of the
Partnership share in the benefits of ownership in proportion to the number of
Units held. Inland Real Estate Investment Corporation is the General Partner.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Offering costs have been offset against the Limited Partners' capital accounts.
The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
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.
-5-
INLAND MORTGAGE INVESTORS FUND III, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1997
(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.
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 $4,671 and $1,290 remained unpaid at September 30, 1997
and December 31, 1996, 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 $1,879 and $2,210 for the nine months ended September 30, 1997 and
1996, 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, 1997
(unaudited)
(3) Mortgage Loans Receivable
Mortgage loans receivable are collateralized by first mortgages on improved,
income producing properties located in Chicago, Illinois or its surrounding
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 1997, the borrower on the loan collateralized by the property located at
7432 Washington made additional partial paydowns on the mortgage. The
Partnership received $70,071, its proportionate share of the total paydowns.
(4) Subsequent Events
During October 1997, the Partnership paid a distribution of $13,714 to the
Partners, of which $593 was distributed to the General Partner and $13,121 was
distributed to the Limited Partners, including $1,848 of repayment proceeds and
$11,273 of net interest income.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this quarterly report on
Form 10-Q constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the Partnership's actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
factors include, among other things, federal, state or local regulations;
adverse changes in general economic or local conditions; inability of borrower
to meet financial obligations; uninsured losses; and potential conflicts of
interest between the Partnership and its Affiliates, including the General
Partner.
Liquidity and Capital Resources
On 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 gross offering proceeds of $2,837,749
which includes the General Partner's $500 contribution. The Partnership funded
seven loans between October 1990 and June 1992 utilizing $2,302,064 of capital
proceeds collected. As of September 30, 1997, cumulative distributions to the
Limited Partners totaled $2,518,014, of which $1,374,563 represents principal
amortization and repayments and $306,874 represents Supplemental Capital
Contributions from the General Partner.
As of September 30, 1997, the Partnership had cash and cash equivalents of
$62,200. The Partnership intends to use such funds to pay distributions and
for working capital requirements.
The mortgage loans receivable of the Partnership are currently 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 cash flow is insufficient to meet the Partnership's needs, the
Partnership may rely on advances from Affiliates of the General Partner, other
short-term financing, or may liquidate certain mortgage loans or other assets.
At September 30, 1997, the Partnership had three mortgage loans receivable
totaling $983,609. 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.
-8-
Results of Operations
The decrease in interest on mortgage loans receivable for the three and nine
months ended September 30, 1997, as compared to the three and nine months ended
September 30, 1996, is due to the partial paydowns of the loan collateralized
by the property located at 7432 Washington in the second, third and fourth
quarters of 1996 and the first quarter of 1997.
The increase in general and administrative expenses to Affiliates for the nine
months ended September 30, 1997, as compared to the nine months ended September
30, 1996, is due to increases in postage, data processing expense and investor
service 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 12, 1997
/S/ MARK ZALATORIS
By: Mark Zalatoris
Vice President
Date: November 12, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 12, 1997
-10-
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