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 #0-19220
Inland Land Appreciation Fund II, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3664407
(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 LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
------
1996 1995
---- ----
Current assets:
Cash and cash equivalents (Note 1).............. $ 3,885,605 5,097,705
Investments in marketable securities (Note 1)... 2,025,000 -
Accounts and accrued interest receivable........ 145,330 19,900
Deposits and other current assets............... 12,159 2,544
------------ ------------
Total current assets.......................... 6,068,094 5,120,149
------------ ------------
Investment properties (including acquisition
fees paid to Affiliates of $2,028,936 and
$2,049,707 at September 30, 1996 and December 31,
1995, respectively) (Notes 1 and 3):
Land and improvements........................... 40,354,280 40,799,412
Buildings....................................... 93,082 93,082
------------ ------------
40,447,362 40,892,494
Less accumulated depreciation................... 11,506 9,179
------------ ------------
Total investment properties, net of accumulated
depreciation.................................... 40,435,856 40,883,315
------------ ------------
Total assets...................................... $46,503,950 46,003,464
============ ============
See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1996 1995
---- ----
Current liabilities:
Accounts payable................................ $ 14,399 21,907
Accrued real estate taxes....................... 77,948 97,271
Due to Affiliates (Note 2)...................... 402 11,167
Unearned income................................. 53,218 29,898
------------ ------------
Total current liabilities..................... 145,967 160,243
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution........................... 500 500
Cumulative net income.......................... 448,864 447,723
Cumulative cash distributions.................. (93,034) (93,034)
------------ ------------
356,330 355,189
------------ ------------
Limited Partners:
Units of $1,000. Authorized 60,000 Units,
50,184.52 and 50,193.52 Units outstanding
as of September 30, 1996 and December 31,
1995, respectively (net of offering costs of
$7,532,439, of which $2,535,445 was paid
to Affiliates)................................ 42,655,371 42,663,992
Cumulative net income.......................... 6,183,245 5,660,948
Cumulative cash distributions.................. (2,836,963) (2,836,908)
------------ ------------
46,001,653 45,488,032
------------ ------------
Total Partners' capital....................... 46,357,983 45,843,221
------------ ------------
Total liabilities and Partners' capital........... $46,503,950 46,003,464
============ ============
See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND II, 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:
Sale of investment properties
(Notes 1 and 3)................ $ 39,265 512,364 1,291,491 3,248,110
Rental income (Note 4)........... 94,183 105,661 267,804 312,058
Interest income.................. 81,671 29,599 236,974 51,532
Other income..................... 166 - 166 1,300
---------- ---------- ---------- ----------
215,285 647,624 1,796,435 3,613,000
---------- ---------- ---------- ----------
Expenses:
Cost of investment properties
sold........................... 29,084 381,287 882,162 2,173,390
Professional services to
Affiliates..................... 6,793 12,981 16,734 32,959
Professional services to
non-affiliates................. 289 433 30,657 28,737
General and administrative
expenses to Affiliates......... 12,413 12,217 33,268 29,887
General and administrative
expenses to non-affiliates..... 3,813 4,249 32,966 16,078
Marketing expenses to Affiliates. 9,192 13,261 35,569 59,875
Marketing expenses to
non-affiliates................. 37,034 5,645 45,621 15,668
Land operating expenses to
Affiliates..................... 22,712 24,453 69,092 74,706
Land operating expenses to
non-affiliates................. 46,736 37,840 124,601 111,440
Depreciation..................... 776 775 2,327 2,327
---------- ---------- ---------- ----------
168,842 493,141 1,272,997 2,545,067
---------- ---------- ---------- ----------
Net income......................... $ 46,443 154,483 523,438 1,067,933
========== ========== ========== ==========
See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
(continued)
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
---- ---- ---- ----
Net income (loss) allocated to:
General Partner.................. $ 362 234 1,141 (68)
Limited Partners................. 46,081 154,249 522,297 1,068,001
---------- ---------- ---------- ----------
Net income......................... $ 46,443 154,483 523,438 1,067,933
========== ========== ========== ==========
Net income (loss) allocated to the
one General Partner Unit......... $ 362 234 1,141 (68)
========== ========== ========== ==========
Net income per weighted average
Limited Partner Unit (50,197
and 50,224 for the three months
ended September 30, 1996 and 1995,
respectively, and 50,196 and
50,228 for the nine months
ended September 30, 1996 and 1995,
respectively).................... $ .92 3.07 10.41 21.26
========== ========== ========== ==========
See accompanying notes to financial statements.
-5-
INLAND LAND APPRECIATION FUND II, 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...................................... $ 523,438 1,067,933
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation.................................. 2,327 2,327
Gain on sale of investment properties......... (409,329) (1,074,720)
Changes in assets and liabilities:
Accounts and accrued interest receivable.... (125,430) (88,426)
Deposits and other current assets........... (9,615) (2,832)
Accounts payable............................ (7,508) (3,278)
Accrued real estate taxes................... (19,323) (28,909)
Due to Affiliates........................... (10,765) 13,515
Unearned income............................. 23,320 (21,728)
------------ ------------
Net cash used in operating activities............. (32,885) (136,118)
------------ ------------
Cash flows from investing activities:
Additions to investment properties.............. (437,030) (1,626,141)
Sale (purchase) of marketable securities, net... (2,025,000) -
Proceeds from sale of investment properties..... 1,291,491 3,248,110
------------ ------------
Net cash provided by (used in) investing
activities...................................... (1,170,539) 1,621,969
------------ ------------
Cash flows from financing activities:
Cash distributions.............................. - (1,000,000)
Foreign Partners' withholding................... (55) -
Repurchase of Limited Partnership Units......... (8,621) (7,762)
------------ ------------
Net cash used in financing activities............. (8,676) (1,007,762)
------------ ------------
Net increase (decrease) in cash
and cash equivalents............................ (1,212,100) 478,089
Cash and cash equivalents at beginning of
period.......................................... 5,097,705 896,813
------------ ------------
Cash and cash equivalents at end of period........ $ 3,885,605 1,374,902
============ ============
See accompanying notes to financial statements.
-6-
INLAND LAND APPRECIATION FUND II, 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 Land Appreciation Fund II, L.P. (the "Partnership") was organized on
June 28, 1989 by the filing of a Certificate of Limited Partnership under the
Revised Uniform Limited Partnership Act of the State of Delaware. On October
25, 1989, the Partnership commenced an Offering of 30,000 (subject to increase
to 60,000) Limited Partnership Units pursuant to a Registration under the
Securities Act of 1933. The Offering terminated on October 24, 1991, with
total sales of 50,476.17 Units at $1,000 per Unit, resulting in $50,476,170 in
gross offering proceeds, not including the General Partner's contribution of
$500. All of the holders of these Units have been admitted to the Partnership.
As of September 30, 1996, the Partnership has repurchased a total of 291.65
Units for $288,360 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.
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 because of the relative short maturity of
these instruments.
Investments purchased with a maturity of three months or more are considered to
be investments in marketable securities and are carried at cost, which
approximates fair value.
-7-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
Investment properties held by the Partnership are carried at the lower of
aggregate cost or net realizable value. Periodically, the Partnership reviews
the portfolio and if management determines that parcels suffered an impairment
in value which is deemed to be other than temporary, the carrying value of the
parcels would be reduced to their net realizable value. Through September 30,
1996, there were no such impairments.
For vacant land parcels and parcels with insignificant buildings and
improvements, the Partnership uses the area method of allocation, which
approximates 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. For parcels with significant buildings and improvements (Parcel
24, described in Note 3), the Partnership records the buildings and
improvements at a cost based upon the appraised value at the date of
acquisition. Building and improvements are depreciated using the straight-line
method of depreciation over a useful life of thirty years. Repair and
maintenance expenses are charged to operations as incurred. Significant
improvements are capitalized and depreciated over their estimated useful lives.
No provision for Federal income taxes has been made as the liability for such
taxes is that of the Partners rather than the Partnership.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" was issued in March 1995 and
is effective for fiscal years beginning after December 15, 1995. This
pronouncement is not expected to have a material effect on the financial
position or results of operations of 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 period
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.
-8-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(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 to Affiliates and general and administrative expenses to
Affiliates, of which $402 and $7,536 was unpaid as of September 30, 1996 and
December 31, 1995, 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 $69,092 and
$74,706 have been incurred for the nine months ended September 30, 1996 and
1995, respectively, and are included in land operating expenses to Affiliates,
all of which have been paid.
An Affiliate of the General Partner performed marketing and advertising
services of the Partnership's land investments and was reimbursed (as set forth
under terms of the Partnership Agreement) for direct costs. Such costs of
$35,569 and $59,875 have been incurred and are included in marketing expenses
to Affiliates for the nine months ended September 30, 1996 and 1995,
respectively, of which $0 and $3,631 was unpaid as of September 30, 1996 and
December 31, 1995, 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 take a profit
on any project. Such costs of $34,957 and $13,772 have been incurred for the
nine months ended September 30, 1996 and 1995, respectively, and are included
in investment properties, all of which have been paid.
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. For the nine months ended September 30, 1996 and 1995, the Partnership
paid $4,142 and $4,750, respectively, to the loss reserve trust for the land
parcels.
-9-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties
The following real property investments are owned by the Partnership as
of September 30, 1996:
Gross
Acres Purchase/ Initial Costs
Parcel Location: Purchased Sales Original Acquisition
# County /Sold Date Costs Costs Total
1 McHenry 372.759 04/25/90 $ 2,114,295 114,070 2,228,365
2 Kendall 41.118 07/06/90 549,639 43,889 593,528
3 Kendall 120.817 11/06/90 1,606,794 101,863 1,708,657
4 Kendall 299.025 06/28/91 1,442,059 77,804 1,519,863
5 Kane 189.0468 02/28/91 1,954,629 94,569 2,049,198
6 Lake 57.3345 04/16/91 904,337 71,199 975,536
(.258) 10/01/94
7 McHenry 56.7094 04/22/91 680,513 44,444 724,957
8 Kane 325.394 06/14/91 3,496,700 262,275 3,758,975
(.870) 04/03/96
9 Will 9.867 08/13/91 217,074 988 218,062
10 Will 150.66 08/20/91 1,866,716 89,333 1,956,049
11 Will 138.447 08/20/91 289,914 20,376 310,290
(138.447) 05/03/93
12 Will 44.732 08/20/91 444,386 21,988 466,374
13 Will 6.342 09/23/91 139,524 172 139,696
(6.342) 05/03/93
14 Kendall 44.403 09/03/91 888,060 68,210 956,270
15 Kendall 100.364 09/04/91 1,050,000 52,694 1,102,694
(5.000) 09/01/93
(11.000) 12/01/94
16 McHenry 168.905 09/13/91 1,402,058 69,731 1,471,789
17 Kendall 3.462 10/30/91 435,000 22,326 457,326
18 McHenry 139.1697 11/07/91 1,160,301 58,190 1,218,491
------------ ------------ ------------
Subtotal $20,641,999 1,214,121 21,856,120
Total
Costs Remaining Current
Capitalized Costs of Costs of Year Gain
Parcel Subsequent to Property Parcels at on Sale
# Acquisition Sold 9/30/96 Recognized
1 195,328 - 2,423,693 -
2 7,160 - 600,688 -
3 5,741 - 1,714,398 -
4 510 - 1,520,373 -
5 142,137 - 2,191,335 -
6 15,782 4,457 986,861 -
7 299,614 - 1,024,571 -
8 24,020 10,000 3,772,995 -
9 869 - 218,931 -
10 122 - 1,956,171 -
11 2,700 312,990 - -
12 40 - 466,414 -
13 - 139,696 - -
14 460 - 956,730 -
15 17,867 177,298 943,263 -
16 79,806 - 1,551,595 -
17 231 - 457,557 -
18 204,549 - 1,423,040 -
-------------- ------------ ------------ ------------
996,936 644,441 22,208,615 -
-10-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties (continued)
Gross
Acres Purchase/ Initial Costs
Parcel Location: Purchased Sales Original Acquisition
# County /Sold Date Costs Costs Total
Subtotal $20,641,999 1,214,121 21,856,120
19 Kane 436.236 12/13/91 4,362,360 321,250 4,683,610
20 Kane &
Kendall 400.129 01/31/92 1,692,623 101,318 1,793,941
21 Kendall 15.013 05/26/92 250,000 23,844 273,844
22 Kendall 391.959 10/30/92 3,870,000 283,186 4,153,186
(10.000) 01/06/94
(5.538) 01/05/96
23 (c) Kendall 133.2074 10/30/92 3,231,942 251,373 3,483,315
(11.525) 07/16/93
(56.53) Var 1995
(6.08) Var 1996
23A(a) Kendall .2676 10/30/92 170,072 12,641 182,713
(.2676) 03/16/93
24 Kendall 3.908 01/21/93 645,000 56,316 701,316
24A(b) Kendall .406 01/21/93 155,000 13,533 168,533
25 Kendall 656.687 01/28/93 1,625,000 82,536 1,707,536
(656.687) 10/31/95
26 Kane 89.511 03/10/93 1,181,555 89,312 1,270,867
27 Kendall 83.525 03/11/93 984,474 54,846 1,039,320
------------ ------------ ------------
$38,810,025 2,504,276 41,314,301
============ ============ ============
Total
Costs Remaining Current
Capitalized Costs of Costs of Year Gain
Parcel Subsequent to Property Parcels at on Sale
# Acquisition Sold 9/30/96 Recognized
996,936 644,441 22,208,615 -
19 113,920 - 4,797,530 -
20 38,743 - 1,832,684 -
21 6,229 - 280,073 -
22 89,862 164,804 4,078,244 94,270
23 4,245,442 3,712,086 4,016,671 315,059
23A - 182,713 - -
24 427 - 701,743 -
24A(b) - - 168,533 -
25 22,673 1,730,209 - -
26 52,640 - 1,323,507 -
27 442 - 1,039,762 -
-------------- ------------ ------------ -----------
5,567,314 6,434,253 40,447,362 409,329
============== ============ ============ ===========
(a) Included in the purchase of Parcel 23 was a newly constructed 2,500
square foot house. The house, located at 213 Stonemill Lane in the Mill
Race Creek Subdivision, was sold in March 1993.
(b) Included in the purchase of Parcel 24 was a 2,400 square foot
office building.
(c) Parcel 23, annexed and zoned to Oswego as part of the Mill Race
Creek subdivision, consists of two parts: a 28-acre multi-family
portion and a 105-acre single-family portion. The Partnership sold
the 28-acre multi-family portion on June 7, 1995 and as of September 30,
1996, 102 of the 243 single-family lots. Of the 141 remaining
single-family lots, 132 are under contract for sale with homebuilders.
Under the purchase schedules, these lots would be sold by April 1997.
-11-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(3) Investment Properties (continued)
(d) Reconciliation of real estate owned:
1996 1995
---- ----
Balance at January 1,........................... $40,892,494 43,264,960
Additions during period:
Improvements.................................... 437,030 2,257,644
------------ ------------
41,329,524 45,522,604
Sales during period............................. 882,162 4,630,110
------------ ------------
Balance at end of period........................ $40,447,362 40,892,494
============ ============
(e) Reconciliation of accumulated depreciation:
1996 1995
---- ----
Balance at January 1,........................... $ 9,179 6,076
Depreciation expense............................ 2,327 3,103
Sales during period............................. - -
------------ ------------
Balance at end of period........................ $ 11,506 9,179
============ ============
(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 September 30, 1996, the Partnership had farm leases of generally one year
in duration, for approximately 3,094 acres of the approximately 3,571 acres
owned.
-12-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
On October 25, 1989, the Partnership commenced an Offering of 30,000 (subject
to increase to 60,000) Limited Partnership Units pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering
terminated on October 24, 1991, with total sales of 50,476.17 Units at $1,000
per Unit, resulting in $50,476,170 in gross offering proceeds, not including
the General Partner's contribution of $500. All the holders of these Units have
been admitted to the Partnership. The Limited Partners of the Partnership will
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 $41,314,301 of gross offering proceeds to purchase, on an
all-cash basis, twenty-seven parcels of undeveloped land and two buildings.
These investments included the payment of the purchase price, acquisition fees
and acquisition costs of such properties. Three of the parcels were purchased
during 1990, sixteen during 1991, four during 1992 and four during 1993. As of
September 30, 1996, the Partnership has had multiple sales transactions through
which it has disposed of approximately 909 acres of the approximately 4,480
acres originally owned. As of September 30, 1996, cumulative distributions
have totaled $2,836,963 to the Limited Partners and $93,034 to the General
Partner. Of the $2,836,963 distributed to the Limited Partners, $2,115,963 was
net sales proceeds (which represents a return of Invested Capital, as defined
in the Partnership Agreement) and $721,000 was from operations. As of
September 30, 1996, the Partnership has used $5,567,314 of working capital
reserve for rezoning and other activities and such amount is included in
investment properties.
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 September 30, 1996, the Partnership owns, in whole or in part,
twenty-four of its original parcels and one office building, the majority of
which are leased to local tenants and are generating sufficient cash flow from
leases to cover property taxes and insurance.
At September 30, 1996, the Partnership had cash, cash equivalents and
investments in marketable securities of $5,910,605, of which approximately
$291,000 is reserved for the repurchase of Units through the Unit Repurchase
Program. The remaining $5,619,605 is available to be used for the Partnership
expenses and liabilities, cash distributions to partners and other activities
with respect to some or all of its land parcels. The Partnership plans to
maximize its parcel sales effort in anticipation of rising land values.
-13-
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, annexed to the
Village of Huntley and zoned for residential and commercial development, has
improvements underway and sites are being marketed to potential buyers. Parcel
7, annexed to the Village of McHenry and zoned residential, has improvements
underway and sites are being marketed to potential buyers. Parcel 18, zoned for
multi- and single-family use, is being marketed to potential homebuilders.
Results of Operations
The sale of investment properties income and cost of investment properties sold
recorded for the three and nine months ended September 30, 1996 is a result of
the continued lot sales at the Ponds of Mill Race Creek Subdivision (Parcel
23), the sale of approximately 5 1/2 acres of Parcel 22 during January of 1996
and a roadway easement of approximately 4 1/2 acres of Parcel 8 during April
1996. The sale of investment properties income and cost of investment
properties sold recorded for the three and nine months ended September 30, 1995
is a result of sales at the Mill Race Creek Subdivision (Parcel 23). As of
September 30, 1996, the Partnership has sold 102 of the 243 single-family lots
at The Ponds of Mill Race Creek.
As of September 30, 1996, the Partnership owned twenty-four parcels of land
consisting of approximately 3,571 acres and one office building. Of the
approximately 3,571 acres owned, 3,094 acres are leased to local farmers and
are generating sufficient cash flow to cover property taxes, insurance and
other miscellaneous expenses. The decrease in rental income and land operating
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
the decrease of the land portfolio as a result of land sales. The decrease in
rental income was partially offset by the annual increase in lease amounts from
tenants. Land operating expenses to non-affiliates increased for the three and
nine months ended September 30, 1996, as compared to the three and nine months
ended September 30, 1995, due to an increase in assessment fees and grounds
maintenance relating to Parcel 23. This increase was partially offset by
decreases in repair and maintenance, insurance and real estate taxes.
Interest income increased for the three and nine months ended September 30,
1996, as compared to the three and nine months ended September 30, 1995, due to
the Partnership replenishing its working capital reserve, primarily from the
sales at Parcel 23 and the sale of Parcel 25 and an increase in interest rates.
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 decreases in legal and accounting services
required by the Partnership. Professional services to non-affiliates increased
for the nine months ended September 30, 1996, as compared to the nine months
ended September 30, 1995, due primarily to an increase in outside legal
services.
-14-
General and administrative expenses to Affiliates increased for the three and
nine months ended September 30, 1996, as compared to the three and nine months
ended September 30, 1995, due primarily to an increase in investor service
expenses. General and administrative expenses to non-affiliates increased for
the nine months ended September 30, 1996, as compared to the nine months ended
September 30, 1995, due primarily to an increase in the Illinois Replacement
Tax owed by the Partnership in 1996.
Marketing expenses 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 expenses relating to marketing and advertising
the Partnership's land investments. Marketing expenses to non-affiliates
increased for the three and nine months ended September 30, 1996, as compared
to the three and nine months ended September 30, 1995, due to an increase in
advertising and travel expenses relating to marketing the land portfolio to
prospective purchasers.
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
-15-
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 II, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: November 13, 1996
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: November 13, 1996
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 13, 1996
-16-
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