<PAGE> 1
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 June 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-
<PAGE> 2
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
June 30, 1996 and December 31, 1995
(unaudited)
Assets
------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1).............. $ 4,070,930 5,097,705
Investments in marketable securities (Note 1)... 2,025,000 -
Accounts and accrued interest receivable........ 56,390 19,900
Deposits and other current assets............... 1,462 2,544
----------- ----------
Total current assets.......................... 6,153,782 5,120,149
----------- ----------
Investment properties (including acquisition
fees paid to Affiliates of $2,029,733 and
$2,049,707 at June 30, 1996 and December 31,
1995, respectively) (Notes 1 and 3):
Land and improvements........................... 40,259,472 40,799,412
Buildings....................................... 93,082 93,082
----------- ----------
40,352,554 40,892,494
Less accumulated depreciation................... 10,730 9,179
----------- ----------
Total investment properties, net of accumulated
depreciation.................................... 40,341,824 40,883,315
----------- ----------
Total assets...................................... $46,495,606 46,003,464
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE> 3
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Partners' Capital
---------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable................................ $ 32,542 21,907
Accrued real estate taxes....................... 95,499 97,271
Due to Affiliates (Note 2)...................... 4,229 11,167
Unearned income................................. 51,796 29,898
----------- ----------
Total current liabilities..................... 184,066 160,243
----------- ----------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution........................... 500 500
Cumulative net income.......................... 448,502 447,723
Cumulative cash distributions.................. (93,034) (93,034)
----------- ----------
355,968 355,189
----------- ----------
Limited Partners:
Units of $1,000. Authorized 60,000 Units,
50,184.52 and 50,193.52 Units outstanding
as of June 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.......................... 6,137,164 5,660,948
Cumulative cash distributions.................. (2,836,963) (2,836,908)
----------- ----------
45,955,572 45,488,032
----------- ----------
Total Partners' capital....................... 46,311,540 45,843,221
----------- ----------
Total liabilities and Partners' capital........... $46,495,606 46,003,464
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE> 4
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Sale of investment properties
(Notes 1 and 3)................ $ 822,086 2,581,616 1,252,226 2,735,746
Rental income (Note 4)........... 96,881 105,896 173,621 206,397
Interest income.................. 82,356 11,657 155,303 21,933
Other income..................... - 1,300 - 1,300
---------- --------- --------- ---------
1,001,323 2,700,469 1,581,150 2,965,376
---------- --------- --------- ---------
Expenses:
Cost of investment properties
sold........................... 590,076 1,674,823 853,078 1,792,103
Professional services to
Affiliates..................... 5,176 8,701 9,941 19,978
Professional services to
non-affiliates................. 394 496 30,368 28,304
General and administrative
expenses to Affiliates......... 8,842 8,291 20,855 17,670
General and administrative
expenses to non-affiliates..... 7,227 6,396 29,153 11,829
Marketing expenses to Affiliates. 4,665 19,272 26,377 46,614
Marketing expenses to
non-affiliates................. 3,005 6,569 8,587 10,023
Land operating expenses to
Affiliates..................... 23,162 25,023 46,380 50,253
Land operating expenses to
non-affiliates................. 43,121 41,073 77,865 73,600
Depreciation..................... 775 776 1,551 1,552
---------- --------- --------- ---------
686,443 1,791,420 1,104,155 2,051,926
---------- --------- --------- ---------
Net income......................... $ 314,880 909,049 476,995 913,450
========== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 5
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) allocated to:
General Partner.................. $ 829 22 779 (302)
Limited Partners................. 314,051 909,027 476,216 913,752
--------- ------- ------- -------
Net income......................... $ 314,880 909,049 476,995 913,450
========= ======= ======= =======
Net income (loss) allocated to the
one General Partner Unit......... $ 829 22 779 (302)
========= ======= ======= =======
Net income per weighted average
Limited Partner Unit (50,194.52
and 50,226.52 for the three months
ended June 30, 1996 and 1995,
respectively, and 50,192.49 and
50,229.01 for the six months
ended June 30, 1996 and 1995,
respectively).................... $ 6.26 18.10 9.49 18.19
========= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE> 6
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 476,995 913,450
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation.................................. 1,551 1,552
Gain on sale of investment properties......... (399,148) (943,643)
Changes in assets and liabilities:
Accounts and accrued interest receivable.... (36,490) (25,519)
Deposits and other current assets........... 1,082 (6,773)
Accounts payable............................ 10,635 6,855
Accrued real estate taxes................... (1,772) 937
Due to Affiliates........................... (6,938) (2,111)
Unearned income............................. 21,898 (7,997)
----------- ----------
Net cash provided by (used in) operating
activities...................................... 67,813 (63,249)
----------- ----------
Cash flows from investing activities:
Additions to investment properties.............. (313,138) (1,076,690)
Sale (purchase) of marketable securities, net... (2,025,000) -
Proceeds from sale of investment properties..... 1,252,226 2,735,746
----------- ----------
Net cash provided by (used in) investing
activities...................................... (1,085,912) 1,659,056
----------- ----------
Cash flows from financing activities:
Foreign Partners' withholding................... (55) (80)
Repurchase of Limited Partnership Units......... (8,621) (4,889)
----------- ----------
Net cash used in financing activities............. (8,676) (4,969)
----------- ----------
Net increase (decrease) in cash and
cash equivalents................................ (1,026,775) 1,590,838
Cash and cash equivalents at beginning of
period.......................................... 5,097,705 896,813
----------- ----------
Cash and cash equivalents at end of period........ $ 4,070,930 2,487,651
=========== ==========
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE> 7
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
June 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 June 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.
Deferred organization costs were amortized over a 60-month period. 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-
<PAGE> 8
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 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 the direct
write-off method. Through June 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-
<PAGE> 9
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 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 $4,229 and $7,536 was unpaid as of June 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 $46,380 and
$50,253 have been incurred for the six months ended June 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, of which $0 and
$3,631 was unpaid as of June 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 direct costs. Such costs of $12,604 and $10,992 have been
incurred for the six months ended June 30, 1996 and 1995, respectively, and are
included in investment properties, all of which have been paid.
-9-
<PAGE> 10
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
June 30, 1996:
<TABLE>
<CAPTION>
Total
Gross Costs Remaining Current
Acres Purchase/ Initial Costs Capitalized Costs of Costs of Year Gain
-------------------------------------
Parcel Location: Purchased Sales Original Acquisition Subsequent to Property Parcels at on Sale
# County /Sold Date Costs Costs Total Acquisition Sold 6/30/96 Recognized
- ------ --------- -------- --------- ------------ ----------- --------- ------------- -------- ------------ ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 McHenry 372.759 04/25/90 $ 2,114,295 114,070 2,228,365 177,282 - 2,405,647 -
2 Kendall 41.118 07/06/90 549,639 43,889 593,528 6,979 - 600,507 -
3 Kendall 120.817 11/06/90 1,606,794 101,863 1,708,657 5,618 - 1,714,275 -
4 Kendall 299.025 06/28/91 1,442,059 77,804 1,519,863 312 - 1,520,175 -
5 Kane 189.0468 02/28/91 1,954,629 94,569 2,049,198 138,600 - 2,187,798 -
6 Lake 57.3345 04/16/91 904,337 71,199 975,536 15,379 4,457 986,458 -
(.258) 10/01/94
7 McHenry 56.7094 04/22/91 680,513 44,444 724,957 243,661 - 968,618 -
8 Kane 325.394 06/14/91 3,496,700 262,275 3,758,975 23,757 10,000 3,772,732 -
(.870) 04/03/96
9 Will 9.867 08/13/91 217,074 988 218,062 836 - 218,898 -
10 Will 150.66 08/20/91 1,866,716 89,333 1,956,049 56 - 1,956,105 -
11 Will 138.447 08/20/91 289,914 20,376 310,290 2,700 312,990 - -
(138.447) 05/03/93
12 Will 44.732 08/20/91 444,386 21,988 466,374 23 - 466,397 -
13 Will 6.342 09/23/91 139,524 172 139,696 - 139,696 - -
(6.342) 05/03/93
14 Kendall 44.403 09/03/91 888,060 68,210 956,270 329 - 956,599 -
15 Kendall 100.364 09/04/91 1,050,000 52,694 1,102,694 16,416 177,298 941,812 -
(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 79,649 - 1,551,438 -
17 Kendall 3.462 10/30/91 435,000 22,326 457,326 148 - 457,474 -
18 McHenry 139.1697 11/07/91 1,160,301 58,190 1,218,491 189,143 - 1,407,634 -
19 Kane 436.236 12/13/91 4,362,360 321,250 4,683,610 110,770 - 4,794,380 -
----------- --------- ---------- --------- ------- ---------- ----------
Subtotal $25,004,359 1,535,371 26,539,730 1,011,658 644,441 26,906,947 -
</TABLE>
-10-
<PAGE> 11
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties (continued)
<TABLE>
<CAPTION> Total
Gross Initial Costs Costs Remaining Current
Acres Purchase/ -------------------------------- Capitalized Costs of Costs of Year Gain
Parcel Location: Purchased Sales Original Acquisition Subsequent to Property Parcels at on Sale
# County /Sold Date Costs Costs Total Acquisition Sold 6/30/96 Recognized
- ----- --------- --------- --------- ---------- ------------ ----- -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Subtotal $25,004,359 1,535,371 26,539,730 1,011,658 644,441 26,906,947 -
20 Kane &
Kendall 400.129 01/31/92 1,692,623 101,318 1,793,941 38,291 - 1,832,232 -
21 Kendall 15.013 05/26/92 250,000 23,844 273,844 6,179 - 280,023 -
22 Kendall 391.959 10/30/92 3,870,000 283,186 4,153,186 88,826 164,804 4,077,208 94,270
(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 4,224,074 3,683,002 4,024,387 304,878
(11.525) 07/16/93
(56.53) Var 1995
(10.41) Var 1996
23A(a) Kendall .2676 10/30/92 170,072 12,641 182,713 - 182,713 - -
(.2676) 03/16/93
24 Kendall 3.908 01/21/93 645,000 56,316 701,316 213 - 701,529 -
24A(b) Kendall .406 01/21/93 155,000 13,533 168,533 - - 168,533 -
25 Kendall 656.687 01/28/93 1,625,000 82,536 1,707,536 22,673 1,730,209 - -
(656.687) 10/31/95
26 Kane 89.511 03/10/93 1,181,555 89,312 1,270,867 51,082 - 1,321,949 -
27 Kendall 83.525 03/11/93 984,474 54,846 1,039,320 426 - 1,039,746 -
----------- --------- ---------- --------- --------- ---------- -------
$38,810,025 2,504,276 41,314,301 5,443,422 6,405,169 40,352,554 399,148
=========== ========= ========== ========= ========= ========== =======
</TABLE>
(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 June 30, 1996, 101 of the
243 single-family lots. Of the 142 remaining single-family lots, 133
under contract for sale with homebuilders. Under the purchase schedules,
these lots would be sold by April 1997.
-11-
<PAGE> 12
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 30, 1996
(unaudited)
(3) Investment Properties (continued)
(d) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Balance at January 1,........................... $40,892,494 43,264,960
Additions during period:
Improvements.................................... 313,138 2,257,644
---------- ----------
41,205,632 45,522,604
Sales during period............................. 853,078 4,630,110
---------- ----------
Balance at end of period........................ $40,352,554 40,892,494
=========== ==========
(e) Reconciliation of accumulated depreciation:
1996 1995
---- ----
Balance at January 1,........................... $ 9,179 6,076
Depreciation expense............................ 1,551 3,103
Sales during period............................. - -
---------- ----------
Balance at end of period........................ $ 10,730 9,179
=========== ===========
</TABLE>
(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 June 30, 1996, the Partnership had farm leases of generally one year in
duration, for approximately 3,094 acres of the approximately 3,567 acres owned.
-12-
<PAGE> 13
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
June 30, 1996, the Partnership has had multiple sales transactions through
which it has disposed of approximately 913 acres of the approximately 4,480
acres originally owned. As of June 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 June 30, 1996,
the Partnership has used $5,443,422 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 June 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 June 30, 1996, the Partnership had cash, cash equivalents and investments in
marketable securities of $6,095,930, of which approximately $287,000 is
reserved for the repurchase of Units through the Unit Repurchase Program. The
remaining $5,808,930 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-
<PAGE> 14
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 six months ended June 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 six months ended June 30, 1995 is a result of sales at the Mill Race
Creek Subdivision (Parcel 23). As of June 30, 1996, the Partnership has sold
101 of the 243 single-family lots at The Ponds of Mill Race Creek.
As of June 30, 1996, the Partnership owned twenty-four parcels of land
consisting of approximately 3,563 acres and one office building. Of the
approximately 3,567 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 six months ended June 30, 1996, as
compared to the three and six months ended June 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
six months ended June 30, 1996, as compared to the three and six months ended
June 30, 1995, is due to an increase in assessment fees 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 six months ended June 30, 1996, as
compared to the three and six months ended June 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 six months
ended June 30, 1996, as compared to the three and six months ended June 30,
1995, due to a decreases in legal and accounting services required by the
Partnership. Professional services to non-affiliates increased for the six
months ended June 30, 1996, as compared to the six months ended June 30, 1995,
due primarily to an increase in outside legal services.
-14-
<PAGE> 15
General and administrative expenses to Affiliates increased for the three and
six months ended June 30, 1996, as compared to the three and six months ended
June 30, 1995, due primarily to an increase in investor service expenses.
General and administrative expenses to non-affiliates increased for the three
and six months ended June 30, 1996, as compared to the three and six months
ended June 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 six months ended
June 30, 1996, as compared to the three and six months ended June 30, 1995, due
to a decrease in expenses relating to marketing and advertising the
Partnership's land investments. Marketing expenses to non-affiliates decreased
for the three and six months ended June 30, 1996, as compared to the three and
six months ended June 30, 1995, due to a decrease in advertising and travel
expenses relating to marketing the land portfolio to prospective purchasers.
PART II
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
-15-
<PAGE> 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 II, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: August 12, 1996
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: August 12, 1996
/S/ CYNTHIA M. HASSETT
By: Cynthia M. Hassett
Principal Financial Officer and
Principal Accounting Officer
Date: August 12, 1996
-16-
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<PERIOD-START> JAN-01-1996
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