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 March 31, 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 #0-21606
InLand Capital Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware #36-3767977
(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 CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
March 31, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 823,195 581,693
Investments in marketable securities (Note 1)... 339,800 1,077,802
Accrued interest and other receivables.......... 41,766 4,903
Deposits and other assets....................... 1,153 2,702
------------ ------------
Total current assets.............................. 1,205,914 1,667,100
------------ ------------
Investment properties and improvements
(including acquisition fees paid to Affiliates
of $1,418,902) (Notes 3 and 4).................. 27,804,284 27,714,600
------------ ------------
Total assets...................................... $29,010,198 29,381,700
============ ============
See accompanying notes to financial statements.
-2-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1997 and December 31, 1996
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1997 1996
Current liabilities: ---- ----
Accounts payable................................ $ 38,120 474,058
Accrued real estate taxes....................... 91,516 73,031
Due to Affiliates (Note 2)...................... 80,979 6,451
Unearned income................................. 22,360 30,528
------------ ------------
Total current liabilities......................... 232,975 584,068
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 12,886 13,040
------------ ------------
13,386 13,540
Limited Partners: ------------ ------------
Units of $1,000. Authorized 60,000 Units,
32,372.11 and 32,377.11 Units outstanding
at March 31, 1997 and December 31, 1996,
respectively (net of offering costs of
$4,466,765, of which $3,488,574 was paid
to Affiliates).............................. 27,905,843 27,910,743
Cumulative cash distributions................. (646,629) (646,474)
Cumulative net income......................... 1,504,623 1,519,823
------------ ------------
28,763,837 28,784,092
------------ ------------
Total Partners' capital........................... 28,777,223 28,797,632
------------ ------------
Total liabilities and Partners' capital........... $29,010,198 29,381,700
============ ============
See accompanying notes to financial statements.
-3-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
Income: ---- ----
Interest income................................. $ 15,908 34,255
Rental income................................... 77,836 67,879
Other income.................................... 28,000 -
------------ ------------
121,744 102,134
Expenses: ------------ ------------
Professional services to Affiliates............. 13,847 6,321
Professional services to non-affiliates......... 25,105 24,445
General and administrative expenses to
Affiliates.................................... 7,883 8,905
General and administrative expenses to
non-affiliates................................ 5,275 3,840
Marketing expenses to Affiliates................ 32,029 10,572
Marketing expenses to non-affiliates............ 14,034 5,321
Land operating expenses to Affiliates........... 15,959 15,959
Land operating expenses to non-affiliates....... 22,966 24,881
Amortization of deferred organization costs..... - 729
------------ ------------
137,098 100,973
------------ ------------
Net income (loss)............................. $ (15,354) 1,161
============ ============
Net income (loss) allocated to:
General Partner................................. (154) 12
Limited Partners................................ (15,200) 1,149
------------ ------------
Net income (loss)............................. $ (15,354) 1,161
============ ============
Net income (loss) allocated to the one
General Partner Unit............................ $ (154) 12
============ ============
Net income (loss) allocated to Limited Partners
per weighted average Limited Partnership Units
of 32,375.39 and 32,397.11 for the three months
ended March 31, 1997 and 1996, respectively..... $ (.47) .04
============ ============
See accompanying notes to financial statements.
-4-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
Cash flows from operating activities: ---- ----
Net income (loss)............................... $ (15,354) 1,161
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization of deferred organization costs... - 729
Changes in assets and liabilities:
Accrued interest and other receivables...... (36,863) 762
Deposits and other assets................... 1,549 1,279
Accounts payable............................ (435,938) 10,989
Accrued real estate taxes................... 18,485 20,848
Due to Affiliates........................... 74,528 29,522
Unearned income............................. (8,168) 25,197
Net cash provided by (used in) operating ------------ ------------
activities...................................... (401,761) 90,487
------------ ------------
Cash flows from investing activities:
Sale (purchase) of marketable securities, net... 738,002 250,000
Additions to investment properties.............. (89,684) (278,448)
Net cash provided by (used in) investing ------------ ------------
activities...................................... 648,318 (28,448)
------------ ------------
Cash flows from financing activities:
Repurchase of Limited Partnership Units......... (4,900) -
Distributions paid.............................. (155) (140)
------------ ------------
Net cash used in financing activities............. (5,055) (140)
------------ ------------
Net increase in cash and cash equivalents......... 241,502 61,899
Cash and cash equivalents at beginning of period.. 581,693 708,979
------------ ------------
Cash and cash equivalents at end of period........ $ 823,195 770,878
============ ============
See accompanying notes to financial statements.
-5-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 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 Capital Fund, L.P. (the "Partnership") was organized on June 21, 1991 by
the filing of a Certificate of Limited Partnership under the Revised Uniform
Limited Partnership Act of the State of Delaware. On December 13, 1991, the
Partnership commenced an Offering of 60,000 Limited Partnership Units ("Units")
pursuant to a Registration under the Securities Act of 1933. The Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement")
provides for Inland Real Estate Investment Corporation to be the General
Partner. The Offering terminated on August 23, 1993, with total sales of
32,399.28 Units, at $1,000 per Unit, resulting in $32,399,282 in gross offering
proceeds, not including the General Partner's capital contribution of $500. All
of 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. As of March 31, 1997, the Partnership has repurchased and
canceled a total of 27.174 Units for $26,675 from various Limited Partners
through the Units Repurchase Program. Under this program, Limited Partners may
under certain circumstances have their Units repurchased for an amount equal to
their Invested Capital.
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.
Investments purchased with an original maturity of three months or more are
considered to be investments in marketable securities.
-6-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
For vacant land parcels and parcels with insignificant buildings and
improvements, the Partnership uses the area method of allocation, which
approximates the 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. Repair and maintenance expenses are charged to operations as
incurred.
The Partnership adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS
121 requires that the Partnership record an impairment loss on its property to
be held for investment whenever its carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's estimated
fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.
The Partnership is required to pay a withholding tax to the Internal Revenue
Service with respect to a Partner's allocable share of the Partnership's
taxable net income, if the Partner is a foreign person. The Partnership will
first pay the withholding tax from the distributions to any foreign person, and
to the extent that the tax exceeds the amount of distributions withheld, or if
there have been no distributions to withhold, the excess will be accounted for
as a distribution to the foreign person. Future withholding tax payments will
be made every April, June, September and December.
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 for the period
presented herein. Results of 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 and general and administrative expenses to Affiliates, of
which $26,650 and $6,451 were unpaid as of March 31, 1997 and December 31,
1996, respectively.
-7-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
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 $15,959 and
$15,959 have been incurred and are included in land operating expenses to
Affiliates for the three months ended March 31, 1997 and 1996, respectively, of
which $15,959 was unpaid as of March 31, 1997.
An Affiliate of the General Partner performed sales marketing and advertising
services for the Partnership and was reimbursed (as set forth under terms of
the Partnership Agreement) for direct costs. Such costs of $32,029 and $10,572
have been incurred and are included in marketing expenses to Affiliates for the
three months ended March 31, 1997 and 1996, respectively, of which $31,922 was
unpaid as of March 31, 1997.
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 $6,448 have been incurred for the three months
ended March 31, 1997 and are included in investment properties, of which $6,448
was unpaid as of March 31, 1997.
-8-
<TABLE> INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties
<CAPTION>
All of the Partnership's investment properties are located in the collar counties surrounding the Chicago metropolitan area. The
following real property investments are owned by the Partnership as of March 31, 1997:
Total
Gross Initial Costs Costs Remaining Current
Acres Purchase/ -------------------------------------- Capitalized Costs of Costs of Year Gain
Parcel Location: Purchased Sales Original Acquisition Total Subsequent to Property Parcels at On Sale
# County /(Sold) Date Costs Costs Costs Acquisition Sold 3/31/97 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Kendall 108.8960 07/22/92 $ 707,566 57,926 765,492 74,754 - 840,246 -
2 McHenry 201.0000 11/09/93 2,020,314 122,145 2,142,459 1,174,583 196,473 3,120,569 -
(17.742) 08/02/95
3 Will 34.0474 03/04/94 1,235,830 88,092 1,323,922 16,206 - 1,340,128 -
4 Will 86.9195 03/30/94 1,778,820 143,817 1,922,637 79,059 - 2,001,696 -
5 LaSalle 190.9600 04/01/94 532,000 18,145 550,145 61,823 - 611,968 -
6 DeKalb 59.0800 05/11/94 670,207 58,373 728,580 475,731 - 1,204,311 -
7 Kendall 200.8210 07/28/94 1,506,158 82,999 1,589,157 19,723 - 1,608,880 -
8 Kendall 133.0000 08/17/94 1,300,000 106,949 1,406,949 3,392 - 1,410,341 -
9 LaSalle 335.9600 08/30/94 993,441 79,329 1,072,770 108,115 - 1,180,885 -
10 Kendall 223.7470 09/16/94 2,693,025 205,660 2,898,685 21,856 - 2,920,541 -
10A(a) Kendall 7.0390 09/16/94 206,975 15,806 222,781 1,327 221,078 - -
(7.0390) 04/21/95
11 Kane 123.0000 09/26/94 1,353,000 75,551 1,428,551 4,289 - 1,432,840 -
12 Kendall 110.2530 09/28/94 600,001 51,220 651,221 15,114 - 666,335 -
13 LaSalle 352.7390 10/06/94 1,032,666 91,117 1,123,783 20,856 - 1,144,639 -
14 Kendall 134.7760 10/26/94 1,000,000 81,674 1,081,674 4,656 - 1,086,330 -
15 McHenry 169.5400 10/31/94 2,900,000 79,196 2,979,196 98,679 - 3,077,875 -
16 McHenry 207.0754 11/30/94 1,760,256 101,388 1,861,644 98,140 - 1,959,784 -
17 LaSalle 236.4400 12/07/94 1,060,286 74,735 1,135,021 494 - 1,135,515 -
18 Kendall 386.9900 11/02/95 934,993 126,329 1,061,322 79 - 1,061,401 -
------------ ------------ ------------ -------------- ------------ ------------ ------------
$24,285,539 1,660,450 25,945,989 2,278,876 417,551 27,804,284 -
============ ============ ============ ============== ============ ============ ============
</TABLE>
-9-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(3) Investment Properties (continued)
(a) Included in the purchase of Parcel 10 was a house and several outbuildings,
located on approximately seven acres, which was sold on April 21, 1995.
(b) Reconciliation of real estate owned:
1997 1996
---- ----
Balance at January 1,........................... $27,714,600 26,130,416
Additions to investment properties.............. 89,684 1,584,184
------------ ------------
Balance at end of period........................ $27,804,284 27,714,600
============ ============
(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 March 31, 1997, the Partnership had farm leases of generally one year in
duration, for approximately 2,834 acres of the approximately 3,278 acres owned.
-10-
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 of "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 December 13, 1991, the Partnership commenced an Offering of 60,000 Limited
Partnership Units ("Units") at $1,000 per Unit, pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933. The Offering
terminated on August 23, 1993, with total sales of 32,399.28 Units, at $1,000
per Unit, resulting in $32,399,282 in gross offering proceeds, not including
the General Partner's capital contribution of $500. All of 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 $25,945,989 of gross offering proceeds to purchase, on an
all-cash basis, eighteen parcels of land and one building. These investments
include the payment of the purchase price, acquisition fees and acquisition
costs of such properties. One of the parcels was purchased during 1992, one
during 1993, fifteen during 1994 and one during 1995. As of March 31, 1997,
the Partnership has had two sales transactions through which it has disposed of
the building and approximately twenty-five acres of the 3,302 acres originally
owned. As of March 31, 1997, cumulative distributions to the Limited Partners
have totaled $646,629 (which represents a return of Invested Capital, as
defined the Partnership Agreement). Through March 31, 1997, the Partnership
has used $2,278,876 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 March 31, 1997, the Partnership owns, in whole or in part, all
eighteen of its original parcels, the majority of which are leased to local
farmers and are generating sufficient cash flow from farm leases to cover
property taxes and insurance.
-11-
At March 31, 1997, the Partnership had cash, cash equivalents and investments
in marketable securities of $1,162,995, of which approximately $165,300 is
reserved for the repurchase of Units through the Unit Repurchase Program. The
remaining $997,695 is available, upon maturity, to be used for 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.
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 2, annexed to the
village of McHenry and zoned for a business park, has improvements underway and
sites are being marketed to potential buyers. Parcel 4, zoned for a variety of
business uses, has two separate contracts pending the buyer's due diligence.
Parcel 6, annexed to the village of DeKalb and zoned for twenty-five large,
residential lots, has completed the road into the subdivision and the lots are
being marketed to homebuilders and individuals. Parcels 15 and 16 have been
annexed to the village of Huntley and zoned for residential and commercial
development.
Results of Operations
As of March 31, 1997, the Partnership owned eighteen parcels of land consisting
of approximately 3,278 acres. Of the 3,278 acres owned, approximately 2,834
acres are tillable and leased to local farmers and are generating sufficient
cash flow to cover property taxes, insurance and other miscellaneous property
expenses. The increase in rental income for the three months ended March 31,
1997, as compared to the three months ended March 31, 1996, is due to an under-
accrual of rental income for the three months ended March 31, 1996. The
increase in other income for the three months ended March 31, 1997, as compared
to the three months ended March 31, 1996, is due primarily to the Partnership
receiving a non-refundable deposit on a land sale which did not occur. The
decrease in land operating expenses to non-affiliates for the three months
ended March 31, 1997, as compared to the three months ended March 31, 1996, is
due to decreases in real estate taxes and insurance. This decrease was
partially offset by an increase in repair and maintenance expenses.
Interest income decreased for the three months ended March 31, 1997, as
compared to the three months ended March 31, 1996, due primarily to the
Partnership utilizing its working capital reserve to fund pre-development
activity on its land parcels.
Professional services to Affiliates increased for the three months ended March
31, 1997, as compared to the three months ended March 31, 1996, due to an
increase in legal services required by the Partnership. This increase was
partially offset by a decrease in accounting services required by the
Partnership. Professional services to non-affiliates increased for the three
months ended March 30, 1997, as compared to the three months ended March 31,
1996, due to increases in outside legal and other professional fees.
-12-
General and administrative expenses to Affiliates decreased for the three
months ended March 31, 1997, as compared to the three months ended March 31,
1996, due to a decrease in investor services expenses. This decrease was
partially offset by an increase in data processing expenses. General and
administrative expenses to non-affiliates increased for the three months ended
March 31, 1997, as compared to the three months ended March 31, 1996, due to
increases in printing and postage expenses. This increase was partially offset
by a decrease in the Illinois Replacement Tax paid in 1997.
Marketing expenses to Affiliates increased for the three months ended March 31,
1997, as compared to the three months ended March 31, 1996, due to increases in
expenses relating to marketing and advertising the Partnership's land
investments for sale. Marketing expenses to non-affiliates increased for the
three months ended March 31, 1997, as compared to the three months ended March
31, 1996, 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
-13-
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 CAPITAL FUND, L.P.
By: Inland Real Estate Investment Corporation
General Partner
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chairman
Date: May 14, 1997
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 14, 1997
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 14, 1997
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 823195
<SECURITIES> 339800
<RECEIVABLES> 41766
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1205914
<PP&E> 27804284
<DEPRECIATION> 0
<TOTAL-ASSETS> 29010198
<CURRENT-LIABILITIES> 232975
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28777223
<TOTAL-LIABILITY-AND-EQUITY> 29010198
<SALES> 0
<TOTAL-REVENUES> 121744
<CGS> 0
<TOTAL-COSTS> 38925
<OTHER-EXPENSES> 98173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15354)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15354)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15354)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
