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, 1998
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 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 CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
March 31, 1998 and December 31, 1997
(unaudited)
Assets
------
1998 1997
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 245,414 304,452
Investments in marketable securities (Note 1)... 174,800 174,800
Accrued interest and other receivables.......... 36,632 1,018
Other current assets............................ 1,123 2,632
------------ ------------
Total current assets.............................. 457,969 482,902
------------ ------------
Other assets...................................... 166,301 169,139
Investment properties and improvements
(including acquisition fees paid to Affiliates
of $1,409,967) (Notes 3 and 4).................. 28,403,929 28,301,315
------------ ------------
Total assets...................................... $29,028,199 28,953,356
============ ============
See accompanying notes to financial statements.
-2-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
March 31, 1998 and December 31, 1997
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1998 1997
Current liabilities: ---- ----
Accounts payable................................ $ 25,173 8,590
Accrued real estate taxes....................... 91,964 73,097
Due to Affiliates (Note 2)...................... 49,076 10,343
Unearned income................................. 36,883 20,802
------------ ------------
Total current liabilities......................... 203,096 112,832
------------ ------------
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 13,521 13,675
------------ ------------
14,021 14,175
Limited Partners: ------------ ------------
Units of $1,000. Authorized 60,000 Units,
32,352.11 Units outstanding at March 31, 1998
and December 31, 1997 (net of offering costs
of $4,466,765, of which $3,488,574 was paid
to Affiliates).............................. 27,886,551 27,886,551
Cumulative cash distributions................. (1,646,334) (1,646,334)
Cumulative net income......................... 2,570,865 2,586,132
------------ ------------
28,811,082 28,826,349
------------ ------------
Total Partners' capital........................... 28,825,103 28,840,524
------------ ------------
Total liabilities and Partners' capital........... $29,028,199 28,953,356
============ ============
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, 1998 and 1997
(unaudited)
1998 1997
Income: ---- ----
Rental income................................... $ 72,508 77,836
Interest income................................. 6,111 15,908
Other income.................................... - 28,000
------------ ------------
78,619 121,744
Expenses: ------------ ------------
Professional services to Affiliates............. 6,341 13,847
Professional services to non-affiliates......... 21,575 25,105
General and administrative expenses to
Affiliates.................................... 8,493 7,883
General and administrative expenses to
non-affiliates................................ 9,269 5,275
Marketing expenses to Affiliates................ 4,463 32,029
Marketing expenses to non-affiliates............ 5,792 14,034
Land operating expenses to Affiliates........... 15,862 15,959
Land operating expenses to non-affiliates....... 22,245 22,966
------------ ------------
94,040 137,098
------------ ------------
Net loss.......................................... $ (15,421) (15,354)
============ ============
Net loss allocated to:
General Partner................................. (154) (154)
Limited Partners................................ (15,267) (15,200)
------------ ------------
Net loss.......................................... $ (15,421) (15,354)
============ ============
Net loss allocated to the one General Partner
Unit............................................ $ (154) (154)
============ ============
Net loss per Unit, basic and diluted,
allocated to Limited Partners per weighted
average Limited Partnership Units of 32,352.11
and 32,375.39 for the three months ended
March 31, 1998 and 1997, respectively........... $ (.47) (.47)
============ ============
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, 1998 and 1997
(unaudited)
1998 1997
Cash flows from operating activities: ---- ----
Net loss........................................ $ (15,421) (15,354)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in assets and liabilities:
Accrued interest and other receivables...... (35,614) (36,863)
Other current assets........................ 1,509 1,549
Accounts payable............................ 16,583 (435,938)
Accrued real estate taxes................... 18,867 18,485
Due to Affiliates........................... 38,733 74,528
Unearned income............................. 16,081 (8,168)
Net cash provided by (used in) operating ------------ ------------
activities...................................... 40,738 (401,761)
------------ ------------
Cash flows from investing activities:
Sale (purchase) of marketable securities, net... - 738,002
Other assets.................................... 2,838 -
Additions to investment properties.............. (102,614) (89,684)
Net cash provided by (used in) investing ------------ ------------
activities...................................... (99,776) 648,318
------------ ------------
Cash flows from financing activities:
Repurchase of Limited Partnership Units......... - (4,900)
Distributions paid.............................. - (155)
------------ ------------
Net cash used in financing activities............. - (5,055)
Net increase (decrease) in cash and cash ------------ ------------
equivalents..................................... (59,038) 241,502
Cash and cash equivalents at beginning of period.. 304,452 581,693
------------ ------------
Cash and cash equivalents at end of period........ $ 245,414 823,195
============ ============
See accompanying notes to financial statements.
-5-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 1998
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1997, which are
included in the Partnership's 1997 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 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, 1998, the Partnership has repurchased and
canceled a total of 47.17 Units for $45,967 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, 1998
(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.
Statement of Financial Accounting Standards No. 121 ("SFAS 121") requires the
Partnership to 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. As of March 31, 1998, the
Partnership has not recognized any such impairment.
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership for the year ended December 31, 1997 and has been
applied to all prior earnings periods presented in the financial statements.
The Partnership has no dilutive securities.
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.
-7-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(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 and general and administrative expenses to Affiliates, of
which $14,331 and $3,822 was unpaid as of March 31, 1998 and December 31, 1997,
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 $15,862 and
$15,959 have been incurred and paid and are included in land operating expenses
to Affiliates for the three months ended March 31, 1998 and 1997, respectively.
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 $4,463 and $32,029
have been incurred and are included in marketing expenses to Affiliates for the
three months ended March 31, 1998 and 1997, respectively, of which $3,775 and
$6,521 was unpaid as of March 31, 1998 and December 31, 1997, 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 $15,866 and $6,448 have been incurred for the
three months ended March 31, 1998 and 1997, respectively, and are included in
investment properties, of which $15,866 was unpaid as of March 31, 1998.
-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, 1998:
Total
Gross Initial Costs Costs Cumulative 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 3/31/98 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 79,920 - 845,412 -
2 McHenry 201.0000 11/09/93 2,020,314 122,145 2,142,459 1,561,388 451,106 3,252,741 -
(17.7420) 08/02/95
(1.9290) 09/02/97
(6.7516) 11/07/97
3 Will 34.0474 03/04/94 1,235,830 88,092 1,323,922 30,638 - 1,354,560 -
4 Will 86.9195 03/30/94 1,778,820 143,817 1,922,637 294,179 70,411 2,146,405 -
(.8700) 06/07/97
(1.4350) 08/12/97
5 LaSalle 190.9600 04/01/94 532,000 18,145 550,145 66,780 - 616,925 -
6 DeKalb 59.0800 05/11/94 670,207 58,373 728,580 482,313 - 1,210,893 -
7 Kendall 200.8210 07/28/94 1,506,158 82,999 1,589,157 23,764 - 1,612,921 -
8 Kendall 133.0000 08/17/94 1,300,000 106,949 1,406,949 5,573 - 1,412,522 -
9 LaSalle 335.9600 08/30/94 993,441 79,329 1,072,770 110,806 - 1,183,576 -
10 Kendall 223.7470 09/16/94 2,693,025 205,660 2,898,685 23,738 - 2,922,423 -
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 6,038 - 1,434,589 -
12 Kendall 110.2530 09/28/94 600,001 51,220 651,221 44,364 - 695,585 -
13 LaSalle 352.7390 10/06/94 1,032,666 91,117 1,123,783 22,698 - 1,146,481 -
14 Kendall 134.7760 10/26/94 1,000,000 81,674 1,081,674 5,963 - 1,087,637 -
15 McHenry 169.5400 10/31/94 2,900,000 79,196 2,979,196 222,648 - 3,201,844 -
16 McHenry 207.0754 11/30/94 1,760,256 101,388 1,861,644 220,010 - 2,081,654 -
17 LaSalle 236.4400 12/07/94 1,060,286 74,735 1,135,021 943 - 1,135,964 -
18 Kendall 386.9900 11/02/95 934,993 126,329 1,061,322 475 - 1,061,797 -
------------ ------------ ------------ -------------- ------------ ------------ ------------
$24,285,539 1,660,450 25,945,989 3,203,565 742,595 28,403,929 -
============ ============ ============ ============== ============ ============ ============
</TABLE>
-9-
-9-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 1998
(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:
1998 1997
---- ----
Balance at January 1,........................... $28,301,315 27,714,600
Additions during period......................... 102,614 911,759
------------ ------------
28,403,929 28,626,359
Sales during period............................. - 325,044
------------ ------------
Balance at end of period........................ $28,393,929 28,301,315
============ ============
(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, 1998, the Partnership had farm leases of generally one year in
duration, for approximately 2,761 acres of the approximately 3,266 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 "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, 1998,
the Partnership has had multiple sales transactions through which it has
disposed of the building and approximately thirty-six acres of the 3,302 acres
originally owned. As of March 31, 1998, cumulative distributions to the
Limited Partners have totaled $1,646,334 (which represents a return of Invested
Capital, as defined the Partnership Agreement). Through March 31, 1998, the
Partnership has used $3,203,565 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, 1998, 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, 1998, the Partnership had cash, cash equivalents and investments
in marketable securities of $420,214, of which approximately $155,100 is
reserved for the repurchase of Units through the Unit Repurchase Program. The
remaining $265,114 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 one phase of improvements
complete and sites are being marketed to potential buyers, of which nine of the
190 lots were sold during 1997. Parcel 4, zoned for a variety of business
uses, has improvements underway and sites are being marketed to potential
buyers, of which one site consisting of .87 acres was sold to a hotel chain on
June 6, 1997 and another site consisting of 1.435 acres was sold to a
combination gas station/convenient store on August 12, 1997. (See Note 3 of the
Notes to Financial Statements.) 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, 1998, the Partnership owned eighteen parcels of land consisting
of approximately 3,266 acres. Of the 3,266 acres owned, approximately 2,761
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 decrease in rental income for the three months ended March 31,
1998, as compared to the three months ended March 31, 1997, is the result of a
decrease in tillable acres due to land sales and pre-development activity on
the Partnership's land investments.
Interest income decreased for the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997, due primarily to the
Partnership utilizing its working capital reserve to fund pre-development
activity on its land parcels.
The other income recorded for the three months ended March 31, 1997 is
primarily the result of the Partnership receiving a non-refundable deposit on a
land sale which did not occur.
-12-
Professional services to Affiliates decreased for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, due to a
decrease in legal services required by the Partnership. Professional services
to non-affiliates decreased for the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997, due to a decrease in legal
services. This decrease was partially offset by an increase in accounting fees.
General and administrative expenses to Affiliates increased for the three
months ended March 31, 1998, as compared to the three months ended March 31,
1997, due primarily to an increase in investor services expenses. General and
administrative expenses to non-affiliates increased for the three months ended
March 31, 1998, as compared to the three months ended March 31, 1997, due
primarily to increases in the Illinois Replacement tax and travel expenses.
Marketing expenses to Affiliates decreased for the three months ended March 31,
1998, as compared to the three months ended March 31, 1997, due to the
identification of such costs which are specific to a particular parcel, and
accordingly, have been capitalized and are included in investments in land.
Marketing expenses to non-affiliates decreased for the three months ended March
31, 1998, as compared to the three months ended March 31, 1997, due to a
decrease in advertising and travel expenses relating to marketing the land
portfolio to prospective purchasers.
Year 2000 Compliance
The Partnership has reviewed its current computer systems and does not
anticipate any future problems relating to the year 2000.
PART II - Other Information
Items 1 through 6(b) are omitted because of the absence of conditions under
which they are required.
-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 15, 1998
/S/ PATRICIA A. CHALLENGER
By: Patricia A. Challenger
Senior Vice President
Date: May 15, 1998
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: May 15, 1998
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 245414
<SECURITIES> 174800
<RECEIVABLES> 36632
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 457969
<PP&E> 28403929
<DEPRECIATION> 0
<TOTAL-ASSETS> 29028199
<CURRENT-LIABILITIES> 203096
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28825103
<TOTAL-LIABILITY-AND-EQUITY> 29028199
<SALES> 0
<TOTAL-REVENUES> 78619
<CGS> 0
<TOTAL-COSTS> 38107
<OTHER-EXPENSES> 55933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (15421)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15421)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
