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, 1999
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
September 30, 1999 and December 31, 1998
(unaudited)
Assets
------
1999 1998
Current assets: ---- ----
Cash and cash equivalents (Note 1).............. $ 1,115,780 569,663
Accounts and accrued interest receivable
(Note 5)...................................... 115,284 44,801
Other current assets............................ 2,906 2,406
------------ ------------
Total current assets.............................. 1,233,970 616,870
------------ ------------
Other assets...................................... 8,220 3,074
Mortgage loans receivable (Note 5)................ 400,000 400,000
Investment properties and improvements
(including acquisition fees paid to Affiliates
of $1,087,925 and $1,187,120 at
September 30, 1999 and December 31, 1998,
respectively) (Notes 1, and 3).................. 23,357,801 24,946,536
------------ ------------
Total assets...................................... $24,999,991 25,966,480
============ ============
See accompanying notes to financial statements.
-2-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 1999 and December 31, 1998
(unaudited)
Liabilities and Partners' Capital
---------------------------------
1999 1998
Current liabilities: ---- ----
Accounts payable................................ $ 4,729 18,124
Accrued real estate taxes....................... 43,628 80,989
Due to Affiliates (Note 2)...................... 53,903 19,796
Unearned income................................. 12,771 15,012
------------ ------------
Total current liabilities......................... 115,031 133,921
------------ ------------
Deferred gain on sale of investment properties
(Note 5)........................................ 2,805 2,805
Partners' capital (Notes 1 and 2):
General Partner:
Capital contribution.......................... 500 500
Cumulative net income......................... 14,768 13,719
------------ ------------
15,268 14,219
Limited Partners: ------------ ------------
Units of $1,000. Authorized 60,000 Units,
32,352.11 Units outstanding (net of offering
costs of $4,466,765, of which $3,488,574
was paid to Affiliates)..................... 27,886,551 27,886,551
Cumulative net income......................... 5,811,460 3,793,605
Cumulative cash distributions................. (8,831,124) (5,864,621)
------------ ------------
24,866,887 25,815,535
------------ ------------
Total Partners' capital........................... 24,882,155 25,829,754
------------ ------------
Total liabilities and Partners' capital........... $24,999,991 25,966,480
============ ============
See accompanying notes to financial statements.
-3-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and nine months ended September 30, 1999 and 1998
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
Income: ---- ---- ---- ----
Sale of investment property
(Notes 1 and 3)................ $ 588,491 4,124,129 3,707,848 4,435,750
Rental income.................... 60,508 74,450 176,564 220,734
Interest income.................. 25,476 45,938 108,567 60,749
Other income..................... 39,000 - 39,000 -
---------- ---------- ---------- ----------
713,475 4,244,517 4,031,979 4,717,233
Expenses: ---------- ---------- ---------- ----------
Cost of investment property sold. 193,449 3,376,178 1,793,828 3,542,808
Professional services to
Affiliates..................... 7,687 12,197 26,250 24,788
Professional services to
non-affiliates................. 500 500 23,965 23,602
General and administrative
expenses to Affiliates......... 2,864 2,117 19,751 12,850
General and administrative
expenses to non-affiliates..... (1,955) 2,333 14,236 17,645
Marketing expenses to Affiliates. 2,617 12,131 12,687 25,260
Marketing expenses to
non-affiliates................. (6,649) 7,076 22,226 31,428
Land operating expenses to
Affiliates..................... 12,405 15,698 37,965 47,421
Land operating expenses to
non-affiliates................. 29,222 26,494 62,167 100,894
---------- ---------- ---------- ----------
240,140 3,454,724 2,013,075 3,826,696
---------- ---------- ---------- ----------
Net income......................... $ 473,335 789,793 2,018,904 890,537
========== ========== ========== ==========
See accompanying notes to financial statements.
-4-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and nine months ended September 30, 1999 and 1998
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
Net income (loss) allocated to: ---- ---- ---- ----
General Partner.................. $ 782 418 1,049 (24)
Limited Partners................. 472,553 789,375 2,017,855 890,561
---------- ---------- ---------- ----------
Net income......................... $ 473,335 789,793 2,018,904 890,537
========== ========== ========== ==========
Net income (loss) allocated to the
one General Partner Unit......... $ 782 418 1,049 (24)
========== ========== ========== ==========
Net income per Unit, basic and
diluted, allocated to Limited
Partners per weighted average
Limited Partnership Units
(32,352.11 and 32,372.11 for
the three months ended September
30, 1999 and 1998, and 32,352.11
and 32,373.19 for the nine months
ended September 30, 1999 and
1998, respectively).............. $ 14.60 24.40 62.37 27.53
========== ========== ========== ==========
See accompanying notes to financial statements.
-5-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the nine months ended September 30, 1999 and 1998
(unaudited)
1999 1998
Cash flows from operating activities: ---- ----
Net income...................................... $ 2,018,904 890,537
Adjustments to reconcile net income to net
cash used in operating activities:
Gain on sale of land.......................... (1,914,020) (892,942)
Changes in assets and liabilities:
Accrued interest and other receivables...... (70,483) (95,724)
Other current assets........................ (500) (1,184)
Accounts payable............................ (13,395) (4,883)
Accrued real estate taxes................... (37,361) (12,015)
Due to Affiliates........................... 34,107 19,741
Unearned income............................. (2,241) (17,054)
Deferred gain on sale....................... - (292)
------------ ------------
Net cash used in operating activities............. 15,011 (113,816)
------------ ------------
Cash flows from investing activities:
Sale (purchase) of marketable securities, net... - 174,800
Additions to investment properties.............. (205,093) (255,364)
Principal payments collected on mortgage loans
receivable.................................... - 41,634
Other assets.................................... (5,146) 52,565
Proceeds from sale of investment properties..... 3,707,848 3,318,639
------------ ------------
Net cash provided by investing activities......... 3,497,609 3,332,274
------------ ------------
Cash flows from financing activities:
Repurchase of Limited Partnership Units......... - -
Distributions paid.............................. (2,966,503) -
------------ ------------
Net cash used in financing activities............. (2,966,503) -
------------ ------------
Net increase in cash and cash equivalents......... 546,117 3,218,458
Cash and cash equivalents at beginning of period.. 569,663 304,452
------------ ------------
Cash and cash equivalents at end of period........ $ 1,115,780 3,522,910
============ ============
See accompanying notes to financial statements.
-6-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 1999
(unaudited)
Readers of this Quarterly Report should refer to the Partnership's audited
financial statements for the fiscal year ended December 31, 1998, which are
included in the Partnership's 1998 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 September 30, 1999, 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 and are
carried at cost, which approximates market.
A presentation of information about operating segments as required in Statement
of Financial Accounting Standards No. 131 "Disclosures About Segments of an
Enterprise and Related Information" would not be material to an understanding
of the Partnership's business taken as a whole as the Partnership is engaged in
the business of real estate investment which management considers to be a
single operating segment.
-7-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1999
(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. As of
September 30, 1999, the Partnership has not recognized any such impairment.
Statement of Financial Accounting Standards No. 128 "Earnings per Share" was
adopted by the Partnership 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.
-8-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1999
(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 $12,501 and $2,772 was unpaid as of September 30, 1999 and December 31,
1998, 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 $37,965 and
$47,421 have been incurred and are included in land operating expenses to
Affiliates for the nine months ended September 30, 1999 and 1998, respectively,
of which $12,406 and $14,024 was unpaid as of September 30, 1999 and December
31, 1998, 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 $12,687 and $25,260
have been incurred and are included in marketing expenses to Affiliates for the
nine months ended September 30, 1999 and 1998, respectively, of which $12,153
and $3,000 was unpaid as of September 30, 1999 and December 31, 1998,
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 $90,540 and $25,492 have been incurred for the
nine months ended September 30, 1999 and 1998, respectively, and are included
in investment properties, of which $16,843 and $0 was unpaid as of September
30, 1999 and December 31, 1998.
-9-
<TABLE>
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties
<CAPTION>
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 09/30/99 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 82,546 - 848,038 -
2 McHenry 201.0000 11/09/93 2,020,314 122,145 2,142,459 1,661,338 817,814 2,985,983 282,326
(17.7420) 08/02/95
(8.6806) Var 1997
(1.9290) Var 1998
(9.6450) Var 1999
3 Will 34.0474 03/04/94 1,235,830 88,092 1,323,922 37,856 1,361,778 - 1,232,402
(34.0474) 02/04/99
4 Will 86.9195 03/30/94 1,778,820 143,817 1,922,637 395,323 229,101 2,088,859 310,132
(2.3050) Var 1997
(3.3600) Var 1998
(1.0331) 08/19/99
5 LaSalle 190.9600 04/01/94 532,000 18,145 550,145 69,391 6,655 612,881 -
(2.0600) 04/08/98
6 DeKalb 59.0800 05/11/94 670,207 58,373 728,580 486,869 1,215,449 - -
(4.9233) Apr 1998
(54.1567) 07/23/98
7 Kendall 200.8210 07/28/94 1,506,158 82,999 1,589,157 26,371 - 1,615,528 -
8 Kendall 133.0000 08/17/94 1,300,000 106,949 1,406,949 8,408 - 1,415,357 -
9 LaSalle 335.9600 08/30/94 993,441 79,329 1,072,770 113,155 - 1,185,925 -
10 Kendall 223.7470 09/16/94 2,693,025 205,660 2,898,685 31,532 - 2,930,217 -
10A(a) Kendall 7.0390 09/16/94 206,975 15,806 222,781 1,327 224,108 - -
(7.0390) 04/21/95
11 Kane 123.0000 09/26/94 1,353,000 75,551 1,428,551 10,155 - 1,438,706 -
12 Kendall 110.2530 09/28/94 600,001 51,220 651,221 64,854 - 716,075 -
------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal 15,597,338 1,106,011 16,703,349 2,989,125 3,854,905 15,837,569 1,824,860
-10-
-10-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(3) Investment Properties (continued)
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 09/30/99 Recognized
- ------ --------- --------- ---------- ------------ ------------ ------------ -------------- ------------ ------------ ------------
Subtotal 15,597,338 1,106,011 16,703,349 2,989,125 3,854,905 15,837,569 1,824,860
13 LaSalle 352.7390 10/06/94 1,032,666 91,117 1,123,783 22,723 1,146,506 - -
(10.0000) 07/27/98
(342.7390) 08/31/98
14 Kendall 134.7760 10/26/94 1,000,000 81,674 1,081,674 7,684 85,960 1,003,398 89,160
(10.6430) 05/21/99
15 McHenry 169.5400 10/31/94 2,900,000 79,196 2,979,196 255,603 - 3,234,799 -
16 McHenry 207.0754 11/30/94 1,760,256 101,388 1,861,644 248,129 - 2,109,773 -
17 LaSalle 236.4400 12/07/94 1,060,286 74,735 1,135,021 37,241 - 1,172,262 -
18 Kendall 386.9900 11/02/95 934,993 126,329 1,061,322 501 1,061,823 - -
(386.9900) 08/31/98
------------ ------------ ------------ -------------- ------------ ------------ ------------
$24,285,539 1,660,450 25,945,989 3,561,006 6,149,194 23,357,801 1,914,020
============ ============ ============ ============== ============ ============ ============
</TABLE>
-11-
-11-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1999
(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 in April 1995.
(b) Reconciliation of investment properties and improvements owned:
September 30, December 31,
1999 1998
------------ ------------
Balance at January 1,........................... $24,946,536 28,301,315
Additions during period......................... 205,093 254,963
Sales during period............................. (1,793,828) 3,609,742
------------ ------------
Balance at end of period........................ $23,357,801 24,946,536
============ ============
(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, 1999, the Partnership had farm leases of generally one year
in duration, for approximately 2,058 acres of the approximately 2,411 acres
owned.
(5) Mortgage Loan Receivable
As a result of the sale of the remaining acres of Parcel 6 for a sales price of
$1,125,000 on July 7, 1998, the Partnership received a mortgage loan receivable
of $1,125,000 and recorded a deferred gain on sale of $7,889. The deferred
gain will be recognized over the life of the related mortgage loan receivable
as principal payments are received, of which $5,084 has been recognized as of
December 31, 1998. Of the $1,125,000 mortgage loan receivable received,
$725,000 accrued interest at 9% per annum and had a maturity date of November
30, 1998 (extended from September 30, 1998). The remaining $400,000 accrues
interest at 9% per annum and has a maturity date of July 7, 2001, at which time
all accrued interest, as well as principal, is due. As of September 30, 1999,
accrued interest receivable totaled $71,670.
-12-
INLAND CAPITAL FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 1999
(unaudited)
(6) Subsequent Events
On October 13, 1999, the Partnership sold the entire remaining acreage of
Parcel 5 to an unaffiliated third party for $800,646. The Partnership received
net sales proceeds of $136,749, provided purchase money financing to the buyer
in the amount of $641,760, and recorded a gain of $165,628, of which $136,527
was deferred. The purchase money note has an interest rate of 8% and requires
interest only monthly payments and annual principal payments with the final
maturity date of October 1, 2004. As of November 1, 1999, the Partnership sold
the note at its full face value to the General Partner and received proceeds of
$641,760. The deferred gain of $136,527 will be recognized in full during the
fourth quarter of 1999.
On October 18, 1999, the Partnership sold 4 lots of Parcel 2 to an unaffiliated
third party for $290,020. The Partnership received net sales proceeds of
$289,284 and recorded a gain of $164,615.
-13-
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 September 30,
1999, the Partnership has had multiple sales transactions through which it has
disposed of the building and approximately 897 acres of the 3,302 acres
originally owned. As of September 30, 1999, cumulative distributions to the
Limited Partners have totaled $8,831,124 (which represents a return of Invested
Capital, as defined in the Partnership Agreement). Through September 30, 1999,
the Partnership has used $3,561,006 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, 1999, the Partnership owns, in whole or in part,
fourteen of its original eighteen 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.
-14-
At September 30, 1999, the Partnership had cash and cash equivalents of
$1,115,780 of which approximately $167,500 is reserved for the repurchase of
Units through the Unit Repurchase Program. The remaining approximately
$948,280 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 1 and a portion of
Parcel 12 are zoned for single family housing. Parcel 2, annexed to the city
of McHenry and zoned for a business park, has one phase of improvements
complete and sites are being marketed to potential buyers, of which twenty-one
of the 190 lots were sold as of September 30, 1999. (See Note 3 of the Notes to
Financial Statements.) 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, another site consisting of 1.435 acres was sold to a combination gas
station/convenient store on August 12, 1997, a third site consisting of 1.5
acres was sold to a national fast-food chain on August 13, 1998, a fourth site
consisting of 1.86 acres was sold to a different national fast-food chain on
October 6, 1998, and a fifth site consisting of 1.033 acres was sold to a
national tire sales store on August 19, 1999. (See Note 3 of the Notes to
Financial Statements.) A contract for sale of Parcel 10 has been entered into
and the purchaser has begun zoning and annexation proceeding with the City of
Elgin. Parcels 15 and 16 have been annexed to the village of Huntley and zoned
for residential and commercial development. The Partnership sold Parcels 3, 13
and 18 and the remaining acres of Parcel 6 to unaffiliated third-parties. (See
Note 3 of the Notes to Financial Statements.)
Results of Operations
Income from the sale of investment properties and the cost of investment
properties sold for the nine months ended September 30, 1999 is the result of
the sale of approximately 55 acres, including the sale of Parcel 3, ten
additional lots of Parcel 2, eleven acres of Parcel 14, and 1 acre of Parcel 4.
(See Note 3 of the Notes to Financial Statements.)
As of September 30, 1999, the Partnership owned fourteen parcels of land
consisting of approximately 2,411 acres. Of the 2,411 acres owned,
approximately 2,058 acres are tillable and leased to local farmers and are
generating sufficient cash flow to cover property taxes, insurance and other
miscellaneous property expenses. Rental income decreased for the three and
nine months ended September 30, 1999, as compared to the three and nine months
ended September 30, 1998, due to the decrease in tillable acres due to land
sales and pre-development activity on the Partnership's land investments. This
decrease was partially offset by the annual increase in lease amounts from
tenants.
Interest income increased for the nine months ended September 30, 1999, as
compared to the nine months ended September 30, 1998, due primarily to interest
income earned on the mortgage loan receivable the Partnership received from the
sale of the remaining acres of Parcel 6. See Note 5 of the Notes to Financial
Statements for further discussion of the terms of the mortgage loan receivable
received from this sale.
-15-
Professional services to Affiliates increased for the nine months ended
September 30, 1999, as compared to the nine months ended September 30, 1998,
due to an increase in accounting services required by the Partnership.
Professional services to Affiliates decreased for the three months ended
September 30, 1999, as compared to the three months ended September 30, 1998,
due to a decrease in legal services required by the Partnership to transact
sales.
General and administrative expenses to Affiliates increased for the three and
nine months ended September 30, 1999, as compared to the three and nine months
ended September 30, 1998, due to increases in data processing and investor
services expenses. General and administrative expenses to non-affiliates
decreased for the three and nine months ended September 30, 1999, as compared
to the three and nine months ended September 30, 1998, due primarily to a
decrease in postage, messenger service and insurance expense.
Marketing expenses to Affiliates and non-affiliates decreased for the three and
nine months ended September 30, 1999, as compared to the three and nine months
ended September 30, 1998, due to less activity in marketing, advertising and
travel expenses relating to marketing the land portfolio to prospective
purchasers.
Land operating expenses to Affiliates decreased for the three and nine months
ended September 30, 1999, as compared to the three and nine months ended
September 30, 1998, due to a decrease in tillable acres due to land sales.
Land operating expenses to non-affiliates decreased for the three and nine
months ended September 30, 1999, as compared to the three and nine months ended
September 30, 1998, due to a decrease in real estate tax expenses.
Year 2000 Issues
GENERAL
- -------
Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, the Partnership relies on computers and operating systems
provided by equipment manufacturers, and also on application software developed
internally and, to a limited extent, by outside software vendors. The
Partnership has assessed its vulnerability to the so-called "Year-2000 Issue"
with respect to its equipment and computer systems.
-16-
STATE OF READINESS
- ------------------
The Partnership has identified the following two areas for "Year-2000"
compliance efforts:
Business Computer Systems: The majority of the Partnership's information
technology systems were developed internally and include accounting, lease
management, investment portfolio tracking, and tax return preparation. The
Partnership has rights to the source code for these applications and employs
programmers who are knowledgeable regarding these systems. The process of
testing these internal systems to determine year 2000 compliance is nearly
complete. The Partnership does not anticipate any material costs relating to
its business computer systems regarding year 2000 compliance since the
Partnership's critical hardware and software systems use four digits to
represent the applicable year. The Partnership does use various computers, so-
called "PC's", that may run software that may not use four digits to represent
the applicable year. The Partnership is in the process of testing the PC
hardware and software to determine year 2000 compliance, but it must be noted
that such PC's are incidental to the Partnership's critical systems. The
Partnership is considering independent testing of its critical systems.
Suppliers and other Parties: The Partnership is in the process of surveying
suppliers and other parties with whom the Partnership does a significant amount
of business to identify the Partnership's potential exposure in the event such
parties are not year 2000 compliant in a timely manner. At this time, the
Partnership is not aware of any party that is anticipating a material Year 2000
compliance issue. However, since this area involves some parties over which
the Partnership has no control, such as public utility companies, it is
difficult, at best, to judge the status of the outside companies' year 2000
compliance. The Partnership is working closely with all suppliers of goods and
services in an effort to minimize the impact of the failure of any supplier to
become year 2000 compliant by December 31, 1999. The Partnership's
investigations and assessments of possible year 2000 issues are in a
preliminary stage, and currently the Partnership is not aware of any material
impact on its business, operations or financial condition even if one or more
parties is not Year 2000 compliant in a timely manner, due to the number and
nature of the Partnership's diverse supplier base.
YEAR 2000 RISKS
- ---------------
The most reasonable likely worst case scenario for the Partnership with respect
to the year 2000 non-compliance of its business computer systems would be the
inability to access information which could result in the failure to issue
financial reports.
YEAR 2000 COSTS
- ---------------
The Partnership's General Partner and its Affiliates estimate that costs to
achieve year 2000 compliance will not exceed $100,000. However, only
approximately 1% of these costs will be directly allocated to and paid by the
Partnership. The balance of the year 2000 compliance costs, approximately 99%,
will be paid by the General Partner and its Affiliates. Total year 2000
compliance costs are not expected to be significant.
-17-
CONTINGENCY PLAN
- ----------------
The Partnership expects to be Year 2000 compliant in advance of the year 2000.
The Partnership will continue to monitor its progress and state of readiness,
and is in the process of formulating a contingency plan which the Partnership
will be prepared to adopt with respect to areas in which evidence arises that
it may not become Year 2000 compliant in sufficient time. With respect to its
suppliers and other parties with whom the Partnership conducts business, the
Partnership does not yet have sufficient information to identify the types of
problems it may encounter in the event these third parties are not Year 2000
compliant. As information is obtained that may indicate such parties may not
become Year 2000 compliant in sufficient time, the Partnership is prepared to
develop contingency plans, accordingly.
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
-18-
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: November 12, 1999
/S/ PATRICIA A. DELROSSO
By: Patricia A. DelRosso
Senior Vice President
Date: November 12, 1999
/S/ KELLY TUCEK
By: Kelly Tucek
Principal Financial Officer and
Principal Accounting Officer
Date: November 12, 1999
-19-
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<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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