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As filed with the Securities and Exchange Commission on June 19, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 17, 1996
(Date of earliest event reported)
Inland Monthly Income Fund III, Inc.
(Exact name of registrant as specified in the charter)
Maryland 33-79012 36-3953261
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60521
(Address of Principal Executive Offices)
(708) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Capitalized terms not otherwise defined herein shall have the same meaning as
in the prospectus of Inland Monthly Income Fund III, Inc. (the "Company") dated
May 7, 1996 (the "Prospectus").
Prospect Heights Plaza, Prospect Heights, Illinois
On June 17, 1996, the Company acquired Prospect Heights Plaza ("Prospect
Heights") from an unaffiliated third party for a purchase price of $2,165,000
on an all cash basis.
Prospect Heights, built in 1985, consists of two one-story, multi-tenant brick
buildings aggregating 28,080 rentable square feet.
The table below sets forth certain information with respect to the occupancy
rate at Prospect Heights expressed as a percentage of total gross leasable area
for each of the last five years and the average effective annual base rent per
square foot for each of the last five years.
<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1991 100% $7.53
1992 100% 7.53
1993 100% 7.53
1994 100% 7.53
1995 78% 5.85
</TABLE>
As of June 18, 1996, Prospect Heights was 100% leased and 78% occupied.
Tenants leasing more than 10% of the total square footage currently include
Walgreens with 12,600 square feet, United Farm Stands Corp. with 4,680 square
feet and Blockbuster Video with 6,250 square feet.
The lease with Walgreens requires a base rent of $5.50 per square foot per
annum until July 31, 2005, $6.00 per square foot per annum from August 1, 2005
to July 31, 2015 and $6.50 per square foot per annum from August 1, 2015 to
July 31, 2025. The lease also requires the payment of percentage rent annually
based on 1% of food item sales, 1.5% of liquor sales and 2% of other sales in
excess of monthly rent paid including their portion of CAM, real estate taxes
and insurance. In 1995, net percentage rent was $23,000. Walgreens has the
option to terminate the lease in 2005, 2010, 2015, and 2020 with a one year
notice.
The lease with United Farm Stands Corp. requires a base rent of $12.00 per
square foot per annum until January 31, 1998 and contains three renewal options
of two years each. United Farm Stands Corp. sells fruits and vegetables.
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The lease with Blockbuster Video requires a base rent of $12.00 per square foot
per annum for three years and contains four renewal options of five years each.
Blockbuster Video sells and rents prerecorded audio and video products.
Blockbuster Video will begin paying rent three months after occupancy which is
anticipated to be in July 1996. The seller will master lease this space at
$12.00 per square foot per annum until Blockbuster Video begins paying rent.
For federal income tax purposes, the Company's depreciable basis in the
Prospect Heights buildings will be approximately $1,665,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.
Real estate taxes paid in 1995 for the tax year ended 1994 (the most recent tax
year for which information is available) were $127,033.
At June 18, 1996, Prospect Heights had five tenants. The following tables set
forth certain information with respect to the amount of and expiration of
leases at this Neighborhood Retail Center.
<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- ----------------- ------ ------ ------- ------ -----------
<S> <C> <C> <C> <C> <C>
Walgreens 12,600 07/2025 None $ 72,450 $ 5.75
Blockbuster 6,250 07/1999 4/5 75,000 12.00
Power Motion 2,550 07/1998 1/3 27,600 10.82
Dr. W. Beck 2,000 12/1997 1/5 22,000 11.00
United Farm Stands 4,680 01/1998 3/2 56,160 12.00
</TABLE>
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ------------- ----------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 - - - $ 253,710 - - -
1997 1 2,000 $ 22,000 254,910 $ 11.00 7.12% 8.63%
1998 2 7,230 86,160 233,610 11.92 25.75 36.88
1999 1 6,250 75,000 147,450 12.00 22.26 50.86
2000-2004 - - - 72,450 - - -
2005 - - - 73,763 - - -
</TABLE>
(1) No assumptions were made regarding the releasing of expired leases. It
is management of the Company's current opinion that the space will be
released at market rates.
The Company received an appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers
reflecting a market value of Prospect Heights as of June 17, 1996 of
$2,190,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.
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Montgomery-Sears, Montgomery, Illinois
On June 17, 1996, the Company acquired Montgomery-Sears Shopping Center
("Montgomery-Sears") from an unaffiliated third party for a purchase price of
$3,419,000 on an all cash basis.
Montgomery-Sears, built in 1990, is a one-story, multi tenant concrete masonry
building aggregating 34,600 rentable square feet.
The table below sets forth certain information with respect to the occupancy
rate at Montgomery-Sears expressed as a percentage of total gross leasable area
for each of the last five years and the average effective annual base rent per
square foot for each of the last five years.
<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1991 95% $ 8.88
1992 95% 9.50
1993 95% 9.84
1994 95% 10.48
1995 95% 9.47
</TABLE>
As of June 18, 1996, Montgomery-Sears was 85% leased. Tenants leasing more
than 10% of the building's square footage include Sears Hardware with 20,000
square feet and Blockbuster Video with 7,000 square feet.
The lease with Sears requires a base rent of $10.50 per square foot per annum
until September 1, 1996, $11.44 per square foot per annum from October 1, 1996
to September 30, 1999 and $12.47 per square foot per annum from October 1, 1999
to July 30, 2000 and contains two renewal options of five years each. Sears
has the right to terminate the lease at any time after July 15, 1997 with 180
days notice and payment of one year's rent. Sears Hardware sells hardware
supplies and tools. The lease with Blockbuster requires a base rent of $13.20
per square foot per annum until August 31, 2000 and contains a renewal option
for an additional five years. Blockbuster Video sells and rents prerecorded
audio and video products.
The vacant space, totaling 5,100 square feet, at Montgomery-Sears will be
master leased by the seller for a period of 24 months or until such time as a
tenant begins paying rent at $12.00 per square foot per annum, on a net basis,
for 3,600 square feet and $10.20 per square foot, on a net basis, for 1,500
square feet.
For federal income tax purposes, the Company's depreciable basis in the
Montgomery-Sears building will be approximately $2,675,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.
Real estate taxes to be paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $65,310.
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At June 17, 1996, Montgomery-Sears had three tenants. The following tables set
forth certain information with respect to the amount of and expiration of
leases at this Neighborhood Retail Center.
<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- --------------- ------ ----- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Sears Hardware 20,000 07/2000 2/5 $ 210,000 $ 10.50
Blockbuster 7,000 08/2000 1/5 92,400 13.20
Radio Shack 2,500 09/2000 1/5 25,000 10.00
Vacant* 3,600 06/1998 - 43,200 12.00
Vacant* 1,500 06/1998 - 15,300 10.20
</TABLE>
* The vacancies currently total 5,100 square feet, however, the vacant space
will be master leased by the seller for a two-year period at $12.00 per
square foot, on a net basis, for 3,600 square feet and $10.20 per square
foot, on a net basis, for 1,500 square feet.
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ------------- ----------- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 - - - $ 396,380 - - -
1997 - - - 416,640 - - -
1998 1 5,100 $ 61,200 416,640 $ 12.00 14.74% 14.69%
1999 - - - 362,178 - - -
2000 3 29,500 379,004 379,004 12.85 85.26 100.00
2001-2005 - - - - - - -
</TABLE>
(1) No assumptions were made regarding the releasing of expired leases. It
is management of the Company's current opinion that the space will be
released at market rates.
The Company received an appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers
reflecting a market value of Montgomery Sears as of June 17, 1996 of
$3,450,000. It should be noted, however, that appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.
Item 7. Financial Statements and Exhibits
See Item 7 on Form 8-K, filed on June 14, 1996, incorporated herein by
reference.
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SIGNATURE
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, hereunto duly authorized.
Inland Monthly Income Fund III, Inc.
(Registrant)
By:/s/ CYNTHIA M. HASSETT
--------------------------
Cynthia M. Hassett
Chief Financial and Accounting Officer
Date: JUNE 19, 1996
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