<PAGE> 1
Inland Monthly Income Fund III, Inc.
Sticker Supplement
Supplement No. 2 to the Prospectus of Inland Monthly Income Fund III,
Inc. (the "Company") includes information regarding the status of the Offering
and recent property acquisitions. Supplement No. 2 expands upon, supplements,
modifies and supersedes certain information contained in the Prospectus and
Supplement No. 1 and must be read in conjunction therewith.
As of June 19, 1996, subscriptions for a total of 4,185,300 Shares
were received through sales pursuant to the Offering and participation in the
Company's Distribution Reinvestment Program (the "DRP"). As of June 19, 1996,
the Company owned nine Neighborhood Retail Centers and one single-user retail
property. Of the ten properties acquired to date by the Company, the Company
utilized financing in connection with acquisition of seven of the properties.
The financing on five of the properties acquired was provided by an Affiliate
of the Advisor. Financing on the remaining two properties was provided by an
entity unaffiliated with the Company, which financing contains terms deemed
favorable by management of both the Advisor and the Company. The Company has
approximately $6,200,000 (including funds received through the Company's DRP)
after adjustment for two recent property acquisitions as described in this
Supplement No. 2 in the Section entitled "Real Property Investments." Of this
amount, $2,455,000 has been allocated to the proposed acquisition of one
additional property as described in Supplement No. 1.
An Affiliate of the Advisor serves as dealer manager of the Offering
and is entitled to receive selling commissions. Such commissions incurred were
$2,526,845 and $1,719,406 as of March 31, 1996 and December 31, 1995,
respectively, of which $192,632 and $102,084 were unpaid as of March 31, 1996
and December 31, 1995, respectively. An Affiliate of the Advisor is entitled
to receive Property Management Fees for management and leasing services. The
Company incurred and paid Property Management Fees of $46,791 for the year
ended December 31, 1995. The Advisor may receive an annual Advisor Asset
Management Fee of not more than 1% of the Average Invested Assets, paid
quarterly. As of March 31, 1996, the Company has incurred $48,540 of such
fees, all of which remains unpaid at March 31, 1996.
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SUPPLEMENT NO. 2
DATED JUNE 20, 1996
TO THE PROSPECTUS DATED MAY 7, 1996
OF INLAND MONTHLY INCOME FUND III, INC.
This Supplement No. 2 is provided for the purpose of supplementing the
Prospectus dated May 7, 1996 of Inland Monthly Income Fund III, Inc. (the
"Company"). This Supplement No. 2 expands upon, supplements, modifies and
supersedes certain information contained in the Prospectus and Supplement No. 1
dated June 14, 1996 and must be read in conjunction therewith. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.
PLAN OF DISTRIBUTION
GENERAL
As of January 3, 1995, the Company sold in excess of the Minimum Offering
(150,000 Shares); accordingly, all funds were released from escrow as of that
date for use by the Company. As of June 19, 1996, the Company had issued
approximately 4,185,300 Shares through sales pursuant to the Offering and
participation in the Company's Distribution Reinvestment Program (the "DRP")
leaving approximately 1,814,700 Shares unsold. The Company has approximately
$6,200,000 (including funds received through the Company's DRP) available for
investment in additional properties after adjustment for two recent property
acquisitions as described in this Supplement No. 2 in the Section entitled
"Real Property Investments." Of this amount, $2,455,000 has been
allocated to the proposed acquisition of one additional property as described
in Supplement No. 1 in the Section entitled "Real Property Investments."
The Company expects to complete this Offering in August 1996 and must
complete this Offering by October 13, 1996. The Company intends to commence an
additional offering of up to 11,000,000 Shares after completing this Offering.
In all other respects, this section entitled "Plan of Distribution" of the
Prospectus remains unchanged.
REAL PROPERTY INVESTMENTS
This section is amended and restated as follows:
PROSPECT HEIGHTS PLAZA, PROSPECT HEIGHTS, ILLINOIS
On June 17, 1996, the Company purchased the Prospect Heights Plaza
property ("Prospect Heights") 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.
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<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 17, 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.
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 $1,407,000. 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 1, 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.
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<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
<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.
MONTGOMERY-SEARS, MONTGOMERY, ILLINOIS
On June 17, 1996, the Company purchased the Montgomery-Sears Shopping
Center ("Montgomery-Sears") 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>
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As of June 17, 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 3600 square feet and $10.20 per square foot, on a net basis, for
1500 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.
At June 1, 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.
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<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.
The Directors, including the Independent Directors, approved each of
these acquisitions as being fair and reasonable to the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS OF THE COMPANY
This section is amended and restated as follows:
SUBSEQUENT EVENTS
On June 17, 1996, the Company acquired Prospect Heights Plaza in
Prospect Heights, Illinois for $2,165,000 on an all cash basis. The Company
also purchased, on June 17, 1996, the Montgomery-Sears Shopping Center located
in Montgomery, Illinois for $3,419,000 on an all cash basis. See "Real Property
Investments."
In all other respects, the section entitled "Management's Discussion
and Analysis of Financial Conditions of the Company" of the Prospectus remains
unchanged.
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