<PAGE> 1
Inland Real Estate Corporation
Sticker Supplement
Supplement No. 6 to the Company's Prospectus discloses information
regarding a recently completed acquisition of property and updates certain
information in the sections of the Prospectus headed "Real Property
Investments," "Management's Discussion and Analysis of the Financial Condition
and Results of Operation," and "Plan of Distribution" and discloses information
regarding three pending acquisitions of property. Unless otherwise defined,
capitalized terms used herein shall have the same meaning as in the Prospectus.
On November 13, 1996, the Company completed the acquisition of a
125,198 square foot Neighborhood Retail Center known as Spring Hill Fashion
Corner located at 830-890 West Main Street, West Dundee, Illinois for
approximately $9.2 million. The center was purchased from an unaffiliated
third party.
The Company has entered into agreements to purchase a 20,044 square
foot neighborhood retail facility known as Crestwood Plaza Shopping Center
located at 13335 South Cicero Avenue, Crestwood, Illinois for approximately
$1.8 million, a 33,248 square foot neighborhood retail facility known as The
Summit of Park Ridge located at 100-15- Euclid Avenue, Park Ridge, Illinois for
approximately $3.2 million and a 220,095 square foot neighborhood retail
facility known Maple Park Place Shopping Center located at the northwest corner
of Naperville Road and Boughton Road, Bolingbrook, Illinois for approximately
$15.3 million. The purchase of each of these centers is subject to, among
other things, the Company completing its due diligence.
The Company commenced the "best efforts" Offering on July 24, 1996,
and as of November 20, 1996, the Company had accepted subscriptions for
2,103,904 shares ($19,097,503 net of Selling Commissions, the Marketing
Contribution and the Due Diligence Expense Allowance Fee). Supplement No. 5 to
the Company's prospectus reported the number of subscriptions accepted, and net
proceeds, for the current offering as well as an offering the Company completed
on July 22, 1996. Inland Securities Corporation, an Affiliate of the Advisor,
serves as dealer manager of the Offering and is entitled to receive selling
commissions and certain other amounts. As of November 20, 1996, Inland
Securities Corporation was entitled to receive commissions, the Marketing
Contribution and the Due Diligence Expense Allowance Fee totalling $1,944,557
in connection with the Offering. An Affiliate of the Advisor is also entitled
to receive Property Management Fees for management and leasing services.
<PAGE> 2
SUPPLEMENT NO. 6
DATED NOVEMBER 27, 1996
TO THE PROSPECTUS DATED JULY 24, 1996
OF INLAND REAL ESTATE CORPORATION
This Supplement No. 6 is provided for the purpose of supplementing the
Prospectus dated July 24, 1996 of Inland Real Estate Corporation (the
"Company"), as supplemented by Supplement No. 5 dated November 1, 1996 and must
be read in conjunction therewith. Unless otherwise defined, capitalized terms
used herein shall have the same meaning as in the Prospectus, as supplemented.
REAL PROPERTY INVESTMENTS
SPRING HILL FASHION CORNER, WEST DUNDEE, ILLINOIS
On November 13, 1996, the Company acquired a Neighborhood Retail
Center located at 830-890 West Main Street, West Dundee, Illinois known as
Spring Hill Fashion Corner ("Spring Hill") from JMB/Spring Hill Associates, an
unaffiliated third party, for approximately $9.2 million. The purchase price
was funded using cash and cash equivalents, including the proceeds of monies
previously drawn against the Company's line of credit provided by LaSalle Bank
on September 30, 1996. The purchase price was approximately $73.48 per square
foot, which the Company concluded was fair and reasonable and within the range
of values indicated in an appraisal received by the Company and presented to
the Company's board of directors.
Spring Hill was built in 1985 and consists of a one-story building
aggregating 125,198 rentable square feet. As of November 1, 1996, Spring Hill
was 95% leased. In evaluating Spring Hill as a potential acquisition, the
Company considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and the occupancy of the center. The Company believes that the center
is located within a vibrant economic area. According to a 1996 study conducted
by Richard Ellis, the population within a five mile radius of Spring Hill is
111,500, with an estimated average household income in excess of $54,500 per
year, higher than the national average. Although 44% of the rentable square
feet at Spring Hill is leased to two tenants, the Company's management believes
that retenanting of any space which is vacated in the future should be
accomplished relatively quickly and at rental rates comparable to those
currently paid by the tenants at the facility. The Company did not consider
any other factors materially relevant to the decision to acquire the property.
The Company does not anticipate making any significant repairs and
improvements to Spring Hill over the next few years. A substantial portion of
any such cost would be paid by the tenants.
The table below sets forth certain information with respect to the
occupancy rate at Spring Hill expressed as a percentage of total gross leasable
area and the average effective annual base rent per square foot. Information
for prior years is not available to the Company since the property is being
acquired through a foreclosure proceeding.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ -------------------- ---------------
<S> <C> <C>
1995 75% $8.92
</TABLE>
1
<PAGE> 3
Tenants leasing more than 10% of the total square footage are
Michael's, which leases 30,000 square feet, or approximately 24% of the
rentable square feet, and T. J. Maxx, which leases 25,161 square feet, or
approximately 20% of the rentable square feet. Michael's is a national chain
of craft stores, and T. J. Maxx is a discount clothing chain. The lease with
Michael's requires Michael's to pay base rent equal to $7.00 per square foot
per annum payable monthly until January 31, 2001, and $7.50 per square foot per
annum payable monthly from February 1, 2001 until January 31, 2006. The
Michael's lease contains no option to renew. The lease with T.J. Maxx requires
T.J. Maxx to pay base rent equal to $6.50 per square foot per annum payable
monthly until January 31, 2001. The lease with T.J. Maxx also grants T.J. Maxx
one option to renew the lease for a five-year term. If this option is
exercised, T.J. Maxx will be required to pay a base rent of $6.50 per square
foot per annum payable monthly from February 1, 2001 until January 31, 2006.
For federal income tax purposes, the Company's depreciable basis in
Spring Hill will be approximately $7,406,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1996 for the tax year ended 1995 (the
most recent tax year for which information is available) were $123,314.60. The
real estate taxes payable were calculated by multiplying Spring Hill's assessed
value by an equalizer of 1.00 and a tax rate of 6.2199%.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 4
At November 1, 1996, a total of 119,198 square feet were leased to 18
tenants at Spring Hill. 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 Foot Renewal Current Rent per
Lessee Leased Lease Ends Options Annual Rent Square Foot
------ ------ ---------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Pier 1 Imports 8,487 03/2002 - $110,331 $13.00
Travel Agents Int'l 2,000 09/1999 - 21,500 10.75
China Palace 5,000 07/2003 1/5 yr. 62,500 12.50
Wild Bird Unltd. 2,000 12/2000 - 26,120 13.06
Let's Learn 4,000 12/2000 - 39,960 9.99
Michael's 30,000 01/2006 - 210,000 7.00
Fantastic Sam's 900 06/2000 - 22,500 25.00
Jenny Craig 3,600 09/1998 1/5 yr. 41,400 11.50
Sizes Unltd. 4,000 01/2001 - 56,000 14.00
Sally Beauty Supply 2,000 03/1998 1/5 yr. 30,000 15.00
Music Go Round 3,000 09/2001 1/5 yr. 37,500 12.50
Once Upon a Child 4,000 02/2001 1/5 yr. 38,000 9.50
T. J. Maxx 25,161 01/2001 1/5 yr. 163,546 6.50
Play It Again Sports 3,500 02/2000 - 36,750 10.50
Funcoland 2,000 05/1997 - 24,000 12.00
Cosmetic Center 6,000 01/2003 2/5 yr. 60,000 10.00
Celebration Center 8,125 10/2004 - 89,700 11.04
Famous Footwear 5,425 09/2000 - 59,675 11.00
Vacant 3,000 - - - -
Vacant 1,000 - - - -
Vacant 2,000 - - - -
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
Percent of
Average Total Percent of
Base Rent Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring by Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
-------- -------- ----------- ------ ------------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 - - - 1,129,786 - - -
1997 1 2,000 $24,000 1,139,920 $12.00 1.60% 2.11%
1998 2 5,600 71,400 1,150,809 12.75 4.47 6.20
1999 1 2,000 21,500 1,093,874 10.75 1.60 1.97
2000 5 15,825 206,988 1,086,035 13.08 12.64 19.06
2001 4 36,161 301,546 899,123 8.34 28.88 33.54
2002 1 8,487 126,244 601,744 14.87 6.78 20.98
2003 2 11,000 153,000 475,500 13.91 8.79 32.18
2004 1 8,125 97,500 322,500 12.00 6.49 30.23
2005 - - - 225,000 - - -
2006 1 30,000 225,000 225,000 7.50 23.96 100.00
</TABLE>
(1) No assumptions were made regarding the releasing of expired leases. It is
the opinion of the Company's management that the space will be released at
market rates.
The Company received a letter appraisal prepared by an independent
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers which reported a fair market value for the Spring Hill
property, as of November 15, 1996, of not less than $9,380,000 million.
Appraisals are estimates of value and should not, however, be relied on as a
measure of true worth or realizable value.
CRESTWOOD PLAZA SHOPPING CENTER, CRESTWOOD, ILLINOIS
The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 13335 South Cicero Avenue in Crestwood,
Illinois known as Crestwood Plaza Shopping Center ("Crestwood Plaza"). Under
the proposed terms of the acquisition, the Company would purchase Crestwood
Plaza from Inland Property Sales, Inc. ("IPS"), an affiliated third party, for
approximately $1.8 million. The purchase price does not exceed its fair market
value as determined by a competent independent appraiser who is a member in
good standing of the American Institute of Real Estate Appraisers, and a
majority of the Directors, including a majority of the Independent Directors,
not interested in the transaction have approved the purchase as fair and
reasonable to the Company. The Directors, including all of the Independent
Directors, have approved this acquisition, however, there can be no assurance
that the price to be paid to the Affiliate will not exceed that which would be
paid by an unaffiliated purchaser. The Company anticipates funding the
purchase using cash and cash equivalents. Execution of a definitive agreement
is subject to completion of due diligence, which the Advisor is undertaking on
behalf of the Company, and receipt of a final environmental report indicating
no environmental concerns on the property. No acquisition fees will be payable
in connection with the acquisition of Crestwood Plaza. There can be no
assurance that the Company will complete the acquisition of Crestwood Plaza.
4
<PAGE> 6
Crestwood Plaza was built in 1992 and consists of a one-story building
comprising a two-tenant neighborhood retail facility aggregating 20,044
rentable square feet. The center is occupied by Entenmann's Bakery, which
leases 13,644 square feet, and Pet Supplies Plus, which leases 6,400 square
feet.
THE SUMMIT OF PARK RIDGE, PARK RIDGE, ILLINOIS
The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at 100-150 Euclid Avenue in Park Ridge,
Illinois known as The Summit of Park Ridge ("The Summit"). Under the proposed
terms of the acquisition, the Company would purchase The Summit from WHPX-S
Real Estate Limited Partnership, a Delaware limited partnership, an
unaffiliated third party, for approximately $3.2 million. The Company
anticipates funding the purchase using cash and cash equivalents. Execution of
a definitive agreement is subject to completion of due diligence, which the
Advisor is undertaking on behalf of the Company, execution and delivery of
leases from three current tenants, receipt of the final appraisal indicating
the value of the property is not less than $3.2 million and receipt of a final
environmental report indicating no environmental concerns on the property. No
acquisition fees will be payable in connection with the acquisition of The
Summit. There can be no assurance that the Company will complete the
acquisition of The Summit.
The Summit was built in 1986 and consists of a one-story building
comprising a multi-tenant neighborhood retail facility aggregating 33,248
rentable square feet. The center is anchored by Giappo's Pizza, which leases
3,683 square feet, and L Peep, which leases 3,621 square feet.
MAPLE PARK PLACE SHOPPING CENTER, BOLINGBROOK, ILLINOIS
The Company has entered into a non-binding letter of intent to purchase
a Neighborhood Retail Center located at the northwest corner of Naperville Road
and Boughton Road in Bolingbrook, Illinois known as Maple Park Place Shopping
Center ("Maple Park"). Under the proposed terms of the acquisition, the
Company would purchase Maple Park from KBS Retail Limited Partnership, a
Delaware limited partnership, an unaffiliated third party, for approximately
$15.3 million. The Company anticipates funding the purchase using the proceed
of a loan from LaSalle Bank, in the principal amount of approximately $12.0
million, and cash and cash equivalents. The Company has chosen to utilize debt
financing in order to maximize the return on its investment. Execution of a
definitive agreement is subject to completion of due diligence, which the
Advisor is undertaking on behalf of the Company, receipt of the final appraisal
indicating the value of the property is not less than $15.3 million and receipt
of a final environmental report indicating no environmental concerns on the
property. No acquisition fees will be payable in connection with the
acquisition of Maple Park. There can be no assurance that the Company will
complete the acquisition of Maple Park.
Maple Park was built in 1992 with expansions in 1994 and consists of a
one-story building comprising a multi-tenant community retail facility
aggregating 220,095 rentable square feet. The center is anchored by Kart,
which leases 109,033 square feet, and Eagle Foods, which leases 56,706 square
feet.
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Supplement
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 Company'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, limitations on the area in which the Company may
acquire properties; risks associated with borrowing secured by the Company's
properties; competition for tenants and customers; federal, state or local
regulations; adverse changes in general economic or local conditions;
competition for property acquisitions with third parties that have greater
financial resources than the Company; inability of lessees to meet financial
obligations; uninsured losses; risks of failing to qualify as a REIT; and
potential conflicts of interest between the Company and its affiliates
including the Advisor.
As of December 31, 1994, subscriptions for a total of 189,938.145 Shares
had been received resulting in $1,899,381 in gross offering proceeds, which
includes $200,000 received from the Advisor for 20,000 Shares. Subscriber
funds were held in an interest-bearing escrow account with the Company's
unaffiliated escrow agent until January 3, 1995 when the subscriptions were
accepted and Shares issued by the Company. As of July 24, 1996, the Company
had received subscriptions for a total of 5,000,000 Shares, resulting in Gross
Offering Proceeds of $50,000,000, thereby completing the initial offering. On
July 24, 1996, the Company commenced the follow-on Offering of 10,000,000
shares plus an additional 1,000,000 shares available for distribution through
the DRP. As of September 30, 1996, the Company had received subscriptions for a
total of 931,147 Shares of the follow-on Offering, resulting in $9,311,472 in
Gross Offering Proceeds. In addition, the Company has received $968,320 in
Gross Offering Proceeds from 106,997 Shares purchased through the DIP. As of
September 30, 1996, the Company has repurchased 6,318 Shares from Stockholders
for an aggregate price of $57,179 through the Share Repurchase Program.
The Company's capital needs and resources are expected to undergo
changes as a result of the completion of the initial public offering of
Shares, the commencement of the follow-on Offering and the acquisition of
properties. Operating cash flow is expected to increase as these additional
properties are added to the portfolio. Distributions to Stockholders are
determined by the Company's Board of Directors and are dependent on a number of
factors, including the amount of funds available for distribution, the
Company's financial condition, capital expenditures, and the annual
distribution required to maintain REIT status under the Code.
Management of the Company monitors the various qualification tests the
Company must meet to maintain its status as a real estate investment trust.
Large ownership of the Company's stock is tested upon purchase to determine
that no more than 50% in value of the outstanding stock is owned directly, or
indirectly, by five or fewer persons or entities at any time. Management of
the Company also determines, on a quarterly basis, that the Gross Income, Asset
and Distribution Tests as described in the section of the Prospectus entitled
"Federal Income Tax Considerations--Taxation of the Company--REIT Qualification
Tests" are met. On an ongoing basis, as due diligence is performed by
management of both the Company and the Advisor on potential real estate
purchases or temporary investment of uninvested capital, management of both
entities determines that the income from the new asset will qualify for REIT
purposes. For the year ended December 31, 1995, the Company qualified as a
REIT.
6
<PAGE> 8
As of September 30, 1996, the Company had acquired thirteen properties
utilizing approximately $33,100,000 of cash and cash equivalents. Cash and
cash equivalents consists of cash and short-term investments. Cash and cash
equivalents at September 30, 1996 and December 31, 1995 were $19,250,977 and
$738,931, respectively. This increase was due to the additional sales proceeds
raised and $12,820,000 in loan proceeds from financing the properties.
Partially offsetting the increase in cash and cash equivalents was the purchase
of seven additional properties in 1996 and the payment of Offering costs.
The Company intends to use cash and cash equivalents to purchase
additional properties, to pay distributions and to pay offering costs. To the
extent that these sources are insufficient to meet the Company's short- and
long-term liquidity requirements the Company may rely on financing of one or
more of the properties.
The properties owned by the Company are currently generating sufficient
cash flow to cover operating expenses of the Company plus pay a monthly
distribution of 8% per annum on weighted average shares. Commencing with the
fourth quarter of 1996, the Company intends to pay monthly distributions of
8.3% per annum on weighted average shares. Distributions declared for the nine
months ended September 30, 1996 were $2,232,004, a portion of which represents
a return of capital for federal income tax purposes. The return of capital
portion of the distributions cannot be determined at this time and will be
calculated at year end.
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities increased by approximately
$1,862,181 for the nine months ended September 30, 1996 to $2,389,287 from
$527,106 for the same period in 1995. This increase is due primarily to an
increase in net income for the nine months ended September 30, 1996, as
compared to the net income for the nine months ended September 30, 1995. This
increase in net income is due to the purchase of additional properties. As of
September 30, 1996, the Company had acquired thirteen properties, as compared
to five properties as of September 30, 1995. This increase is also due to
$305,054 of rental income received under master lease agreements for the nine
months ended September 30, 1996, as compared to no rental income received under
master lease agreements for the nine months ended September 30, 1995.
CASH FLOWS FROM INVESTING ACTIVITIES
During the nine months ended September 30, 1996, the Company utilized
$26,729,537 in investing activities for the purchase of seven properties, as
compared to the $5,286,038 utilized in the nine months ended September 30, 1995
for the purchase of five properties.
CASH FLOWS FROM FINANCING ACTIVITIES
For the nine months ended September 30, 1996, the Company generated
$43,020,331 of cash flows from financing activities as compared to $5,413,372
of cash flows generated from financing activities for the nine months ended
September 30, 1995. This increase is due primarily to the increase in proceeds
raised from the Offering of $40,246,259 for the nine months ended September 30,
1996, as compared to $13,012,136 of Offering proceeds raised for the nine
months ended September 30, 1995. This increase is partially offset by an
increase in the cash used for the payment of Offering costs for the nine months
ended September 30, 1996. The increase is also partially offset by an increase
in the amount of distributions paid for the nine months ended September 30,
1996 of $1,989,199 as compared to the distributions paid for the nine months
ended September 30, 1995 of $188,958. In the third quarter of 1996, the
Company placed financing on seven of the Company's properties and received
$12,633,172 in loan proceeds, net of loan costs.
7
<PAGE> 9
The Advisor has guaranteed payment of all public offering expenses
(excluding selling commissions, the marketing contribution and the due
diligence expense allowance fee) in excess of 5.5% of the Gross Offering
Proceeds of the Offering (the "Gross Offering Proceeds") or all organization
and offering expenses (including such selling expenses) which together exceed
15% of the Gross Offering Proceeds. As of September 30, 1996, organizational
and offering costs did not exceed this limitation.
The Company provides the following programs to facilitate investment in
the Shares and to provide limited liquidity for Stockholders until such time as
a market for the Shares develops:
The Distribution Reinvestment Program allows Stockholders who purchase
Shares pursuant to the Offering to automatically reinvest distributions by
purchasing additional Shares from the Company. Such purchases will not be
subject to selling commissions or the Marketing Contribution and Due Diligence
Expense Allowance Fee and will be sold at a price of $9.05 per Share. As of
September 30, 1996, the Company had received $968,320 through the DIP and had
repurchased 6,318 Shares from Stockholders for an aggregate price of $57,179,
pursuant to the terms of the Share Repurchase Program. The remaining $911,141
is available to the Company for investment in additional properties,
maintenance of existing properties or the repurchase of additional Shares
pursuant to the terms of the Share Repurchase Program.
The Share Repurchase Program will, subject to certain restrictions,
provide existing Stockholders with limited, interim liquidity by enabling them
to sell Shares back to the Company at a price of $9.05 per Share. Shares
purchased by the Company will not be available for resale. As of September 30,
1996, the Company has repurchased 6,318 Shares.
RESULTS OF OPERATIONS
As of September 30, 1996, subscriptions for a total of 6,038,144 Shares
were received from the public resulting in $60,279,792 in Gross Offering
Proceeds, which includes the Advisor's capital contribution of $200,000. As of
September 30, 1996, the Company has repurchased 6,318 Shares from Stockholders
for an aggregate price of $57,179 through the Share Repurchase Program.
Funds from operations ("FFO") means net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation and other
non-cash items. FFO and funds available for distribution for the nine months
ended September 30, 1996 and 1995 are calculated as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . $1,332,939 157,039
Depreciation . . . . . . . . . . . . . . . . . . 561,983 33,909
---------- -------
Funds from operations (1) . . . . . . . . . 1,894,922 190,948
Deferred rent receivable (2) . . . . . . . . . . (63,007) (3,656)
Rental income received under
Master lease agreements (3) . . . . . . . .
305,054 -
---------- -------
Funds available for distribution . . . . . . . . $2,136,969 187,292
========== =======
</TABLE>
8
<PAGE> 10
(1) FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available
to fund cash needs. FFO should not be considered as an
alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a
measure of liquidity. FFO as reported by the Company may not
be comparable to other similarly titled measures of other real
estate companies.
(2) Reference is made to Note (5) of the Notes to Financial
Statements of the Company.
(3) As part of the purchase of some of the properties, the Company
will receive rent under master lease agreements on some of the
spaces currently vacant for periods ranging from one to two
years or until the spaces are leased. Generally accepted
accounting principles require that as these payments are
received, they be recorded as a reduction in the purchase
price of the properties rather than as rental income. For the
nine months ended September 30, 1996, the Company has recorded
$305,054 of such payments. Reference is made to Note (5) of
the Notes to Financial Statements of the Company.
Total income for the three and nine months ended September 30, 1996
and 1995 was $3,706,605 and $803,508, respectively. This increase was due to
the purchase of additional properties. As of September 30, 1996, the Company
had acquired thirteen properties, as compared to five properties as of
September 30, 1995. The purchase of additional properties also resulted in
increases in property operating expenses to Affiliates and non-affiliates and
depreciation expense.
The decrease in mortgage interest expense to Affiliates for the three
and nine months ended September 30, 1996, as compared to the three and nine
months ended September 30, 1995, is due to the payoff of the acquisition
financing. The Company continues to have a mortgage in the principal amount of
$741,467, which bears interest at 7.655%, collateralized by the Walgreens,
Decatur property payable to an Affiliate.
The increase in mortgage interest to non-affiliates for the three and
nine months ended September 30, 1996, as compared to the three and nine months
ended September 30, 1995, is due to the mortgage which was assumed as part of
the purchase of Regency Point. During the third quarter of 1996, the Company
obtained $12,820,000 of financing from an unaffiliated lender, on seven
properties previously acquired.
For the nine months ended September 30, 1995, the Company had not paid
an annual distribution equal to or greater than the 8% Current Return, and
accordingly, no advisor asset management fee was accrued. For the nine months
ended September 30, 1996, the Company has paid an annual distribution equal to
the 8% Current Return and therefore has accrued the advisor asset management
fee.
During 1994, the Advisor advanced $193,300 to the Company for costs
incurred with the Offering. These advances were repaid with a market rate of
interest to the Advisor in January 1995 with interest ranging from 7.75% to
9.50%.
Interest income is the result of cash and cash equivalents being
invested in short-term investments until a property is purchased.
The increases in professional services to Affiliates and
non-affiliates and general and administrative expenses to Affiliates and
non-affiliates for the three and nine months ended September 30, 1996, as
compared to the three and nine months ended September 30, 1995, is due to the
Company entering the operational stage.
9
<PAGE> 11
The following is a list of approximate physical occupancy levels for
the Company's investment properties as of the end of each quarter during 1995
and 1996. N/A indicates the property was not owned by the Company at the end
of the quarter.
<TABLE>
<CAPTION>
1995 1996
--------------------------------- -----------------------
at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30
- ---------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Walgreens 100% 100% 100% 100% 100% 100% 100%
Decatur, Illinois
Eagle Crest 100% 100% 100% 100% 100% 100% 100%
Naperville, Illinois
Montgomery-Goodyear N/A N/A 100% 100% 100% 100% 100%
Montgomery, Illinois
Hartford/Naperville Plaza N/A N/A 48% 90% 100% 100% 100%
Naperville, Illinois
Nantucket Square NA N/A 92% 81% 81% 81% 94% *
Schaumburg, Illinois
Antioch Plaza N/A N/A N/A 33% 49% 49% 49% *
Antioch, Illinois
Mundelein Plaza N/A N/A N/A N/A N/A 100% 100%
Mundelein, Illinois
Regency Point N/A N/A N/A N/A N/A 97% 97%
Lockport, Illinois
Prospect Heights N/A N/A N/A N/A N/A 78% 100%
Prospect Heights, Illinois
Montgomery-Sears N/A N/A N/A N/A N/A 85% 85% *
Montgomery, Illinois
Zany Brainy N/A N/A N/A N/A N/A N/A 100%
Wheaton, Illinois
Salem Square N/A N/A N/A N/A N/A N/A 97% *
Countryside, Illinois
Hawthorn Village N/A N/A N/A N/A N/A N/A 99%
Vernon Hills, Illinois
</TABLE>
*As part of the purchase of these properties, the Company receives
rent under master lease agreements on the space which was vacant at
the time of the purchase, resulting in 100% economical occupancy at
September 30, 1996 for Nantucket Square and Antioch Plaza and 98%
economic occupancy for Salem Square. See footnote (5) to the
Company's financial statement.
10
<PAGE> 12
As of September 30, 1996 two leases totaling 3,447 square feet were
executed at Antioch Plaza. Tenants are expected to begin occupancy in the
fourth quarter 1996.
Subsequent Events
On October 18,1996, the Company acquired the Six Corners Plaza
Shopping Center from an unaffiliated third party for a purchase price of
$6,000,000 on an all cash basis.
On November 13, 1996, the Company acquired the Spring Hill Fashion
Corner from an unaffiliated third party for a purchase price of approximately
$9,200,000 on an all-cash basis.
On the behalf of the Company, the Advisor is currently exploring the
purchase of additional shopping centers from unaffiliated third parties.
PLAN OF DISTRIBUTION
The Company commenced the "best efforts" Offering on July 24, 1996,
and as of November 20, 1996, the Company had accepted subscriptions for
2,103,904 shares ($19,097,503 net of Selling Commissions, the Marketing
Contribution and the Due Diligence Expense Allowance Fee). Supplement No. 5 to
the Company's prospectus reported the number of subscriptions accepted, and net
proceeds, for the Offering as well as an offering the Company completed on
July 22, 1996.
Inland Securities Corporation, an Affiliate of the Advisor, serves as
dealer manager of the Offering and is entitled to receive selling commissions
and certain other amounts. As of November 20, 1996, Inland Securities
Corporation was entitled to receive commissions, the Marketing Contribution and
the Due Diligence Expense Allowance Fee totalling $1,944,557 in connection with
the Offering. An Affiliate of the Advisor is also entitled to receive Property
Management Fees for management and leasing services. The Company incurred and
paid Property Management Fees of $139,597 for the nine months ended September
30, 1996 and $46,791 for the year ended December 31, 1995. The Advisor may
also receive an annual Advisor Asset Management Fee of not more than 1% of the
Average Invested Assets, paid quarterly. As of September 30, 1996, the Company
had incurred Advisor Asset Management Fees of $242,341, all of which remained
unpaid on such date. As of December 31, 1995, the Company had not incurred or
paid any such fees.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Balance Sheets at September 30, 1996 and December 31, 1995 (unaudited)
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Statements of Operations for the three and nine months ended
September 30, 1996 and 1995 (unaudited) of the Company . . . . . . . . . . . . . . . . . . . . F-3
Statements of Stockholders' Equity September 30, 1996 and December 31, 1995
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Cash Flows for the nine months ended September 30, 1996 and
1995 (unaudited) of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Financial Statements September 30, 1996 (unaudited) of the Company . . . . . . . . . F-7
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
Pro Forma Balance Sheet (unaudited) at December 31, 1995 of the Company . . . . . . . . . . . F-17
Notes to Pro Forma Balance Sheet (unaudited) at December 31, 1995 of the Company . . . . . . . F-19
Pro Forma Statement of Operations (unaudited) for the year ended
December 31, 1995 of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24
Notes to Pro Forma Statement of Operations (unaudited) for the year ended
December 31, 1995 of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
Pro Forma Balance Sheet (unaudited) at September 30, 1996 of the Company . . . . . . . . . . . F-36
Notes to Pro Forma Balance Sheet (unaudited) at September 30, 1996 of the Company . . . . . . F-38
Pro Forma Statement of Operations (unaudited) for the nine months ended
September 30, 1996 of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-40
Notes to Pro Forma Statement of Operations (unaudited) for the nine months
ended September 30, 1996 of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
</TABLE>
12
<PAGE> 14
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
September 30, 1996 and December 31, 1995
(unaudited)
Assets
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Investment properties (Notes 1, 4 and 5):
Land............................................ $14,695,748 5,437,948
Building and improvements....................... 36,782,378 12,074,484
------------ ------------
51,478,126 17,512,432
Less accumulated depreciation................... 731,877 169,894
------------ ------------
Net investment properties....................... 50,746,249 17,342,538
Cash and cash equivalents including amounts
held by property manager (Note 1)............... 19,250,977 738,931
Restricted funds.................................. - 150,000
Accounts and rents receivable (Note 5)............ 1,087,810 333,823
Deposits and other assets......................... 236,854 158,123
Deferred organization costs (net of accumulated
amortization of $4,119 at September 30, 1996)
(Note 1)........................................ 23,343 27,462
Loan fees......................................... 186,828 -
------------ ------------
Total assets.................................. $71,532,061 18,750,877
============ ============
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE> 15
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
(continued)
September 30, 1996 and December 31, 1995
(unaudited)
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Liabilities:
Accounts payable................................ $ 105,062 6,875
Accrued offering costs to Affiliates............ 646,121 222,353
Accrued offering costs to non-affiliates........ 89,235 6,444
Accrued interest payable to Affiliates.......... - 5,242
Accrued real estate taxes....................... 981,687 374,180
Distributions payable (Note 7).................. 372,337 129,532
Security deposits............................... 112,374 54,483
Note payable to Affiliate (Note 6).............. - 360,000
Mortgages payable (Note 6)...................... 18,003,626 750,727
Unearned income................................. 62,650 39,846
Other liabilities............................... 28,852 178,852
Due to Affiliates (Note 2)...................... 244,040 7,277
------------ ------------
Total liabilities............................. 20,645,984 2,135,811
------------ ------------
Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 6,038,144 and 6,031,826 issued
and outstanding at September 30, 1996, and
2,003,073 and 2,000,073 Shares issued and
outstanding at December 31, 1995,
respectively.................................. 59,824 19,996
Additional paid-in capital (net of offering
costs of $8,197,358 at September 30, 1996, of
which $6,282,497 was paid to Affiliates)...... 51,965,431 16,835,183
Accumulated distributions in excess of
net income.................................... (1,139,178) (240,113)
------------ ------------
Total stockholders' equity.................... 50,886,077 16,615,066
------------ ------------
Total liabilities and stockholders' equity........ $71,532,061 18,750,877
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 16
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statements of Operations
For the three and nine months ended September 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income (Notes 1 and 5).... $1,258,317 216,155 2,578,953 469,568
Additional rental income......... 396,095 222,234 785,719 260,193
Interest income.................. 87,474 42,167 212,063 73,747
Other income..................... 12,064 - 64,870 -
---------- ---------- ---------- ----------
1,753,950 480,556 3,641,605 803,508
---------- ---------- ---------- ----------
Expenses:
Professional services to
Affiliates..................... 5,780 - 16,434 -
Professional services to
non-affiliates................. 4,723 - 40,951 1,615
General and administrative
expenses to Affiliates......... (9,319) - 42,116 -
General and administrative
expenses to non-affiliates..... 15,424 263 21,418 1,084
Advisor asset management fee..... 116,809 - 242,341 -
Property operating expenses
to Affiliates.................. 67,501 9,463 139,597 21,917
Property operating expenses
to non-affiliates.............. 560,438 243,067 1,007,064 297,946
Mortgage interest to Affiliates.. 20,670 36,815 49,993 82,992
Mortgage interest to
non-affiliates................. 82,335 - 160,139 17,340
Depreciation..................... 284,483 33,909 561,983 82,262
Amortization..................... 1,373 - 4,119 -
Acquisition costs expensed....... 5,361 - 22,511 315
---------- ---------- ---------- ----------
1,155,578 323,517 2,308,666 505,471
---------- ---------- ---------- ----------
Net income..................... $ 598,372 157,039 1,332,939 298,037
========== ========== ========== ==========
Net income per weighted average
common stock shares outstanding
(5,166,900 and 1,065,503 for the
three months ended September 30,
1996 and 1995, respectively and
3,688,310 and 707,779 for the
nine months ended September 30,
1996 and 1995, respectively)..... $ .11 .15 .36 .42
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 17
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statements of Stockholders' Equity
September 30, 1996 and December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance January 1, 1995..... $ 200 199,800 - 200,000
Net income.................. - - 496,514 496,514
Distributions declared
($.78 per weighted average
common stock shares
outstanding).............. - - (736,627) (736,627)
Proceeds from Offering (net
of Offering costs of
$3,121,175).............. 19,826 16,662,162 - 16,681,988
Repurchases of Shares....... (30) (26,779) - (26,809)
------- ---------- --------- ----------
Balance December 31, 1995... 19,996 16,835,183 (240,113) 16,615,066
Net income.................. - - 1,332,939 1,332,939
Distributions declared
($.60 per weighted average
common stock shares
outstanding).............. - - (2,232,004) (2,232,004)
Proceeds from Offering (net
of Offering costs of
$5,076,183)............... 39,861 35,166,172 - 35,206,033
Repurchases of Shares....... (33) (35,924) - (35,957)
------- ---------- --------- ----------
Balance September 30, 1996.. $59,824 51,965,431 (1,139,178) 50,886,077
</TABLE> ======= ========== ========== ==========
See accompanying notes to financial statements.
F-4
<PAGE> 18
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Cash Flows
For the nine months ended September 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 1,332,939 298,037
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.................................. 561,983 82,262
Amortization.................................. 4,119 -
Deferred rent receivable...................... (63,007) (3,656)
Rental income under master lease.............. 305,054 66,990
Changes in assets and liabilities:
Accounts and rents receivable............... (690,980) (232,992)
Other assets................................ (78,731) (198,848)
Accounts payable............................ 98,187 69,942
Accrued interest payable.................... (5,242) 27,186
Accrued real estate taxes................... 607,507 368,202
Security deposits........................... 57,891 49,983
Unearned income............................. 22,804 -
Due to Affiliates........................... 236,763 -
----------- ----------
Net cash provided by operating activities......... 2,389,287 527,106
----------- ----------
Cash flows from investing activities:
Additions to investment properties.............. (168,035) -
Purchase of investment properties............... (26,729,537) (5,286,038)
----------- ----------
Net cash used in investing activities............. (26,897,572) (5,286,038)
----------- ----------
Cash flows from financing activities:
Repayment of loan from Advisor.................. - (193,300)
Proceeds from offering.......................... 40,246,259 13,012,136
Payments of offering costs...................... (4,569,624) (1,762,295)
Loan proceeds................................... 12,820,000 -
Loan fees....................................... (186,828) -
Distributions paid.............................. (1,989,199) (188,958)
Repayment of note from Affiliate................ (360,000) -
Principal payments of debt...................... (2,940,277) (5,454,211)
----------- ----------
Net cash provided by financing activities......... 43,020,331 5,413,372
----------- ----------
Net increase in cash and cash equivalents......... 18,512,046 654,440
Cash and cash equivalents at beginning of period.. 738,931 10,934
----------- ----------
Cash and cash equivalents at end of period........ $19,250,977 665,374
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 19
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Cash Flows
(continued)
For the nine months ended September 30, 1996 and 1995
(unaudited)
Supplemental schedule of noncash investing and financing activities:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Purchase of investment property................... $(34,102,713) (15,843,643)
Assumption of debt................................ 4,473,176 4,595,178
Note payable...................................... 2,900,000 5,962,427
------------ ---------
$(26,729,537) (5,286,038)
============ =========
Distributions payable............................. $ 372,337 214,852
============ =========
Cash paid for interest............................ $ 243,326 107,454
============ =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 20
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
September 30, 1996
(unaudited)
Readers of this Quarterly Report should refer to the Company's audited
financial statements for the fiscal year ended December 31, 1995, which are
included in the Company's 1995 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 Real Estate Corporation (the "Company") was formed on May 12, 1994 to
invest in neighborhood retail centers located within an approximate 150-mile
radius of its headquarters in Oak Brook, Illinois. The Company may also
acquire single-user retail properties in locations throughout the United
States, certain of which may be sale and leaseback transactions, net leased to
creditworthy tenants. On October 14, 1994, the Company commenced an initial
public offering (the "Offering") of 5,000,000 shares of common stock (the
"Shares") at a price of $10 per Share and the issuance of 1,000,000 Shares at a
price of $9.05 per Share for distribution pursuant to the Company's
distribution reinvestment program (the "DRP"). Inland Real Estate Advisory
Services, Inc. (the "Advisor"), an Affiliate of the Company, is the advisor to
the Company. Subscriber funds were held in an interest-bearing escrow account
with the Company's unaffiliated escrow agent until January 3, 1995. Offering
proceeds were released from escrow on January 3, 1995 when subscriptions were
accepted and Shares issued by the Company. Subscribers received their pro rata
share of interest income earned on their subscriptions while in escrow. As of
July 24, 1996, the Company had received subscriptions for a total of 5,000,000
Shares, resulting in Gross Offering Proceeds of $50,000,000, thereby completing
[Be initial Offering. On July 24, 1996, the Company commenced a follow-on
Offering of 10,000,000 shares plus an additional 1,000,000 shares available for
distribution through the DRP. As of September 30, 1996, the Company had
received subscriptions for a total of 931,147 Shares of the follow-on Offering,
resulting in $9,311,472 in Gross Offering Proceeds. In addition, the Company
has received $968,320 in Gross Offering Proceeds from 106,997 Shares purchased
through the DRP. As of September 30, 1996, the Company has repurchased 6,318
Shares from Stockholders for an aggregate price of $57,179 through the Shares
Repurchase Program.
The Company qualified as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended, for federal income tax purposes
commencing with the tax year ending December 31, 1995. Since the Company
qualified for taxation as a REIT, the Company generally is not subject to
federal income tax to the extent it distributes 95% of its REIT taxable income
to its stockholders. If the Company fails to qualify as a REIT in any taxable
year, the Company will be subject to federal income tax on its taxable income
at regular corporate tax rates. Even if the Company qualifies for taxation as
a REIT, the Company may be subject to certain state and local taxes on its
income and property and federal income and excise taxes on its undistributed
income.
F-7
<PAGE> 21
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
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.
The Company considers all highly liquid investments purchased with a maturity
of three months or less to be cash equivalents and are carried at cost, which
approximates fair value. Included in cash and cash equivalents is $655,905
held by the Company's affiliated property manager which is unrestricted and
held in the Company's name.
Deferred organization costs are amortized over a 60-month period.
Offering costs were offset against the Stockholders' equity accounts once the
Shares sold exceeded the Minimum Offering and Gross Offering Proceeds were
released from escrow. Offering costs consist principally of printing, selling
and registration costs.
The investment properties are carried at the lower of aggregate cost or net
realizable value. Periodically, the Company will review its real estate
portfolio and if investment properties suffer an impairment in value which is
deemed to be other than temporary, the investment in properties would be
reduced to the net realizable value of the properties. As of September 30,
1996, there have been no such impairments. Depreciation expense is computed
using the straight-line method. Buildings and improvements are based upon
estimated useful lives of 30 years. Tenant improvements will be depreciated
over the related lease period.
Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned and the cash rent due under
the provisions of the lease agreements is recorded as deferred rent receivable.
The Company believes that the interest rate associated with the mortgages
payable approximates the market interest rates for these types of debt
instruments, and as such, the carrying amount of the mortgages payable
approximates their fair value.
F-8
<PAGE> 22
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
The carrying amount of cash and cash equivalents, restricted cash, accounts and
rents receivable, accounts payable and other liabilities, accrued offering
costs to Affiliates, accrued offering costs to non-Affiliates, accrued interest
payable to Affiliates, accrued real estate taxes, and distributions payable
approximate fair value because of the relative short maturity of these
instruments.
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 periods
presented herein. Results of interim periods are not necessarily indicative of
the results to be expected for the year.
(2) Transactions with Affiliates
As of September 30, 1996, the Company had incurred $8,197,358 of organization
and offering costs. Pursuant to the terms of the Offering, the Advisor is
required to pay organization and offering expenses (excluding sales
commissions, the marketing contribution and the due diligence expense allowance
fee) in excess of 5.5% of the gross proceeds of the Offering (the "Gross
Offering Proceeds") or all organization and offering expenses (including such
selling expenses) which together exceed 15% of Gross Offering Proceeds. As of
September 30, 1996, organizational and offering costs did not exceed the 5.5%
and 15% limitations. The Company anticipates that these costs will not exceed
these limitations upon completion of the Offering, however, any excess amounts
will be reimbursed by the Advisor.
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
Offering and to the administration of the Company. Such costs to Affiliates
incurred relating to the Offering were $645,669 and $409,858 as of September
30, 1996 and December 31, 1995, respectively, of which $8,339 and $120,269 were
unpaid as of September 30, 1996 and December 31, 1995, respectively. In
addition, an Affiliate of the Advisor serves as dealer manager of the Offering
and is entitled to receive selling commissions, a marketing contribution and a
due diligence expense allowance fee from the Company in connection with the
Offering. Such amounts incurred were $5,636,828 and $1,719,406 as of September
30, 1996 and December 31, 1995, respectively, of which $637,782 and $102,084
were unpaid as of September 30, 1996 and December 31, 1995, respectively. As
of September 30, 1996, approximately $4,955,000 of these commissions has been
reallowed to soliciting broker/dealers.
F-9
<PAGE> 23
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to the
administration of the Company. Such costs are included in professional
services to Affiliates, general and administrative expenses to Affiliates and
acquisition costs expensed of which $1,699 remained unpaid at September 30,
1996.
As of September 30, 1996, the Advisor has contributed $200,000 to the capital
of the Company for which it received 20,000 Shares.
During 1994, the Advisor advanced $193,300 to the Company for costs incurred
with the Offering. These advances were repaid with a market rate of interest
to the Advisor in January 1995 with interest ranging from 7.75% to 9.50%. The
principal of $193,300 and interest totaling $3,162 were paid from Gross
Offering Proceeds.
The Advisor may receive an annual Advisor Asset Management Fee of not more than
1% of the Average Invested Assets, paid quarterly. For any year in which the
Company qualifies as a REIT, the Advisor must reimburse the Company: (i) to
the extent that the Advisor Asset Management Fee plus Other Operating Expenses
paid during the previous calendar year exceed 2% of the Company's Average
Invested Assets for that calendar year or 25% of the Company's Net Income for
that calendar year; and (ii) to the extent that Stockholders have not received
an annual Distribution equal to or greater than the 8% Current Return. As of
September 30, 1996, the Company has incurred $242,341 of such fees, all of
which remains unpaid at September 30, 1996. (Defined terms in this paragraph
have the same definitions from the prospectus dated July 24, 1996.)
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 $139,597 and $21,917 for the nine months ended September 30,
1996 and 1995, respectively, all of which has been paid.
F-10
<PAGE> 24
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(3) Commitments and Contingencies
The Company adopted an Independent Director Stock Option Plan which granted
each Independent Director an option to acquire 3,000 Shares as of October 14,
1994 and an additional 500 Shares on the date of each annual stockholders'
meeting commencing with the annual meeting in 1995 if the Independent Director
is a member of the Board on such date. The options for the initial 3,000 Share
grant are exercisable as follows: 1,000 Shares on the date of grant and 1,000
Shares on each of the first and second anniversaries of the date of grant. The
succeeding options are exercisable on the second anniversary of the date of
grant. No options have been exercised.
In addition to sales commissions, certain Soliciting Dealers may receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the Offering. The holder of a Soliciting Dealer Warrant will be
entitled to purchase one Share from the Company at a price of $12 during the
period commencing with the first date upon which the Soliciting Dealer Warrants
are issued and ending upon the first to occur of: (i) October 14, 1999; or (ii)
the closing date of an offering of the Shares by the Company. Notwithstanding
the foregoing, no Soliciting Dealer Warrant will be exercisable until one year
from the date of issuance.
On the behalf of the Company, the Advisor is currently exploring the purchase
of additional shopping centers from unaffiliated third parties.
F-11
<PAGE> 25
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(4) Investment Properties
<TABLE>
<CAPTION>
Initial Cost (A)
-------------------------
Net
Buildings Adjustments
Date and to
Acq Land improvements Basis (B)
---- ----------- ------------ --------
<S> <C> <C> <C> <C>
Single-user Retail
Walgreens/Decatur
Decatur, IL............. 01/95 $ 78,330 1,130,723 -
Zany Brainy
Wheaton, IL............. 07/96 838,000 1,625,202 -
Neighborhood Retail Centers
Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 -
Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 834,659 (12,692)
Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,427,961 (7,847)
Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,354,583 (47,276)
Antioch Plaza
Antioch, IL............. 12/95 268,000 1,488,122 (110,198)
Mundelein Plaza
Mundelein, IL........... 03/96 1,803,000 3,857,560 (17,682)
Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (16,709)
Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 (11,989)
Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,666,646 (10,817)
----------- ------------ -----------
Subtotal $10,341,248 26,728,363 (235,210)
</TABLE>
(4) Investment Properties
<TABLE>
<CAPTION>
Gross amount at which carried
at end of period
-------------------------------------
Land Buildings
and and
improvements improvements Total
------------ ------------ ---------
<S> <C> <C> <C>
Single-user Retail
Walgreens/Decatur
Decatur, IL............. 78,330 1,130,723 1,209,053
Zany Brainy
Wheaton, IL............. 838,000 1,625,202 2,463,202
Neighborhood Retail Centers
Eagle Crest Shopping Center
Naperville, IL.......... 1,878,618 2,938,352 4,816,970
Montgomery-Goodyear
Montgomery, IL.......... 315,000 821,967 1,136,967
Hartford/Naperville Plaza
Naperville, IL.......... 990,000 3,420,114 4,410,114
Nantucket Square
Schaumburg, IL.......... 1,908,000 2,307,307 4,215,307
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
Antioch Plaza
Antioch, IL............. 268,000 1,377,924 1,645,924
Mundelein Plaza
Mundelein, IL........... 1,803,000 3,839,878 5,642,878
Regency Point
Lockport, IL............ 1,000,000 4,704,091 5,704,091
Prospect Heights
Prospect Heights, IL.... 494,300 1,671,766 2,166,066
Montgomery-Sears
Montgomery, IL.......... 768,000 2,655,829 3,423,829
------------ ------------ ------------
Subtotal 10,341,248 26,493,153 36,834,401
</TABLE>
F-12
<PAGE> 27
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(4) Investment Properties (continued)
<TABLE>
<CAPTION>
Initial Cost (A)
Net
Buildings Adjustments
Date and to
Acq Land improvements Basis (B)
<S> <C> <C> <C> <C>
Subtotal $10,341,248 26,728,363 (235,210)
Neighborhood Retail Centers
Salem Square
Countryside, IL......... 08/96 1,735,000 4,446,874 (1,725)
Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,844,076 -
----------- ---------- -------
$14,695,748 37,019,313 (236,935)
=========== ========== =======
</TABLE>
(4) Investment Properties (continued)
<TABLE>
<CAPTION>
Gross amount at which carried
at end of period
Land Buildings
and and
improvements improvements Total
<S> <C> <C> <C>
Subtotal 10,341,248 26,493,153 36,834,401
Neighborhood Retail Centers
Salem Square
Countryside, IL......... 1,735,000 4,445,149 6,180,149
Hawthorn Village
Vernon Hills, IL........ 2,619,500 5,844,076 8,463,576
---------- ---------- ----------
14,695,748 36,782,378 51,478,126
========== ========== ==========
</TABLE>
(A) The initial cost to the Company, represents the original purchase price of
the property, including amounts incurred subsequent to acquisition, which
were contemplated at the time the property was acquired.
(B) Adjustments to basis includes additions to investment properties and
payments received under master lease agreements. As part of several
purchases, the Company will receive rent under master lease agreements on
the spaces currently vacant for periods ranging from one to two years or
until the spaces are leased. Generally accepted accounting principles
require that as these payments are received, they be recorded as a
reduction in the purchase price of the properties rather than as rental
income. As of September 30, 1996, the cumulative amount of such payments
was $438,070. (Note 5)
F-13
<PAGE> 28
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
(5) Operating Leases
Master Lease Agreements
As part of the purchases of several of the properties, the Company will receive
rent under master lease agreements on some of the spaces currently vacant for
periods ranging from one to two years or until the spaces are leased and
tenants begin paying rent. Generally Accepted Accounting Principles require
that as these payments are received, they be recorded as a reduction in the
purchase price of the properties rather than as rental income.
<TABLE>
<CAPTION>
Master Lease
Square Feet Payments
Covered by Received for
Master Master Lease Nine Months
Lease as of Rate per Ended
Property Expires Sept 30,1996 Square Foot Sept 30,1996
-------- ------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Montgomery-Goodyear 09/96 3,010 $ 4.03 (A) $ 9,090
Hartford/Naperville 09/96 2,200 15.00 59,043
Nantucket Square 09/96 4,500(B) 15.00 69,518
Antioch Plaza 06/97 11,810 12.00 108,481
Mundelein Plaza 12/97 1,686 14.90 17,682
Regency Point 04/97 3,115 14.00 16,709
Prospect Heights 08/96 - - 11,989
Montgomery-Sears 06/98 3,600 12.00
1,500 10.20 10,817
Salem Square 07/97 3,742 5.53 1,725
----------
$ 305,054
==========
</TABLE>
(A) The seller has master leased this space for $12.00 per square foot, which
was the rental rate required under the prior lease. Rent collected from
the current tenant is credited against the master lease.
(B) The Company also received a credit at closing for rent abatement
agreements under current leases.
F-14
<PAGE> 29
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
Certain tenant leases contain provisions providing for stepped rent increases.
Generally accepted accounting principles require that rental income be recorded
for the period of occupancy using the effective monthly rent, which is the
average monthly rent for the entire period of occupancy during the term of the
lease. The accompanying financial statements include $63,007 and $3,656 for
the nine months ended September 30, 1996 and 1995, respectively, of rental
income for the period of occupancy for which stepped rent increases apply and
$75,420 and $12,413 in related accounts receivable as of September 30, 1996
and December 31, 1995, respectively. These amounts will be collected over the
terms of the related leases as scheduled rent payments are made.
(6) Mortgages Payable and Note Payable to Affiliates
Mortgages payable and note payable to Affiliates consist of the following at
September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
7.655% first mortgage secured by Walgreens,
Decatur, Illinois, monthly principal and
interest payments of $5,689, with the
remaining balance due May 2004.................. $ 741,467 750,727
First mortgage secured by Regency Point with a
floating interest rate of 180 basis points over
the 30-day LIBOR rate, which rate adjusts
monthly, amortizing over 25 years with remaining
balance due August 2000......................... 4,442,159 -
7.85% first mortgage secured by Eagle Crest,
Naperville, IL, monthly interest only payments
of $15,373, with the balance due October 2003... 2,350,000 -
7.85% first mortgage secured by Nantucket Square,
Schaumburg, IL, monthly interest only payments
of $14,392, with the balance due October 2003... 2,200,000 -
7.85% first mortgage secured by Antioch Plaza,
Antioch, IL, monthly interest only payments
of $5,724, with the balance due October 2003.... 875,000 -
7.85% first mortgage secured by Mundelein Plaza,
Mundelein, IL, monthly interest only payments
of $18,382, with the balance due October 2003... 2,810,000 -
</TABLE>
F-15
<PAGE> 30
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
7.85% first mortgage secured by Montgomery-Goodyear,
Montgomery, IL, monthly interest only payments
of $4,121, with the balance due October 2003.... $ 630,000 -
7.85% first mortgage secured by Montgomery-Sears,
Montgomery, IL, monthly interest only payments
of $10,761, with the balance due August 2003.... 1,645,000 -
7.85% first mortgage secured by Hartford/Naperville
Plaza, Naperville, IL, monthly interest only
payments of $15,111, with the balance due August
2003............................................ 2,310,000 -
----------- -------
Mortgages payable................................. $18,003,626 750,727
=========== =======
9.5% promissory note payable to Inland
Real Estate Investment Corporation, paid
in full on January 9, 1996...................... $ - 360,000
----------- -------
Note payable to Affiliate......................... $ - 360,000
=========== =======
</TABLE>
(7) Subsequent Events
During October 1996, the Company paid distributions of $372,337 to the
Stockholders of record at September 30, 1996 on a weighted average basis for
the month.
On October 18, 1996, the Company acquired the Six Corners Plaza Shopping Center
from an unaffiliated third party for a purchase price of $6,000,000 on an all
cash basis.
On November 13, 1996, the Company acquired the Spring Hill Fashion Corner from
an unaffiliated third party for a purchase price of approximately $9,200,000 on
an all cash basis.
F-16
<PAGE> 31
Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1995
(unaudited)
The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisitions of Mundelein Plaza, the Regency Point Shopping Center,
Prospect Heights Plaza, Montgomery-Sears Shopping Center, the Zany Brainy
store, Salem Square, Hawthorn Village Commons, Six Corners and Spring Hill
Fashion Center as though these transactions occurred December 31, 1995. This
unaudited Pro Forma Balance Sheet should be read in conjunction with the
December 31, 1995 Financial Statements and the notes thereto as filed on Form
10-K.
This unaudited Pro Forma Balance Sheet is not necessarily indicative of what
the actual financial position would have been at December 31, 1995, nor does it
purport to represent the future financial position of the Company. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.
F-17
<PAGE> 32
Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
December 31,
December 31, 1995
1995 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------ ------------- -------------
Assets
- ------
<S> <C> <C> <C>
Net investment in
properties.................. $17,342,538 49,221,080 66,563,618
Cash and cash equivalents..... 738,931 - 738,931
Restricted cash............... 150,000 - 150,000
Accounts and rents
receivable.................. 333,823 790,763 1,124,586
Other assets.................. 185,585 42,534 228,119
----------- ---------- ----------
Total assets.................. $18,750,877 50,054,377 68,805,254
=========== ========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 288,037 7,500 295,537
Accrued real estate taxes..... 374,180 1,008,136 1,382,316
Distributions payable (C)..... 129,532 - 129,532
Security deposits............. 54,483 107,918 162,401
Mortgage payable.............. 750,727 8,428,200 9,178,927
Notes payable to Affiliate.... 360,000 - 360,000
Other liabilities............. 178,852 - 178,852
----------- ---------- ----------
Total liabilities............. 2,135,811 9,551,754 11,687,565
----------- ---------- ----------
Common Stock.................. 19,996 47,097 67,093
Additional paid in capital
(net of Offering costs)..... 16,835,183 40,455,526 57,290,709
Accumulated distributions in
excess of net income........ (240,113) - (240,113)
----------- ---------- ----------
Total Stockholders' equity.... 16,615,066 40,502,623 57,117,689
----------- ---------- ----------
Total liabilities and
Stockholders' equity........ $18,750,877 50,054,377 68,805,254
=========== ========== ==========
</TABLE>
See accompanying notes to pro forma balance sheet.
F-18
<PAGE> 33
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
December 31, 1995
(unaudited)
(A) The December 31, 1995 Historical column represents the historical balance
sheet as presented in the December 31, 1995 10-K as filed with the SEC.
(B) The following pro forma adjustment relates to the acquisition of the
subject properties as though they were acquired on December 31, 1995.
The terms are described in the notes that follow.
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------------
Mundelein Regency Prospect Montgomery-
Plaza Point Heights Sears
------------ ------------ ------------ ------------
Assets
- ------
<S> <C> <C> <C> <C>
Net investment in
properties........ $5,658,230 5,700,000 2,165,000 3,419,000
Accounts and rent
receivable........ 84,375 16,867 38,771 27,842
Other assets........ - - - -
---------- --------- --------- ---------
Total assets........ $5,742,605 5,716,867 2,203,771 3,446,842
========== ========= ========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and
accrued expenses.. $ 7,500 - - -
Accrued real estate
taxes............. 89,010 16,867 63,517 32,655
Security deposits... 15,000 28,621 8,600 -
Mortgage payable.... - 4,473,200 - -
---------- --------- --------- ---------
Total liabilities... 111,510 4,518,688 72,117 32,655
---------- --------- --------- ---------
Common Stock(D)..... 6,548 1,393 2,479 3,970
Additional paid in
capital (net of
Offering costs)(D) 5,624,547 1,196,786 2,129,175 3,410,217
---------- --------- --------- ---------
Total Stockholders'
equity............ 5,631,095 1,198,179 2,131,654 3,414,187
---------- --------- --------- ---------
Total liabilities
and Stockholders'
equity............ $5,742,605 5,716,867 2,203,771 3,446,842
========== ========= ========= =========
</TABLE>
F-19
<PAGE> 34
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
December 31, 1995
(unaudited)
(B) Continued
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------
Hawthorn
Zany Salem Village
Brainy Square Commons
------------ ------------ ------------
Assets
- ------
<S> <C> <C> <C>
Net investment in
properties........ $ 2,455,000 6,173,850 8,450,000
Accounts and rent
receivable........ - 270,729 194,400
Other assets........ - - 39,550
----------- --------- ---------
Total assets........ $ 2,455,000 6,444,579 8,683,950
=========== ========= =========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and
accrued expenses.. $ - - -
Accrued real estate
taxes............. - 270,729 194,400
Security deposits... - - -
Mortgage payable.... - - 3,955,000
----------- --------- ---------
Total liabilities... - 270,729 4,149,400
----------- --------- ---------
Common Stock(D)..... 2,855 7,179 5,273
Additional paid in
capital (net of
Offering costs)(D) 2,452,145 6,166,671 4,529,277
----------- --------- ---------
Total Stockholders'
equity............ 2,455,000 6,173,850 4,534,550
----------- --------- ---------
Total liabilities
and Stockholders'
equity............ $ 2,455,000 6,444,579 8,683,950
=========== ========= =========
</TABLE>
F-20
<PAGE> 35
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
December 31, 1995
(unaudited)
(B) Continued
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------
Total
Six Spring Pro Forma
Corners Hill Adjustment
------------ ------------ -------------
<S> <C> <C> <C>
Assets
- ------
Net investment in
properties........ $ 6,000,000 9,200,000 49,221,080
Accounts and rent
receivable........ 65,293 95,470 793,747
Other assets........ - - 39,550
----------- --------- ----------
Total assets........ $ 6,065,293 9,295,470 50,054,377
=========== ========= ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and
accrued expenses.. $ - - 7,500
Accrued real estate
taxes............. 217,643 123,315 1,008,136
Security deposits... 15,542 40,155 107,918
Mortgage payable.... - - 8,428,200
----------- --------- ----------
Total liabilities... 233,185 163,470 9,551,754
----------- --------- ----------
Common Stock(D)..... 6,781 10,619 47,097
Additional paid in
capital (net of
Offering costs)(D) 5,825,327 9,121,381 40,455,526
----------- --------- ----------
Total Stockholders'
equity............ 5,832,108 9,132,000 40,502,623
----------- --------- ----------
Total liabilities
and Stockholders'
equity............ $ 6,065,293 9,295,470 50,054,377
=========== ========= ==========
</TABLE>
F-21
<PAGE> 36
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)
Acquisition of Mundelein Plaza, Mundelein, Illinois
On March 29, 1996, the Company acquired the Mundelein Plaza property
located in Mundelein, Illinois ("Mundelein Plaza") from an unaffiliated
third party for a purchase price of $5,658,230, including closing costs of
$8,230, on an all cash basis, funded from cash and cash equivalents.
Acquisition of Regency Point Shopping Center, Lockport, Illinois
On April 5, 1996, the Company completed the acquisition of the Regency
Point Shopping Center located in Lockport, Illinois ("Regency Point"), from
an unaffiliated third party for a purchase price of $5,700,000. As part of
the acquisition, the Company will assume the existing first mortgage loan
of $4,473,200 along with a related interest rate swap agreement, with the
balance funded with cash and cash equivalents.
The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The first mortgage loan matures
in August 2000. The related interest rate swap agreement was terminated on
April 18, 1996 resulting in $48,419 proceeds to the Company. No pro forma
adjustment has been made as a result of this termination.
Acquisition of Prospect Heights Plaza, Prospect Heights, Illinois
On June 17, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $2,165,000 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Montgomery-Sears, Montgomery, Illinois
On June 17, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $3,419,000 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Zany Brainy, Wheaton, Illinois
On July 1, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $2,455,000 on an all cash basis,
funded from cash and cash equivalents.
F-22
<PAGE> 37
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)
Acquisition of Salem Square, Countryside, Illinois
On August 2, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $6,173,850, on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Hawthorn Village Commons, Vernon Hills, Illinois
On August 15, 1996, the Company acquired this property from an unaffiliated
third party for the purchase price of $8,450,000.
The Company funded the purchase using: (i) the proceeds of a short-term
loan maturing August 23, 1996 in the amount of $2.9 million from Inland
Mortgage Investment Corporation ("IMIC"), an Affiliate of the Company (the
"Short-Term Loan"), and (ii) cash and cash equivalents. The Company did
not pay any fees in connection with the Short-Term Loan, which bears
interest at a rate of eight percent per annum. A majority of the Company's
board, including a majority of the Independent Directors has approved the
terms and conditions of the Short-Term Loan. The Company repaid the Short-
Term Loan using the proceeds of a loan (the "Mortgage Loan") in the amount
of $3,955,000 from an unaffiliated lender. The Company paid a 1%
origination fee to the lender of the Mortgage Loan. The Mortgage Loan has
a term of five years and, prior to the maturity date, requires payments of
interest only, at an annual rate of 7.85%.
Acquisition of Six Corners, Chicago, Illinois
On October 18, 1996, the Company acquired this property from an
unaffiliated third party for the purchase price of approximately
$6,000,000, on an all cash basis, funded from cash and cash equivalents.
Acquisition of Spring Hill Fashion Center, West Dundee, Illinois
On November 13, 1996, the Company acquired this property from an
unaffiliated third party for the purchase price of approximately
$9,200,000, on an all cash basis, funded from cash and cash equivalents.
(C) No pro forma assumptions have been made for the additional payment of
distributions resulting from the additional proceeds raised.
(D) Additional Offering Proceeds of $47,097,000, net of additional Offering
costs of $6,594,377, are reflected as received as of December 31, 1995,
prior to the purchase of the properties. Offering costs consist
principally of registration costs, printing and selling costs, including
commissions.
F-23
<PAGE> 38
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1995
(unaudited)
The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of the Walgreens/Decatur property, Eagle
Crest Shopping Center, Montgomery-Goodyear property, Nantucket Square Shopping
Center, Mundelein Plaza, Regency Point Shopping Center, Prospect Heights Plaza,
Montgomery-Sears Shopping Center, Salem Square, Hawthorn Village Commons, Six
Corners and Spring Hill Fashion Center as though these transactions occurred on
January 1, 1995. Hartford/Naperville Plaza, Antioch Plaza and the Zany Brainy
store were constructed in 1995 and acquired shortly after construction was
completed and as such, the unaudited Pro Forma Statement of Operations of the
Company is presented to effect these acquisitions as of August 17, 1995,
September 1, 1995 and November 22, 1995, respectively, the date occupancy
commenced at these properties. This unaudited Pro Forma Statement of
Operations should be read in conjunction with the December 31, 1995 Financial
Statements and the notes thereto as filed on Form 10-K.
This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the year ended
December 31, 1995, nor does it purport to represent the future results of
operations of the Company. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.
F-24
<PAGE> 39
Inland Real Estate Corporation
Pro Forma Statement of Operations
for the year ended December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------
1995 1995 1996
Historical Acquisitions Acquisitions 1995
(A) (B) (C) Pro Forma
---------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Rental
income..................... $ 869,485 585,614 5,190,974 6,646,073
Additional
rental income.............. 228,024 162,536 1,522,774 1,913,334
Interest
income (D)................. 82,913 - - 82,913
---------- ---------- ---------- ----------
Total income............... 1,180,422 748,150 6,713,748 8,642,320
---------- ---------- ---------- ----------
Professional
services and
general and
administrative............. 23,132 - - 23,132
Property operating
expenses................... 326,721 275,218 2,294,340 2,896,279
Interest expense............. 164,161 429,997 662,368 1,256,526
Depreciation (E)............. 169,894 111,767 1,169,588 1,451,249
---------- ---------- ---------- ----------
Total expenses............... 683,908 816,982 4,126,296 5,627,186
---------- ---------- ---------- ----------
Net income(loss) $ 496,514 (68,832) 2,587,452 3,015,134
========== ========== ========== ==========
Weighted average
common stock shares
outstanding (F)............ 943,156 5,652,856
========== ==========
Net income per weighted
average common stock
outstanding (F)............ $ .53 .53
========== ==========
</TABLE>
See accompanying notes to pro forma statement of operations.
F-25
<PAGE> 40
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1995
(unaudited)
(A) The 1995 Historical column represents the historical statement of
operations of the Company for the year ended December 31, 1995, as filed
with the SEC on Form 10-K.
(B) Total pro forma adjustments for the year ended December 31, 1995 are as
though the acquisitions were acquired the earlier of January 1, 1995 or
date that operations commenced.
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------------
Hartford
Montgomery- Naperville
Walgreens Eagle Crest Goodyear Plaza
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Rental
income.......... $ 10,651 95,232 101,359 15,077
Additional
Rental income... - 2,218 19,203 662
---------- ---------- ---------- ---------
Total income.... 10,651 97,450 120,562 15,739
---------- ---------- ---------- ---------
Property operating
expenses........ 533 17,376 47,758 3,436
Interest expense.. 4,840 77,170 46,325 13,625
Depreciation (E).. 3,141 16,324 20,682 8,867
---------- ---------- ---------- ---------
Total expenses.... 8,514 110,870 114,765 25,928
---------- ---------- ---------- ---------
Net income(loss) $ 2,137 (13,420) 5,797 (10,189)
========== ========== ========== =========
<CAPTION>
Total
Nantucket Antioch 1995
Square Plaza Pro Forma
---------- ------ ---------
<S> <C> <C> <C>
Rental
income.......... $ 340,545 22,750 585,614
Additional
Rental income... 140,453 - 162,536
---------- ------ -------
Total income.... 480,998 22,750 748,150
---------- ------ -------
Property operating
expenses........ 205,903 212 275,218
Interest expense.. 267,137 20,900 429,997
Depreciation (E).. 57,357 5,396 111,767
---------- ------ -------
Total expenses.... 530,397 26,508 816,982
---------- ------ -------
Net income(loss) $ (49,399) (3,758) (68,832)
========== ====== =======
</TABLE>
F-26
<PAGE> 41
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Walgreens/Decatur, Decatur, Illinois
In conjunction with the acquisition, the Company assumed a portion of the
first mortgage loan with a balance of $775,000. This mortgage has an
interest rate of 7.655%, amortizes over a 25-year period and matures May
31, 2004. The Company is responsible for monthly payments of principal
and interest of $5,689. The pro forma adjustment for interest expense for
the period prior to acquisition was estimated using the described loan
terms.
Acquisition of Eagle Crest Shopping Center, Naperville, Illinois
As part of the acquisition, the Company assumed a portion of the first
mortgage loan with a balance of $3,534,000, as well as entering into a
loan agreement with Inland Property Sales, Inc. ("IPS"), an Affiliate of
the Advisor, for the balance of the purchase price for $1,212,427. The
first mortgage bears interest at 9.5% per annum and the loan to IPS bears
interest at 10.5%. The pro forma adjustment for interest expense for the
period prior to acquisition was estimated using the described loan terms.
Acquisition of Montgomery-Goodyear, Montgomery, Illinois
As part of the acquisition, the Company entered into a loan agreement with
Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the
Advisor, for $600,000 which bears interest of 10.9% per annum. The pro
forma adjustment for interest expense for the period prior to acquisition
was estimated using the described loan terms.
Acquisition of Hartford/Naperville Plaza, Naperville, Illinois
In conjunction with the acquisition, the Company entered into a loan
agreement with IMIC for $600,000 which bears interest of 10.9% per annum.
The pro forma adjustment for interest expense was estimated using the
described loan terms.
Acquisition of Nantucket Square Shopping Center, Schaumburg, Illinois
As part of the acquisition, the Company entered into a loan agreement with
IMIC for $3,550,000 which bears interest of 10.5% per annum. The pro
forma adjustment for interest expense for the period prior to acquisition
was estimated using the described loan terms.
F-27
<PAGE> 42
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Antioch Plaza, Antioch, Illinois
This pro forma adjustment reflects the purchase of the Antioch Plaza
property as if the Company had purchased the property as of September 1,
1995, the date the first tenant occupied this newly constructed property.
The pro forma adjustment for operations for the period September 1, 1995
to December 28, 1995 (date of acquisition) was estimated using applicable
lease information. Blockbuster Video was the only tenant occupying the
property during that period. No pro forma adjustment was made for real
estate tax expense and the related recovery income since the property was
vacant land for most of 1995 and the amount would be difficult to estimate
and have an immaterial effect.
As part of the acquisition, the Company entered into a loan agreement with
Inland Real Estate Investment Corporation, an affiliate of the Advisor,
for $660,000 which bears interest of 9.5% per annum. The pro forma
adjustment for interest expense was estimated using the described loan
terms.
F-28
<PAGE> 43
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
(C) Total pro forma adjustments for 1996 Acquisitions are as though they were
acquired the earlier of January 1, 1995 or date that operations commenced.
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------------------------
Mundelein Regency Prospect Montgomery- Zany
Plaza Point Heights Sears Brainy
---------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Rental
income.......... $ 639,124 541,085 164,152 327,610 28,643
Additional
Rental income... 66,669 63,294 116,175 76,182 5,030
---------- --------- ------- --------- ---------
Total income.... 705,793 604,379 280,327 403,792 33,673
---------- --------- ------- --------- ---------
Property operating
expenses........ 141,482 71,615 180,819 102,067 5,502
Interest expense.. - 351,900 - - -
Depreciation (E).. 128,233 162,500 46,900 83,200 4,422
---------- --------- ------- --------- ---------
Total expenses.... 269,715 586,015 227,719 185,267 9,924
---------- --------- ------- --------- ---------
Net income...... $ 436,078 18,364 52,608 218,525 23,749
========== ========= ======= ======= =========
<CAPTION>
Hawthorn Total
Salem Village Six Spring 1995
Square Commons Corners Hill Pro Forma
---------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Rental
income.......... $ 717,522 970,313 685,443 1,117,082 5,190,974
Additional
Rental income... 387,179 353,145 164,345 290,755 1,522,774
---------- --------- ------- --------- ---------
Total income.... 1,104,701 1,323,458 849,788 1,407,837 6,713,748
---------- --------- ------- --------- ---------
Property operating
expenses........ 435,021 407,404 584,070 366,360 2,294,340
Interest expense.. - 310,468 - - 662,368
Depreciation (E).. 150,000 194,467 153,000 246,866 1,169,588
---------- --------- ------- --------- ---------
Total expenses.... 585,021 912,339 737,070 613,226 4,126,296
---------- --------- ------- --------- ---------
Net income...... $ 519,680 411,119 112,718 794,611 2,587,452
========== ========= ======= ======= =========
</TABLE>
F-29
<PAGE> 44
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Mundelein Plaza, Mundelein, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Mundelein Plaza
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- ----------
<S> <C> <C> <C>
Rental income.................... $ 639,124 - 639,124
Additional rental income......... 66,669 - 66,669
---------- -------- -------
Total income..................... 705,793 - 705,793
---------- -------- -------
Property operating expenses...... 141,482 - 141,482
Interest expense................. - - -
Depreciation (E)................. - 128,233 128,233
---------- -------- -------
Total expenses................... 141,482 128,233 269,715
---------- -------- -------
Net income....................... $ 564,311 (128,233) 436,078
========== ======== =======
</TABLE>
Acquisition of Regency Point, Lockport, Illinois
As part of the acquisition, the Company will assume the existing first
mortgage loan of $4,473,200, along with a related interest rate swap
agreement.
The first mortgage loan has a floating interest rate of 180 basis points
over the 30-day LIBOR rate, which rate is adjusted monthly. The interest
rate swap agreement, in conjunction with the first mortgage, provides for
Bank One, Chicago, to receive from or pay to the Company the difference
between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan
has an effective rate of 7.91% per annum. The pro forma adjustment for
interest expense for 1995 was estimated using the described loan terms.
The related interest rate swap agreement was terminated on April 18, 1996
resulting in $48,419 proceeds to the Company. The pro forma adjustment
does not give effect to the termination of this agreement.
F-30
<PAGE> 45
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Regency Point
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income.................... $ 541,085 - 541,085
Additional rental income......... 63,294 - 63,294
---------- -------- -------
Total income..................... 604,379 - 604,379
---------- -------- -------
Property operating expenses...... 71,615 - 71,615
Interest expense................. - 351,900 351,900
Depreciation (E)................. - 162,500 162,500
---------- -------- -------
Total expenses................... 71,615 514,400 586,015
---------- -------- -------
Net income....................... $ 532,764 (514,400) 18,364
========== ======== =======
</TABLE>
Acquisition of Prospect Heights Plaza, Prospect Heights, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Prospect Heights
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income.................... $ 164,152 - 164,152
Additional rental income......... 116,175 - 116,175
---------- -------- -------
Total income..................... 280,327 - 280,327
---------- -------- -------
Property operating expenses...... 180,819 - 180,819
Interest expense................. - - -
Depreciation (E)................. - 46,900 46,900
---------- -------- -------
Total expenses................... 180,819 46,900 227,719
---------- -------- -------
Net income....................... $ 99,508 (46,900) 52,608
========== ======== =======
</TABLE>
F-31
<PAGE> 46
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Montgomery-Sears, Montgomery, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Montgomery-Sears
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income.................... $ 327,610 - 327,610
Additional rental income......... 76,182 - 76,182
---------- ------- -------
Total income..................... 403,792 - 403,792
---------- ------- -------
Property operating expenses...... 102,067 - 102,067
Interest expense................. - - -
Depreciation (E)................. - 83,200 83,200
---------- ------- -------
Total expenses................... 102,067 83,200 185,267
---------- ------- -------
Net income....................... $ 301,725 (83,200) 218,525
========== ======= =======
</TABLE>
Acquisition of Zany Brainy, Wheaton, Illinois
This pro forma adjustment reflects the purchase of Zany Brainy as if the
Company had purchased the property as of January 1, 1995. Operations for
this property for the period from November 22, 1995 (date of occupancy) to
December 31, 1995 were estimated using the lease and operating expense
information supplied by the seller. This property was purchased on an all
cash basis.
F-32
<PAGE> 47
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Salem Square, Countryside, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Salem Square
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- ---------
<S> <C> <C> <C>
Rental income.................... $ 717,522 - 717,522
Additional rental income......... 387,179 - 387,179
---------- ------- ---------
Total income..................... 1,104,701 - 1,104,701
---------- ------- ---------
Property operating expenses...... 435,021 - 435,021
Interest expense................. - - -
Depreciation (E)................. - 150,000 150,000
---------- ------- ---------
Total expenses................... 435,021 150,000 585,021
---------- ------- ---------
Net income....................... $ 669,680 (150,000) 519,680
========== ======= =======
</TABLE>
Acquisition of Hawthorn Village Commons, Vernon Hills, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Hawthorn Village Commons
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- ---------
<S> <C> <C> <C>
Rental income.................... $ 970,313 - 970,313
Additional rental income......... 353,145 - 353,145
---------- ------- ---------
Total income..................... 1,323,458 - 1,323,458
---------- ------- ---------
Property operating expenses...... 407,404 - 407,404
Interest expense................. - 310,468 310,468
Depreciation (E)................. - 194,467 194,467
---------- ------- ---------
Total expenses................... 407,404 504,935 912,339
---------- ------- ---------
Net income....................... $ 916,054 (504,935) 411,119
========== ======= =======
</TABLE>
F-33
<PAGE> 48
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
The Company funded the purchase of Hawthorn Village Commons using: (i) the
proceeds of a short-term loan maturing August 23, 1996 in the amount of
$2.9 million from Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Company (the "Short-Term Loan"), and (ii) cash and cash
equivalents. The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of eight percent per
annum. A majority of the Company's board, including a majority of the
Independent Directors has approved the terms and conditions of the Short-
Term Loan. The Company repaid the Short-Term Loan using the proceeds of a
loan (the "Mortgage Loan") in the amount of $3,955,000 from an
unaffiliated lender. The Company paid a 1% origination fee to the lender
of the Mortgage Loan. The Mortgage Loan has a term of five years and,
prior to the maturity date, requires payments of interest only, at an
annual rate of 7.85%.
Acquisition of Six Corners, Chicago, Illinois
This pro forma adjustment reflects the purchase of Six Corners as if the
Company had acquired the property as of January 1, 1995. The year ended
December 31, 1995 is based on the Historical Summary of Gross Income and
Direct Operating Expenses for the year ended June 30, 1996 prepared in
accordance with Rule 3-14 of Regulation S-X and information provided by
the seller.
<TABLE>
<CAPTION>
Six Corners
------------------------------------
Year Ended
December 31, Pro Forma
1995 Adjustments Total
---------- ----------- -------
<S> <C> <C> <C>
Rental income.................... $ 685,443 - 685,443
Additional rental income......... 164,345 - 164,345
---------- ------- -------
Total income..................... 849,788 - 849,788
---------- ------- -------
Property operating expenses...... 584,070 - 584,070
Interest expense................. - - -
Depreciation (E)................. - 153,000 153,000
---------- ------- -------
Total expenses................... 584,070 153,000 737,070
---------- ------- -------
Net income....................... $ 265,718 (153,000) 112,718
========== ======= =======
</TABLE>
F-34
<PAGE> 49
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
Acquisition of Spring Hill Fashion Center, West Dundee, Illinois
Reconciliation of Gross Income and Direct Operating Expenses for the year
ended December 31, 1995 prepared in accordance with Rule 3.14 of
Regulation S-X (*) to the Pro Forma Adjustments:
<TABLE>
<CAPTION>
Spring Hill Fashion Center
------------------------------------
*As Pro Forma
Reported Adjustments Total
---------- ----------- ---------
<S> <C> <C> <C>
Rental income.................... $1,117,082 - 1,117,082
Additional rental income......... 290,755 - 290,755
---------- ------- ---------
Total income..................... 1,407,837 - 1,407,837
---------- ------- ---------
Property operating expenses...... 366,360 - 366,360
Interest expense................. - - -
Depreciation (E)................. - 246,866 246,866
---------- ------- ---------
Total expenses................... 366,360 246,866 613,226
---------- ------- ---------
Net income....................... $1,041,477 (246,866) 794,611
========== ======= =========
</TABLE>
(D) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.
(E) Depreciation expense is computed using the straight-line method, based
upon an estimated useful life of thirty years.
(F) The pro forma weighted average common stock shares for the year ended
December 31, 1995 was calculated by estimating the additional shares sold
to purchase each of the Company's properties on a weighted average basis.
F-35
<PAGE> 50
Inland Real Estate Corporation
Pro Forma Balance Sheet
September 30, 1996
(unaudited)
The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisition of the Six Corners and Spring Hill Fashion Center as
though these transactions occurred September 30, 1996. This unaudited Pro
Forma Balance Sheet should be read in conjunction with the September 30, 1996
Financial Statements and the notes thereto as filed on Form 10-Q.
This unaudited Pro Forma Balance Sheet is not necessarily indicative of what
the actual financial position would have been at September 30, 1996, nor does
it purport to represent the future financial position of the Company. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Prospectus.
F-36
<PAGE> 51
Inland Real Estate Corporation
Pro Forma Balance Sheet
September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
September 30,
September 30, 1996
1996 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------ ------------- -------------
<S> <C> <C> <C>
Assets
Net investment in
properties.................. $ 50,746,249 15,200,000 65,946,249
Cash and cash equivalents..... 19,250,977 - 19,250,977
Accounts and rents
receivable.................. 1,087,810 397,779 1,485,589
Other assets.................. 447,025 - 447,025
------------ ---------- ----------
Total assets.................. $ 71,532,061 15,597,779 87,129,840
============ ========== ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 840,418 - 840,418
Accrued real estate taxes..... 981,687 433,908 1,415,595
Distributions payable (C)..... 372,337 - 372,337
Security deposits............. 112,374 55,697 168,071
Mortgages payable............. 18,003,626 - 18,003,626
Unearned income............... 62,650 - 62,650
Other liabilities............. 28,852 - 28,852
Due to Affiliates............. 244,040 - 244,040
------------ ---------- ----------
Total liabilities............. 20,645,984 489,605 21,135,589
------------ ---------- ----------
Common Stock.................. 59,824 17,567 77,391
Additional paid in capital
(net of Offering costs)..... 51,965,431 15,090,607 67,056,038
Accumulated distributions in
excess of net income........ (1,139,178) - (1,139,178)
------------ ---------- ----------
Total Stockholders' equity.... 50,886,077 15,108,174 65,994,251
------------ ---------- ----------
Total liabilities and
Stockholders' equity........ $ 71,532,061 15,597,779 87,129,840
============ ========== ==========
</TABLE>
See accompanying notes to pro forma balance sheet.
F-37
<PAGE> 52
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
September 30, 1996
(unaudited)
(A) The September 30, 1996 Historical column represents the historical balance
sheet as presented in the September 30, 1996 10-Q as filed with the SEC.
(B) The following pro forma adjustment relates to the acquisition of the
subject properties as though they were acquired on September 30, 1996. The
terms are described in the notes that follow.
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------
Total
Six Spring Pro Forma
Corners Hill Adjustments
----------- --------- -----------
<S> <C> <C> <C>
Assets
- ------
Net investment in
properties........... $ 6,000,000 9,200,000 15,200,000
Accounts and rents
receivable........... 306,203 91,576 397,779
----------- --------- ----------
Total assets........... $ 6,306,203 9,291,576 15,597,779
=========== ========= ==========
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ $ 336,487 97,421 433,908
Security deposits...... 15,542 40,155 55,697
----------- --------- ----------
Total liabilities...... 352,029 137,576 489,605
----------- --------- ----------
Common Stock (D)....... $ 6,923 10,644 17,567
Additional paid in capital
(net of Offering
Costs)(D)............ 5,947,251 9,143,356 15,090,607
----------- --------- ----------
Total Stockholders'
equity............... 5,954,174 9,154,000 15,108,174
----------- --------- ----------
Total liabilities and
Stockholders' equity. $ 6,306,203 9,291,576 15,597,779
=========== ========= ==========
</TABLE>
F-38
<PAGE> 53
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
September 30, 1996
(unaudited)
Acquisition of Six Corners, Chicago, Illinois
On October 18, 1996, the Company acquired this property from an
unaffiliated third party for the purchase price of approximately
$6,000,000, on an all cash basis, funded from cash and cash equivalents.
Acquisition of Spring Hill Fashion Center, West Dundee, Illinois
On November 13, 1996, the Company acquired this property from an
unaffiliated third party for the purchase price of approximately
$9,200,000, on an all cash basis, funded from cash and cash equivalents.
(C) No pro forma assumptions have been made for the additional payment of
distributions resulting from the additional proceeds raised.
(D) Additional Offering Proceeds of $17,567,000, net of additional Offering
costs of $2,458,826 are reflected as received as of September 30, 1996,
prior to the purchase of the properties. Offering costs consist
principally of registration costs, printing and selling costs, including
commissions.
F-39
<PAGE> 54
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the nine months ended September 30, 1996
(unaudited)
The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of Mundelein Plaza, Regency Point Shopping
Center, Prospect Heights Plaza, Montgomery-Sears Shopping Center, the Zany
Brainy store, Salem Square, Hawthorn Village Commons, Six Corners and Spring
Hill Fashion Center as of January 1, 1996. This unaudited Pro Forma Statement
of Operations should be read in conjunction with the September 30, 1996
Financial Statements and the notes thereto as filed on Form 10-Q.
This unaudited Pro Forma Statement of Operations is not necessarily indicative
of what the actual results of operations would have been for the nine months
ended September 30, 1996, nor does it purport to represent the future financial
position of the Company. Unless otherwise defined, capitalized terms used
herein shall have the same meaning as in the Prospectus.
F-40
<PAGE> 55
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the nine months ended September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
1996 Total
Historical Pro Forma 1996
(A) Adjustments(B) Pro Forma
------------ ------------- ---------
<S> <C> <C> <C>
Rental income............... $ 2,578,953 3,221,285 5,800,238
Additional rental income.... 785,719 1,435,744 2,221,463
Interest income (C)......... 212,063 - 212,063
Other income................ 64,870 - 64,870
------------ --------- ---------
Total income.............. 3,641,605 4,657,029 8,298,634
------------ --------- ---------
Professional services and
general and
administrative fees....... 120,919 - 120,919
Advisor asset management
fee....................... 242,341 252,255 494,596
Property operating expenses. 1,146,661 1,690,234 2,836,895
Interest expense............ 210,132 321,303 531,435
Depreciation (D)............ 561,983 1,061,596 1,623,579
Amortization................ 4,119 - 4,119
Acquisition costs expensed.. 22,511 - 22,511
------------ --------- ---------
Total expenses.............. 2,308,666 3,325,388 5,634,054
------------ --------- ---------
Net income................ $ 1,332,939 1,331,641 2,664,580
============ ========= =========
Weighted average
common stock shares
outstanding (E)........... 3,688,310 5,445,010
============ =========
Net income per weighted
average common stock
outstanding (E)........... $ .36 .49
============ =========
</TABLE>
See accompanying notes to pro forma statement of operations.
F-41
<PAGE> 56
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the nine months ended September 30, 1996
(unaudited)
(A) The 1996 Historical column represents the historical statement of
operations of the Company for the nine months ended September 30, 1996, as
filed with the SEC on Form 10-Q.
(B) Total pro forma adjustments for the nine months ended September 30, 1996
are as though the acquisitions of the following properties occurred on
January 1, 1996 on an all cash basis except for the following:
Regency Point
In the purchase of Regency Point the Company assumed the existing first
mortgage loan of $4,473,200, along with a related interest rate swap
agreement. The first mortgage loan has a floating interest rate of 180
basis points over the 30-day LIBOR rate, which rate is adjusted monthly.
The interest rate swap agreement, in conjunction with the first mortgage,
provides for Bank One, Chicago, to receive from or pay to the Company the
difference between 6.11% and the 30-day LIBOR rate, so that the first
mortgage loan has an effective rate of 7.91% per annum. The pro forma
adjustment for interest expense for 1996 was estimated using the described
loan terms. The related interest rate swap agreement was terminated on
April 18, 1996 resulting in $48,419 proceeds to the Company. The pro forma
adjustment does not give effect to the termination of this agreement.
Hawthorn Village Commons
The Company funded the purchase of Hawthorn Village Commons using: (i) the
proceeds of a short-term loan maturing August 23, 1996 in the amount of
$2.9 million from Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Company (the "Short-Term Loan"), and (ii) cash and cash
equivalents. The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of eight percent per annum.
A majority of the Company's board, including a majority of the Independent
Directors has approved the terms and conditions of the Short-Term Loan.
The Company repaid the Short-Term Loan using the proceeds of a loan (the
"Mortgage Loan") in the amount of $3,955,000 from an unaffiliated lender.
The Company paid a 1% origination fee to the lender of the Mortgage Loan.
The Mortgage Loan has a term of five years and, prior to the maturity date,
requires payments of interest only, at an annual rate of 7.85%.
F-42
<PAGE> 57
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the nine months ended September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Mundelein Regency Prospect Montgomery- Zany
Plaza Point Heights Sears Brainy
---------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Rental income..... $ 163,381 139,271 89,105 163,700 137,489
Additional rental
income.......... 32,975 16,034 83,593 57,012 24,144
Interest income... - - - - -
---------- ------- --------- --------- -------
Total income...... 196,356 155,305 172,698 220,712 161,633
---------- ------- --------- --------- -------
Advisor asset
management fee.. - - - - -
Property operating
expenses........ 53,986 19,046 91,364 66,944 30,331
Interest expense.. - - - - -
Depreciation (D).. - - - - -
---------- ------- --------- --------- -------
Total expenses.... 53,986 19,046 91,364 66,944 30,331
---------- ------- --------- --------- -------
Net income........ $ 142,370 136,259 81,334 153,768 131,302
========== ======= ========= ========= =======
<CAPTION>
Hawthorn
Salem Village Six Spring
Square Commons Corners Hill
<S> <C> <C> <C> <C>
Rental income..... $ 422,146 548,667 749,262 808,264
Additional rental
income.......... 260,832 270,570 490,551 200,033
---------- ------- --------- ---------
Total income...... 682,978 819,237 1,239,813 1,008,297
---------- ------- --------- ---------
Advisor asset
management fee.. - - - -
Property operating
expenses........ 270,756 293,132 607,048 257,627
Interest expense.. - - - -
Depreciation (D).. - - - -
---------- ------- --------- ---------
Total expenses.... 270,756 293,132 607,048 257,627
---------- ------- --------- ---------
Net income........ $ 412,222 526,105 632,765 750,670
========== ======= ========= =========
</TABLE>
F-43
<PAGE> 58
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the nine months ended September 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Total
----------- ---------
<S> <C> <C>
Rental income..... - 3,221,285
Additional rental
income.......... - 1,435,744
----------- ---------
Total income...... - 4,657,029
----------- ---------
Advisor asset
management fee.. 252,255 252,255
Property operating
expenses........ - 1,690,234
Interest expense.. 321,303 321,303
Depreciation (D).. 1,061,596 1,061,596
----------- ---------
Total expenses.... 1,635,154 3,325,388
----------- ---------
Net income........ $(1,635,154) 1,331,641
=========== =========
</TABLE>
F-44
<PAGE> 59
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the nine months ended September 30, 1996
(unaudited)
(C) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.
(D) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years.
(E) The pro forma weighted average common stock shares for the nine months
ended September 30, 1996 was calculated by estimating the additional shares
sold to purchase each of the Company's properties on a weighted average
basis.
F-45
