<PAGE> 1
As filed with the Securities and Exchange Commission on June 14, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 3, 1996
(Date of earliest event reported)
Inland Monthly Income Fund III, Inc.
(Exact name of registrant as specified in the charter)
Maryland 33-79012 36-3953261
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60521
(Address of Principal Executive Offices)
(708) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
-1-
<PAGE> 2
Item 5. Other Events
Anticipated purchase of properties:
Inland Monthly Income Fund III, Inc. has executed commitments to purchase,
subject to completion of due diligence, the properties described below from an
unaffiliated seller. There can be no assurance that any or all of the properties
will be acquired.
Prospect Heights Plaza, Prospect Heights, Illinois
The Company, through the Advisor, is currently completing its due diligence on
the Prospect Heights Plaza ("Prospect Heights") and anticipates purchasing the
property in June 1996 from an unaffiliated third party for a purchase price of
$2,165,000 on an all cash basis.
Prospect Heights, built in 1985, consists of two one-story, multi-tenant brick
buildings aggregating 28,080 rentable square feet.
The table below sets forth certain information with respect to the occupancy
rate at Prospect Heights expressed as a percentage of total gross leasable area
for each of the last five years and the average effective annual base rent per
square foot for each of the last five years.
<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C> <C>
1991 100% $ 7.53
1992 100% 7.53
1993 100% 7.53
1994 100% 7.53
1995 78% 5.85
</TABLE>
As of June 14, 1996, Prospect Heights was 100% leased and 78% occupied. Tenants
leasing more than 10% of the total square footage currently include Walgreens
with 12,600 square feet, United Farm Stands Corp. with 4,680 square feet and
Blockbuster Video with 6,250 square feet.
The lease with Walgreens requires a base rent of $5.50 per square foot per annum
until July 31, 2005, $6.00 per square foot per annum from August 1, 2005 to July
31, 2015 and $6.50 per square foot per annum from August 1, 2015 to July 31,
2025. The lease also requires the payment of percentage rent annually based on
1% of food item sales, 1.5% of liquor sales and 2% of other sales in excess of
monthly rent paid including their portion of CAM, real estate taxes and
insurance. In 1995, net percentage rent was $23,000. Walgreens has the option to
terminate the lease in 2005, 2010, 2015, and 2020 with a one year notice.
The lease with United Farm Stands Corp. requires a base rent of $12.00 per
square foot per annum until January 31, 1998 and contains three renewal options
of two years each. United Farm Stands Corp. sells fruits and vegetables.
-2-
<PAGE> 3
The lease with Blockbuster Video requires a base rent of $12.00 per square foot
per annum for three years and contains four renewal options of five years each.
Blockbuster Video sells and rents prerecorded audio and video products.
Blockbuster Video will begin paying rent three months after occupancy which is
anticipated to be in July 1996. The seller will master lease this space at
$12.00 per square foot per annum until Blockbuster Video begins paying rent.
For federal income tax purposes, the Company's depreciable basis in the Prospect
Heights buildings will be approximately $1,407,000. Depreciation expense, for
tax purposes, will be computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 40 years.
Real estate taxes paid in 1995 for the tax year ended 1994 (the most recent tax
year for which information is available) were $127,033.
At June 1, 1996, Prospect Heights had five tenants. The following tables set
forth certain information with respect to the amount of and expiration of leases
at this Neighborhood Retail Center.
<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- ------------------ ------- ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Walgreens 12,600 07/2025 None $ 72,450 $ 5.75
Blockbuster 6,250 07/1999 4/5 75,000 12.00
Power Motion 2,550 07/1998 1/3 27,600 10.82
Dr. W. Beck 2,000 12/1997 1/5 22,000 11.00
United Farm Stands 4,680 01/1998 3/2 56,160 12.00
</TABLE>
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ -------- ------------- ----------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 - - - $ 253,710 - - -
1997 1 2,000 $ 22,000 $ 254,910 $ 11.00 7.12% 8.63%
1998 2 7,230 $ 86,160 $ 233,610 $ 11.92 25.75% 36.88%
1999 1 6,250 $ 75,000 $ 147,450 $ 12.00 22.26% 50.86%
2000-2004 - - - $ 72,450 - - -
2005 - - - $ 73,763 - - -
</TABLE>
* No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be released
at market rates.
The Company received a letter appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate Appraisers
reflecting a prospective value of Prospect Heights of the leased fee interest
upon reaching stabilized occupancy as of June 11, 1996 of not less than
$2,165,000. It should be noted, however, that appraisals are estimates of value
and should not be relied on as true worth or realizable value.
-3-
<PAGE> 4
Montgomery-Sears, Montgomery, Illinois
The Company, through the Advisor, is currently completing its due diligence on
Montgomery-Sears and anticipates purchasing the property in June, 1996 from an
unaffiliated third party for a purchase price of $3,419,000 on an all cash
basis.
Montgomery-Sears, built in 1990, is a one-story, multi tenant concrete masonry
building aggregating 34,600 rentable square feet.
The table below sets forth certain information with respect to the occupancy
rate at Montgomery-Sears expressed as a percentage of total gross leasable area
for each of the last five years and the average effective annual base rent per
square foot for each of the last five years.
<TABLE>
<CAPTION>
Year Ending Occupancy Annual Rents Received
December 31, Rate Per Square Foot
------------ --------- ---------------------
<S> <C> <C>
1991 95% $ 8.88
1992 95% 9.50
1993 95% 9.84
1994 95% 10.48
1995 95% 9.47
</TABLE>
As of June 14, 1996, Montgomery-Sears was 85% leased. Tenants leasing more than
10% of the building's square footage include Sears Hardware with 20,000 square
feet and Blockbuster Video with 7,000 square feet.
The lease with Sears requires a base rent of $10.50 per square foot per annum
until September 1, 1996, $11.44 per square foot per annum from October 1, 1996
to September 30, 1999 and $12.47 per square foot per annum from October 1, 1999
to July 30, 2000 and contains two renewal options of five years each. Sears has
the right to terminate the lease at any time after July 15, 1997 with 180 days
notice and payment of one year's rent. Sears Hardware sells hardware supplies
and tools. The lease with Blockbuster requires a base rent of $13.20 per square
foot per annum until August 31, 2000 and contains a renewal option for an
additional five years. Blockbuster Video sells and rents prerecorded audio and
video products.
The vacant space, totaling 5,100 square feet, at Montgomery-Sears will be master
leased by the seller for a period of 24 months at $12.00 per square foot per
annum or until such time as a tenant begins paying rent.
For federal income tax purposes, the company's depreciable basis in the
Montgomery-Sears building will be approximately $2,675,000. Depreciation
expense, for tax purposes, will be computed using the straight-line method.
Buildings and improvements are based upon estimated useful lives of 40 years.
Real estate taxes to be paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $65,310.
-4-
<PAGE> 5
At June 1, 1996, Montgomery-Sears had three tenants. The following tables set
forth certain information with respect to the amount of and expiration of leases
at this Neighborhood Retail Center.
<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- -------------- ------- ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sears Hardware 20,000 07/2000 2/5 $ 210,000 $ 10.50
Blockbuster 7,000 08/2000 1/5 92,400 13.20
Radio Shack 2,500 09/2000 1/5 25,000 10.00
Vacant* 3,600 06/1998 - 43,200 12.00
Vacant* 1,500 06/1998 - 15,300 10.20
</TABLE>
* The vacancies currently total 5,100 square feet, however, the vacant space
will be master leased by the seller for a two-year period at $12.00 per
square foot, on a net basis, for 3,600 square feet and $10.20 per square
foot, on a net basis, for 1,500 square feet.
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ --------- ------------- ----------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 - - - $ 396,380 - - -
1997 - - - $ 416,640 - - -
1998 1 5,100 $ 61,200 $ 416,640 $ 12.00 14.74% 14.69%
1999 - - - $ 362,178 - - -
2000 3 29,500 $379,004 $ 379,004 $ 12.85 85.26% 100.00%
2001-2005 - - - - - - -
</TABLE>
* No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be released
at market rates.
The Company received a letter appraisal prepared by an independent appraiser who
is a member in good standing of the American Institute of Real Estate Appraisers
reflecting a prospective value of Montogomery Sears of the leased fee interest
upon reaching stabilized occupancy as of June 11, 1996 of $3,450,000. It should
be noted, however, that appraisals are estimates of value and should not be
relied on as true worth or realizable value.
-5-
<PAGE> 6
Zany Brainy, Wheaton, Illinois
The Company has a commitment, subject to completion of due diligence, to
purchase a single tenant retail facility in Wheaton, Illinois, which facility
has been leased to Children's Concepts, Inc. ("the Zany Brainy store"). The
Company expects to purchase the Zany Brainy property in July, 1996 from an
unaffiliated third party for a purchase price of $2,455,000 on an all cash
basis. The Zany Brainy store is a retail store which sells children's books,
computer software, toys, and related items.
The Zany Brainy store, built in 1995, is a single tenant retail facility
aggregating 12,499 rentable square feet and is leased 100% to Children's
Concepts, Inc. (d/b/a Zany Brainy).
The lease with Zany Brainy requires a base rent of $22.00 per square foot per
annum until November 2000, which increases for the period December 2000 to
November 2005 to the lesser of $24 per square foot per annum or a calculated
amount using the consumer price index. The lease with Zany Brainy contains two
renewal options of five years each.
For federal income tax purposes, the company's depreciable basis in the Zany
Brainy building will be approximately $1,592,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are based upon estimated useful lives of 40 years.
Real estate taxes to be paid in 1996 for the tax year ended 1995 (the most
recent tax year for which information is available) were $1,292 for vacant land.
The following tables set forth certain information with respect to the amount of
and expiration of the Zany Brainy lease.
<TABLE>
<CAPTION>
Square Current
Foot Lease Renewal Annual Rent Per
Lessee Leased Ends Options Rent Square Foot
- --------------- ------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Zany Brainy 12,499 11/2006 2/5 $ 274,978 $ 22.00
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Average Percent of Percent of
Approx. Base Rent Total Annual
GLA of Annual Total Per Square Building GLA Base Rent
Number of Expiring Base Rent Annual Foot Under Represented Represented
Year Ending Leases Leases of Expiring Base Expiring By Expiring By Expiring
December 31, Expiring (square feet) Leases Rent(1) Leases Leases Leases
- ------------ --------- ------------- ----------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996-1999 - - - $274,978 - - -
2000 - - - $289,560 (2) - - -
2001-2004 - - - $299,976 - - -
2005 1 12,499 $299,976 $299,976 $ 24.00 100% 100%
</TABLE>
(1) No assumptions were made regarding the releasing of expired leases. It is
management of the Company's current opinion that the space will be released
at market rates.
(2) The base rent will increase in December 2000 to the lesser of $24.00 per
square foot per annum or $274,978* (1.0 plus the sum of CPI for the first
five years plus .025). For presentation purposes, $24.00 per square foot per
annum was used.
The Company is in the process of obtaining an appraisal prepared by an
independent appraiser who is a member in good standing of the American Institute
of Real Estate Appraisers.
Acquisition of these properties is subject to approval of the Directors,
including the Independent Directors, as being fair and reasonable to the
Company.
-7-
<PAGE> 8
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Index to Financial Statements
Page
----
<S> <C>
Report of Independent Public Accountants............................ 9
Statement of Gross Income and Direct Operating Expenses for the
year ended December 31, 1995 of Prospect Heights Plaza.............. 10
Notes to the Statement of Gross Income and Direct Operating
Expenses for the year ended December 31, 1995
of Prospect Heights Plaza........................................... 11
Independent Auditors' Report........................................ 13
Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1995 of Montgomery-Sears... 14
Notes to Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1995 of Montgomery-Sears... 15
Pro Forma Balance Sheet (unaudited) at December 31, 1995............ 17
Notes to Pro Forma Balance Sheet (unaudited) at December 31, 1995... 19
Pro Forma Statement of Operations (unaudited) of the Company
for the year ended December 31, 1995................................ 24
Notes to Pro Forma Statement of Operations (unaudited) for
the year ended December 31, 1995.................................... 26
Pro Forma Balance Sheet (unaudited) at March 31, 1996............... 34
Notes to Pro Forma Balance Sheet (unaudited) at March 31, 1996...... 36
Pro Forma Statement of Operations (unaudited) of the Company
for the three months ended March 31, 1996........................... 40
Notes to Pro Forma Statement of Operations (unaudited) for the
three months ended March 31, 1996................................... 42
</TABLE>
-8-
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
NATIONAL SHOPPING PLAZAS, INC.
We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the Prospect Heights Plaza for the year ended December 31, 1995.
This Statement is the responsibility of the management of the Company. Our
responsibility is to express an opinion on this Statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the Statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and for
inclusion in the Registration Statement on Form S-11 of Inland Monthly Income
Fund III, Inc. as described in Note 2. The presentation is not intended to be a
complete presentation of the Prospect Heights Plaza revenues and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the gross income and direct operating expenses of Prospect Heights
Plaza as described in Note 2 for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
BRUCE GORLICK, C.P.A., LTD.
A PROFESSIONAL CORPORATION
BUFFALO GROVE, ILLINOIS
MAY 24, 1996
-9-
<PAGE> 10
Prospect Heights Plaza
Statement of Gross Income and Direct Operating Expenses
For the year ended December 31, 1995
<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 164,152
Operating expense and real estate
tax recoveries................................ 116,075
Other tenant income............................. 100
----------
Total Gross Income.............................. 280,327
----------
Direct operating expenses:
Real estate taxes............................... 127,033
Management fees................................. 16,600
Operating expenses.............................. 29,678
Utilities....................................... 3,339
Insurance expense............................... 4,169
----------
Total Direct Operating Expenses................. 180,819
----------
Excess of Gross over Direct Operating............. $ 99,508
==========
</TABLE>
-10-
<PAGE> 11
Prospect Heights Plaza
Notes to the Statement of Income and Direct Operating Expenses
December 31, 1995
1. Business
Prospect Heights Plaza is located in Prospect Heights, Illinois. It
consists of approximately 27,830 square feet of gross leasable area and was
78% occupied at December 31, 1995. Prospect Heights Plaza is owned by
Amalgamated Bank of Chicago, Trust No. 5073. Amalgamated Bank of Chicago,
Trust No. 5073 has signed a sale and purchase agreement for the sale of
Prospect Heights Plaza to Inland Monthly Income Fund III, Inc.
2. Basis of Presentation
The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of revenues and
expenses. The Statement has been prepared on the accrual basis of
accounting.
3. Gross Income
National Shopping Plazas, Inc. leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. Certain of the leases include provisions under which Prospect
Heights Plaza is reimbursed for certain common area, real estate, and
insurance costs. Operating Expense and Real Estate Tax Recoveries reflected
on the Statement of Gross Income and Direct Operating Expenses includes
amounts due for 1995 expenses for which the tenants have not yet been
billed. Certain leases have rent due for the year ended December 31, 1995.
Certain leases contain renewal options for various periods at various rental
rates.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. The adjusted increase in base rental income is $11 for the
year ended December 31, 1995, which we consider immaterial.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are approximately as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C> <C>
1996 $ 178,710
1997 179,910
1998 116,630
1999 94,450
2000 94,450
Thereafter 332,062
-----------
$ 996,212
===========
</TABLE>
-11-
<PAGE> 12
Prospect Heights Plaza
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1995
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be comparable
to the proposed future operations of Prospect Heights Plaza. Costs such as
mortgage interest, depreciation, amortization, and professional fees are
excluded from the Statement.
Prospect Heights Plaza has not received its final real estate bill for 1995.
The difference between this estimate and the final bill is not expected to
have a material impact on the Statement of Gross Income and Direct Operating
Expenses.
Prospect Heights Plaza is managed by National Shopping Plazas, Inc. For the
year ended December 31, 1995, Prospect Heights Plaza paid approximately
$17,000 for management fees, as per the management agreement.
-12-
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
NATIONAL SHOPPING PLAZAS, INC.
We have audited the accompanying Statement of Gross Income and Direct Operating
Expenses of the Montgomery-Sears Shopping Center ("Montgomery-Sears") for the
year ended December 31, 1995. This Statement is the responsibility of the
management of the Company. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the Statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and for
inclusion in the Registration Statement on Form S-11 of Inland Monthly Income
Fund III, Inc. as described in Note 2. The presentation is not intended to be a
complete presentation of the Montgomery-Sears revenues and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the gross income and direct operating expenses of Montgomery-Sears as
described in Note 2 for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
BRUCE GORLICK, C.P.A., LTD.
A PROFESSIONAL CORPORATION
BUFFALO GROVE, ILLINOIS
MAY 29, 1996
-13-
<PAGE> 14
Montgomery-Sears Shopping Center
Statement of Gross Income and Direct Operating Expenses
For the year ended December 31, 1995
<TABLE>
<S> <C>
Gross income:
Base rental income.............................. $ 327,610
Operating expense and real estate
tax recoveries................................ 75,642
Other tenant income............................. 540
----------
Total Gross Income.............................. 403,792
----------
Direct operating expenses:
Real estate taxes............................... 60,996
Management fees................................. 14,800
Operating expenses.............................. 12,596
Utilities....................................... 5,311
Insurance expense............................... 8,364
----------
Total Direct Operating Expenses................. 102,067
----------
Excess of Gross over Direct Operating............. $ 301,725
==========
</TABLE>
-14-
<PAGE> 15
Montgomery-Sears Shopping Center
Notes to the Statement of Income and Direct Operating Expenses
December 31, 1995
1. Business
Montgomery-Sears is located in Montgomery, Illinois. It consists of
approximately 34,600 square feet of gross leasable area and was 85%
occupied at December 31, 1995. Montgomery-Sears is owned by Amalgamated
Bank of Chicago, Trust No. 5435. Amalgamated Bank of Chicago, Trust No.
5435 has signed a sale and purchase agreement for the sale of Montgomery-
Sears to Inland Monthly Income Fund III, Inc.
2. Basis of Presentation
The Statement has been prepared for the purpose of complying with Rule 3-14
of the Securities and Exchange Commission Regulation S-X and for inclusion
in the Registration Statement on Form S-11 of Inland Monthly Income Fund
III, Inc. and is not intended to be a complete presentation of revenues and
expenses. The Statement has been prepared on the accrual basis of
accounting.
3. Gross Income
National Shopping Plazas, Inc. leases retail space under various lease
agreements with its tenants. All leases are accounted for as operating
leases. Certain of the leases include provisions under which
Montgomery-Sears is reimbursed for certain common area, real estate, and
insurance costs. Operating Expense and Real Estate Tax Recoveries reflected
on the Statement of Gross Income and Direct Operating Expenses includes
amounts due for 1995 expenses for which the tenants have not yet been
billed. Certain leases contain renewal options for various periods at
various rental rates.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. The adjusted increase in base rental income is $56 for the
year ended December 31, 1995, which we consider immaterial.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1995 are approximately as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 335,180
1997 355,440
1998 321,560
1999 258,950
2000 205,800
Thereafter -
-----------
$ 1,476,930
===========
</TABLE>
-15-
<PAGE> 16
Montgomery-Sears Shopping Center
Notes to the Statement of Gross Income and Direct Operating Expenses
December 31, 1995
4. Direct Operating Expenses
Direct operating expenses include only those costs expected to be comparable
to the proposed future operations of Montgomery-Sears. Costs such as
mortgage interest, depreciation, amortization, and professional fees are
excluded from the Statement.
Montgomery-Sears has not received its final real estate bill for 1995. The
difference between this estimate and the final bill is not expected to have
a material impact on the Statement of Gross Income and Direct Operating
Expenses.
Montgomery-Sears is managed by National Shopping Plazas, Inc. For the year
ended December 31, 1995, Montgomery-Sears paid approximately $15,000 for
management fees, as per the management agreement.
-16-
<PAGE> 17
Inland Monthly Income Fund III, Inc.
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 and the Zany Brainy
store, as of 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.
-17-
<PAGE> 18
Inland Monthly Income Fund III, Inc.
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
------------- -------------- -------------
<S> <C> <C> <C>
Assets
Net investment in
properties.................. $ 17,342,538 19,397,230 36,739,768
Cash and cash equivalents..... 738,931 - 738,931
Restricted cash............... 150,000 - 150,000
Accounts and rents
receivable.................. 333,823 167,855 501,678
Other assets.................. 185,585 - 185,585
------------ ----------- -----------
Total assets.................. $ 18,750,877 19,565,085 38,315,962
============ =========== ===========
Liabilities and Stockholders'
Equity
Accounts payable and accrued
expenses.................... $ 288,037 7,500 295,537
Accrued real estate taxes..... 374,180 202,049 576,229
Distributions payable (C)..... 129,532 - 129,532
Security deposits............. 54,483 52,221 106,704
Mortgage payable.............. 750,727 4,473,200 5,223,927
Notes payable to Affiliate.... 360,000 - 360,000
Other liabilities............. 178,852 - 178,852
------------ ----------- -----------
Total liabilities............. 2,135,811 4,734,970 6,870,781
------------ ----------- -----------
Common Stock(D)............... 19,996 17,245 37,241
Additional paid in capital
(net of Offering costs)(D).. 16,835,183 14,812,870 31,648,053
Accumulated distributions in
excess of net income........ (240,113) - (240,113)
------------ ----------- -----------
Total Stockholders' equity.... 16,615,066 14,830,115 31,445,181
------------ ----------- -----------
Total liabilities and
Stockholders' equity........ $ 18,750,877 19,565,085 38,315,962
============ =========== ===========
</TABLE>
See accompanying notes to pro forma balance sheet.
-18-
<PAGE> 19
Inland Monthly Income Fund III, Inc.
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 and
includes the following properties acquired by the Company as of December 31,
1995.
Walgreens, Decatur, Illinois
On January 31, 1995, the Company acquired this property from Inland Property
Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the total purchase
price of $1,209,053, including acquisition costs of $482, and the assumption
of the first mortgage loan with a balance of $750,727 at December 31, 1995,
which is secured by the property. This mortgage has an interest rate of
7.655% and amortizes over a 25-year period. The Company is responsible for
monthly payments of principal and interest of $5,689.
Eagle Crest Shopping Center, Naperville, Illinois
On March 1, 1995, the Company acquired this property from IPS for the
purchase price of $4,816,970, including acquisition costs of $11,059, and
the assumption of the first mortgage loan of approximately $3,534,000, which
was secured by the property. The balance of the purchase price was funded
through a loan from IPS, totaling $1,212,427, with interest accruing at
10.5%. On April 20, 1995, the Company paid off the first mortgage secured by
this property. The deferred portion of the purchase price, totaling
$1,212,427, was paid to IPS in May 1995 from Gross Offering Proceeds. In
addition, accrued interest of $22,009 was paid from Company operations.
Montgomery-Goodyear Shopping Center, Montgomery, Illinois
On September 14, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $1,145,992, including
closing costs of $5,992, a portion of which was evidenced by a promissory
note payable to Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Advisor, in the gross amount of $600,000. The remainder of
the purchase price net of prorations, of approximately $535,000 was funded
with proceeds of the Offering. The promissory note was paid in full in
October 1995, with interest at a rate of 10.9% per annum. The total amount
paid was $604,260, of which $600,000 was principal paid from Gross Offering
Proceeds and $4,260 was interest paid from Company operations.
-19-
<PAGE> 20
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)
Hartford Plaza, Naperville, Illinois
On September 14, 1995, the Company acquired this newly constructed property
from an unaffiliated third party for a purchase price of $4,414,015
including closing costs of $14,015, and deposited $150,000 in an escrow
account for leasehold improvements to the Blockbuster, Inc. space. A portion
of the purchase price was evidenced by a promissory note payable to IMIC, in
the gross amount of $600,000. The remainder of the purchase price was funded
with proceeds of the Offering. The promissory note was paid in full in
October 1995 with interest at a rate of 10.9% per annum. The total amount
paid was $605,102, of which $600,000 was principal paid from Gross Offering
Proceeds and $5,102 was interest paid from Company operations.
Nantucket Square Shopping Center, Schaumburg, Illinois
On September 20, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $4,257,918, including
closing costs of $4,913, a portion of which was evidenced by a promissory
note payable to IMIC, in the gross amount of $3,550,000. The remainder of
the purchase price was funded with proceeds of the Offering. In addition, as
part of the purchase, the Company agreed to pay $51,135 for tenant
improvements for two tenants expanding their space, which was added to the
cost of the property. The promissory note was paid in full in December 1995
with interest at a rate of 10.5% per annum. The principal amount paid was
$3,550,000 from Gross Offering Proceeds and interest of $62,011 was paid
from Company operations.
Antioch Plaza, Antioch, Illinois
On December 28, 1995, the Company acquired Antioch Plaza from an
unaffiliated third party for a purchase price of $1,750,365, including
closing costs of $365, a portion of which was evidenced by a promissory note
payable to Inland Real Estate Investment Corporation, an affiliate of the
Advisor ("IREIC"), in the gross amount of $660,000. As of December 31, 1995,
the unpaid balance of this note was $360,000. The note which bore interest
at a rate of 9.5% per annum was repaid in full on January 9, 1996 and the
total amount paid was $661,163, of which $660,000 was principal paid from
Gross Offering Proceeds and $1,163 was interest paid from Company
operations. The remainder of the purchase price, net of prorations of
approximately $1,100,000 was funded with proceeds of the Offering.
-20-
<PAGE> 21
Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
December 31, 1995
(unaudited)
(B) The following pro forma adjustment relates to the acquisition or probable
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
-------------------------------------------------------------------
Total
Mundelein Regency Prospect Montgomery- Zany Pro Forma
Plaza Point Heights Sears Brainy Adjustment
----------- --------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Net investment in
properties.................. $ 5,658,230 5,700,000 2,165,000 3,419,000 2,455,000 19,397,230
Cash and cash equivalents..... - - - - - -
Restricted cash............... - - - - - -
Accounts and rent
receivable.................. 84,375 16,867 38,771 27,842 - 167,855
Other assets.................. - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Total assets.................. $ 5,742,605 5,716,867 2,203,771 3,446,842 2,455,000 19,565,085
=========== =========== =========== =========== =========== ===========
Liabilities and Stockholders'
Equity
Accounts payable and accrued
expenses.................... $ 7,500 - - - - 7,500
Accrued real estate taxes..... 89,010 16,867 63,517 32,655 - 202,049
Distributions payable (C)..... - - - - - -
Security deposits............. 15,000 28,621 8,600 - - 52,221
Mortgage payable.............. - 4,473,200 - - - 4,473,200
Notes payable to Affiliate.... - - - - - -
Other liabilities............. - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities............. 111,510 4,518,688 72,117 32,655 2,455,000 4,734,970
----------- ----------- ----------- ----------- ----------- -----------
Common Stock(D)............... 6,548 1,393 2,479 3,970 2,855 17,245
Additional paid in capital
(net of Offering costs)(D).. 5,624,547 1,196,786 2,129,175 3,410,217 2,452,145 14,812,870
Accumulated distributions in
excess of net income........ - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Total Stockholders' equity.... 5,631,095 1,198,179 2,131,654 3,414,187 2,455,000 14,830,115
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
Stockholders' equity........ $ 5,742,605 5,716,867 2,203,771 3,446,842 2,455,000 19,565,085
=========== =========== =========== =========== =========== ===========
</TABLE>
-21-
<PAGE> 22
Inland Monthly Income Fund III, Inc.
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 offering proceeds.
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 Offering proceeds.
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
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in June 1996 from an unaffiliated
third party for the purchase price of $2,165,000 on an all cash basis.
Acquisition of Montgomery-Sears, Montgomery, Illinois
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in June 1996 from an unaffiliated
third party for the purchase price of $3,419,000 on an all cash basis.
Acquisition of Zany Brainy, Wheaton, Illinois
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in July 1996 from an unaffiliated
third party for the purchase price of $2,455,000 on an all cash basis.
-22-
<PAGE> 23
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1995
(unaudited)
(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 $17,244,320, net of additional Offering
costs of $2,414,205, 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.
-23-
<PAGE> 24
Inland Monthly Income Fund III, Inc.
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 and Montgomery-Sears Shopping Center as of January 1,
1995. The remaining three properties acquired or proposed to be acquired by the
Company were constructed in 1995 and acquired shortly after construction was
completed. Therefore, the unaudited Pro Forma Statement of Operations of the
Company is presented to effect the acquisition of Hartford/Naperville Plaza,
Antioch Plaza and the Zany Brainy store, 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.
-24-
<PAGE> 25
Inland Monthly Income Fund III, Inc.
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 1,700,614 3,155,713
Additional
Rental income ....... 228,024 162,536 327,350 717,910
Interest
income (D) .......... 82,913 -- -- 82,913
---------- ------- --------- ---------
Total income ........ 1,180,422 748,150 2,027,964 3,956,536
---------- ------- --------- ---------
Professional
services and
general and
administrative ...... 23,132 -- -- 23,132
Property operating
expenses ............ 326,721 275,218 501,485 1,103,424
Interest expense ...... 164,161 429,997 351,900 946,058
Depreciation (E) ...... 169,894 111,767 425,255 706,916
---------- ------- --------- ---------
Total expenses ........ 683,908 816,982 1,278,640 2,779,530
---------- ------- --------- ---------
Net income(loss) .... $ 496,514 (68,832) 749,324 1,177,006
========== ======= ========= =========
Weighted average
common stock shares
outstanding (F) ..... 943,156 2,667,588
========== =========
Net income per weighted
average common stock
outstanding (F) .... $ .53 .44
========== =========
</TABLE>
See accompanying notes to pro forma statement of operations.
-25-
<PAGE> 26
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1995
(unaudited)
(A) The December 31, 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 1995 acquisitions as though they were
acquired the earlier of January 1, 1995 or date that operations commenced.
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------------------------------------------
Hartford Total
Montgomery- Naperville Nantucket Antioch 1995
Walgreens Eagle Crest Goodyear Plaza Square Plaza Pro Forma
--------- ----------- -------- ----- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental
income ......... 10,651 95,232 101,359 15,077 340,545 22,750 585,614
Additional
Rental income .. -- 2,218 19,203 662 140,453 -- 162,536
Interest
income (D) ..... -- -- -- -- -- -- --
------ ------- ------- ------- ------- ------ -------
Total income ... 10,651 97,450 120,562 15,739 480,998 22,750 748,150
------ ------- ------- ------- ------- ------ -------
Professional
services and
general and
administrative . -- -- -- -- -- -- --
Property operating
expenses ....... 533 17,376 47,758 3,436 205,903 212 275,218
Interest expense . 4,840 77,170 46,325 13,625 267,137 20,900 429,997
Depreciation (E) . 3,141 16,324 20,682 8,867 57,357 5,396 111,767
------ ------- ------- ------- ------- ------ -------
Total expenses ... 8,514 110,870 114,765 25,928 530,397 26,508 816,982
------ ------ ------- ------- ------- ------ -------
Net income(loss) 2,137 (13,420) 5,797 (10,189) (49,399) (3,758) (68,832)
====== ======= ======= ======= ======= ====== ========
</TABLE>
-26-
<PAGE> 27
Inland Monthly Income Fund III, Inc.
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.
-27-
<PAGE> 28
Inland Monthly Income Fund III, Inc.
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.
-28-
<PAGE> 29
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
for the year ended December 31, 1995
(unaudited)
(C) Total pro forma adjustments for 1996 Acquisitions as though they were
acquired the earlier of January 1, 1995 or date that operations commenced.
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------------------------
Total
Mundelein Regency Prospect Montgomery- Zany 1995
Plaza Point Heights Sears Brainy Pro Forma
--------- ----- ------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Rental
income ......... 639,124 541,085 164,152 327,610 28,643 1,700,614
Additional
Rental income .. 66,669 63,294 116,175 76,182 5,030 327,350
Interest
income (D) ..... -- -- -- -- -- --
------- ------- ------- ------- ------ ---------
Total income ... 705,793 604,379 280,327 403,792 33,673 2,027,964
------- ------- ------- ------- ------ ---------
Professional
services and
general and
administrative . -- -- -- -- -- --
Property operating
expenses ....... 141,482 71,615 180,819 102,067 5,502 501,485
Interest expense . -- 351,900 -- -- -- 351,900
Depreciation (E) . 128,233 162,500 46,900 83,200 4,422 425,255
------- ------- ------- ------- ------ ---------
Total expenses ... 269,715 586,015 227,719 185,267 9,924 1,278,640
------- ------- ------- ------- ------ ---------
Net income ..... 436,078 18,364 52,608 218,525 23,749 749,324
======= ======= ======= ======= ====== =========
</TABLE>
-29-
<PAGE> 30
Inland Monthly Income Fund III, Inc.
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
Interest income ..... -- -- --
-------- ------- -------
Total income ........ 705,793 -- 705,793
-------- ------- -------
Professional services
and general and
administrative .... -- -- --
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>
-30-
<PAGE> 31
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
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.
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
Interest income ..... -- -- --
-------- ------- --------
Total income ........ 604,379 -- 604,379
-------- ------- --------
Professional services
and general and
administrative .... -- -- --
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>
-31-
<PAGE> 32
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1995
(unaudited)
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
Interest income ..... -- -- --
-------- ------ -------
Total income ........ 280,327 -- 280,327
-------- ------ -------
Professional services
and general and
administrative .... -- -- --
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>
-32-
<PAGE> 33
Inland Monthly Income Fund III, Inc.
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
Interest income ..... -- -- --
-------- ------ -------
Total income ........ 403,792 -- 403,792
-------- ------ -------
Professional services
and general and
administrative .... -- -- --
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 will be purchased on an
all cash basis.
(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.
-33-
<PAGE> 34
Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
March 31, 1996
(unaudited)
The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisition of the Regency Point Shopping Center, Prospect Heights
Plaza, Montgomery-Sears Shopping Center and the Zany Brainy store as of March
31, 1996. This unaudited Pro Forma Balance Sheet should be read in conjunction
with the March 31, 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 March 31, 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.
-34-
<PAGE> 35
Inland Monthly Income Fund III, Inc.
Pro Forma Balance Sheet
March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
March 31,
March 31, 1996
1996 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- -------------- -------------
Assets
- ------
<S> <C> <C> <C>
Net investment in
properties ....................... $ 22,950,129 13,739,000 36,689,129
Cash and cash equivalents .......... 2,937,473 -- 2,937,473
Accounts and rents
receivable ....................... 492,081 155,731 647,812
Other assets ....................... 48,398 -- 48,398
------------ ---------- -----------
Total assets ....................... $ 26,428,081 13,894,731 40,322,812
============ ========== ===========
Liabilities and Stockholders' Equity
Accounts payable and accrued
expenses ......................... $ 418,393 -- 418,393
Accrued real estate taxes .......... 463,751 207,738 671,489
Distributions payable (C) .......... 183,457 -- 183,457
Security deposits .................. 71,133 37,221 108,354
Mortgage payable ................... 748,011 4,473,200 5,221,211
Other liabilities .................. 42,120 -- 42,120
------------ ---------- -----------
Total liabilities .................. 1,926,865 4,718,159 6,645,024
------------ ---------- -----------
Common Stock (D) ................... 29,103 10,671 39,774
Additional paid in capital
(net of Offering costs)(D) ....... 24,953,635 9,165,901 34,119,536
Accumulated distributions in
excess of net income ............. (481,522) -- (481,522)
------------ ---------- -----------
Total Stockholders' equity ......... 24,501,216 9,176,572 33,677,788
------------ ---------- -----------
Total liabilities and
Stockholders' equity ............. $ 26,428,081 13,894,731 40,322,812
============ ========== ===========
</TABLE>
See accompanying notes to pro forma balance sheet.
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<PAGE> 36
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
March 31, 1996
(unaudited)
(A) The March 31, 1996 Historical column represents the historical balance
sheet as presented in the March 31, 1996 10-Q as filed with the SEC and
includes the following properties acquired by the Company as of March 31,
1996.
Walgreens, Decatur, Illinois
On January 31, 1995, the Company acquired this property from Inland
Property Sales, Inc. ("IPS"), an Affiliate of the Advisor, for the total
purchase price of $1,209,053, including acquisition costs of $482, and the
assumption of the first mortgage loan with a balance of $748,011 at March
31, 1996, which is secured by the property. This mortgage has an interest
rate of 7.655% and amortizes over a 25-year period. The Company is
responsible for monthly payments of principal and interest of $5,689.
Eagle Crest Shopping Center, Naperville, Illinois
On March 1, 1995, the Company acquired this property from IPS for the
purchase price of $4,816,970, including acquisition costs of $11,059, and
the assumption of the first mortgage loan of approximately $3,534,000,
which was secured by the property. The balance of the purchase price was
funded through a loan from IPS, totaling $1,212,427, with interest accruing
at 10.5%. On April 20, 1995, the Company paid off the first mortgage
secured by this property. The deferred portion of the purchase price,
totaling $1,212,427, was paid to IPS in May 1995 from Gross Offering
Proceeds. In addition, accrued interest of $22,009 was paid from Company
operations.
Montgomery-Goodyear Shopping Center, Montgomery, Illinois
On September 14, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $1,145,992, including
closing costs of $5,992, a portion of which was evidenced by a promissory
note payable to Inland Mortgage Investment Corporation ("IMIC"), an
Affiliate of the Advisor, in the gross amount of $600,000. The remainder of
the purchase price net of prorations, of approximately $535,000 was funded
with proceeds of the Offering. The promissory note was paid in full in
October 1995, with interest at a rate of 10.9% per annum. The total amount
paid was $604,260, of which $600,000 was principal paid from Gross Offering
Proceeds and $4,260 was interest paid from Company operations.
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<PAGE> 37
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)
Hartford Plaza, Naperville, Illinois
On September 14, 1995, the Company acquired this newly constructed property
from an unaffiliated third party for a purchase price of $4,414,015
including closing costs of $14,015, and deposited $150,000 in an escrow
account for leasehold improvements to the Blockbuster, Inc. space. The
leasehold improvements were completed in January, 1996 and were added to
the cost of the property. A portion of the purchase price was evidenced by
a promissory note payable to IMIC, in the gross amount of $600,000. The
remainder of the purchase price was funded with proceeds of the Offering.
The promissory note was paid in full in October 1995 with interest at a
rate of 10.9% per annum. The total amount paid was $605,102, of which
$600,000 was principal paid from Gross Offering Proceeds and $5,102 was
interest paid from Company operations.
Nantucket Square Shopping Center, Schaumburg, Illinois
On September 20, 1995, the Company acquired this property from an
unaffiliated third party for a purchase price of $4,257,918, including
closing costs of $4,913, a portion of which was evidenced by a promissory
note payable to IMIC, in the gross amount of $3,550,000. The remainder of
the purchase price was funded with proceeds of the Offering. In addition,
as part of the purchase, the Company agreed to pay $51,135 for tenant
improvements for two tenants expanding their space, which was added to the
cost of the property. The promissory note was paid in full in December 1995
with interest at a rate of 10.5% per annum. The principal amount paid was
$3,550,000 from Gross Offering Proceeds and interest of $62,011 was paid
from Company operations.
Antioch Plaza, Antioch, Illinois
On December 28, 1995, the Company acquired Antioch Plaza from an
unaffiliated third party for a purchase price of $1,750,365, including
closing costs of $365, a portion of which was evidenced by a promissory
note payable to Inland Real Estate Investment Corporation, an affiliate of
the Advisor ("IREIC"), in the gross amount of $660,000. The note which bore
interest at a rate of 9.5% per annum was repaid in full on January 9, 1996
and the total amount paid was $661,163, of which $660,000 was principal
paid from Gross Offering Proceeds and $1,163 was interest paid from Company
operations. The remainder of the purchase price, net of prorations of
approximately $1,100,000 was funded with proceeds of the Offering.
Mundelein Plaza, Mundelein, Illinois
On March 29, 1996, the Company acquired the Mundelein Plaza property
("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 offering proceeds.
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<PAGE> 38
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)
(B) The following pro forma adjustment relates to the acquisition or probable
acquisition of the subject properties as though they were acquired on March
31, 1996. The terms are described in the notes that follow.
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------------
Total
Regency Prospect Montgomery- Zany Pro Forma
Point Heights Sears Brainy Adjustments
----- ------- ----- ------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Net investment in
properties ..................... $5,700,000 2,165,000 3,419,000 2,455,000 13,739,000
Cash and cash
equivalents .................... -- -- -- -- --
Accounts and rents
receivable ..................... 21,072 80,632 54,027 -- 155,731
Other assets ..................... -- -- -- -- --
---------- --------- --------- --------- ----------
Total assets ..................... $5,721,072 2,245,632 3,473,027 2,455,000 13,894,731
========== ========= ========= ========= ==========
Liabilities and Stockholders' Equity
Accounts payable
and accrued
expenses ....................... $ -- -- -- -- --
Accrued real estate
taxes .......................... 21,072 123,284 63,382 -- 207,738
Distributions
payable(C) ..................... -- -- -- -- --
Security Deposits ................ 28,621 8,600 -- -- 37,221
Mortgage payable ................. 4,473,200 4,473,200
Other liabilities ................ -- -- -- -- --
---------- --------- --------- --------- ----------
Total liabilities ................ 4,522,893 131,884 63,382 -- 4,718,159
---------- --------- --------- --------- ----------
Common Stock (D) ................. $ 1,393 2,458 3,965 2,855 10,671
Additional paid in
capital (net of
Offering
Costs)(D) ...................... 1,196,786 2,111,290 3,405,680 2,452,145 9,165,901
Accumulated
distributions in
excess of net
income ......................... -- -- -- -- --
---------- --------- --------- --------- ----------
Total Stockholders'
equity ......................... 1,198,179 2,113,748 3,409,645 2,455,000 9,176,572
---------- --------- --------- --------- ----------
Total liabilities
and Stockholders'
equity ......................... $5,721,072 2,245,632 3,473,027 2,455,000 13,894,731
========== ========= ========= ========= ==========
</TABLE>
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<PAGE> 39
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1996
(unaudited)
Acquisition of Regency Point, Lockport, Illinois
On April 5, 1996, the Company completed the acquisition of the Regency
Point from an unaffiliated third party for a purchase price of $5,700,000.
As part of the acquisition, the Company assumed the existing first mortgage
loan of $4,473,200 along with a related interest rate swap agreement, with
the balance funded with Offering Proceeds.
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 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
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in June 1996 from an unaffiliated
third party for the purchase price of $2,165,000 on an all cash basis.
Acquisition of Montgomery-Sears, Montgomery, Illinois
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in June 1996 from an unaffiliated
third party for the purchase price of $3,419,000 on an all cash basis.
Acquisition of the Zany Brainy Store, Wheaton, Illinois
The Company, through the Advisor, is currently completing its due diligence
and anticipates purchasing this property in July 1996 from an unaffiliated
third party for the purchase price of $2,455,000 on an all cash basis.
(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 $10,670,432, net of additional Offering
costs of $1,493,860 are reflected as received as of March 31, 1996, prior
to the purchase of the properties. Offering costs consist principally of
registration costs, printing and selling costs, including commissions.
-39-
<PAGE> 40
Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
For the three months ended March 31, 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 and the Zany
Brainy store as of January 1, 1996. This unaudited Pro Forma Statement of
Operations should be read in conjunction with the March 31, 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 three months
ended March 31, 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.
-40-
<PAGE> 41
Inland Monthly Income Fund III, Inc.
Pro Forma Statement of Operations
for the three months ended March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
1996 Total
Historical Pro Forma 1996
(A) Adjustments(B) Pro Forma
----------- -------------- ---------
<S> <C> <C> <C>
Rental income .............. $ 475,038 505,299 980,337
Additional rental income ... 242,290 120,227 362,517
Interest income (C) ........ 43,751 -- 43,751
---------- ------- ---------
Total income ............. 761,079 625,526 1,386,605
---------- ------- ---------
Professional services and
general and
administrative fees ...... 38,168 -- 38,168
Advisor asset management
fee ...................... 48,540 34,348 82,888
Property operating expenses 310,613 166,660 477,273
Interest expense ........... 15,043 88,455 103,498
Depreciation (D) ........... 103,091 117,108 220,199
Amortization ............... 1,373 -- 1,373
Acquisition costs expensed . 8,985 -- 8,985
---------- ------- ---------
Total expenses ............. 525,813 406,571 932,384
---------- ------- ---------
Net income ............... $ 235,266 218,955 454,221
========== ======= =========
Weighted average
common stock shares
outstanding (E) .......... 2,394,092 3,461,135
========== =========
Net income per weighted
average common stock
outstanding (E) .......... $ .12 .13
========== =========
</TABLE>
See accompanying notes to pro forma statement of operations.
-41-
<PAGE> 42
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1996
(unaudited)
(A) The March 31, 1996 Historical column represents the historical statement of
operations of the Company for the three months ended March 31, 1996, as
filed with the SEC on Form 10-Q.
(B) Total pro forma adjustments as though the acquisitions of the following
properties occurred on January 1, 1996 on an all cash basis except for
Regency Point where 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.
<TABLE>
<CAPTION>
Mundelein Regency Prospect Montgomery- Zany Pro Forma
Plaza Point Heights Sears Brainy Adjustments Total
----- ----- ------- ----- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income ....... $163,381 139,271 44,552 89,350 68,745 -- 505,299
Additional rental
income ............ 32,975 16,034 33,410 25,736 12,072 -- 120,227
Interest income ..... -- -- -- -- -- -- --
-------- ------- ------ ------- ------ -------- -------
Total income ........ 196,356 155,305 77,962 115,086 80,817 -- 625,526
-------- ------- ------ ------- ------ -------- -------
Professional services
and general and
administrative .... -- -- -- -- -- -- --
Advisor asset
management fee .... -- -- -- -- -- 34,348 34,348
Property operating
expenses .......... 53,986 19,046 44,325 33,348 15,955 -- 166,660
Interest expense .... -- -- -- -- -- 88,455 88,455
Depreciation (D) .... -- -- -- -- -- 117,108 117,108
-------- ------- ------ ------- ------ -------- -------
Total expenses ...... 53,986 19,046 44,325 33,348 15,955 239,911 406,571
-------- ------- ------ ------- ------ -------- -------
Net income .......... $142,370 136,259 33,637 81,738 64,862 (239,911) 218,955
======== ======= ====== ======= ====== ======== =======
</TABLE>
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<PAGE> 43
Inland Monthly Income Fund III, Inc.
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 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 three months
ended March 31, 1996 was calculated by estimating the additional shares
sold to purchase each of the Company's properties on a weighted average
basis.
-43-
<PAGE> 44
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Inland Monthly Income Fund III, Inc.
(Registrant)
By: /s/ CYNTHIA M. HASSETT
-----------------------------------------
Cynthia M. Hassett
Chief Financial and Accounting Officer
Date: JUNE 14, 1996
-----------------
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