Inland Real Estate Corporation
Sticker Supplement
Supplement No. 12 to the Company's Prospectus discloses information regarding
three recently completed acquisitions of property and updates certain
information in the sections of the Prospectus headed "Management", "Real
Property Investments", "Distribution Reinvestment and Share Repurchase
Programs" and "Plan of Distribution". Unless otherwise defined, capitalized
terms used herein shall have the same meaning as in the Prospectus.
On May 14, 1997 Douglas R. Finlayson, M.D. resigned from his position as a
director of the Company due to personal reasons. On May 14, 1997, the
resignation became effective.
On May 6, 1997, the Company completed the acquisition of a 102,643 square foot
Neighborhood Retail Center known as Cobblers Mall located at Summit Road and
Route 58 in Elgin, Illinois for approximately $10.953 million. On May 6, 1997,
the Company also completed the acquisition of a 82,949 square foot Neighborhood
Retail Center known as Mallard Mall located at the northeast corner of Meacham
Road and Nerge Road in Elk Grove Village, Illinois for approximately $8.1
million. On May 9, 1997, the Company completed the acquisition of a 4,504
square foot Neighborhood Retail Center known as Ameritech Outlot located at
3330 West Mall Loop Drive in Joliet, Illinois for approximately $1.050 million.
All of the centers were purchased from unaffiliated third parties.
The Company anticipates reducing the amount of Shares available for the
Distribution Reinvestment Program from 2.0 million Shares to 625,000 Shares.
As of May 8, 1997, 273,536.62 Shares have been issued pursuant to the
Distribution Reinvestment Program. In the event that more than 625,000 Shares
are needed for the Distribution Reinvestment Program, the Company will increase
the number of Shares accordingly.
The Company commenced the best efforts offering on July 24, 1996, and as of May
19, 1997, the Company had accepted subscriptions for 7,682,529 shares
($69,526,891 net of Selling Commissions, the Marketing Contribution and the Due
Diligence Expense Allowance Fee). 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 May 19, 1997,
Inland Securities Corporation was entitled to receive commissions, the
Marketing Contribution and the Due Diligence Expense Allowance Fee totaling
$7,079,066. An Affiliate of the Advisor is also entitled to receive Property
Management Fees for management and leasing services.
SUPPLEMENT NO. 12
DATED MAY 22, 1997
TO THE PROSPECTUS DATED JULY 24, 1996
OF INLAND REAL ESTATE CORPORATION
This Supplement No. 12 is provided for the purpose of supplementing the
Prospectus dated July 24, 1996 of Inland Real Estate Corporation (the
"Company") as previously supplemented by Supplement No. 11 dated April 30, 1997
(which Supplement No. 11 superseded Supplements No. 1-10) 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.
MANAGEMENT
On May 14, 1997 Douglas R. Finlayson, M.D. resigned from his position as a
director of the Company due to personal reasons. On May 14, 1997, the
resignation became effective. There have been no disagreements between the
Company and Dr. Finlayson on any matter relating to the Companys operations,
policies or practices. The Company expects to fill this vacancy in the next
several weeks.
REAL PROPERTY INVESTMENTS
Cobblers Mall, Elgin, Illinois
On May 6, 1997, the Company acquired a Neighborhood Retail Center located at
Summit Road and Route 58 in Elgin, Illinois known as Cobblers Mall from
Hamilton Partners, an unaffiliated third party, for approximately $10.953
million. The purchase price was funded using cash and cash equivalents. The
purchase price was approximately $106.71 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.
Cobblers Mall was built in 1993 and consists of a one-story, multi-tenant
retail facility aggregating 102,643 rentable square feet. As of May 6, 1997,
Cobblers Mall was 91% leased (100% leased if the master lease, which lasts for
one year, is considered). In evaluating Cobblers Mall 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 occupancy. The Company believes that the center is
located within a vibrant economic area. Although approximately 63% of the
rentable square feet at Cobblers Mall is leased to one tenant, 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.
-1-
The Company does not anticipate making any significant repairs and improvements
to Cobblers Mall over the next few years. Nevertheless, a substantial portion
of any cost of repairs and improvements would be paid by the tenants.
The table below sets forth certain information with respect to the occupancy
rate at Cobblers Mall expressed as a percentage of total gross leasable area
and the average effective annual base rent per square foot.
Occupancy Rate
as of
Year Ending December 31, Effective Annual Rental
December 31, of Each Year Per Square Foot
1996 90.65% $9.62
1995 90.80 9.26
1994 85.93 8.63
1993 79.93 5.62
The sole tenant leasing more than 10% of the total square footage is
Jewel/Osco, a regional grocery/pharmacy chain, which leases 64,938 square feet,
or approximately 63.27% of the rentable square feet. The lease with Jewel/Osco
requires Jewel/Osco to pay base rent equal to $9.85 per square foot per annum
payable monthly until March 31, 2013. The lease with Jewel/Osco contains no
option to renew.
For federal income tax purposes, the Company's depreciable basis in Cobblers
Mall will be approximately $10,900,000. 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.
Information regarding real estate taxes payable in 1996 for the tax year ended
1995 (the most recent tax year for which information is generally available)
were $400,919. The real estate taxes payable were calculated by multiplying
Cobblers Malls assessed value by an equalizer of 2.1243 and a tax rate of
10.097%.
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-2-
On May 6, 1997, a total of 93,043 square feet were leased to thirteen tenants
at Cobblers Mall. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.
Square Feet Lease Renewal Current Rent per
Lessee Leased Ends Option Annual Rent Square Ft
1.Goodyear 6,464 04/2008 None $67,224 $10.40
2.Victory Beauty 1,920 09/2001 1/5yr. 20,160 10.50
3.Baskin Robbins 1,220 11/2003 None 18,100 13.70
4.Panda Restaurant 1,900 11/2004 1/8 yr. 30,950 16.00
5.Carol Stream 1,600 05/2004 None 24,933 15.00
Dental
Association
6.Fantastic Sams 1,120 11/1998 1/5 yr. 19,445 17.31
7.Mail Boxes etc. 1,280 09/1998 None 20,480 16.00
8.Staceys 3,792 02/1999 1/6yr. 47,400 12.50
Hallmark
9.Video Smideo 3,000 07/2000 1/5yr. 47,580 15.60
10.Tropical 2,000 04/2000 None 29,700 14.85
Illusions
11.Jewel/Osco 64,938 03/2013 None 636,639 9.85
12.Bedding Expert 2,160 07/1997 None 25,920 12.00
13.Cleaners 1,649 11/1998 None 34,629 21.00
14.Vacant* 9,600 - - - -
*master lease for the first year in the amount of $169,080.
-3-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented by
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1 2,160 $25,920 $1,024,776 $12.00 2.10% 2.53%
1998 2 2,400 39,925 998,856 16.64 2.34 4.00
1999 1 3,792 47,400 924,302 12.50 3.69 5.13
2000 2 5,000 77,280 876,902 15.46 4.87 8.81
2001 1 1,920 20,160 799,622 10.50 1.87 2.52
2002 - - - 779,462 - - -
2003 1 1,220 16,714 779,462 13.70 1.19 2.14
(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.
</TABLE>
The Company received an appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers
which reported a fair market value for the Cobblers Mall property, as of April
22, 1997, of $11 million. Appraisals are estimates of value and should not be
relied on as a measure of true worth or realizable value.
Mallard Mall, Elk Grove Village, Illinois
On May 6, 1997, the Company acquired a Neighborhood Retail Center located at
the northeast corner of Meacham Road and Nerge Road in Elk Grove Village,
Illinois known as Mallard Mall from Hamilton Partners, an unaffiliated third
party, for approximately $8.1 million. The purchase price was funded using cash
and cash equivalents. The purchase price was approximately $97.65 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.
Mallard Mall was built in 1993 and consists of a one-story, multi-tenant retail
facility aggregating 82,949 rentable square feet. As of May 6, 1997, Mallard
Mall was 95% leased (100% when the master lease, which lasts for one year, is
considered). In evaluating Mallard Mall 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 occupancy. The Company believes that the center which is located
within a vibrant economic area. Although approximately 68% of the rentable
square feet at Mallard Mall is leased to one tenant, 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.
-4-
The Company does not anticipate making any significant repairs and improvements
to Mallard Mall over the next few years. Nevertheless, a substantial portion
of any cost of repairs and improvements would be paid by the tenants.
The table below sets forth certain information with respect to the occupancy
rate at Mallard Mall expressed as a percentage of total gross leasable area and
the average effective annual base rent per square foot.
Occupancy Rate
as of Effective
Year Ending December 31, Annual Rental
December 31, of Each Year Per Square Foot
1996 95.00% $11.74
1995 95.00 12.43
1994 94.57 11.93
1993 91.02 9.89
The sole tenant leasing more than 10% of the total square footage is Eagle
Foods, a retail grocery chain, which leases 56,668 square feet, or
approximately 68.32% of the rentable square feet. The lease with Eagle Foods
requires Eagle Foods to pay base rent equal to $12.40 per square foot per annum
payable monthly until February 28, 2011. The lease with Eagle Foods also
grants Eagle Foods four options to renew the lease for a 5-year term each. The
base rent throughout all of these terms will be at the current rate of $12.40
per square foot per annum payable monthly.
For federal income tax purposes, the Company's depreciable basis in Mallard
Mall will be approximately $8,100,000. 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.
Information regarding real estate taxes payable in 1996 for the tax year ended
1995 (the most recent tax year for which information is generally available)
were $361,057. The real estate taxes payable were calculated by multiplying
Mallard Malls assessed value by an equalizer of 2.1243 and a tax rate of
9.548%.
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-5-
On May 6, 1997, a total of 79,128 square feet were leased to ten tenants at
Mallard Mall. The following tables set forth certain information with respect
to the amount of and expiration of leases at this Neighborhood Retail Center.
Square Feet Lease Renewal Current Rent per
Lessee Leased Ends Option Annual Rent Square Ft
1.Payless Shoes 2,354 01/2002 None $37,075 $15.76
2.Family 4,007 01/1999 None 61,942 15.50
Bookstore
3.Eagle Foods 56,668 01/2011 4/5yr. 702,683 12.40
4.Hollywood Video 7,720 09/2006 2/5yr. 123,200 16.00
5.Fannie May 1,128 03/2003 None 29,328 26.00
6.Jimmy Z Hair 1,200 05/1998 1/5yr. 20,772 17.31
7.Taylor Street 2,112 12/2001 1/5yr. 29,568 14.00
Bistro
8.Shike Dance 1,120 09/1999 1/3yr. 15,781 14.09
School
9.Mallard Cleaners 1,360 09/2001 None 28,796 21.17
10.Gallary 1,459 08/1999 1/3yr. 18,967 13.00
Americana
11.Vacant* 3,821 - - - -
*master lease for the first year in the amount of $80,000.
[The remainder of this page intentionally left blank]
-6-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented by
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
<S> <C> <C> <C> <C> <C> <C> <C>
1997 - - - $1,068,112 - - -
1998 2 2,320 $36,553 1,068,112 $15.76 2.80% 3.42%
1999 2 5,466 80,909 1,031,559 14.80 6.59 7.84
2000 - - - 950,650 - - -
2001 2 3,472 58,364 950,650 16.81 4.19 6.14
2002 1 2,354 37,075 892,286 15.75 2.84 4.16
2003 1 1,128 29,328 855,211 26.00 1.36 3.43
(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.
</TABLE>
The Company received an appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers
which reported a fair market value for the Mallard Mall property, as of April
10, 1997, of $8.2 million. Appraisals are estimates of value and should not
be relied on as a measure of true worth or realizable value.
Ameritech Outlot Building, Joliet, Illinois
On May 9, 1997, the Company acquired a Neighborhood Retail Center located at
3330 West Mall Loop Drive in Joliet, Illinois known as Ameritech Outlot
Building ("Ameritech Outlot") from LJ Partners, an unaffiliated third party,
for approximately $1.050 million. The purchase price was funded using cash and
cash equivalents. The purchase price was approximately $233.13 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.
-7-
Ameritech Outlot was built in 1995 and consists of a one-story, single tenant
retail outlot building aggregating 4,504 rentable square feet. As of April 30,
1997, Ameritech Outlot was 100% leased. In evaluating Ameritech Outlot 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. Although
100% of the rentable square feet at Ameritech Outlot is leased to one tenant,
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 tenant 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 Ameritech Outlot over the next few years because the facility was completed
in 1995. Nevertheless, a substantial portion of any such cost would be paid by
the tenant.
The table below sets forth certain information with respect to the occupancy
rate at Ameritech Outlot expressed as a percentage of total gross leasable area
and the average effective annual base rent per square foot.
Effective
Annual Rental
December 31, Occupancy Rate Per Square Foot
1996 100% $23.77
1995 100 23.08
The sole tenant is Ameritech Cellular who leases 100% of the rentable square
feet. Ameritech Cellular is a cellular phone service provider and retailer.
The lease with Ameritech Cellular requires Ameritech Cellular to pay base rent
equal to $24.49 per square foot per annum payable monthly until March 31, 1998,
$25.22 per square foot per annum payable monthly from April 1, 1998 until March
31, 1999, $25.98 per square foot per annum payable monthly from April 1, 1999
until March 31, 2000, $26.76 per square foot per annum payable monthly from
April 1, 2000 until March 31, 2001, $27.56 per square foot per annum payable
monthly from April 1, 2001 until March 31, 2002, $28.39 per square foot per
annum payable monthly from April 1, 2002 until March 31, 2003, $29.24 per
square foot per annum payable monthly from April 1, 2003 until March 31, 2004
and $30.11 per square foot per annum payable monthly from April 1, 2004 until
March 31, 2005. The Ameritech Cellular lease also contains two options to
renew the lease for five year periods each. If the first option is exercised,
Ameritech Cellular will be required to pay base rent equal to $31.01 per square
foot per annum payable monthly from April 1, 2005 until March 31, 2006, with
annual increases of 3% until March 31, 2010. If the second option is
exercised, Ameritech Cellular will be required to pay base rent equal to $35.95
per square foot per annum payable monthly from April 1, 2010 until March 31,
2011, with annual increases of 3% until March 31, 2015.
-8-
For federal income tax purposes, the Company's depreciable basis in Ameritech
Outlot will be approximately $788,000. 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.
Information regarding real estate taxes payable in 1996 for the tax year ended
1995 (the most recent tax year for which information is generally available) is
not available since Ameritech Outlot was completed in 1996.
At May 9, 1997, a total of 4,504 square feet was leased to one tenant at
Ameritech Outlot. The following tables set forth certain information with
respect to the amount of and expiration of leases at this Neighborhood Retail
Center.
Square Feet Lease Renewal Current Rent per
Lessee Leased Ends Option Annual Rent Square Ft
Ameritech 5,405 03/2005 2/5yr. $110,303 $24.49
Cellular
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Building Annual Base
Approx. GLA Annual Base Per Square GLA Rent
Number of of Expiring Rent of Foot Under Represented Represented by
Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring
December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases
<S> <C> <C> <C> <C> <C> <C> <C>
1997 - - - $109,492 - - -
1998 - - - 112,769 - - -
1999 - - - 116,158 - - -
2000 - - - 119,649 - - -
2001 - - - 123,229 - - -
2002 - - - 126,934 - - -
2003 - - - 130,740 - - -
2004 - - - 134,636 - - -
2005 1 4,504 $135,615 135,615 $30.11 100% 100%
2006 - - - - - - -
(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.
</TABLE>
The Company received an appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers
which reported a fair market value for the Ameritech Outlot property, as of
April 22, 1997, of $1.1 million. Appraisals are estimates of value and should
not be relied on as a measure of true worth or realizable value.
-9-
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION OF THE COMPANY
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this quarterly report on
Form 10-Q constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause the 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 borrowings 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.
Liquidity and Capital Resources
As of July 24, 1996, the Company had received subscriptions for a total of
5,000,000 Shares, thereby completing the 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
March 31, 1997, the Company had received subscriptions for a total of 5,878,866
Shares of the follow-on Offering, resulting in $108,357,364 in Gross Offering
Proceeds. As of March 31, 1997, the Company has repurchased 6,350 Shares
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.
-10-
As of March 31, 1997, the Company had acquired twenty-four properties utilizing
approximately $86,523,702 of cash and cash equivalents. Cash and cash
equivalents consists of cash and short-term investments. Cash and cash
equivalents at March 31, 1997 and December 31, 1996 were $22,647,158 and
$8,491,735 respectively. This increase was due to the additional sales
proceeds raised and $38,510,000 in loan proceeds from financing the properties.
Partially offsetting the increase in cash and cash equivalents was the purchase
of seventeen additional properties since March 31, 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.
The properties owned by the Company are currently generating sufficient cash
flow to cover operating expenses of the Company plus pay a monthly distribution
on weighted average shares. Commencing with the fourth quarter of 1996, the
Company increased the monthly distributions from 8.0% to 8.3% per annum on
weighted average shares. Beginning March 1, 1997, the Company increased the
monthly distribution paid to 8.5% per annum on weighted average shares.
Distributions declared for the three months ended March 31, 1997 were
$1,941,390, 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.
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. Beginning with the year ended December 31, 1995, the Company
qualified as a REIT.
-11-
Cash Flows From Operating Activities
Net cash provided by operating activities increased by approximately $980,000
for the three months ended March 31, 1997 to $1,575,693 from $596,106 for the
same period in 1996. This increase is due primarily to an increase in net
income for the three months ended March 31, 1997, as compared to the net income
for the three months ended March 31, 1996. This increase in net income is due
to the purchase of additional properties. As of March 31, 1997, the Company
had acquired twenty-four properties, as compared to seven properties as of
March 31, 1996.
Cash Flows From Investing Activities
During the three months ended March 31, 1997, the Company utilized $11,429,015
in investing activities for the purchase of three properties, as compared to
the $5,657,980 utilized in the three months ended March 31, 1996 for the
purchase of one property.
Cash Flows From Financing Activities
For the three months ended March 31, 1997, the Company generated $27,550,217 of
cash flows from financing activities as compared to $7,413,866 of cash flows
generated from financing activities for the three months ended March 31, 1996.
This increase is due primarily to the increase in proceeds raised from the
Offering of $27,207,053 for the three months ended March 31, 1997, as compared
to $9,084,592 of Offering proceeds raised for the three months ended March 31,
1996. This increase is partially offset by an increase in the cash used for
the payment of Offering costs for the three months ended March 31, 1997. The
increase is also partially offset by an increase in the amount of distributions
paid for the three months ended March 31, 1997 of $1,740,481 as compared to the
distributions paid for the three months ended March 31, 1996 of $422,750.
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 March 31, 1997, organizational and offering costs did
not exceed this limitation.
-12-
Results of Operations
As of March 31, 1997, subscriptions for a total of 10,878,866 Shares were
received from the public resulting in $108,357,364 in Gross Offering Proceeds,
which includes the Advisor's capital contribution of $200,000 and Shares
purchased through the DRP.
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 three months ended
March 31, 1997 and 1996 are calculated as follows:
1997 1996
---- ----
Net income................................... $ 884,700 235,266
Depreciation................................. 741,920 103,091
------------ ------------
Funds from operations(1)................... 1,626,620 338,357
Deferred rent receivable (2)................. (99,411) (7,295)
Rental income received under
Master lease agreements (3)................. 71,599 109,333
------------ ------------
Funds available for distribution............. $ 1,598,808 440,395
============ ============
(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.
(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 three
months ended March 31, 1997 and 1996, the Company has recorded $71,599 and
$109,333, respectively of such payments. Reference is made to Note (5) of
the Notes to Financial Statements of the Company.
-13-
Total income for the three months ended March 31, 1997 and 1996 was $4,857,771
and $761,079, respectively. This increase was due to the purchase of additional
properties. As of March 31, 1997, the Company had acquired twenty-four
properties, as compared to seven properties as of March 31, 1996. The purchase
of additional properties also resulted in increases in property operating
expenses to Affiliates and non-affiliates and depreciation expense.
The increase in mortgage interest to Affiliates and non-affiliates for the three
months ended March 31, 1997, as compared to the three months ended March 31,
1996, is due to several factors. The Company assumed mortgages as part of the
purchases of Regency Point and Aurora Commons. The Company also obtained
$38,510,000 of financing from an unaffiliated lender, on fourteen properties
previously acquired. The Company continues to have a mortgage collateralized by
the Walgreens, Decatur property payable to an Affiliate.
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 non-affiliates and general and
administrative expenses to Affiliates and non-affiliates for the three months
ended March 31, 1997, as compared to the three months ended March 31, 1996, is
due to the management of an increased number of real estate assets.
The following is a list of approximate physical occupancy levels for the
Company's investment properties as of the end of each quarter during 1996 and
1997. N/A indicates the property was not owned by the Company at the end of the
quarter.
1996 1997
------------------------ ------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Walgreens 100% 100% 100% 100% 100%
Decatur, Illinois
Eagle Crest 100% 100% 100% 100% 97%*
Naperville, Illinois
Montgomery-Goodyear 100% 100% 100% 100% 77%
Montgomery, Illinois
Hartford/Naperville Plaza 100% 100% 100% 100% 100%
Naperville, Illinois
Nantucket Square 81% 81% 94% 85% 94%
Schaumburg, Illinois
Antioch Plaza 49% 49% 49% 57% 59%*
Antioch, Illinois
Mundelein Plaza 100% 100% 100% 100% 100%
Mundelein, IL
Regency Point N/A 97% 97% 97% 100%
Lockport, IL
Prospect Heights N/A 78% 100% 100% 83%*
Prospect Heights, IL
Montgomery-Sears N/A 85% 85% 85% 85%*
Montgomery, IL
-14-
1996 1997
------------------------ ------------------------
at at at at at at at at
Properties 03/31 06/30 09/30 12/31 03/31 06/30 09/30 12/31
---------- ----- ----- ----- ----- ----- ----- ----- -----
Zany Brainy N/A N/A 100% 100% 100%
Wheaton, IL
Salem Square N/A N/A 97% 97% 97%*
Countryside, IL
Hawthorn Village N/A N/A 99% 98% 97%
Vernon Hills, IL
Six Corners N/A N/A N/A 92% 94%
Chicago, IL
Spring Hill Fashion Ctr. N/A N/A N/A 95% 96%
West Dundee, IL
Crestwood Plaza N/A N/A N/A 100% 100%
Crestwood, IL
Park St. Claire N/A N/A N/A 100% 100%
Schaumburg, IL
Lansing Square N/A N/A N/A 89% 90%
Lansing, IL
Summit of Park Ridge N/A N/A N/A 81% 82%*
Park Ridge, IL
Grand and Hunt Club N/A N/A N/A 100% 100%
Gurnee, IL
Quarry Outlot N/A N/A N/A 100% 100%
Hodgkins, IL
Maple Park Place N/A N/A N/A N/A 99%
Bolingbrook, IL
Aurora Commons N/A N/A N/A N/A 99%
Aurora, IL
Lincoln Park Place N/A N/A N/A N/A 100%
Chicago, IL
* 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% economic occupancy at March 31, 1997 for
Antioch, Montgomery-Sears and Salem Square.
As part of the purchase of Summit of Park Ridge, a portion of the Seller's
proceeds were escrowed for the monthly release of master lease payments.
The master lease agreements along with credits for signed leases resulted in
93% economic occupancy at March 31, 1997.
The master lease agreements are for periods ranging from one to two years or
until the spaces are leased.
The Company has received termination fees resulting in 100% economic
occupancy for Eagle Crest and Prospect Heights.
-15-
Subsequent Events
On April 11, 1997, the Company purchased the Niles Shopping Center from an
unaffiliated third party for approximately $3,280,000. The property is located
in Niles, Illinois and contains 26,117 square feet of leasable space.
On May 6, 1997, the Company purchased the Mallard Crossing Shopping Center from
an unaffiliated third party for approximately $8,000,000. The property is
located in Elk Grove Village, Illinois and contains 82,949 square feet of
leasable space. Its anchor tenant is Eagle Foods.
On May 6, 1997, the Company purchased Cobblers Crossing Shopping Center from an
unaffiliated third party for approximately $10,800,000. The property is located
in Elgin, Illinois and contains 102,642 square feet of leasable space. Its
anchor tenant is Jewel/Osco.
On May 9, 1997, the Company purchased Ameritech Outlot from an unaffiliated
third party for approximately $1,050,000. The property is located in Joliet,
Illinois. It consists of a 4,504 square foot building occupied solely by
Ameritech.
On the behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.
-16-
PLAN OF DISTRIBUTION
The Company commenced the best efforts Offering on July 24, 1996, and as of May
19, 1997 the Company had accepted subscriptions for 7,682,529 shares
($69,526,891 net of Selling Commissions, the Marketing Contributions and the
Due Diligence Expense Allowance Fee).
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 May 19, 1997, Inland Securities Corporation was
entitled to receive commissions, the Marketing Contribution and the Due
Diligence Expense Allowance Fee totaling $7,079,066 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 approximately $173,000 for the three months
ended March 31, 1997 and $229,307 for the year ended December 31, 1996. 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 March 31, 1997,
the Company had incurred Advisor Asset Management Fees of $233,337, all of
which remains unpaid.
DISTRIBUTION REINVESTMENT AND SHARE REPURCHASE PROGRAMS
The Company anticipates reducing the amount of Shares available for the
Distribution Reinvestment Program from 2.0 million Shares to 625,000 Shares.
As of May 8, 1997, 273,536.62 Shares have been issued pursuant to the
Distribution Reinvestment Program. In the event that more than 625,000 Shares
are needed for the Distribution Reinvestment Program, the Company will increase
the number of Shares accordingly.
-17-
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets (unaudited), March 31, 1997 and December 31,1996........... F-1
Statements of Operations (unaudited) for the three months ended
March 31, 1997 and 1996................................................. F-3
Statements of Stockholders' Equity (unaudited),
March 31, 1997 and December 31, 1996.................................... F-4
Statements of Cash Flows (unaudited) for the three months ended
March 31, 1997 and December 31, 1996.................................... F-5
Notes to Financial Statements............................................. F-7
Pro Forma Balance Sheet (unaudited) at December 31, 1996.................. F-16
Notes to Pro Forma Balance Sheet (unaudited) at December 31, 1996......... F-18
Pro Forma Statement of Operations (unaudited) for the year ended
December 31, 1996....................................................... F-22
Notes to Pro Forma Statement of Operations (unaudited) for the year
ended December 31, 1996................................................. F-24
Pro Forma Balance Sheet at March 31, 1997 (unaudited).................... F-41
Notes to Pro Forma Balance Sheet at March 31, 1997 (unaudited)........... F-43
Pro Forma Statement of Operations for the three months ended
March 31, 1997 (unaudited)............................................. F-46
Notes to Pro Forma Statement of Operations for the three months
ended March 31, 1997 (unaudited)....................................... F-48
-18-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
March 31, 1997 and December 31, 1996
(unaudited)
Assets
------
1997 1996
Investment properties (Notes 1, 4 and 5): ---- ----
Land............................................ $ 31,859,748 24,705,743
Building and improvements....................... 91,746,576 69,927,238
------------- ------------
123,606,324 94,632,981
Less accumulated depreciation................... 1,850,958 1,109,038
------------- ------------
Net investment properties....................... 121,755,366 93,523,943
------------- ------------
Cash and cash equivalents including amounts
held by property manager (Note 1)............... 22,647,158 8,491,735
Restricted cash (Note 1).......................... 1,117,333 122,043
Accounts and rents receivable (Notes 1 and 5)..... 2,666,872 1,914,756
Deposits and other assets (Note 7)................ 2,808,079 95,828
Deferred organization costs (net of accumulated
amortization of $6,865 and $5,492 at March 31,
1997 and December 31, 1996, respectively)
(Note 1)........................................ 20,597 21,970
Loan fees (net of accumulated amortization
of $48,866 and $11,875 at March 31, 1997 and
December 31, 1996, respectively) (Note 1)....... 495,004 338,411
------------- ------------
Total assets.................................. $151,510,409 104,508,686
============= ============
See accompanying notes to financial statements.
F-1
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
(continued)
March 31, 1997 and December 31, 1996
(unaudited)
Liabilities and Stockholders' Equity
------------------------------------
1997 1996
Liabilities: ---- ----
Accounts payable................................ $ 445,536 289,912
Accrued offering costs to Affiliates............ 838,302 298,341
Accrued offering costs to non-affiliates........ 29,926 4,236
Accrued interest payable to Affiliates.......... 4,699 4,718
Accrued interest payable to non-affiliates...... - 52,402
Accrued real estate taxes....................... 3,134,066 2,770,889
Distributions payable (Note 8).................. 749,856 548,947
Security deposits............................... 320,966 247,769
Mortgage payable (Note 6)....................... 53,182,067 30,838,233
Unearned income................................. 375,570 64,590
Other liabilities............................... - 32,820
Due to Affiliates (Note 2)...................... 247,191 255,591
------------- ------------
Total liabilities............................. 59,328,179 35,408,448
------------- ------------
Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 10,885,216 and 10,878,866, issued
and outstanding at March 31, 1997 and 8,144,116
and 8,137,766 issued and outstanding at
December 31, 1996, respectively............... 108,280 81,000
Additional paid-in capital (net of offering
costs of $13,568,479 and $10,500,108 at March
31, 1997 and December 31, 1996, respectively,
of which $10,926,010 and $8,096,213 was paid
to Affiliates, respectively).................. 94,623,475 70,512,073
Accumulated distributions in excess
of net income................................. (2,549,525) (1,492,835)
------------- ------------
Total stockholders' equity.................... 92,182,230 69,100,238
------------- ------------
Total liabilities and stockholders' equity........ $151,510,409 104,508,686
============= ============
See accompanying notes to financial statements.
F-2
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statements of Operations
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
---- ----
Income:
Rental income (Notes 1 and 5)................... $ 3,603,584 475,038
Additional rental income........................ 1,061,507 242,290
Interest income................................. 156,436 43,751
Other income.................................... 36,244 -
------------ ------------
4,857,771 761,079
------------ ------------
Expenses:
Professional services to Affiliates............. 9,500 2,000
Professional services to non-affiliates......... 30,410 26,068
General and administrative expenses
to Affiliates................................. 16,936 7,903
General and administrative expenses
to non-affiliates............................. 28,312 2,197
Advisor asset management fee.................... 233,337 48,540
Property operating expenses to Affiliates....... 172,537 29,136
Property operating expenses to non-affiliates... 1,686,924 281,477
Mortgage interest to Affiliates................. 44,454 15,043
Mortgage interest to non-affiliates............. 961,287 -
Depreciation.................................... 741,920 103,091
Amortization.................................... 38,364 1,373
Acquisition costs expensed...................... 9,090 8,985
------------ ------------
3,973,071 525,813
------------ ------------
Net income.................................... $ 884,700 235,266
============ ============
Net income per weighted average common stock shares
outstanding (9,384,792 and 2,000,073 for the
three months ended March 31, 1997 and 1996,
respectively.................................... $ .09 .12
============ ============
See accompanying notes to financial statements.
F-3
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statements of Stockholders' Equity
March 31, 1997 and December 31, 1996
(unaudited)
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----------- ----------- ----------- ------------
Balance January 1, 1996..... $ 19,996 16,835,183 (240,113) 16,615,066
Net income.................. - - 2,452,221 2,452,221
Distributions declared
($.82 for the year ended
December 31, 1996 per
weighted average common
stock shares outstanding). - - (3,704,943) (3,704,943)
Proceeds from Offering (net
of Offering costs of
$7,378,933................ 61,038 53,707,177 - 53,768,215
Repurchases of Shares....... (34) (30,287) - (30,321)
----------- ----------- ----------- ------------
Balance December 31, 1996... 81,000 70,512,073 (1,492,835) 69,100,238
Net income.................. - - 884,700 884,700
Distributions declared
($.21 for the three months
ended March 31, 1997 per
weighted average common
stock shares outstanding). - - (1,941,390) (1,941,390)
Proceeds from Offering (net
of Offering costs of
$3,068,371)............... 27,280 24,111,402 - 24,138,682
----------- ----------- ----------- ------------
Balance March 31, 1997...... $ 108,280 94,623,475 (2,549,525) 92,182,230
=========== =========== =========== ============
See accompanying notes to financial statements.
F-4
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Cash Flows
For the three months ended March 31, 1997 and 1996
(unaudited)
1997 1996
Cash flows from operating activities: ---- ----
Net income.................................... $ 884,700 235,266
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 741,920 103,091
Amortization................................ 38,364 1,373
Rental income under master lease agreements. 71,599 109,333
Changes in assets and liabilities:
Accounts and rents receivable............... (752,116) (158,258)
Other assets................................ (218,111) 135,814
Accrued interest payable.................... (52,421) (471)
Accrued real estate taxes................... 363,177 89,571
Accounts payable............................ 155,624 36,669
Unearned income............................. 310,980 (26,578)
Other current liabilities................... (32,820) -
Due to Affiliates........................... (8,400) 53,646
Security deposits........................... 73,197 16,650
------------ ------------
Net cash provided by operating activities......... 1,575,693 596,106
------------ ------------
Cash flows from investing activities:
Restricted cash................................. (995,290) -
Additions to investment properties.............. (52,042) (153,450)
Purchase of investment properties............... (11,429,015) (5,657,980)
Deposits on investment properties............... (2,494,140) -
------------ ------------
Net cash used in investing activities............. (14,970,487) (5,811,430)
------------ ------------
Cash flows from financing activities:
Repayment of note to Affiliate.................. - (360,000)
Proceeds from offering.......................... 27,207,053 9,084,592
Payments of offering costs...................... (2,502,720) (885,260)
Loan proceeds................................... 12,840,000 -
Loan fees....................................... (193,584) -
Distributions paid.............................. (1,740,481) (422,750)
Principal payments of debt...................... (8,060,051) (2,716)
------------ ------------
Net cash provided by financing activities......... 27,550,217 7,413,866
------------ ------------
Net increase in cash and cash equivalents......... 14,155,423 2,198,542
Cash and cash equivalents at beginning of period.. 8,491,735 738,931
------------ ------------
Cash and cash equivalents at end of period........ $22,647,158 2,937,473
============ ============
See accompanying notes to financial statements.
F-5
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Cash Flows
(continued)
For the three months ended March 31, 1997 and 1996
(unaudited)
Supplemental schedule of noncash investing and financing activities:
1997 1996
---- ----
Purchase of investment properties................ $(28,992,900) (5,657,980)
Assumption of mortgage debt.................... 9,563,885 -
Note payable to Affiliate...................... 8,000,000 -
------------- -------------
$(11,429,015) (5,657,980)
============= =============
Distributions payable............................ $ 749,856 183,457
============= =============
Cash paid for interest........................... $ 1,058,162 15,513
============= =============
See accompanying notes to financial statements.
F-6
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
March 31, 1997
(unaudited)
Readers of this Quarterly Report should refer to the Company's audited
financial statements for the fiscal year ended December 31, 1996, which are
included in the Company's 1996 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. Inland Real Estate Advisory Services, Inc. (the
"Advisor"), an Affiliate of the Company, is the advisor to the Company. On
October 14, 1994, the Company commenced an initial public offering, on a best
efforts basis, ("Offering") of 5,000,000 shares of common stock ("Shares") at a
price of $10 per Share and 1,000,000 Shares at a price of $9.05 per Share to be
distributed pursuant to the Company's distribution reinvestment program (the
"DRP"). As of July 24, 1996, the Company had received subscriptions for a
total of 5,000,000 Shares, thereby completing the initial Offering. On July
24, 1996, the Company commenced an offering of an additional 10,000,000 Shares,
on a best efforts basis, (the "Second Offering") plus an additional 1,000,000
Shares for distribution through the DRP. As of March 31, 1997, the Company had
received subscriptions for a total of 5,878,866 Shares from the Second
Offering, resulting in $108,357,364 in gross offering proceeds, including
Shares purchased through the Distribution Reinvestment Program. As of March
31, 1997, the Company has repurchased 6,350 Shares through the Share 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 will not be subject to
federal income tax to the extent it distributes 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.
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.
F-7
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
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.
Restricted cash at March 31, 1997 includes $995,290 held in escrow for the
principal payments on the Aurora Commons mortgage payable. Restricted cash at
March 31, 1997 and December 31, 1996 also includes amounts held in escrow for
tenant improvements, concessions and leasing commissions at Antioch Plaza.
Such amounts will be added to the basis of the property as tenant improvements
are completed.
The Partnership adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121") as required in the first quarter of 1996. SFAS
121 requires that the Partnership record an impairment loss on its property to
be held for investment whenever its carrying value cannot be fully recovered
through estimated undiscounted future cash flows from their operations and
sale. The amount of the impairment loss to be recognized would be the
difference between the property's carrying value and the property's estimated
fair value. The adoption of SFAS 121 did not have any effect on the
Partnership's financial position, results of operations or liquidity.
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.
Loan fees are amortized on a straight line basis over the life of the related
loans.
Deferred organization costs are amortized over a 60-month period.
Offering costs are offset against the Stockholders' equity accounts. Offering
costs consist principally of printing, selling and registration costs.
Rental income is recognized on a straight-line basis over the term of each
lease. The difference between rental income earned on a straight-line basis
and the cash rent due under the provisions of the lease agreements is recorded
as deferred rent receivable.
F-8
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(2) Transactions with Affiliates
As of March 31, 1997, the Company had incurred $13,568,479 of organization and
offering costs. Pursuant to the terms of the offering, the Advisor is required
to pay organizational 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 selling commissions) which
together exceed 15% of gross offering proceeds. As of the completion of the
initial Offering, organizational and offering did not exceed the 5.5% or 15%
limitations. As of March 31, 1997, organizational and offering costs of the
Second Offering did not exceed the 5.5% and 15% limitations. The Company
anticipates that these costs will not exceed these limitations upon completion
of the offerings, 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. Such costs to Affiliates incurred relating to the offering were
$964,824 and $692,248 as of March 31, 1997 and December 31, 1996, respectively,
of which $260,555 and $120,269 were unpaid as of March 31, 1997 and December
31, 1996, 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 $9,961,186
and $7,403,965 as of March 31, 1997 and December 31, 1996, respectively, of
which $577,747 and $270,365 was unpaid as of March 31, 1997 and December 31,
1996, respectively. As of March 31, 1997, approximately $8,436,000 of these
commissions had been passed through from the Affiliate to unaffiliated
soliciting broker/dealers.
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 $13,854 remained unpaid at March 31, 1997.
As of March 31, 1997, the Advisor has contributed $200,000 to the capital of
the Company for which it received 20,000 Shares.
F-9
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
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 the 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. For the
three months ended March 31, 1997, the Company has incurred $233,337 of such
fees, all of which remains unpaid at March 31, 1997.
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 $172,537 and $29,136 for the three months ended March 31,
1997 and 1996, respectively, all of which has been paid.
(3) Stock Option and Dealer Warrant Plan
The Company adopted an Independent Director Stock Option Plan which granted
each Independent Director an option to acquire 3,000 Shares as of October 19,
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
Shares granted shall be 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. As of March 31, 1997, options for 1,000
Shares have been exercised $9.05.
In addition to sales commissions, Soliciting Dealers will also receive one
Soliciting Dealer Warrant for each 40 Shares sold by such Soliciting Dealer
during the offerings, subject to state and federal securities laws. 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 a secondary 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.
As of December 31, 1996, none of these warrants were exercised.
F-10
<TABLE> INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
(4) Investment Properties
<CAPTION> Gross amount at which carried
Initial Cost (A) at end of period
-------------------------- Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------ ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Single-user Retail
- ------------------
Walgreens/Decatur
Decatur, IL............. 01/95 $ 78,330 1,130,723 - 78,330 1,130,723 1,209,053
Zany Brainy
Wheaton, IL............. 07/96 838,000 1,626,033 - 838,000 1,626,033 2,464,033
Neighborhood Retail Centers
- ---------------------------
Eagle Crest Shopping Center
Naperville, IL.......... 03/95 1,878,618 2,938,352 - 1,878,618 2,938,352 4,816,970
Montgomery-Goodyear
Montgomery, IL.......... 09/95 315,000 834,659 (12,692) 315,000 821,967 1,136,967
Hartford/Naperville Plaza
Naperville, IL.......... 09/95 990,000 3,427,961 11,244 990,000 3,439,205 4,429,205
Nantucket Square
Schaumburg, IL.......... 09/95 1,908,000 2,349,918 (72,214) 1,908,000 2,277,704 4,185,704
Antioch Plaza
Antioch, IL............. 12/95 268,000 1,360,445 (161,464) 268,000 1,198,981 1,466,981
Mundelein Plaza
Mundelein, IL........... 03/96 1,695,000 3,965,560 (30,620) 1,695,000 3,934,940 5,629,940
Regency Point
Lockport, IL............ 04/96 1,000,000 4,720,800 (24,225) 1,000,000 4,696,575 5,696,575
Prospect Heights
Prospect Heights, IL.... 06/96 494,300 1,683,755 (11,989) 494,300 1,671,766 2,166,066
Montgomery-Sears
Montgomery, IL.......... 06/96 768,000 2,714,173 (46,150) 768,000 2,668,023 3,436,023
------------ ------------ ----------- ------------ ------------ ------------
Subtotal $10,233,248 26,752,379 (348,110) 10,233,248 26,404,269 36,637,517
</TABLE>
F-11
<TABLE>
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
(4) Investment Properties (continued)
<CAPTION> Gross amount at which carried
Initial Cost (A) at end of period
-------------------------- Net -----------------------------------------
Buildings Adjustments Land Buildings
Date and to and and
Acq Land improvements Basis (B) improvements improvements Total
------- ------------ ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Subtotal $10,233,248 26,752,379 (348,110) 10,233,248 26,404,269 36,637,517
Salem Square
Countryside, IL......... 08/96 1,735,000 4,449,217 (12,075) 1,735,000 4,437,142 6,172,142
Hawthorn Village
Vernon Hills, IL........ 08/96 2,619,500 5,887,640 - 2,619,500 5,887,640 8,507,140
Six Corners
Chicago, IL............. 10/96 1,440,000 4,538,152 - 1,440,000 4,538,152 5,978,152
Spring Hill Fashion Corner
West Dundee, IL......... 11/96 1,794,000 7,415,396 (3,500) 1,794,000 7,411,896 9,205,896
Crestwood Plaza
Crestwood, IL........... 12/96 325,577 1,483,183 750 325,577 1,483,933 1,809,510
Park St. Claire
Schaumburg, IL.......... 12/96 319,578 1,205,672 5,537 319,578 1,211,209 1,530,787
Lansing Square
Lansing, IL............. 12/96 4,075,000 12,179,383 3,158 4,075,000 12,182,541 16,257,541
Summit of Park Ridge
Park Ridge, IL.......... 12/96 672,000 2,497,950 187 672,000 2,498,137 3,170,137
Grand and Hunt Club
Gurnee, IL.............. 12/96 969,840 2,622,575 (53,343) 969,840 2,569,232 3,539,072
Quarry Outlot
Hodgkins, IL............ 12/96 522,000 1,278,431 5,099 522,000 1,283,530 1,805,530
Maple Park Place
Bolingbrook, IL......... 01/97 3,115,005 12,220,332 - 3,115,005 12,220,332 15,335,337
Aurora Commons
Aurora, IL.............. 01/97 3,220,000 8,318,661 - 3,220,000 8,318,661 11,538,661
Lincoln Park Place
Chicago, IL............. 01/97 819,000 1,299,902 - 819,000 1,299,902 2,118,902
------------ ------------ ----------- ------------ ------------ ------------
Total $31,859,748 92,148,873 (402,297) 31,859,748 91,746,576 123,606,324
============ ============ =========== ============ ============ ============
</TABLE>
F-12
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(4) Investment Properties (continued)
(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
("GAAP") 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. The cumulative amount of such payments was $642,293 and $570,694
as of March 31, 1997 and December 31, 1996, respectively. (Note 5)
(5) Operating Leases
As part of the purchases of several of the properties, the Company will receive
rent under master lease agreements on spaces currently vacant for periods
ranging from one to two years or until the spaces are leased and tenants begin
paying rent. GAAP requires the Company to reduce the purchase price of the
properties as these payments are received, rather than record the payments as
rental income.
Certain tenant leases contain provisions providing for stepped rent increases.
GAAP requires the Company to record rental income 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 increases of $99,411 and $7,295 for the three
months ended March 31, 1997 and 1996, of rental income for the period of
occupancy for which stepped rent increases apply and $230,732 and $131,638 in
related accounts receivable as of March 31, 1997 and December 31, 1996,
respectively. The Company anticipates collecting these amounts over the terms
of the related leases as scheduled rent payments are made.
F-13
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(6) Mortgages and Note Payable
Mortgages payable consist of the following at March 31, 1997 and December 31,
1996:
Current Current Balance at
Property as Interest Maturity Monthly March 31, December 31,
Collateral Rate Date Payment(a) 1997 1996
- ----------- ---------- --------- ---------- ----------- ------------
Mortgage payable to Affiliate:
Walgreens 7.655% 05/2004 $ 5,689 $ 736,611 739,543
Mortgages payable to non-affiliates:
Regency Point 7.2375% 08/2000 (b) 4,412,963 4,428,690
Eagle Crest 7.850% 10/2003 15,373 2,350,000 2,350,000
Nantucket Square 7.850% 10/2003 14,392 2,200,000 2,200,000
Antioch Plaza 7.850% 10/2003 5,724 875,000 875,000
Mundelein Plaza 7.850% 10/2003 18,382 2,810,000 2,810,000
Montgomery-Goodyear 7.850% 10/2003 4,121 630,000 630,000
Montgomery-Sears 7.850% 08/2003 10,761 1,645,000 1,645,000
Hartford/Naperville 7.850% 08/2003 15,111 2,310,000 2,310,000
Zany Brainy 7.590% 01/2004 7,875 1,245,000 1,245,000
Prospect Heights
Plaza 7.590% 01/2004 6,926 1,095,000 1,095,000
Hawthorn Village
Commons 7.590% 01/2004 27,071 4,280,000 4,280,000
Six Corners Plaza 7.590% 01/2004 19,608 3,100,000 3,100,000
Salem Square
Shopping Center 7.590% 01/2004 19,797 3,130,000 3,130,000
Lansing Square 7.800% 01/2004 52,975 8,150,000 -
Spring Hill Fashion
Mall 7.800% 01/2004 30,485 4,690,000 -
Aurora Commons (c) 9.000% 10/2001 85,423 9,522,493 -
----------- ------------
Mortgages Payable.................................... $53,182,067 30,838,233
=========== ============
(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point and Aurora Commons properties.
(b) Payments on this mortgage are based on a floating interest rate of 180
basis points over the 30-day LIBOR rate, which adjusts monthly, amortizing
over 25 years.
(c) The Company received a credit for interest expense on the debt at closing,
which is included in restricted cash, along with an amount set aside by the
Company for principal payments on the debt. Interest income earned on the
restricted cash amounts, when netted with interest expense on the debt,
results in an adjusted interest rate on the debt of approximately 8.2%.
F-14
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
March 31, 1997
(unaudited)
(7) Deposits on Investment Properties
On February 7, 1997, the Company made an initial deposit of $1,228,510 for the
purchase of Forest Commons. The balance of the purchase price, approximately
$10,607,000 will be paid upon completion of the redevelopement of the center
and when the anticipated main tenant, Dominick's Finer Foods, Inc., begins
paying rent under a lease agreement.
On February 7, 1997, the Company made an initial deposit of $1,265,630 for the
purchase of Downers Grove Plaza. The balance of the purchase price,
approximately $15,382,000 will be paid upon completion of the redevelopement of
the center and when the anticipated main tenant, Dominick's Finer Foods, Inc.
begins paying rent under a lease agreement.
The Company earns interest on these deposits at the rate of 9.3% per annum.
(8) Subsequent Events
As of May 13, 1997, subscriptions for a total of 12,462,632 Shares were
received, bringing total gross offering proceeds to $124,445,135.
In April 1997, the Company paid a distribution of $749,856 to the Stockholders.
On April 11, 1997, the Company purchased the Niles Shopping Center from an
unaffiliated third party for approximately $3,280,000. The property is located
in Niles, Illinois and contains 26,117 square feet of leasable space.
On May 6, 1997, the Company purchased the Mallard Crossing Shopping Center from
an unaffiliated third party for approximately $8,000,000. The property is
located in Elk Grove Village, Illinois and contains 82,949 square feet of
leasable space. Its anchor tenant is Eagle Foods.
On May 6, 1997, the Company purchased Cobblers Crossing Shopping Center from an
unaffiliated third party for approximately $10,800,000. The property is
located in Elgin, Illinois and contains 102,642 square feet of leasable space.
Its anchor tenant is Jewel/Osco.
On May 9, 1997, the Company purchased Ameritech Outlot from an unaffiliated
third party for approximately $1,050,000. The property is located in Joliet,
Illinois. It consists of a 4,504 square foot building occupied solely by
Ameritech.
F-15
Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1996
(unaudited)
The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisition of the Maple Park Place Shopping Center, Aurora Commons
Shopping Center, Lincoln Park Place Shopping Center, Niles Shopping Center,
Cobblers Mall, Mallard Mall, Calumet Square, Ameritech Outlot, Sequoia Plaza,
Highland Park Dominicks and Schaumburg Dominicks as though these transactions
occurred December 31, 1996. This unaudited Pro Forma Balance Sheet should be
read in conjunction with the December 31, 1996 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, 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-16
Inland Real Estate Corporation
Pro Forma Balance Sheet
December 31, 1996
(unaudited)
December 31,
December 31, 1996
1996 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- ------------- --------------
Assets
- ------
Net investment in
properties.................. $ 93,523,943 80,854,050 174,377,993
Cash and cash equivalents..... 8,491,735 - 8,491,735
Restricted cash............... 122,043 - 122,043
Accounts and rents
receivable.................. 1,914,756 1,514,537 3,429,293
Other assets.................. 456,209 45,201 501,410
------------- ------------- -------------
Total assets.................. $104,508,686 82,413,788 186,922,474
============= ============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 649,609 - 649,609
Accrued real estate taxes..... 2,770,889 1,591,764 4,362,653
Distributions payable (C)..... 548,947 - 548,947
Security deposits............. 247,769 87,804 335,573
Mortgages payable............. 30,838,233 21,275,747 52,113,980
Unearned income............... 64,590 - 64,590
Other liabilities............. 32,820 - 32,820
Due to Affiliates............. 255,591 - 255,591
------------- ------------- -------------
Total liabilities............. 35,408,448 22,955,315 58,363,763
------------- ------------- -------------
Common Stock.................. 81,000 69,138 150,138
Additional paid in capital
(net of Offering costs)..... 70,512,073 59,389,335 129,901,408
Accumulated distributions in
excess of net income........ (1,492,835) - (1,492,835)
------------- ------------- -------------
Total Stockholders' equity.... 69,100,238 59,458,473 128,558,711
------------- ------------- -------------
Total liabilities and
Stockholders' equity........ $104,508,686 82,413,788 186,922,474
============= ============= =============
See accompanying notes to pro forma balance sheet.
F-17
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)
(A) The December 31, 1996 Historical column represents the historical balance
sheet as presented in the December 31, 1996 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, 1996. The
terms are described in the notes that follow.
Pro Forma Adjustments
---------------------------------------------------
Niles
Maple Park Aurora Lincoln Shopping
Place Commons Park Place Center
------------ ------------ ------------ ------------
Assets
- ------
Net investment in
properties............ $15,262,150 11,500,000 2,100,000 3,280,000
Accounts and rents
receivable............ 189,477 174,067 82,674 121,981
Other assets............ 20,000 - 25,201 -
------------ ------------ ------------ ------------
Total assets............ $15,471,627 11,674,067 2,207,875 3,401,981
============ ============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................. $ 189,477 177,619 82,674 121,981
Security deposits....... 49,224 24,330 - 14,250
Mortgages payable....... 8,000,000 11,259,637 2,016,110 -
------------ ------------ ------------ ------------
Total liabilities....... 8,238,701 11,461,586 2,098,784 136,231
------------ ------------ ------------ ------------
Common Stock (D)........ 8,410 247 127 3,797
Additional paid in capital
(net of Offering
Costs)(D)............. 7,224,516 212,235 108,964 3,261,953
------------ ------------ ------------ ------------
Total Stockholders'
equity................ 7,232,926 212,481 109,091 3,265,750
------------ ------------ ------------ ------------
Total liabilities and
Stockholders' equity.. $15,471,627 11,674,067 2,207,875 3,401,981
============ ============ =========== ============
F-18
<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)
(B) Continued
<CAPTION>
Pro Forma Adjustments
----------------------------------------------------------------------------------------
Highland Total
Cobblers Mallard Calumet Ameritech Sequoia Park Schaumburg Pro Forma
Mall Mall Square Outlot Plaza Dominicks Dominicks Adjustments
----------- ----------- ----------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Net investment in
properties........... $10,953,000 8,099,900 2,108,000 1,050,000 3,010,000 12,800,000 10,691,000 80,854,050
Accounts and rents
receivable........... 391,000 312,800 140,000 5,000 97,538 - - 1,514,537
Other assets........... - - - - - - - 45,201
------------ ------------ ----------- ----------- ----------- ------------ ----------- -------------
Total assets........... $11,344,000 8,412,700 2,248,000 1,055,000 3,107,538 12,800,000 10,691,000 82,413,788
============ ============ =========== =========== =========== ============ =========== =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ $ 430,076 340,057 140,000 5,000 104,880 - - 1,591,764
Security deposits...... - - - - - - - 87,804
Mortgages payable...... - - - - - - 21,275,747
------------ ------------ ----------- ----------- ----------- ------------ ----------- -------------
Total liabilities...... 430,076 340,057 140,000 5,000 104,880 - - 22,955,315
------------ ------------ ----------- ----------- ----------- ------------ ----------- -------------
Common Stock (D)....... 12,691 9,387 2,451 1,221 3,491 14,884 12,431 69,138
Additional paid in capital
(net of Offering
Costs)(D)............ 10,901,233 8,063,256 2,105,549 1,048,779 2,999,167 12,785,116 10,678,569 59,389,335
------------ ------------ ----------- ----------- ----------- ------------ ----------- -------------
Total Stockholders'
equity............... 10,913,924 8,072,643 2,108,000 1,050,000 3,002,658 12,800,000 10,691,000 59,458,473
------------ ------------ ----------- ----------- ----------- ------------ ----------- -------------
Total liabilities and
Stockholders' equity. $11,344,000 8,412,700 2,248,000 1,055,000 3,107,538 12,800,000 10,691,000 82,413,788
============ ============ =========== =========== =========== ============ =========== =============
</TABLE>
F-19
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)
Acquisition of Maple Park Place Shopping Center, Bolingbrook, Illinois
On January 9, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $15,262,150.
The Company funded the purchase using (i) the proceeds of a short-term loan
maturing April 7, 1997 in the amount of $8 million from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the company (the "Short-
Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears
interest at a rate of 9.0% per annum and requires a loan fee of 1/4%.
Acquisition of Aurora Commons Shopping Center, Aurora, Illinois
On January 24, 1997, the Company acquired this property from an
unaffiliated third party for the purchase price of $11,500,000.
As part of the acquisition, the Company assumed the existing mortgage loan
maturing December 31, 2001, with the balance funded with cash and cash
equivalents. The loan bears interest at a rate of 9% per annum with
monthly payments of principal and interest on the first day of each month.
Acquisition of Lincoln Park Place Shopping Center, Chicago, Illinois
On January 24, 1997, the Company acquired this property from an
unaffiliated third party for the purchase price of $2,100,000.
The Company funded the purchase using the proceeds of a short-term loan
maturing February 3, 1997 in the amount of $2,016,110 from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-
Term Loan"). The Company did not pay any fees in connection with the
Short-Term Loan, which bears interest at a rate of 9% per annum.
Acquisition of Niles Shopping Center, Niles, Illinois
On April 11, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $3,280,000 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Cobblers Mall, Elgin, Illinois
On May 6, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $10,953,000 on an all cash basis,
funded from cash and cash equivalents.
F-20
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
December 31, 1996
(unaudited)
Acquisition of Mallard Mall, Elk Grove Village, Illinois
On May 6, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $8,099,900 on an all cash basis,
funded from cash and cash equivalents.
Probable Acquisitions
The Company anticipates acquiring the following properties from
unaffiliated third parties on an all cash basis, funded from cash and cash
equivalents: Calumet Square, Ameritech Outlot, Sequoia Plaza, Highland Park
Dominicks and Schaumburg Dominicks.
(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 $47,060,000, net of additional Offering
costs of $6,588,094 are reflected as received as of December 31, 1996,
prior to the purchase of the properties. Offering costs consist
principally of registration costs, printing and selling costs, including
commissions.
F-21
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 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, the Zany
Brainy store, Salem Square, Hawthorn Village Commons, Six Corners Plaza, Spring
Hill Fashion Corner, Crestwood Plaza Shopping Center, Park St. Claire, Lansing
Square Shopping Center, Summit of Park Ridge, Maple Park Place Shopping Center,
Aurora Commons Shopping Center, Lincoln Park Place Shopping Center, Niles
Shopping Center, Cobblers Mall, Mallard Mall, Calumet Square, Ameritech Outlot,
Sequoia Plaza, Highland Park Dominicks and Schaumburg Dominicks as though they
occurred the earlier of January 1, 1996 or the date operations commenced.
Grand and Hunt Club and the Quarry Outlot were constructed in 1996, and had not
commenced significant operations prior to acquisition, therefore, no operations
relating to these properties are presented on the unaudited Pro Forma Statement
of Operations for December 31, 1996. This unaudited Pro Forma Statement of
Operations should be read in conjunction with the December 31, 1996 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, 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-22
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the year ended December 31, 1996
(unaudited)
Pro Forma Adjustments
------------------------------------
Acquisitions
1996 Probable
Historical 1996 1997 1997 1996
(A) (B) (C) (D) Pro Forma
----------- ----------- ----------- ------------ -----------
Rental income..... $4,467,903 6,127,326 5,796,643 2,221,142 18,613,014
Additional rental
income.......... 1,336,809 3,198,250 1,945,311 333,523 6,813,893
Interest
income(E)....... 438,188 - - - 438,188
Other income...... 84,834 - - - 84,834
----------- ----------- ----------- ------------ ------------
Total income.... 6,327,734 9,325,576 7,741,954 2,554,665 25,949,929
----------- ----------- ----------- ------------ ------------
Professional services
and general and
administrative
fees............ 183,559 - - - 183,559
Advisor asset
management fee.(I) 238,108 708,222 511,950 296,590 1,754,870
Property operating
expenses........ 1,873,174 3,656,698 2,316,784 427,991 8,274,647
Interest expense.. 597,485 949,958 1,784,433 - 3,331,876
Depreciation (F).. 939,144 1,448,017 1,339,661 741,200 4,468,022
Amortization (H).. 17,367 11,428 6,457 - 35,252
Acquisition costs
expensed........ 26,676 - - - 26,676
----------- ----------- ----------- ------------ ------------
Total expenses.... 3,875,513 6,774,323 5,959,285 1,465,781 18,074,902
----------- ----------- ----------- ------------ ------------
Net income...... $2,452,221 2,551,253 1,782,669 1,088,884 7,875,027
=========== =========== =========== ============ ============
Weighted average
common stock shares
outstanding (G). 4,494,620 11,408,420
=========== ============
Net income per weighted
average common stock
outstanding (G). $ .55 .69
=========== ============
See accompanying notes to pro forma statement of operations.
F-23
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the year ended December 31, 1996
(unaudited)
(A) The 1996 Historical column represents the historical statement of
operations of the Company for the year ended December 31, 1996, as filed
with the SEC on Form 10-K.
(B) Total pro forma adjustments for the year ended December 31, 1996 are as
though the 1996 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.
Crestwood Plaza Shopping Center
As part of the December 27, 1996 purchase of Crestwood Plaza, the Company
assumed the existing first mortgage loan of $1,330,253.
F-24
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Lansing Square Shopping Center
The Company funded the purchase using: (i) the proceeds of five long-term
loans totaling $12,850,000 from LaSalle Bank of which approximately
$8,000,000 was used to purchase this property and (ii) cash and cash
equivalents. The Company paid a one point fee in connection with these
long-term loans. The loans have a term of seven years and, prior to the
maturity date, require payments of interest only, at 7.6%, fixed for five
years with the remaining two years at prime plus 1/2%.
Total pro forma adjustments for 1996 acquisitions are as though they were
acquired the earlier of January 1, 1996 or date that operations commenced
(related to Zany Brainy).
Mundelein Regency Prospect Montgomery- Zany
Plaza Point Heights Sears Brainy
----------- ----------- ----------- ----------- -----------
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
----------- ----------- ----------- ----------- -----------
Total income...... 196,356 155,305 172,698 220,712 161,633
----------- ----------- ----------- ----------- -----------
Property operating
expenses........ 53,986 19,046 91,364 66,944 30,331
----------- ----------- ----------- ----------- -----------
Total expenses.... 53,986 19,046 91,364 66,944 30,331
----------- ----------- ----------- ----------- -----------
Net income........ $ 142,370 136,259 81,334 153,768 131,302
=========== =========== =========== =========== ===========
F-25
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Hawthorn
Salem Village Six Spring
Square Commons Corners Hill Crestwood
----------- ----------- ----------- ----------- -----------
Rental income..... $ 422,146 548,667 790,888 948,906 203,007
Additional rental
income.......... 260,832 270,570 517,804 234,837 69,315
----------- ----------- ----------- ----------- -----------
Total income...... 682,978 819,237 1,308,692 1,183,743 272,322
----------- ----------- ----------- ----------- -----------
Property operating
expenses........ 270,756 293,132 640,772 300,842 78,450
----------- ----------- ----------- ----------- -----------
Total expenses.... 270,756 293,132 640,772 300,842 78,450
----------- ----------- ----------- ----------- -----------
Net income........ $ 412,222 526,105 667,920 882,901 193,872
=========== =========== =========== =========== ===========
Total
1996
Park Lansing Park Pro Forma Acquisitions
St. Claire Square Ridge Adjustments Pro Forma
----------- ----------- ----------- ----------- ------------
Rental income..... $ 178,596 2,001,855 340,315 - 6,127,326
Additional rental
income.......... 62,194 1,332,149 236,791 - 3,198,250
----------- ----------- ----------- ----------- -----------
Total income...... 240,790 3,334,004 577,106 - 9,325,576
----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. - - - 708,222 708,222
Property operating
expenses........ 103,386 1,507,941 299,748 - 3,656,698
Interest Expense.. - - - 949,958 949,958
Depreciation...... - - - 1,448,017 1,448,017
Amortization...... - - - 11,428 11,428
----------- ----------- ----------- ----------- -----------
Total expenses.... 103,386 1,507,941 299,748 3,117,625 6,774,323
----------- ----------- ----------- ----------- -----------
Net income (loss). $ 137,404 1,826,063 277,358 (3,117,625) 2,551,253
=========== =========== =========== =========== ===========
F-26
<TABLE> Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
(C) Total pro forma adjustments for 1997 acquisitions are as though they were acquired the earlier of January 1, 1996.
<CAPTION>
Total
Niles 1997
Maple Park Aurora Lincoln Shopping Cobblers Mallard Acquisitions
Place Commons Park Place Center Mall Mall Pro Forma
----------- ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental income..... 1,844,314 1,341,448 228,218 375,349 1,014,342 992,972 5,796,643
Additional rental
income.......... 405,864 534,247 111,997 104,619 376,560 412,024 1,945,311
----------- ----------- ----------- ----------- ------------ ------------ -----------
Total income...... 2,250,178 1,875,695 340,215 479,968 1,390,902 1,404,996 7,741,954
----------- ----------- ----------- ----------- ------------ ------------ -----------
Advisor asset
management fee.. 152,621 115,000 21,000 32,800 109,530 80,999 511,950
Property operating
expenses........ 444,390 632,131 130,176 141,974 548,023 420,090 2,316,784
Interest expense.. 720,000 882,983 181,450 - - - 1,784,433
Depreciation...... 404,905 334,573 42,260 81,600 273,825 202,498 1,339,661
Amortization...... 2,857 - 3,600 - - - 6,457
----------- ----------- ----------- ----------- ------------ ------------ -----------
Total expenses.... 1,724,773 1,964,687 378,486 256,374 931,378 703,587 5,959,285
----------- ----------- ----------- ----------- ------------ ------------ -----------
Net income (loss). 525,405 (88,992) (38,271) 223,594 459,524 701,409 1,782,669
=========== =========== =========== =========== ============ ============ ===========
</TABLE>
F-27
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Maple Park Shopping Center, Bolingbrook, Illinois
The Company funded the purchase using (i) the proceeds of a short-term loan
maturing April 7, 1997 in the amount of $8 million from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-
Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears
interest at a rate of 9.0% per annum and requires a loan fee of 1/4%.
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Maple Park Place
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $1,844,314 - 1,844,314
Additional rental income......... 405,864 - 405,864
----------- ----------- -----------
Total income..................... 2,250,178 - 2,250,178
----------- ----------- -----------
Advisor asset management fee..... - 152,621 152,621
Property operating expenses...... 444,390 - 444,390
Interest expense................. - 720,000 720,000
Depreciation..................... - 404,905 404,905
Amortization..................... - 2,857 2,857
----------- ----------- -----------
Total expenses................... 444,390 1,280,383 1,724,773
----------- ----------- -----------
Net income (loss)................ $1,807,788 (1,280,383) 525,405
=========== =========== ===========
F-28
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Aurora Commons Shopping Center, Aurora, Illinois
As part of the acquisition of Aurora Commons Shopping Center, the Company
assumed the existing mortgage loan, maturing December 31, 2001, with the
balance funded with cash and cash equivalents. The loan bears interest at
a rate of 9% per annum with monthly payments of principal and interest on
the first day of each month.
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Aurora Commons
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $1,314,448 - 1,341,448
Additional rental income......... 534,247 - 534,247
----------- ----------- -----------
Total income..................... 1,875,695 - 1,875,695
----------- ----------- -----------
Advisor asset management fee..... - 115,000 115,000
Property operating expenses...... 659,205 (27,074) 632,131
Interest expense................. - 882,983 882,983
Depreciation..................... - 334,573 334,573
----------- ----------- -----------
Total expenses................... 659,205 1,193,482 1,964,687
----------- ----------- -----------
Net income (loss)................ $1,216,490 (1,193,482) (88,992)
=========== =========== ===========
F-29
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Lincoln Park Place Shopping Center, Chicago, Illinois
The Company funded the purchase of Lincoln Park Place Shopping Center using
the proceeds of a short-term loan maturing February 7, 1997 in the amount
of $2,016,110 from Inland Mortgage Investment Corporation ("IMIC"), an
affiliate of the Company (the "Short-Term Loan"). The Company did not pay
any fees in connection with the Short-Term Loan, which bears interest at a
rate of 9% per annum.
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Lincoln Park Place
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $ 228,218 - 228,218
Additional rental income......... 111,997 - 111,997
----------- ----------- -----------
Total income..................... 340,215 - 340,215
----------- ----------- -----------
Advisor asset management fee..... - 21,000 21,000
Property operating expenses...... 130,176 - 130,176
Interest expense................. - 181,450 181,450
Depreciation..................... - 42,260 42,260
Amortization..................... - 3,600 3,600
----------- ----------- -----------
Total expenses................... 130,176 248,310 378,486
----------- ----------- -----------
Net income (loss)................ $ 210,039 (248,310) (38,271)
=========== =========== ===========
F-30
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Niles Shopping Center, Niles, Illinois
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Niles Shopping Center
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $ 375,349 - 375,349
Additional rental income......... 104,619 - 104,619
----------- ----------- -----------
Total income..................... 479,968 - 479,968
----------- ----------- -----------
Advisor asset management fee..... - 32,800 32,800
Property operating expenses...... 141,974 - 141,974
Depreciation..................... - 81,600 81,600
----------- ----------- -----------
Total expenses................... 141,974 114,400 256,374
----------- ----------- -----------
Net income (loss)................ $ 337,995 (114,400) 223,594
=========== =========== ===========
F-31
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Cobblers Mall, Elgin, Illinois
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Cobblers Mall
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $1,014,342 - 1,014,342
Additional rental income......... 376,560 - 376,560
----------- ----------- -----------
Total income..................... 1,390,902 - 1,390,902
----------- ----------- -----------
Advisor asset
management fee................. - 109,530 109,530
Property operating
expenses....................... 548,023 - 548,023
Depreciation..................... - 273,825 273,825
----------- ----------- -----------
Total expenses................... 548,023 383,355 931,378
----------- ----------- -----------
Net income (loss)................ $ 842,879 (383,355) 459,524
=========== =========== ===========
F-32
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Acquisition of Mallard Mall, Elk Grove Village, Illinois
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Mallard Mall
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income.................... $ 992,972 - 992,972
Additional rental income......... 412,024 - 412,024
----------- ----------- -----------
Total income..................... 1,404,996 - 1,404,996
----------- ----------- -----------
Advisor asset
management fee................. - 80,999 80,999
Property operating
expenses....................... 420,090 - 420,090
Depreciation..................... - 202,498 202,498
----------- ----------- -----------
Total expenses................... 420,090 283,497 703,587
----------- ----------- -----------
Net income (loss)................ $ 984,906 (283,497) 701,409
=========== =========== ===========
F-33
<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
(D) Total pro forma adjustments for 1997 probable acquisitions are as though they were acquired the earlier
of January 1, 1996 or date that operations commenced (relating to Highland Park Dominicks and
Schaumburg Dominicks).
<CAPTION>
Total 1997
Highland Probable
Calumet Ameritech Sequoia Park Schaumburg Acquisitions
Square Outlot Plaza Dominicks Dominicks Pro Forma
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental income..... 222,072 106,283 361,986 883,976 646,825 2,221,142
Additional rental
income.......... 179,854 18,265 135,404 - - 333,523
----------- ----------- ----------- ----------- ----------- -----------
Total income...... 401,926 124,548 497,390 883,976 646,825 2,554,665
----------- ----------- ----------- ----------- ----------- -----------
Advisor asset
management fee.. 21,080 10,500 30,100 128,000 106,910 296,590
Property operating
expenses........ 214,748 18,500 164,126 17,680 12,937 427,991
Depreciation...... 52,700 26,250 75,250 320,000 267,000 741,200
----------- ----------- ----------- ----------- ----------- -----------
Total expenses.... 288,528 55,250 269,476 465,680 386,847 1,465,781
----------- ----------- ----------- ----------- ----------- -----------
Net income........ 113,398 69,298 227,914 418,296 259,978 1,088,884
=========== =========== =========== =========== =========== ===========
</TABLE>
F-34
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Probable Acquisition of Calumet Square Shopping Center, Calumet City,
Illinois
This pro forma adjustment reflects the purchase of Calumet Square as if the
Company had acquired the property as of January 1, 1996 and is based on
information provided by the Seller.
Calumet Square
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
Rental income............. $ 222,072 - 222,072
Additional rental income.. 179,854 - 179,854
----------- ----------- -----------
Total income.............. 401,926 - 401,926
----------- ----------- -----------
Advisor asset
management fee.......... - 21,080 21,080
Property operating
expenses................ 214,748 - 214,748
Depreciation.............. - 52,700 52,700
----------- ----------- -----------
Total expenses............ 214,748 73,780 288,528
----------- ----------- -----------
Net income (loss)......... $ 187,178 (73,780) 113,398
=========== =========== ===========
F-35
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Probable Acquisition of Ameritech Outlot, Joliet, Illinois
This pro forma adjustment reflects the purchase of Ameritech as if the
Company had acquired the property as of January 1, 1996 and is based on
information provided by the Seller.
Ameritech Outlot
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
Rental income............. $ 106,283 - 106,283
Additional rental income.. 18,265 - 18,265
----------- ----------- -----------
Total income.............. 124,548 - 124,548
----------- ----------- -----------
Advisor asset
management fee.......... - 10,500 10,500
Property operating
expenses................ 18,500 - 18,500
Depreciation.............. - 26,250 26,250
----------- ----------- -----------
Total expenses............ 18,500 36,750 55,250
----------- ----------- -----------
Net income (loss)......... $ 106,048 (36,750) 69,298
=========== =========== ===========
F-36
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Probable Acquisition of Sequoia Plaza, Milwaukee, Wisconsin
Reconciliation of Gross income and Direct Operating Expenses for the year
ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation
S-X (*) to the Pro Forma Adjustments:
Sequoia Plaza
-------------------------------------
*As Pro Forma
Reported Adjustments Total
----------- ----------- -----------
Rental income............. $ 361,986 - 361,986
Additional rental income.. 135,404 - 135,404
----------- ----------- -----------
Total income.............. 497,390 - 497,390
----------- ----------- -----------
Advisor asset
management fee.......... - 30,100 30,100
Property operating
expenses................ 164,126 - 164,126
Depreciation.............. - 75,250 75,250
----------- ----------- -----------
Total expenses............ 164,126 105,350 269,476
----------- ----------- -----------
Net income (loss)......... $ 333,264 (105,350) 227,914
=========== =========== ===========
F-37
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Probable Acquisition of Dominicks, Highland Park, Illinois
This pro forma adjustment reflects the purchase of Highland Park Dominicks
as if the Company had acquired the property as of May 1, 1996, the date
operations commenced and is based on information provided by the Seller.
Highland Park Dominicks
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
Rental income............. $ 883,976 - 883,976
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 883,976 - 883,976
----------- ----------- -----------
Advisor asset
management fee.......... - 128,000 128,000
Property operating
expenses................ 17,680 - 17,680
Depreciation.............. - 320,000 320,000
----------- ----------- -----------
Total expenses............ 17,680 448,000 465,680
----------- ----------- -----------
Net income (loss)......... $ 866,296 (448,000) 418,296
=========== =========== ===========
F-38
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
Probable Acquisition of Dominicks, Schaumburg, Illinois
This pro forma adjustment reflects the purchase of Schaumburg Dominicks as
if the Company had acquired the property as of June 1, 1996, the date
operations commenced and is based on information provided by the Seller.
Schaumburg Dominicks
-------------------------------------
Year ended
December 31, Pro Forma
1996 Adjustments Total
----------- ----------- -----------
Rental income............. $ 646,825 - 646,825
Additional rental income.. - - -
----------- ----------- -----------
Total income.............. 646,825 - 646,825
----------- ----------- -----------
Advisor asset
management fee.......... - 106,910 106,910
Property operating
expenses................ 12,937 - 12,937
Depreciation.............. - 267,000 267,000
----------- ----------- -----------
Total expenses............ 12,937 373,910 386,847
----------- ----------- -----------
Net income (loss)......... $ 633,888 (373,910) 259,978
=========== =========== ===========
F-39
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the year ended December 31, 1996
(unaudited)
(E) No pro forma adjustment has been made relating to interest income which
would have been earned on the additional Offering Proceeds raised.
(F) Depreciation expense is computed using the straight-line method, based upon
an estimated useful life of thirty years.
(G) The pro forma weighted average common stock shares for the year ended
December 31, 1996 was calculated by estimating the additional shares sold
to purchase each of the Company's properties on a weighted average basis.
(H) Loan fees are amortized over the term of the related loan.
(I) Advisor Asset Management Fees are calculated as 1% of the Average Invested
Assets.
F-40
Inland Real Estate Corporation
Pro Forma Balance Sheet
March 31, 1997
(unaudited)
The following unaudited Pro Forma Balance Sheet of the Company is presented to
effect the acquisition of the Niles Shopping Center, Cobblers Mall, Mallard
Mall, Ameritech Outlot, Calumet Square, Sequoia Plaza, Highland Park Dominicks
and Schaumburg Dominicks as though these transactions occurred March 31, 1997.
This unaudited Pro Forma Balance Sheet should be read in conjunction with the
March 31, 1997 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, 1997, 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-41
Inland Real Estate Corporation
Pro Forma Balance Sheet
March 31, 1997
(unaudited)
March 31,
March 31, 1997
1997 Pro Forma Pro Forma
Historical(A) Adjustments(B) Balance Sheet
------------- ------------- --------------
Assets
- ------
Net investment in
properties.................. $121,755,366 51,991,900 173,747,266
Cash and cash equivalents..... 22,647,158 - 22,647,158
Restricted cash............... 1,117,333 - 1,117,333
Accounts and rents
receivable.................. 2,666,872 1,352,996 4,019,868
Other assets.................. 3,323,680 - 3,323,680
------------- ------------- -------------
Total assets.................. $151,510,409 53,344,896 204,855,305
============= ============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accounts payable and accrued
expenses.................... $ 1,318,463 - 1,318,463
Accrued real estate taxes..... 3,134,066 1,442,396 4,576,462
Distributions payable (C)..... 749,856 - 749,856
Security deposits............. 320,966 14,250 335,216
Mortgages payable............. 53,182,067 - 53,182,067
Unearned income............... 375,570 - 375,570
Due to Affiliates............. 247,191 - 247,191
------------- ------------- -------------
Total liabilities............. 59,328,179 1,456,646 60,784,825
------------- ------------- -------------
Common Stock (D).............. 108,280 60,335 168,615
Additional paid in capital
(net of Offering costs) (D). 94,623,475 51,827,915 146,451,390
Accumulated distributions in
excess of net income........ (2,549,525) - (2,549,525)
------------- ------------- -------------
Total Stockholders' equity.... 92,182,230 51,888,250 144,070,480
------------- ------------- -------------
Total liabilities and
Stockholders' equity........ $151,510,409 53,344,896 204,855,305
============= ============= =============
See accompanying notes to pro forma balance sheet.
F-42
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1997
(unaudited)
(A) The March 31, 1997 Historical column represents the historical balance
sheet as presented in the March 31, 1997 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 March 31, 1997. The
terms are described in the notes that follow.
Pro Forma Adjustments
--------------------------------------
Niles
Shopping Cobblers Mallard
Center Mall Mall
------------ ------------ ------------
Assets
- ------
Net investment in
properties............ $ 3,280,000 10,953,000 8,099,900
Accounts and rents
receivable............ 154,001 493,734 397,602
------------ ------------ ------------
Total assets............ $ 3,434,001 11,446,734 8,497,502
============ ============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................. $ 154,001 542,971 429,322
Security deposits....... 14,250 - -
------------ ------------ ------------
Total liabilities....... 168,251 542,971 429,322
------------ ------------ ------------
Common Stock............ 3,797 12,679 9,382
Additional paid in capital
(net of Offering
Costs)................ 3,261,953 10,891,084 8,058,798
------------ ------------ ------------
Total Stockholders'
equity................ 3,265,750 10,903,763 8,068,180
------------ ------------ ------------
Total liabilities and
Stockholders' equity.. $ 3,434,001 11,446,734 8,497,502
============ ============ ============
F-43
<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1997
(unaudited)
(B) Continued
<CAPTION>
Pro Forma Adjustments
--------------------------------------------------------------------------
Highland Total
Ameritech Calumet Sequoia Park Schaumburg Pro Forma
Outlot Square Plaza Dominicks Dominicks Adjustments
----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Net investment in
properties........... 1,050,000 2,108,000 3,010,000 12,800,000 10,691,000 51,991,900
Accounts and rents
receivable........... 6,941 176,750 123,968 - - 1,352,996
----------- ----------- ------------ ----------- ----------- -------------
Total assets........... 1,056,941 2,284,750 3,133,968 12,800,000 10,691,000 53,344,896
=========== =========== ============ =========== =========== =============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued real estate
taxes................ $ 6,941 176,750 132,411 - - 1,442,396
Security deposits...... - - - - - 14,250
----------- ----------- ------------ ----------- ----------- -------------
Total liabilities...... 6,941 176,750 132,411 - - 1,456,646
----------- ----------- ------------ ----------- ----------- -------------
Common Stock........... 1,221 2,451 3,490 14,884 12,431 60,335
Additional paid in capital
(net of Offering
Costs)............... $1,048,779 2,105,549 2,998,067 12,785,116 10,678,569 51,827,915
----------- ----------- ------------ ----------- ----------- -------------
Total Stockholders'
equity............... 1,050,000 2,108,000 3,001,557 12,800,000 10,691,000 51,888,250
----------- ----------- ------------ ----------- ----------- -------------
Total liabilities and
Stockholders' equity. 1,056,941 2,284,750 3,133,968 12,800,000 10,691,000 53,344,896
============ ============ ============ =========== =========== =============
</TABLE>
F-44
Inland Real Estate Corporation
Notes to Pro Forma Balance Sheet
(continued)
March 31, 1997
(unaudited)
Acquisition of Niles Shopping Center, Niles, Illinois
On April 11, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $3,280,000 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Cobblers Mall, Elgin, Illinois
On May 6, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $10,953,000 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Mallard Mall, Elk Grove Village, Illinois
On May 6, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $8,099,900 on an all cash basis,
funded from cash and cash equivalents.
Acquisition of Ameritech Outlot, Joliet, Illinois
On May 9, 1997, the Company acquired this property from an unaffiliated
third party for the purchase price of $1,050,000 on an all cash basis,
funded from cash and cash equivalents.
Probable Acquisitions
The Company anticipates acquiring the following properties from
unaffiliated third parties on an all cash basis, funded from cash and cash
equivalents: Calumet Square, Sequoia Plaza, Highland Park Dominicks and
Schaumburg Dominicks.
(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 $60,335,000, net of additional Offering
costs of $8,446,750 are reflected as received as of March 31, 1997, prior
to the purchase of the properties. Offering costs consist principally of
registration costs, printing and selling costs, including commissions.
F-45
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the three months ended March 31, 1997
(unaudited)
The following unaudited Pro Forma Statement of Operations of the Company is
presented to effect the acquisitions of Maple Park Place Shopping Center,
Aurora Commons Shopping Center, Lincoln Park Place Shopping Center, Niles
Shopping Center, Cobblers Mall, Mallard Mall, Ameritech Outlot, Calumet Square,
Sequoia Plaza, Highland Park Dominicks and Schaumburg Dominicks as though they
occurred the earlier of January 1, 1997 or the date operations commenced. This
unaudited Pro Forma Statement of Operations should be read in conjunction with
the March 31, 1997 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, 1997, 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-46
Inland Real Estate Corporation
Pro Forma Statement of Operations
For the three months ended March 31, 1997
(unaudited)
Pro Forma Adjustments
-----------------------
Acquisitions
1997 Probable
Historical 1997 1997 1997
(A) (B) (C) Pro Forma
----------- ----------- ----------- -----------
Rental income..... $3,603,584 785,809 560,678 4,950,071
Additional rental
income.......... 1,061,507 332,242 124,725 1,518,474
Interest
income(D)....... 156,436 - - 156,436
Other income...... 36,244 - - 36,244
----------- ----------- ----------- ------------
Total income.... 4,857,771 1,118,051 685,403 6,661,225
----------- ----------- ----------- ------------
Professional services
and general and
administrative
fees............ 85,158 - - 85,158
Advisor asset
management fee.(G) 233,337 58,457 71,523 363,317
Property operating
expenses........ 1,859,461 372,889 141,865 2,374,215
Interest expense.. 1,005,741 26,718 - 1,032,459
Depreciation (E).. 741,920 172,762 178,738 1,093,420
Amortization...... 38,364 - - 38,364
Acquisition costs
expensed........ 9,090 - - 9,090
----------- ----------- ----------- ------------
Total expenses.... 3,973,071 630,826 392,126 4,996,023
----------- ----------- ----------- ------------
Net income...... $ 884,700 487,225 293,277 1,665,202
=========== =========== =========== ============
Weighted average
common stock shares
outstanding (F). 9,384,792 15,418,292
=========== ============
Net income per weighted
average common stock
outstanding (F). $ .09 .11
=========== ============
See accompanying notes to pro forma statement of operations.
F-47
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
For the three months ended March 31, 1997
(unaudited)
(A) The 1997 Historical column represents the historical statement of
operations of the Company for the three months ended March 31, 1997, as
filed with the SEC on Form 10-Q.
(B) Total pro forma adjustments for the three months ended March 31, 1997 are
as though the 1997 acquisitions of the following properties occurred on
January 1, 1997 on an all cash basis except for the following:
Maple Park Shopping Center
The Company funded the purchase using (i) the proceeds of a short-term loan
maturing April 7, 1997 in the amount of $8 million from Inland Mortgage
Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-
Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears
interest at a rate of 9.0% per annum and requires a loan fee of 1/4%.
Aurora Commons Shopping Center
As part of the acquisition of Aurora Commons Shopping Center, the Company
assumed the existing mortgage loan, maturing December 31, 2001, with the
balance funded with cash and cash equivalents. The loan bears interest at
a rate of 9% per annum with monthly payments of principal and interest on
the first day of each month.
Lincoln Park Place Shopping Center
The Company funded the purchase of Lincoln Park Place Shopping Center using
the proceeds of a short-term loan maturing February 7, 1997 in the amount
of $2,016,110 from Inland Mortgage Investment Corporation ("IMIC"), an
affiliate of the Company (the "Short-Term Loan"). The Company did not pay
any fees in connection with the Short-Term Loan, which bears interest at a
rate of 9% per annum.
F-48
<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three months ended March 31, 1997
(unaudited)
(B) Total pro forma adjustments for 1997 acquisitions are as though they were acquired the earlier of January 1, 1997.
<CAPTION>
Total
Niles 1997
Maple Park Aurora Lincoln Shopping Cobblers Mallard Ameritech Pro Forma Acquisitions
Place Commons Park Place Center Mall Mall Outlot Adjustments Pro Forma
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... 39,736 82,740 14,159 98,780 255,790 267,028 27,576 - 785,809
Additional rental
income.......... 8,168 26,594 5,714 39,507 142,382 103,809 6,068 - 332,242
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Total income...... 47,904 109,334 19,873 138,287 398,172 370,837 33,644 - 1,118,051
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Advisor asset
management fee.. - - - - - - - 58,457 58,457
Property operating
expenses........ 10,039 30,055 6,352 43,952 153,892 121,290 7,309 - 372,889
Interest expense.. - - - - - - - 26,718 26,718
Depreciation...... - - - - - - - 172,762 172,762
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Total expenses.... 10,039 30,055 6,352 43,952 153,892 121,290 7,309 257,937 630,826
----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------
Net income (loss). 37,865 79,279 13,521 94,335 244,280 249,547 26,335 (257,937) 487,225
=========== =========== =========== =========== =========== ============ ============ ============ ============
</TABLE>
F-49
<TABLE>
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three months ended March 31, 1997
(unaudited)
(C) Total pro forma adjustments for 1997 probable acquisitions are as though they were acquired the earlier
of January 1, 1997.
<CAPTION>
Total 1997
Highland Probable
Calumet Sequoia Park Schaumburg Pro Forma Acquisitions
Square Plaza Dominicks Dominicks Adjustments Pro Forma
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Rental income..... 78,398 99,580 220,994 161,706 - 560,678
Additional rental
income.......... 87,939 36,786 - - - 124,725
----------- ----------- ----------- ----------- ------------ ------------
Total income...... 166,337 136,366 220,994 161,706 - 685,403
----------- ----------- ----------- ----------- ------------ ------------
Advisor asset
management fee.. - - - - 71,523 71,523
Property operating
expenses........ 91,467 42,744 4,420 3,234 - 141,865
Depreciation...... - - - - 178,738 178,738
----------- ----------- ----------- ----------- ------------ ------------
Total expenses.... 91,467 42,744 4,420 3,234 250,261 392,126
----------- ----------- ----------- ----------- ------------ ------------
Net income........ 74,870 93,622 216,574 158,472 (250,261) 293,277
=========== =========== =========== =========== ============ ============
</TABLE>
F-50
Inland Real Estate Corporation
Notes to Pro Forma Statement of Operations
(continued)
For the three months ended March 31, 1997
(unaudited)
(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 three months
ended March 31, 1997 was calculated by estimating the additional shares
sold to purchase each of the Company's properties on a weighted average
basis.
(G) Advisor Asset Management Fees are calculated as 1% of the Average Invested
Assets.
F-51
