<PAGE> 1
Inland Real Estate Corporation
Sticker Supplement
Supplement No. 2 to the Company's Prospectus updates certain information in
the sections of the Prospectus headed "Management's Discussion and Analysis of
the Financial Condition and Results of Operations" and "Plan of Distribution".
Unless otherwise defined, capitalized terms used herein shall have the same
meaning as in the Prospectus.
The Company commenced the "best efforts" offering on July 14, 1997, and as
of August 20, 1997, the Company had accepted subscriptions for 1,637,398.15
shares ($14,818,454 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
August 20, 1997, Inland Securities Corporation was entitled to receive
commissions, the Marketing Contribution and the Due Diligence Expense Allowance
Fee totaling $1,555,528. An Affiliate of the Advisor is also entitled to
receive Property Management Fees for management and leasing services.
<PAGE> 2
SUPPLEMENT NO. 2
DATED AUGUST 22, 1997
TO THE PROSPECTUS DATED JULY 14, 1997
OF INLAND REAL ESTATE CORPORATION
This Supplement No. 2 is provided for the purpose of supplementing the
Prospectus dated July 14, 1997 of Inland Real Estate Corporation (the
"Company") as previously supplemented by Supplement No. 1 dated July 31, 1997
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'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Supplement
No. 2 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 June 30, 1997, the Company had received subscriptions for a total of
9,583,394 Shares of the follow-on Offering, resulting in $144,525,563 in Gross
Offering Proceeds. As of June 30, 1997, the Company has repurchased 26,613
Shares through the Share Repurchase Program.
As of July 10, 1997, the Company had received subscriptions for a
total of 10,000,000 Shares thereby completing the follow-on Offering. On July
14, 1997, the Company commenced a second follow-on Offering of 20,000,000
Shares plus an additional 1,000,000 Shares available for distribution through
the DRP. As of August 11, 1997, the Company has accepted subscriptions for
951,535 Shares in the second follow-on Offering.
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
1
<PAGE> 3
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.
Cash and cash equivalents consists of cash and short-term investments.
Cash and cash equivalents at June 30, 1997 and December 31, 1996 were
$16,912,223 and $8,491,735 respectively. The increase in cash and cash
equivalents since December 31, 1996 is due to the additional sales proceeds
raised and $32,848,379 in additional loan proceeds from financing the
properties. Partially offsetting these increases in cash and cash equivalents
was the purchase of additional properties since December 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.
As of June 30, 1997, the Company had acquired thirty-three properties.
The properties owned by the Company are currently generating sufficient cash
flow to cover operating expenses of the Company plus pay a monthly distribution
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 six months ended June 30, 1997 were $4,625,291,
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. Beginning August
1, 1997, the Company has increased the monthly distribution to 8.7% per annum
on weighted average shares.
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.
Cash Flows From Operating Activities
Net cash provided by operating activities increased by approximately
$3,885,778 for the six months ended June 30, 1997 to $5,520,586 from $1,634,808
for the same period in 1996. This increase is due primarily to an increase in
net income for the six months ended June 30, 1997, as compared to the net
income for the six months ended June 30, 1996. This increase in net income is
due to the purchase of additional properties. As of June 30, 1997, the Company
had acquired thirty-three properties, as compared to ten properties as of June
30, 1996.
Cash Flows From Investing Activities
During the six months ended June 30, 1997, the Company utilized
$69,320,114 in investing activities for the purchase of twelve properties, as
compared to the $12,519,834 utilized in the six months
2
<PAGE> 4
ended June 30, 1996 for the purchase of four properties. In addition, the
Company made initial deposits totaling $24,494,140 for the purchase of two
centers to be completed in late 1997.
Cash Flows From Financing Activities
For the six months ended June 30, 1997, the Company generated
$76,614,494 of cash flows from financing activities as compared to $19,505,082
of cash flows generated from financing activities for the six months ended June
30, 1996. This increase is due primarily to the increase in proceeds raised
from the Offering of $63,191,534 for the six months ended June 30, 1997, as
compared to $23,730,034 of Offering proceeds raised for the six months ended
June 30, 1996 and loan proceeds, net of principal payment of debt, received in
the six months ended June 30, 1997. This increase is partially offset by an
increase in the cash used for the payment of Offering costs for the six months
ended June 30, 1997. The increase is also partially offset by an increase in
the amount of distributions paid for the six months ended June 30, 1997 of
$4,202,698 as compared to the distributions paid for the six months ended June
30, 1996 of $1,049,946.
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 June 30, 1997, organizational and
offering costs did not exceed this limitation.
Results of Operations
As of June 30, 1997, subscriptions for a total of 14,583,394 Shares
were received from the public resulting in $144,525,563 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 six months
ended June 30, 1997 and 1996 are calculated as follows:
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
Net income...................................... $ 2,882,164 734,567
Depreciation.................................... 1,639,519 277,500
----------- -----------
Funds from operations (1)....................... 4,521,683 1,012,067
Deferred rent receivable (2).................... (207,655) (41,051)
Rental income received under
Master lease agreements (3) 139,874 194,508
----------- -----------
Funds available for distribution $ 4,453,902 1,165,524
=========== ===========
</TABLE>
3
<PAGE> 5
(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. Reference is made to Note (5) of the Notes to
Financial Statements of the Company.
Total income for the six months ended June 30, 1997 and 1996 was
$11,917,334 and $1,887,655, respectively. This increase was due to the
purchase of additional properties. As of June 30, 1997, the Company had
acquired thirty-three properties, as compared to ten properties as of June 30,
1996. The purchase of additional properties also resulted in increased in
property operating expenses to Affiliates and non-affiliates and depreciation
expense.
The increase in mortgage interest to Affiliates and non-affiliates for
the six months ended June 30, 1997, as compared to the six months ended June
30, 1996, is due to financing placed on previously acquired centers as well as
mortgages assumed as part of the purchases of Regency Point and Aurora Commons.
The mortgages payable totaled $73,130,071 for the six months ended June 30,
1997 as compared to $30,838,233 for the six months ended June 30, 1996. 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 and
six months ended June 30, 1997, as compared to the three and six months ended
June 30, 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.
<TABLE>
<CAPTION>
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
---------- ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Walgreens
Decatur, Illinois 100% 100% 100% 100% 100% 100%
Eagle Crest
Naperville, Illinois 100% 100% 100% 100% 97% 97%
Montgomery-Goodyear
Montgomery, Illinois 100% 100% 100% 100% 77% 77%
Hartford/Naperville Plaza
Naperville, Illinois 100% 100% 100% 100% 100% 100%
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
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
---------- ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nantucket Square
Schaumburg, Illinois 81% 81% 94% 85% 94% 94%
Antioch Plaza
Antioch, Illinois 49% 49% 49% 57% 59% 59%*
Mundelein Plaza
Mundelein, Illinois 100% 100% 100% 100% 100% 96%*
Regency Point
Lockport, Illinois N/A 97% 97% 97% 100% 100%
Prospect Heights
Prospect Heights, N/A 78% 100% 100% 83% 83%*
Illinois
Montgomery-Sears
Montgomery, Illinois N/A 85% 85% 85% 85% 85%*
Zany Brainy
Wheaton, Illinois N/A N/A 100% 100% 100% 100%
Salem Square
Countryside, Illinois N/A N/A 97% 97% 97% 97%*
Hawthorn Village
Vernon Hills, Illinois N/A N/A 99% 98% 97% 98%
Six Corners
Chicago, Illinois N/A N/A N/A 92% 94% 94%
Spring Hill Fashion Ctr.
West Dundee, Illinois N/A N/A N/A 95% 96% 96%
Crestwood Plaza
Crestwood, Illinois N/A N/A N/A 100% 100% 100%
Park St. Clair
Schaumburg, Illinois N/A N/A N/A 100% 100% 100%
Lansing Square
Lansing, Illinois N/A N/A N/A 89% 90% 90%
Summit of Park Ridge
Park Ridge, Illinois N/A N/A N/A 81% 82% 81%*
Grand and Hunt Club
Gurnee, Illinois N/A N/A N/A 100% 100% 100%
Quarry Outlot
Hodgkins, Illinois N/A N/A N/A 100% 100% 100%
Maple Park Place
Bolingbrook, Illinois N/A N/A N/A N/A 99% 97%
Aurora Commons
Aurora, Illinois N/A N/A N/A N/A 99% 100%
Lincoln Park Place
Chicago, Illinois N/A N/A N/A N/A 100% 100%
Ameritech
Joliet, Illinois N/A N/A N/A N/A N/A 100%
Dominicks-Schaumburg
Schaumburg, Illinois N/A N/A N/A N/A N/A 100%
Dominicks-Highland Park
Highland Park, Illinois N/A N/A N/A N/A N/A 100%
Niles Shopping Center
Niles, Illinois N/A N/A N/A N/A N/A 100%
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
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
---------- ------ ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mallard Crossing
Elk Grove Village, N/A N/A N/A N/A N/A 95%
Illinois
Cobblers Crossing
Elgin, Illinois N/A N/A N/A N/A N/A 91%
Calumet Square
Calumet City, Illinois N/A N/A N/A N/A N/A 100%
Sequoia Shopping Center
Milwaukee, Wisconsin N/A N/A N/A N/A N/A 96%
Riversquare Shopping Center
Naperville, Illinois N/A N/A N/A N/A N/A 100%
</TABLE>
* As part of the purchase of these properties the Company receives rent
under master lease agreements on the space which was vacant at the
time of the purchase, resulting in 100% economic occupancy at June 30,
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 90% economic occupancy at June 30, 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 Prospect Heights.
6
<PAGE> 8
Subsequent Events
In July 1997, the Company paid a distribution of $971,540 to the
Stockholders.
As of July 10, 1997, the Company had received subscriptions for a
total of 10,000,000 Shares thereby completing the follow-on Offering. On July
14, 1997, the Company commenced a second follow-on Offering of 20,000,000
Shares plus an additional 1,000,000 Shares available for distribution through
the DRP. As of August 11, 1997, the Company has accepted subscriptions for
951,535 Shares in the second follow-on Offering.
On July 17, 1997, the Company purchased the Rivertree Court Shopping
Center from an unaffiliated third party for approximately $31,750,000. As part
of the acquisitions, the Company assumed the existing first mortgage loan of
$15,700,000. The mortgage requires interest only payments at a rate of 10.03%
per annum, paid monthly, until the maturity date of January 1, 1999. The
property is located in Vernon Hills, Illinois and contains approximately
299,055 square feet of leasable space.
On July 25, 1997, the Company purchased Shorecrest Shopping Center
from an unaffiliated third party for approximately $5,956,000. The property is
located in Racine, Wisconsin and contains approximately 91,177 square feet of
leasable space.
On July 31, 1997, the Company made an additional deposit of $524,390
for the purchase of Oak Forest Commons. The Company earns interest on this
deposit at the rate of 9.3% per annum.
On the behalf of the Company, the Advisor is currently exploring the
purchase of additional shopping centers from unaffiliated third parties.
PLAN OF DISTRIBUTION
The Company commenced the "best efforts" Offering on July 14, 1997,
and as of August 20, 1997 the Company had accepted subscriptions for
1,637,398.15 shares ($14,818,454 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 August 20, 1997, Inland Securities
Corporation was entitled to receive commissions, the Marketing Contribution and
the Due Diligence Expense Allowance Fee totaling $1,555,528 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 $416,000 for the six months
ended June 30, 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 June 30, 1997,
the Company had incurred and paid Advisor Asset Management Fees of $523,000.
7
<PAGE> 9
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheets at June 30, 1997 and December 31, 1996 (unaudited). . . . . . F-1
Statement of Operations for the three and six months ended
June 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . F-3
Statements of Stockholder's Equity at June 30, 1997 and
December 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . F-5
Statement of Cash Flows for the six months ended
June 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements at June 30, 1997 (unaudited). . . . . . . . . F-8
F-i
<PAGE> 10
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
June 30, 1997 and December 31, 1996
(unaudited)
Assets
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment properties (Notes 1, 4 and 5):
Land......................................................... $ 46,784,498 24,705,743
Building and improvements.................................... 135,113,547 69,927,238
------------ -----------
181,898,045 94,632,981
Less accumulated depreciation................................ 2,748,557 1,109,038
------------ -----------
Net investment properties.................................... 179,149,488 93,523,943
Cash and cash equivalents including amounts held
by property manager (Note 1)................................. 16,912,223 8,491,735
Restricted cash (Note 1)............................................. 1,501,442 122,043
Accounts and rents receivable (Note 5)............................... 3,848,015 1,914,756
Deposits and other assets............................................ 2,964,333 95,828
Deferred organization costs (net of accumulated amortization of
$8,239 and $5,492 at June 30, 1997 and December 31, 1996,
respectively (Note 1)........................................ 19,223 21,970
Loan fees (net of accumulated amortization of $69,387
and $11,875 at June 30, 1997 and December 31,1996, respectively)
(Note 1)..................................................... 812,433 338,411
------------ -----------
Total assets................................................. $205,207,157 104,508,686
============ ===========
</TABLE>
F-1
<PAGE> 11
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Balance Sheets
(continued)
June 30, 1997 and December 31, 1996
(unaudited)
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Liabilities:
Accounts payable............................................. $ 486,654 $ 289,912
Accrued offering costs to Affiliates......................... 745,994 298,341
Accrued offering costs to non-affiliates..................... 131,702 4,236
Accrued interest payable to Affiliates....................... 4,680 4,718
Accrued interest payable to non-affiliates................... 5,645 52,402
Accrued real estate taxes.................................... 4,861,649 2,770,889
Distributions payable (Note 7)............................... 971,540 548,947
Security deposits............................................ 485,319 247,769
Mortgages payable (Note 6)................................... 73,130,071 30,838,233
Unearned income.............................................. 369,135 64,590
Other liabilities............................................ 286,097 32,820
Due to Affiliates (Note 2)................................... 325,906 255,591
-------------- --------------
Total liabilities............................................ 81,804,392 35,408,448
-------------- --------------
Stockholders' Equity (Notes 1 and 2):
Common stock, $.01 par value, 24,000,000 Shares
authorized; 14,610,007 and 14,583,394 Shares issued
and outstanding at June 30, 1997 and 8,144,116 and
8,137,766 Shares issued and outstanding at December
31, 1996, respectively....................................... 144,353 81,000
Additional paid-in capital (net of offering costs
of $17,645,988 and $10,500,108 at June 30, 1997 and
December 31, 1996, respectively of which
$14,364,462 and $8,096,213 was paid to Affiliates,
respectively)................................................ 126,494,374 70,512,073
Accumulated distributions in excess of net income.................... (3,235,962) (1,492,835)
Total stockholders' equity................................... -------------- --------------
123,402,765 69,100,238
-------------- --------------
Total liabilities and stockholders' equity........................... $ 205,207,157 104,508,686
============== ==============
</TABLE>
F-2
<PAGE> 12
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Operations
For the three and six months ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income (Notes 1 and 5)........... $4,367,866 845,598 7,971,450 1,320,636
Additional rental income................ 2,348,354 147,334 3,409,861 389,624
Interest income......................... 318,367 80,838 474,803 124,589
Other income............................ 24,976 52,806 61,220 52,806
---------- --------- ---------- ---------
7,059,563 1,126,576 11,917,334 1,887,655
---------- --------- ---------- ---------
Expenses:
Professional services to
Affiliates.............................. 9,970 8,654 19,470 10,654
Professional services to
non-affiliates.......................... 33,515 10,160 63,925 36,228
General and administrative
to Affiliates........................... 21,119 43,532 38,055 51,435
General and administrative
expenses to non-affiliates.............. 34,376 3,797 62,688 5,994
Advisor asset management fee............ 289,663 76,992 523,000 125,532
Property operating expenses
to Affiliates........................... 243,793 42,960 416,330 72,096
Property operating expenses
to non-affiliates....................... 2,355,922 165,149 4,042,846 446,626
Mortgage interest to Affiliates......... 14,059 14,280 58,513 29,323
Mortgage interest to
non-affiliates.......................... 1,096,429 77,804 2,057,716 77,804
Depreciation............................ 897,599 174,409 1,639,519 277,500
Amortization............................ 21,895 1,373 60,259 2,746
Acquisition costs expenses.............. 43,759 8,165 52,849 17,150
---------- --------- ---------- ---------
5,062,099 627,275 9,035,170 1,153,088
---------- --------- ---------- ---------
Net income.............................. $1,997,464 499,301 2,882,164 734,567
========== ========= ========== =========
</TABLE>
F-3
<PAGE> 13
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------- --------
<S> <C> <C> <C> <C>
Net income per weighted average
common stock shares outstanding
(12,617,022 and 3,558,960 for the
three months ended June 30, 1997
and 1996, respectively and
10,945,945 and 2,956,008 for the
six months ended June 30, 1997
and 1996, respectively)................. $ .16 .14 .26 .25
========== ========= ========== =========
</TABLE>
F-4
<PAGE> 14
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statements to Stockholders' Equity
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----- ----------- ------------- -----
<S> <C> <C> <C> <C>
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 $7,145,880)............ 63,556 56,165,479 --- 56,229,035
Repurchases of Shares........................... (34) (30,287) (30,321)
----------- ------------- ------------ ------------
Balance December 31, 1996....................... 81,000 70,512,073 (1,492,835) 69,100,238
Net income...................................... --- --- 2,882,164 2,882,164
Distributions declared
($.42 for the six months ended
June 30, 1997 per weighted
average common stock shares
outstanding)............................. --- --- (4,625,291) (4,625,291)
Proceeds from Offering (net
of Offering costs of $7,145,880) ........ 63,556 56,165,479 --- 56,229,035
Repurchase of Shares............................ (203) (183,178) --- (183,381)
----------- ------------ ------------ ------------
Balance June 30, 1997........................... $ 144,353 126,494,374 (3,235,962) 123,402,765
=========== =========== ============ ============
</TABLE>
F-5
<PAGE> 15
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Statement of Cash Flows
For the six months ended June 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 2, 882,164 734,567
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation....................................... 1,639,519 277,500
Amortization....................................... 60,259 2,746
Rental income under master lease................... 139,874 194,508
Changes in assets and liabilities:
Accounts and rents receivable...................... (1,933,259) (465,358)
Other assets....................................... (374,365) 44,650
Accrued interest payable........................... (46,795) 26,435
Accrued real estate taxes.......................... 2,090,760 356,218
Accounts payable................................... 196,742 204,911
Unearned income.................................... 304,545 24,132
Other current liabilities.......................... 253,277 3,987
Due to Affiliates.................................. 70,315 176,641
Security deposits.................................. 237,550 53,871
------------ -------------
Net cash provided by operating activities.................. 5,520,586 1,634,808
------------ -------------
Cash flows from investing activities:
Restricted cash.................................... (1,379,399) ---
Additions to investment properties................. (520,939) (168,035)
Purchase of investment properties.................. (69,320,114) (12,519,834)
Deposits on investment properties.................. (2,494,140) ---
------------ -------------
Net cash used in investing activities...................... (73,714,592) (12,687,869)
------------ -------------
Cash flows from investing activities:
Repayment of note to Affiliate..................... --- (360,000)
Proceeds from offering............................. 63,191,534 23,730,034
Payments of offering costs......................... (6,570,761) (2,796,689)
Loan proceeds...................................... 32,848,379 ---
Loan fees.......................................... (531,534) ---
Distributions paid................................. (4,202,698) (1,049,946)
Principal payments of debt......................... (8,120,426) (18,317)
------------ -------------
Net cash provided by financing activities.................. 76,614,494 19,505,082
------------ -------------
</TABLE>
F-6
<PAGE> 16
<TABLE>
<CAPTION>
1997 1996
------ -----
<S> <C> <C>
Net increase in cash and cash equivalents......................... 8,420,488 8,452,021
Cash and cash equivalents at beginning of period.................. 8,491,735 738,931
------------ -------------
Cash and cash equivalents at end of period........................ 16,912,223 9,190,952
============ =============
Supplemental schedule of noncash investing and financing activities:
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Purchase of investment properties................................. $(86,883,999) (16,993,010)
Assumption of debt................................................ 9,563,885 4,473,176
Note payable...................................................... 8,000,000 ---
------------ -------------
(69,320,114) (12,519,834)
============ =============
Distributions payable............................................. $ 971,540 269,137
============ =============
</TABLE>
F-7
<PAGE> 17
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
June 30, 1997
(unaudited)
Readers of this Supplement No. 2 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 Supplement.
(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 June 30, 1997, the Company had
received subscriptions for a total of 9,583,394 Shares from the Second
Offering, resulting in $144,525,563 in total gross offering proceeds, including
Shares purchased through the Distribution Reinvestment Program. As of June 30,
1997, the Company has repurchased 26,613 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-8
<PAGE> 18
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
June 30, 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 June 30, 1997 includes $967,290 held in escrow for
the principal payments on the Aurora Commons mortgage payable and $88,298 held
in escrow by the mortgagee for the payment of real estate taxes at Aurora
Commons. Restricted cash at June 30, 1997 also includes amounts held as
vacancy escrows on Cobblers Crossing, Mallard Crossing and Park St. Claire
Shopping Center. Restricted cash at June 30, 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.
Statement of Financial Accounting Standards No. 121 requires the
Partnership to 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. As of
June 30, 1997, the Partnership has not recognized any such impairments on its
properties.
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.
(2) Transactions with Affiliates
As of June 30, 1997, the Company had incurred $17,645,988 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
F-9
<PAGE> 19
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
June 30, 1997
(unaudited)
5.5% or 15% limitations. As of June 30, 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 $1,053,167 and $692,248 as of June 30, 1997 and December 31, 1996,
respectively, of which $2,906 and $120,269 were unpaid as of June 30, 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
$13,311,295 and $7,403,965 as of June 30, 1997 and December 31, 1996,
respectively, of which $743,088 and $270,365 was unpaid as of June 30, 1997 and
December 31, 1996, respectively. As of June 30, 1997, approximately $11,417,000
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 $2,906 remained unpaid at June 30, 1997.
As of June 30, 1997, the Advisor has contributed $200,000 to the
capital of the Company for which it received 20,000 Shares.
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 six months ended Juno 30, 1997, the Company has incurred
$523,000 of such fees, of which $323,000 remains unpaid at June 30, 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 $416,330 and $72,096 for the six months ended June
30, 1997 and 1996, respectively, all of which has been paid.
F-10
<PAGE> 20
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
June 30, 1997
(unaudited)
(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.
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-11
<PAGE> 21
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(Continued)
(4) Investment Properties
<TABLE>
<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) Improvement improvements Total
------- ---------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Single-user Retail
------------------
Walgreen/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
Ameritech
Joliet, IL ................. 05/97 170,000 883,293 --- 170,000 883,293 1,053,293
Dominicks-Schaumburg
Schaumburg, IL ............. 05/97 2,670,250 8,012,450 --- 2,670,250 8,012,450 10,682,700
Dominicks-Highland Park
Highland Park, IL .......... 06/97 3,200,000 9,593,565 --- 3,200,000 9,593,565 12,793,565
Neighborhood Retail Centers
---------------------------
Eagle Crest Shopping Center
Naperville, IL ............. 03/95 1,878,618 2,938,352 115,828 1,8778,618 3,054,180 4,932,798
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 (163,744) 268,000 1,196,701 1,464,701
</TABLE>
F-12
<PAGE> 22
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
(4) Investment Properties
<TABLE>
<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) Improvement improvements Total
------ -------- ------------ ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mundelein Plaza
Mundelein, IL......... 03/96 1,695,000 3,965,560 (38,493) 1,695,000 3,927,067 5,622,067
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 (31,192) 768,000 2,682,981 3,450,981
----------- ---------- -------- ---------- ---------- ----------
Subtotal.............. $16,273,498 45,241,687 (227,477) 16,273,498 45,014,210 61,287,708
Salem Square
Countryside, IL....... 08/96 1,735,000 4,449,217 (17,250) 1,735,000 4,431,967 6,166,967
Hawthorn Village
Vernon Hills, IL...... 08/96 2,619,500 5,887,640 34,880 2,619,500 5,922,520 8,542,020
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 (203) 1,794,000 7,415,193 9,209,193
Crestwood Plaza
Crestwood, IL......... 12/96 325,577 1,483,183 4,750 325,577 1,487,933 1,813,510
Park St. Claire
Schaumburg, IL........ 12/96 319,578 1,205,672 225,636 319,578 1,431,308 1,750,886
Lansing Square
Lansing, IL........... 12/96 4,075,000 12,179,383 15,358 4,075,000 12,194,741 16,269,741
Summit of Park Ridge
Park Ridge, IL........ 12/96 672,000 2,497,950 (143) 672,000 2,497,807 3,169,807
</TABLE>
F-13
<PAGE> 23
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
(4) Investment Properties
<TABLE>
<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 improvement Basis (B) Improvement improvements
------ --------- --------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Grand and Hunt Club
Gurnee, IL................ 12/96 969,840 2,622,575 (53,343) 969,840 2,569,232
Quarry Outlot
Hodgkins, IL.............. 12/96 522,000 1,278,431 6,851 522,000 1,285,282
Maple Park Place
Bolingbrook, IL........... 01/97 3,115,005 12,220,332 5,448 3,115,005 12,225,780
Aurora Commons
Aurora, IL................ 01/97 3,220,000 8,318,661 3,434 3,220,000 8,322,095
Lincoln Park Place
Chicago, IL............... 01/97 819,000 1,299,902 3,526 819,000 1,303,428
----------- ----------- ----- ---------- -----------
Subtotal $37,899,998 110,638,181 1,467 37,899,998 100,639,648
Niles Shopping Center
Niles, IL................. 04/97 850,000 2,408,467 --- 850,000 2,408,467
Mallard Crossing
Elk Grove Village, IL..... 05/97 2,030,000 6,080,610 --- 2,030,000 6,080,610
Cobblers Crossing
Elgin, IL................. 05/97 3,200,000 7,763,940 --- 3,200,00 7,763,940
Calumet Square
Calumet City, IL.......... 06/97 527,000 1,504,316 --- 527,000 1,504,316
Sequoia Shopping Center
Milwaukee, WI............. 06/97 752,500 2,266,750 --- 752,500 2,266,750
<CAPTION>
Gross amount at which carried
at end of period
-----------------------------
Total
-----
<S> <C>
Grand and Hunt Club
Gurnee, IL................ 3,539,072
Quarry Outlot
Hodgkins, IL.............. 1,807,282
Maple Park Place
Bolingbrook, IL...........
Aurora Commons 15,340,785
Aurora, IL................
Lincoln Park Place 11,542,095
Chicago, IL...............
2,122,428
-----------
Subtotal 148,539,646
Niles Shopping Center
Niles, IL................. 3,258,467
Mallard Crossing
Elk Grove Village, IL..... 8,110,610
Cobblers Crossing
Elgin, IL................. 10,963,940
Calumet Square
Calumet City, IL.......... 2,031,316
Sequoia Shopping Center
Milwaukee, WI............. 3,019,250
</TABLE>
F-14
<PAGE> 24
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
(4) Investment Properties
<TABLE>
<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 improvement Basis (B) Improvement improvements
----------- ----------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Riversquare Shopping Center
Center
Naperville, IL .............. 06/97 1,525,000 4,452,958 (3,142) 1,525,000 4,449,816
---------- ----------- ------ ---------- -----------
46,784,498 135,115,222 (1,675) 46,784,498 135,113,547
Total ========== =========== ====== ========== ===========
<CAPTION>
Gross amount at which carried
at end of period
---------------------------------
Total
------
<S> <C>
Riversquare Shopping Center
Center
Naperville, IL .............. 5,974,816
-----------
181,898,045
Total ===========
</TABLE>
(A) The initial cost to the Company, represents the original purchase price of
the property, including amounts incurred subsequent to acquisition, which
were contemplated at the time the property was acquired.
(B) Adjustments to basis includes additions to investment properties and
payments received under master lease agreements. As part of several
purchases, the Company will receive rent under master lease agreements on
the spaces currently vacant for periods ranging from one to two years or
until the spaces are leased. Generally Accepted Accounting Principles
("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 $710,568 and $570,694
as of June 30, 1997 and December 31, 1996, respectively. (Note 5)
F-15
<PAGE> 25
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes Financial Statements
(continued)
June 30, 1997
(unaudited)
(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 $207,655 and $41,051
for the six months ended June 30, 1997 and 1996, of rental income for the
period of occupancy for which stepped rent increases apply and $339,293 and
$131,638 in related accounts receivable as of June 30, 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-16
<PAGE> 26
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
(6) Mortgages and Note Payable
Mortgages payable consist of the following at June 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
Current Current Balance at
Property as Interest Maturity Monthly June 30, December
Collateral Rate Date Payment (a) 1997 31, 1996
---------- ---- ---- ----------- ---- --------
<S> <C> <C> <C> <C> <C>
Mortgage payable to Affiliate: 7.655% 05/2004 $5,689 $733,622 739,543
Walgreens 7.4875% 08/2000 (b) 4,397,906 4,428,690
Mortgages payable to 7.850% 10/2003 15,373 2,350,000 2,350,000
non-affiliates:
Regency Point 7.850% 10/2003 14,392 2,200,000 2,200,000
Eagle Crest 7.850% 10/2003 5,724 875,000 875,000
Nantucket Square 7.850% 10/2003 18,382 2,810,000 2,810,000
Antioch Plaza 7.850% 10/2003 4,121 630,000 630,000
Mundelein Plaza 7.850% 08/2003 10,761 1,645,000 1,645,000
Montgomery-Sears 7.850% 08/2003 15,111 2,310,000 2,310,000
Hartford/Naperville 7.590% 01/2004 7,875 1,245,000 1,245,000
Zany Brainy 7.590% 01/2004 6,926 1,095,000 1,095,000
Prospect Heights Plaza 7.590% 01/2004 27,071 4,280,000 4,280,000
Hawthorn Village 7.590% 01/2004 19,608 3,100,000 3,100,000
Commons
Six Corners Plaza 7.590% 01/2004 19,797 3,130,000 3,130,000
Salem Square Shopping 7.800% 01/2004 52,975 8,150,000 ---
Center
Lansing Square 7.800% 01/2004 30,485 4,690,000 ---
Spring Hill Fashion 9.000% 10/2001 85,423 9,480,163 ---
Mall
Aurora Commons (c) 6.8375% 06/2004 (d) 7,650,000 ---
Maple Park Place 6.8375% 06/2004 (d) 5,345,500 ---
Dominicks-Schaumburg 6.8375% 06/2004 (d) 1,600,000 ---
Summit Park Ridge 6.8375% 06/2004 (d) 1,050,000 ---
Lincoln Park Place 6.8375% 06/2004 (d) 904,380 ---
Park St. Claire 6.8375% 06/2004 (d) 762,500 ---
Quarry 6.8375% 06/2004 (d) 900,000 ---
1,796,000 ---
Grand/Hunt Club 6.8375% 06/2004 (d) ----------------------------
Mortgages Payable................................................................ $73,130,071 30,838,233
============================
</TABLE>
F-17
<PAGE> 27
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes Financial Statements
(continued)
June 30, 1997
(unaudited)
(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%.
(d) Payments on this mortgage are based on a floating interest rate of 115
basis points over the 30-day LIBOR rate, which adjusts monthly.
(7) Deposits on Investment Properties
On February 7, 1997, the Company made an initial deposit of $1,228,510 for
the purchase of Oak Forest Commons. The balance of the purchase price,
approximately $10,607,000 will be paid upon completion of the redevelopment 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 redevelopment 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 July 10, 1997, the Company had received subscriptions for a total@of
10,000,000 Shares thereby completing the follow-on Offering. On July 14, 1997,
the Company commenced a second follow-on Offering of 20,000,000 Shares plus an
additional 1,000,000 Shares available for distribution through the DRP. As of
August 11, 1997, the Company has accepted subscriptions for 951,535 Shares in
the second follow-on Offering.
F-18
<PAGE> 28
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Financial Statements
(continued)
June 30, 1997
(unaudited)
In July 1997, the Company paid a distribution of $971,540 to the
Stockholders.
On July 17, 1997, the Company purchased the Rivertree Court Shopping Center
from an unaffiliated third party for approximately $31,750,000. As part of the
acquisitions, the Company assumed the existing first mortgage loan of
$15,700,000. The mortgage requires interest only payments at a rate of 10.03%
per annum, paid monthly, until the maturity date of January 1, 1999. The
property is located in Vernon Hills, Illinois and contains approximately
299,055 square feet of leasable space.
On July 25, 1997, the Company purchased Shorecrest Shopping Center from an
unaffiliated third party for approximately $5,956,000. The property is located
in Racine, Wisconsin and contains approximately 91,177 square feet of leasable
space.
On July 31, 1997, the Company made an additional deposit of $524,390 for
the purchase of Oak Forest Commons. The Company earns interest on this deposit
at the rate of 9.3% per annum.
F-19
