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As filed with the Securities and Exchange Commission on March 3, 1997.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: January 24, 1997
(Date of earliest event reported)
INLAND REAL ESTATE CORPORATION
(Exact name of registrant as specified in the charter)
Maryland 000-28382 36-3953261
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60521
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
n/a
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Aurora Commons Shopping Center, Aurora, Illinois
On January 24, 1997, the Company acquired a Neighborhood Retail Center
located at Route 31 and Indian Trail Road in Aurora, Illinois known as Aurora
Commons Shopping Center ("Aurora Commons") from Aurora Commons Limited
Partnership and Northpoint Two Limited Partnership, unaffiliated third parties,
for approximately $11.5 million. The purchase price was funded using cash and
cash equivalents as well as by issuing a note assuming the existing first
mortgage (the "Mortgage") granted in favor of the John Hancock Life Insurance
Company, which has a remaining principal balance of approximately $9.58
million. The Mortgage requires the payment of interest only at a rate of 9.0%
per annum until the maturity date of October 31, 2001 and is cross defaulted
with a separate mortgage on the Southpoint Shopping Center located in Arlington
Heights, Illinois, which was simultaneously acquired by an Affiliate of the
Advisor. The purchase price for Aurora Commons was approximately $90.19 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. The Directors, including all of the
Independent Directors, have approved this acquisition.
Aurora Commons was built in 1988 and consists of a one-story building
aggregating 127,510 rentable square feet. As of January 24, 1997, Aurora
Commons was 100% leased. In evaluating Aurora Commons 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 in a vibrant economic area. Although 51% of the rentable
square feet at Aurora Commons 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.
The Company does not anticipate making any significant repairs and
improvements to Aurora Commons over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.
The table below sets forth certain information with respect to the
occupancy rate at Aurora Commons expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ -------------------- ---------------
<S> <C> <C>
1996 98% $9.12
1995 98% $9.11
1994 96% $8.86
1993 97% $8.05
1992 99% $8.64
</TABLE>
The sole tenant leasing more than 10% of the total square footage is
Jewel/Osco, which leases 64,965 square feet, or approximately 51% of the
rentable square feet. Jewel/Osco is a regional grocery/ pharmacy chain. The
lease with Jewel/Osco requires Jewel/Osco to pay base rent equal to $6.00 per
square foot per annum payable monthly until August 31, 2009. The Jewel/Osco
lease contains no option to renew.
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For federal income tax purposes, the Company's depreciable basis in
Aurora Commons will be approximately $10,040,000. Depreciation expense, for
tax purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1996 for the tax year ended 1995 (the
most recent tax year for which information is available) were $274,807. The
real estate taxes payable were calculated by multiplying Aurora Commons'
equalized value by a tax rate of 7.9302%.
At January 24, 1997, a total of 127,510 square feet were leased to
twenty-four tenants at Aurora Commons. The following tables set forth certain
information with respect to the amount of and expiration of leases at this
Neighborhood
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Retail Center.
<TABLE>
<CAPTION> Rent
Square Current per
Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ----- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Colortyme 2,396 10/1999 none $34,740 14.50
H&R Block 1,954 12/1999 none 31,948 16.35
Thang Ngo
Restaurant 1,954 12/2000 none 23,937 12.25
Sally Beauty
Supply 1,954 11/1999 1/5 yr. 31,264 16.00
Fashions $10 1,954 10/1998 none 28,333 14.50
Modern Times 1,667 12/1999 none 24,338 14.60
Hair Cuttery 1,498 02/2002 none 28,462 19.00
Interim
Personnel 1,005 10/1999 none 15,849 15.77
Hollywood
Nails 1,039 05/1997 none 18,183 17.50
Payless Shoes 2,553 05/1997 none 40,695 15.94
Norwest
Financial 1,593 10/1999 1/2 yr. 23,497 14.75
Sizes
Unlimited 7,051 4/2007 none 70,510 10.00
Dots 3,455 1/1999 1/5 yr. 43,188 12.50
Aurora Travel 666 1/1998 none 16,250 24.40
Trak Auto 5,931 1/2000 1/5 yr. 62,276 10.50
Famous
Footwear 6,647 10/2001 1/10 yr. 59,823 9.00
Dollar Bills 3,873 1/2001 none 46,476 12.00
Jewel/Osco 64,965 08/2009 none 389,790 6.00
Cigarettes
Cheaper 1,023 02/1999 1/3 yr. 17,391 17.00
One-hour
Photo 865 06/1998 none 13,606 15.73
Red Wing
Shoes 1,106 12/1999 1/3 yr. 15,484 14.00
Royal
Jewelers 1,388 11/1999 1/3 yr. 26,372 19.00
Blockbuster
Video 7,890 11/1999 1/5 yr. 108,488 13.75
Boston Market 3,083 05/1997 1/10 yr. 33,790 10.96
</TABLE>
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<TABLE>
<CAPTION>
Average Percent
Base of Total Percent
Approx. Rent Per Building of Annual
GLA of Annual Square GLA Base Rent
Number Expiring Base Rent Total Foot Repre- Repre-
Year of Leases of Annual Under sented by sented by
Ending Leases (square Expiring Base Expiring Expiring Expiring
December 31, Expiring feet) Leases Rent(1) Leases Leases Leases
-------- -------- ----- ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 3 6,675 $ 94,929 $ 1,209,099 $14.22 5.23% 7.85%
1998 3 3,485 59,249 1,125,863 17.00 2.73 5.26
1999 11 25,431 358,406 1,075,883 14.09 19.94 3.33
2000 2 7,885 89,241 695,871 11.32 6.18 12.82
2001 2 10,520 114,045 609,858 10.84 8.25 18.70
2002 1 1,498 28,462 495,813 19.00 1.17 5.74
2003 none none none 472,052 none none none
2004 none none none 474,402 none none none
2005 none none none 474,402 none none none
2006 none none none 474,402 none none none
(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 Aurora Commons property,
as of January 1, 1997, of $11.6 million. Appraisals are estimates of value and
should not be relied on as a measure of true worth or realizable value.
Lincoln Park Place Shopping Center, Chicago, Illinois
On January 24, 1997, the Company acquired a Neighborhood Retail Center
located at 666-670 West Diversey Parkway in Chicago, Illinois known as Lincoln
Park Place Shopping Center ("Lincoln Park") from Clark & Diversey Limited
Partnership, an unaffiliated third party, for approximately $2.1 million.
The Company funded the purchase using: (i) the proceeds of a short-term loan
maturing February 3, 1997 in the amount of approximately $2.0 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 9% per annum. A majority of the Company's board, including a
majority of the Independent Directors, have approved the terms and conditions
of the Short-Term Loan. The Company repaid the Short-Term Loan on January 25,
1997 using the proceeds of two loans (the "Mortgage Loans") totaling
$12,840,000 from an unaffiliated lender. The Company paid a 1.25% fee in
connection with these Mortgage Loans. The Mortgage Loans have a term of seven
years and, prior to the maturity date, require payments of interest only, at a
rate of 7.8% per year, fixed for the first five years with interest for the
remaining two years payable at an annual rate equal to the prime rate plus
0.5%. The purchase price for Lincoln Park was approximately $172.26 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.
Lincoln Park was built in 1990 consists of a one-story building
aggregating 10,678 rentable square feet. As of January 24, 1997, Lincoln Park
was 100% leased. In evaluating Lincoln Park as a potential acquisition, the
Company
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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 in a
vibrant economic area. Although 100% of the rentable square feet at Lincoln
Park is leased to two tenants, the Company's management believes that
retenanting of any space which is vacated in the future should be accomplished
relatively quickly and at rental rates comparable to those currently paid by
the tenants at the facility. The Company did not consider any other factors
materially relevant to the decision to acquire the property.
The Company does not anticipate making any significant repairs and
improvements to Lincoln Park over the next few years. Nevertheless, a
substantial portion of any such cost would be paid by the tenants.
The table below sets forth certain information with respect to the
occupancy rate at Lincoln Park expressed as a percentage of total gross
leasable area and the average effective annual base rent per square foot.
<TABLE>
<CAPTION>
Occupancy Rate
Year Ending as of December 31 Effective Annual Rental
December 31, of Each Year Per Square Foot
------------ -------------------- ---------------
<S> <C> <C>
1996 100% $21.37
1995 100% $15.77
1994 69% $17.13
1993 100% $22.38
1992 69% $19.15
</TABLE>
Tenants leasing more than 10% of the total square footage are
Lechter's Housewares ("Lechter's"), which leases 6,375 square feet, or
approximately 59.7% of the rentable square feet and Nordic Trak, which leases
4,303 square feet, or approximately 40.3% of the rentable square feet. Nordic
Trak is a manufacturer and retailer of exercise equipment. The lease with
Lechter's requires Lechter's to pay base rent equal to $22.00 per square foot
per annum payable monthly until March 31, 2001. The lease with Lechter's also
grants Lechter's two options to renew the lease for five-year terms. If the
first option is exercised, Lechter's will be required to pay a base rent of
$25.00 per square foot per annum payable monthly from April 1, 2001 until March
31, 2006. If the second option is exercised, Lechter's will be required to pay
a base rent of $29.00 per square foot per annum payable monthly from April 1,
2006 until March 31, 2011. The lease with Nordic Trak requires Nordic Trak to
pay base rent equal to $22.00 per square foot per annum payable monthly until
October 31, 1997 and $23.00 per square foot per annum payable monthly until
October 31, 1999. The Nordic Trak lease contains no option to renew.
For federal income tax purposes, the Company's depreciable basis in
Lincoln Park will be approximately $1,280,000. Depreciation expense, for tax
purposes, will be computed using the straight-line method. Buildings and
improvements are depreciated based upon estimated useful lives of 40 years.
Real estate taxes payable in 1996 for the tax year ended 1995 (the
most recent tax year for which information is available) were $82,674. The
real estate taxes payable were calculated by multiplying Lincoln Park's
assessed value by an equalizer of 2.1243 and a tax rate of 9.755%.
At January 24, 1997, a total of 10,678 square feet were leased to two
tenants at Lincoln Park. The following
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tables set forth certain information with respect to the amount of and
expiration of leases at this Neighborhood Retail Center.
<TABLE>
<CAPTION>
Square Current Rent per
Feet Lease Renewal Annual Square
Lessee Leased Ends Options Rent Foot
------ ------ ----- ------- ---- ------
<S> <C> <C> <C> <C> <C>
Nordic Track 4,303 10/1999 none $94,666 $22.00
Lechter's 6,375 03/2001 2/5 140,250 $22.00
</TABLE>
<TABLE>
<CAPTION>
Average
Base Percent of
Rent Total Percent
Approx. Per Building of Annual
GLA of Annual Square GLA Base Rent
Number Expiring Base Rent Total Foot Represented Represented
Year of Leases of Annual Under by by
Ending Leases (square Expiring Base Expiring Expiring Expiring
December 31, Expiring feet) Leases Rent(1) Leases Leases Leases
------------ ------- ----- ------ ---- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 none none none $235,633 none none none
1998 none none none 239,219 none none none
1999 1 4,303 $98,969 239,219 $23.00 40.3% 41.4%
2000 none none none 140,250 none none none
2001 1 6,375 140,250 140,250 22.00 59.7% 100.0%
(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 Lincoln Park property, as
of January 17, 1997, of $2,120,000. Appraisals are estimates of value and
should not be relied on as a measure of true worth or realizable value.
Item 7. Financial Statements and Exhibits
To be subsequently filed.
7
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Inland Real Estate Corporation
(Registrant)
By: /s/ Kelly Tucek
---------------------------------
Kelly Tucek
Chief Financial and
Accounting Officer
Date: March 3, 1997
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