UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File #0-28382
Inland Real Estate Corporation
(Exact name of registrant as specified in its charter)
Maryland #36-3953261
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2901 Butterfield Road, Oak Brook, Illinois 60523
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 630-218-8000
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of May 12, 1999, there were 54,235,166 Shares of Common Stock outstanding.
-1-
PART I - Financial Information
Item 1. Financial Statements
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
(unaudited)
Assets
------
1999 1998
Investment properties (Note 3): ---- ----
Land............................................ $215,294,801 193,093,898
Construction in progress........................ 1,474,408 1,230,448
Building and improvements....................... 504,296,439 452,885,969
------------- -------------
721,065,648 647,210,315
Less accumulated depreciation................... 21,490,952 17,161,998
------------- -------------
Net investment properties....................... 699,574,696 630,048,317
------------- -------------
Cash and cash equivalents including amounts
held by property manager........................ 75,693,064 123,056,702
Restricted cash................................... 15,905,450 15,613,197
Accounts and rents receivable (net of allowance
for doubtful account of $200,000 at March 31,
1999 and December 31, 1998) (Note 4)............ 15,641,483 12,720,962
Deposits and other assets........................ 1,502,807 2,854,836
Deferred organization costs (net of accumulated
amortization of $36,223 and $16,477 at March 31,
1999 and December 31, 1998, respectively)....... - 19,746
Loan fees (net of accumulated amortization
of $512,307 and $395,962 at March 31, 1999 and
December 31, 1998, respectively)................ 3,215,678 3,294,787
------------- -------------
Total assets.................................. $811,533,178 787,608,547
============= =============
See accompanying notes to consolidated financial statements.
-2-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
(continued)
March 31, 1999 and December 31, 1998
(unaudited)
Liabilities and Stockholders' Equity
------------------------------------
1999 1998
Liabilities: ---- ----
Accounts payable................................ $ 475,942 917,483
Accrued offering costs to Affiliates............ - 890,786
Accrued offering costs to non-affiliates........ 43,044 2,740
Accrued interest payable to Affiliates.......... 4,536 4,558
Accrued interest payable to non-affiliates...... 1,697,377 1,651,334
Accrued real estate taxes....................... 14,506,948 14,384,234
Distributions payable (Note 8).................. 4,075,436 3,844,649
Security deposits............................... 1,824,622 1,561,020
Mortgages payable (Note 5)...................... 299,612,439 288,982,470
Unearned income................................. 1,757,556 448,809
Other liabilities............................... 5,190,009 5,208,755
Due to Affiliates (Note 2)...................... 397,854 32,925
------------- -------------
Total liabilities............................. 329,585,763 317,929,763
------------- -------------
Minority interest (Note 1)........................ 5,113,884 5,214,298
------------- -------------
Stockholders' Equity (Notes 1 and 2):
Preferred stock, $.01 par value, 6,000,000 Shares
authorized; none issued and outstanding at
March 31, 1999 and December 31, 1998.......... - -
Common stock, $.01 par value, 100,000,000 Shares
authorized; 54,063,321 and 52,394,500, issued
and outstanding at March 31, 1999 and December
31, 1998, respectively........................ 540,633 523,945
Additional paid-in capital (net of offering
costs of $58,812,006 and $57,536,374 at March
31, 1999 and December 31, 1998, respectively,
of which $52,212,645 and $51,108,966 was paid
to Affiliates, respectively).................. 498,225,423 481,271,094
Accumulated distributions in excess
of net income................................. (21,932,525) (17,330,553)
------------- -------------
Total stockholders' equity.................... 476,833,531 464,464,486
------------- -------------
Total liabilities and stockholders' equity........ $811,533,178 787,608,547
============= =============
See accompanying notes to consolidated financial statements.
-3-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Operations
For the three months ended March 31, 1999 and 1998
(unaudited)
1999 1998
---- ----
Income:
Rental income (Notes 1 and 4)................... $ 18,626,079 9,424,416
Additional rental income........................ 6,920,571 3,020,925
Interest income................................. 1,526,372 776,364
Other income.................................... 117,339 46,791
------------- -------------
27,190,361 13,268,496
------------- -------------
Expenses:
Professional services to Affiliates............. 22,782 18,000
Professional services to non-affiliates......... 140,970 98,198
General and administrative expenses
to Affiliates................................. 146,401 70,761
General and administrative expenses
to non-affiliates............................. 83,908 31,056
Advisor asset management fee.................... 325,000 432,183
Property operating expenses to Affiliates....... 1,071,754 494,528
Property operating expenses to non-affiliates... 7,948,188 3,466,494
Mortgage interest to Affiliates................. 13,629 13,888
Mortgage interest to non-affiliates............. 5,644,168 2,318,476
Depreciation.................................... 4,328,954 2,200,954
Amortization.................................... 27,119 42,507
Acquisition cost expenses to Affiliates......... 214,704 30,000
Acquisition cost expenses to non-affiliates..... 119,458 14,036
------------- -------------
20,087,035 9,231,081
------------- -------------
Income before minority interest in earnings... 7,103,326 4,037,415
Minority interest in earnings................... (438) -
------------- -------------
Net income.................................... $ 7,102,888 4,037,415
============= ============
Basic and diluted net income per common share... $ .13 .14
============= ============
Weighted average common stock Shares
outstanding, basic and diluted.................. 53,766,942 29,073,250
============= ============
See accompanying notes to consolidated financial statements.
-4-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Stockholders' Equity
March 31, 1999 and December 31, 1998
(unaudited)
Accumulated
Additional Distributions
Common Paid-in in excess of
Stock Capital net income Total
----------- ------------ ------------ -----------
Balance December 31, 1998... $ 523,945 481,271,094 (17,330,553) 464,464,486
Net income.................. - - 7,102,888 7,102,888
Distributions declared
($.22 for the three months
ended March 31, 1999 per
weighted average common
stock shares outstanding). - - (11,704,860) (11,704,860)
Proceeds from Offering (net
of Offering costs of
$1,275,632 and
subscriptions receivable.. 17,880 18,031,543 - 18,049,423
Repurchases of Shares....... (1,192) (1,077,214) - (1,078,406)
----------- ------------ ------------ ------------
Balance March 31, 1999...... $ 540,633 498,225,423 (21,932,525) 476,833,531
=========== ============ ============ ============
See accompanying notes to consolidated financial statements.
-5-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1999 and 1998
(unaudited)
1999 1998
Cash flows from operating activities: ---- ----
Net income.................................... $ 7,102,888 4,037,415
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................ 4,328,954 2,200,954
Amortization................................ 27,119 42,507
Minority interest in earnings............... 438 -
Rental income under master lease agreements. 515,250 542,940
Straight line rental income................. (437,795) (289,037)
Interest on unamortized loan fees........... 108,972 -
Changes in assets and liabilities:
Accounts and rents receivable............. (2,482,726) (2,837,201)
Other assets.............................. 1,352,029 (128,019)
Accounts payable.......................... 310,191 210,755
Accrued interest payable.................. 46,021 304,864
Accrued real estate taxes................. 122,714 2,178,186
Security deposits......................... 263,602 280,657
Deposits held for others.................. (649,510) -
Other liabilities......................... (18,746) 1,013,317
Due to Affiliates......................... 364,929 163,494
Unearned income........................... 1,308,747 470,973
-------------- --------------
Net cash provided by operating activities....... 12,263,077 8,191,805
-------------- --------------
Cash flows from investing activities:
Restricted cash............................... 357,257 (1,107,324)
Additions to investment properties, net of
related payables........................... (1,257,077) (49,282)
Purchase of investment properties............. (63,268,526) (114,437,960)
Construction in progress...................... (243,960) -
Land Donation................................. 1,117,151 -
Deposits on investment properties............. - 3,018,530
-------------- --------------
Net cash used in investing activities........... (63,295,155) (112,576,036)
-------------- --------------
See accompanying notes to consolidated financial statements.
-6-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
(continued)
For the three months ended March 31, 1999 and 1998
(unaudited)
Cash flows from financing activities:
Proceeds from offering........................ 19,325,055 108,707,257
Repurchase of Shares.......................... (1,078,406) -
Payments of offering costs.................... (2,126,114) (10,225,219)
Loan proceeds................................. - 38,702,000
Loan fees..................................... (37,236) (481,928)
Distributions paid............................ (11,574,925) (5,592,993)
Principal payments of debt.................... (839,934) (662,254)
-------------- --------------
Net cash provided by financing activities....... 3,668,440 130,446,863
-------------- --------------
Net increase (decrease) in cash and
cash equivalents.............................. (47,363,638) 26,062,632
Cash and cash equivalents at beginning of period 123,056,702 51,145,587
-------------- --------------
Cash and cash equivalents at end of period...... $ 75,693,064 77,208,219
============== =============
Supplemental schedule of noncash investing and financing activities:
1999 1998
---- ----
Purchase of investment properties................ $(74,738,429) (123,937,960)
Assumption of mortgage debt.................... 11,469,903 9,500,000
-------------- --------------
$(63,268,526) (114,437,960)
============= ==============
Distributions payable............................ $ 4,040,698 2,447,251
============= =============
Cash paid for interest........................... $ 5,564,385 2,027,500
============= =============
See accompanying notes to consolidated financial statements.
-7-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
March 31, 1999
(unaudited)
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-
X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. Readers of this Quarterly
Report should refer to the audited financial statements of Inland Real Estate
Corporation (the "Company") for the fiscal year ended December 31, 1998, which
are included in the Company's 1998 Annual Report, as certain footnote
disclosures contained in such audited financial statements have been omitted
from this Report. In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been included
in this quarterly report.
(1) Organization and Basis of Accounting
The Company was formed on May 12, 1994. The Company may acquire existing
Neighborhood Retail Centers and Community Centers located primarily within an
approximate 400-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. The Company is also permitted to construct or
develop properties, or render services in connection with such development or
construction, subject to the Company's compliance with the rules governing real
estate investment trusts under the Internal Revenue Code of 1986, ("Code"), as
amended. 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, ("Initial Offering") of 5,000,000 shares of common stock
("Shares") at $10 per Share. 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 at $10.00 per Share, on a best efforts basis, (the "Second
Offering"). As of July 10, 1997, the Company had received subscriptions for a
total of 10,000,000 Shares, thereby completing the Second Offering. On July
14, 1997, the Company commenced an offering of an additional 20,000,000 Shares
at $10.00 per Share, on a best efforts basis, (the "Third Offering"). As of
March 19, 1998, the Company had received subscriptions for a total of
20,000,000 Shares, thereby completing the Third Offering. On April 7, 1998,
the Company commenced an offering of an additional 27,000,000 Shares at $11.00
per Share, on a best efforts basis, (the "Fourth Offering"). In order to
maximize the Company's flexibility in evaluating strategic alternatives, the
Board of Directors decided to terminate the Fourth Offering on December 31,
1998. The Company received subscriptions for a total of 16,642,397 Shares in
the Fourth Offering. In addition, as of March 31, 1999, the Company has issued
2,738,459 Shares through the Company's Distribution Reinvestment Program
("DRP"). As of March 31, 1999, the Company has repurchased a total of 317,535
Shares through the Share Repurchase Program. As a result, as of March 31,
1999, Gross Offering Proceeds total $557,578,062, net of Shares repurchased
through the Share Repurchase Program.
-8-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
The preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from management's estimates.
In the opinion of management, the financial statements contain all the
adjustments necessary, which are of a normal recurring nature, to present
fairly the financial position and results of operations for the period
presented herein. Results of interim periods are not necessarily indicative of
results to be expected for the year.
The consolidated financial statements include the accounts of the Company and
Joliet Commons LLC, an Illinois limited liability company ("LLC"). The Company
entered into the LLC with an unaffiliated third party (the "Seller") in order
to purchase the Joliet Commons Shopping Center. The transaction was structured
such that the Company contributed approximately $52,000 for a 1% interest in an
LLC and the Seller contributed a property with a value of approximately
$19,733,000 and debt of approximately $14,569,000 to the LLC for a 99%
interest. The company is the managing member of the LLC. Due to the Company's
ability as managing member to directly control the LLC, it is consolidated for
financial reporting purposes. The Seller's interest is reflected as a minority
interest in the accompanying consolidated financial statements.
(2) Transactions with Affiliates
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to each of the
Offerings. Such expenses include postage, data processing and marketing and
are reimbursed at cost. The aggregate costs to Affiliates incurred relating to
the Offerings were $1,641,190 and $1,489,541 as of March 31, 1999 and December
31, 1998, respectively, all of which the Company has paid. In addition, an
Affiliate of the Advisor served as Dealer Manager of each of the Offerings and
was entitled to receive selling commissions, a marketing contribution and a due
diligence expense allowance fee from the Company in connection with each of the
Offerings. Such amounts incurred were $51,506,386 and $49,619,425 as of March
31, 1999 and December 31, 1998, respectively, all of which was paid by the
Company. Approximately $43,392,000 and $42,236,000 of these commissions were
passed through from the Affiliate to unaffiliated soliciting broker/dealers as
of March 31, 1999 and December 31, 1998, respectively.
-9-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
As of March 31, 1999, the Company had incurred $58,848,229 of organization and
offering costs to Affiliates and non-affiliates in connection with all of the
Company's offerings. Pursuant to the terms of each of the Offerings, 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 Offerings (the
"Gross Offering Proceeds") or all organization and offering expenses (including
selling commissions) which together exceed 15% of Gross Offering Proceeds. As
of March 31, 1999, organizational and offering costs expenses did not exceed
the 5.5% and 15% limitations.
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. The
Company incurred $325,000 and $432,183 of Advisor Asset Management Fees, for
the three months ended March 31, 1999 and 1998, respectively, all of which
remain unpaid at March 31, 1999 and 1998.
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 $1,071,754, and $494,528 for the three months ended March
31, 1999 and 1998, respectively, all of which the Company has paid.
The Advisor and its Affiliates are entitled to reimbursement for salaries and
expenses of employees of the Advisor and its Affiliates relating to selecting,
evaluating and acquiring properties. The costs relating to properties
purchased are included in building and improvements. The costs relating to
properties not acquired are included in acquisition cost expenses to
Affiliates.
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 of $22,782, $146,401 and $214,704
are included in professional services to Affiliates, general and administrative
expenses to Affiliates and acquisition costs expensed to Affiliates,
respectively for the three months ended March 31, 1999.
-10-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
(3) Investment Properties
As part of several purchases, the Company receives rent under master lease
agreements on the spaces currently vacant for periods ranging from one to two
years or until the spaces are leased. GAAP requires 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 $3,478,079 and $2,962,829 as of March 31, 1999 and December 31,
1998, respectively.
(4) Operating Leases
Certain tenant's 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 consolidated financial statements include increases of $437,795
and $289,037 in 1999 and 1998, of rental income for the period of occupancy
for which stepped rent increases apply and $3,345,362 and $2,907,567 in
related accounts and rents receivable as of March 31, 1999 and December 31,
1998, respectively. The Company anticipates collecting these amounts over the
terms of the related leases as scheduled rent payments are made.
-11-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
(5) Mortgages Payable
Current Current Balance at
Interest Maturity Monthly March 31, Dec. 31,
Rate Date Payment(a) 1999 1998
---------- --------- --------- ------------ -----------
Mortgage payable to Affiliate:
Inland Mortgage
Servicing Corp. (a) 7.65% 05/2004 $ 5,689 $ 711,027 714,443
Mortgages payable to non-affiliates:
Bank One 7.03% 08/2000 (b) 4,293,924 4,312,036
LaSalle National Bank 7.85% 10/2003 57,992 8,865,000 8,865,000
LaSalle National Bank 7.85% 08/2003 25,872 3,955,000 3,955,000
LaSalle National Bank 7.59% 01/2004 81,277 12,850,000 12,850,000
LaSalle National Bank 7.80% 01/2004 83,460 12,840,000 12,840,000
John Hancock (a) (c) 9.00% 10/2001 85,423 9,155,730 9,205,252
LaSalle National Bank 7.65% 06/2004 65,133 10,216,880 10,216,880
LaSalle National Bank 7.49% 06/2004 61,116 9,791,500 9,791,500
LaSalle National Bank 7.23% 01/2005 28,183 4,677,795 4,677,795
Allstate 7.21% 12/2004 38,453 6,400,000 6,400,000
LaSalle National
Bank (d) 3.13% 12/2014 19,740 6,200,000 6,200,000
LaSalle National Bank 7.28% 03/2005 25,041 4,050,000 4,050,000
LaSalle National Bank 6.99% 04/2003 6,827 1,150,000 1,150,000
LaSalle National Bank 7.00% 04/2005 106,404 17,897,500 17,897,500
Allstate 7.00% 02/2005 31,946 5,476,500 5,476,500
Allstate 7.00% 01/2005 23,917 4,100,000 4,100,000
Allstate 7.15% 01/2005 18,173 3,050,000 3,050,000
Allstate 7.10% 03/2003 17,620 2,978,000 2,978,000
Nationwide Life
Insurance Company 8.00% 09/1999 63,333 9,500,000 9,500,000
Allstate 6.65% 05/2005 53,200 9,600,000 9,600,000
Allstate (e) 9.25% 12/2009 30,125 3,908,082 3,908,082
Allstate 6.82% 08/2005 60,243 10,600,000 10,600,000
LaSalle National Bank 6.50% 12/2005 72,123 13,500,000 13,500,000
Allstate 6.66% 10/2003 17,483 3,150,000 3,150,000
-12-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
Current Current Balance at
Interest Maturity Monthly March 31, Dec. 31,
Rate Date Payment(a) 1999 1998
---------- --------- --------- ------------ -----------
Allstate 7.00% 12/2003 65,333 11,200,000 11,200,000
Berkshire Mortgage (a) 7.79% 10/2007 105,719 14,535,915 14,569,482
Woodmen of the World 6.75% 06/2008 26,015 4,625,000 4,625,000
Lehman secured
financing (f) 6.36% 10/2008 299,025 54,600,000 54,600,000
Column secured
financing (g) 7.00% 11/2008 150,695 25,000,000 25,000,000
Principal Life Ins. 6.24% 09/2001 55,820 10,734,585 -
------------ ------------
Mortgages Payable.................................... $299,612,439 288,982,470
============ ============
(a) All payments are interest only, with the exception of the loans secured by
the Walgreens, Regency Point, Aurora Commons and Joliet 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) As part of the purchase of this property, the Company assumed the existing
mortgage-backed Economic Development Revenue Bonds, Series 1994 offered by
the Village of Skokie, Illinois. The interest rate floats and is reset
weekly by a re-marketing agent. The current rate is 3.13%. The bonds are
further secured by an Irrevocable Letter of Credit, issued by LaSalle Bank
at a fee of 1.25% of the bond outstanding. In addition, there is a .125%
re-marketing fee paid annually and a trustee fee of $250 paid quarterly.
On January 15, 1998, the Company made a $600,000 paydown on the principal
outstanding.
-13-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
March 31, 1999
(unaudited)
(e) The seller deposited money into an escrow account, which together with
interest earnings on the deposit, will provide a sum that will be drawn
down on a monthly basis by the Company to reduce the effective interest
rate paid on the loan to 7% per annum for a period of five years.
(f) The Company paid $636,000 of loan fees and $503,295 of other costs
associated with this financing with Lehman Brothers Holdings Inc. This
agreement allowed the Company to secure a rate lock agreement to set the
interest rate at the time of execution of this financing, thus protecting
the Company from future interest rate increases.
(g) The Company paid $37,125 of loan fees and $267,884 of other costs
associated with this financing with Column Financial Inc. This agreement
allowed the Company to secure a rate lock agreement to set the interest
rate at the time of execution of this financing, thus protecting the
Company from future interest rate increases.
(6) Earnings per Share
Basic earnings per share ("EPS") is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed by reflecting the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. As of March 31, 1999
and December 31, 1998 options to purchase 13,500 shares of common stock at
prices ranging from $9.05 to $10.45 per share were outstanding.
As of March 31, 1999, the Company has issued warrants to purchase 1,159,421
shares of common stock at a price of $12.00 per share to soliciting dealers
pursuant to its Offerings. These warrants were not included in the computation
of diluted EPS because the warrants' exercise price was greater than the
average market prices of common shares.
-14-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
(7) Segment Reporting
The Company owns and seeks to acquire single-user retail centers, neighborhood
and community shopping centers in the Midwest, generally consisting of the
states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. All of
the Company's shopping centers are located within in these states. The
Company's shopping centers are typically anchored by grocery and drug stores
complemented with additional stores providing a wide range of other goods and
services to shoppers.
The Company assesses and measures operating results on an individual property
basis for each of its properties based on net property operations. Since all
of the Company's properties exhibit highly similar economic characteristics,
cater to the day-to-day living needs of their respective surrounding
communities, and offer similar degrees of risk and opportunities for growth,the
properties have been aggregated and reported as one operating segment.
The property revenues and property net operations of the reportable segments
are summarized in the following tables as of March 31, 1999 and 1998, and for
the three month periods then ended, along with a reconciliation to net income.
Property asset information is as of March 31, 1999 and December 31, 1998.
1999 1998
---- -----
Total property revenues......... $ 25,663,989 12,492,132
Total property operating
expenses...................... 9,019,942 3,961,022
Mortgage interest................ 5,657,797 2,332,364
------------- -------------
Net property operations.......... 10,986,250 6,198,746
------------- -------------
Interest income.................. 1,526,372 776,364
Less non property expenses:
Professional services.......... 163,752 116,198
General and administrative..... 230,309 101,817
Advisor asset management fee... 325,000 432,183
Depreciation and amortization.. 4,356,073 2,243,461
Acquisition cost expense....... 334,162 44,036
------------- -------------
Net income before minority
interest in earnings........... $ 7,103,326 4,037,415
============= =============
Net investment properties........ $699,217,439 630,048,317
============= =============
-15-
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
(8) Subsequent Events
In April 1999, the Company paid a distribution of $4,075,436 to the
Stockholders.
On April 18, 1999, the Board of Directors approved an increase in Distributions
effective June 1, 1999, payable beginning July 17, 1999, from the current level
of $.88 per Share per annum to $.89 per Share per annum.
Subsequent to March 31, 1999, the Company has purchased three additional
properties from unaffiliated third parties for a total purchase price of
approximately $16,285,000.
On May 10, 1999, the Company entered into a loan commitment in connection with
a $57,450,000 loan between the Company and Bear Stearns Funding, Inc. This
loan was funded May 13, 1999.
On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.
-16-
Item 2. Management's Discussion and Analysis of 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 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
On September 28, 1998, the Board of Directors authorized the Company to engage
Everen Securities, Inc. to advise the Company on strategic alternatives
designed to maximize Stockholder value. These alternative include, but are not
limited to, evaluating whether: (1) the Company should become internally
advised and managed by acquiring the Advisor and the Company's property
manager; (2) the Company should list its common stock on an exchange or other
trading system; and (3) the Company should seek to merge with a third party
that is already listed on an exchange or other trading system. Everen
Securities is expected to complete its advisory engagement by the third quarter
1999.
Cash and cash equivalents consists of cash and short-term investments. Cash
and cash equivalents at March 31, 1999 and December 31, 1998 were $75,693,064
and $123,056,702, respectively. The decrease in cash and cash equivalents
since December 31, 1998 resulted primarily from the use of cash resources to
purchase additional properties since December 31, 1998. The Company intends to
use cash and cash equivalents to purchase additional properties, to pay
distributions and for working capital requirements. The source of future cash
for investing in properties will be from financing obtained on currently
unencumbered properties.
-17-
As of March 31, 1999, the Company had acquired ninety-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. Distributions declared for the three months ended
March 31, 1999 were $11,704,860, 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 imposed by the REIT requirements are met. On an ongoing
basis, as due diligence is performed by the Advisor on potential real estate
purchases or temporary investment of uninvested capital, management determines
that the income from the new asset will qualify for REIT purposes. Beginning
with the tax year ended December 31, 1995, the Company has qualified as a REIT.
Cash Flows From Operating Activities
Net cash provided by operating activities increased from $8,191,805 for the
three months ended March 31, 1998 to $12,263,077 for the three months ended
March 31, 1999. This increase is due primarily to the purchase of additional
properties in 1999 and a full three months of operations on properties acquired
during 1998. As of March 31, 1999, the Company had acquired ninety-three
properties, as compared to fifty-nine properties as of March 31, 1998.
Cash Flows From Investing Activities
Cash flows used in investing activities were utilized primarily for the
purchase of and additions to properties.
Cash Flows From Financing Activities
For the three months ended March 31, 1999, the Company generated $3,668,440 of
cash flows from financing activities as compared to $130,446,862 of cash flows
generated from financing activities for the three months ended March 31, 1998.
This decrease is due primarily to the termination of the Fourth Offering on
December 31, 1998. For the three months ended March 31, 1998, the Company had
proceeds from the offering of shares, net of offering costs paid, of
approximately $98,500,000, compared to offering proceeds received, net of
offering costs paid, for the three months ended March 31, 1999 of approximately
$17,200,000. Additionally, during the three months ended March 31, 1998, the
Company received approximately $38,700,000 of loan proceeds from financing
placed on previously unencumbered properties. The decrease is also due to an
increase in the distributions paid for the three months ended March 31, 1999 of
approximately $11,500,000, as compared to the distributions paid for the three
months ended March 31, 1998 of approximately $5,600,000.
-18-
Results of Operations
At March 31, 1999, the Company owned sixty-one Neighborhood Retail Centers,
fourteen Community Centers and eighteen single-user retail properties.
Total income for the three months ended March 31, 1999 and 1998 was $27,190,361
and $13,268,496 respectively. This increase was due to the purchase of
additional properties in 1999 and a full three months of operations on
properties acquired during 1998. As of March 31, 1999, the Company had acquired
ninety-three properties, as compared to fifty-nine properties as of March 31,
1998. The purchase of additional properties also resulted in increases in
additional rental income, property operating expenses and depreciation expense.
During March 1999, the Company received a lease termination fee of $803,158 on a
lease at one of the Company's properties. This termination fee is included in
additional rental income for the three months ended March 31, 1999. The Company
signed a lease with a new tenant for this space and began receiving rent from
the new tenant in April 1999.
The increase in mortgage interest to non-affiliates for the three months ended
March 31, 1999, as compared to the three months ended March 31, 1998, is due the
Company obtaining additional financing secured by previously acquired centers as
well as mortgages assumed as part of the purchase of properties. The mortgages
payable totaled $299,612,439 as of March 31, 1999 as compared to $154,129,456 as
of March 31, 1998.
Interest income is the result of cash and cash equivalents being invested in
short-term investments until a property is purchased.
The increase in professional services to Affiliates and non-affiliates and
general and administrative expenses to Affiliates for the three months ended
March 31, 1999, as compared to the three months ended March 31, 1998, is due to
the management of an increased number of real estate assets and an increased
number of stockholders.
The increase in acquisition cost expenses is due to the increased number of
properties considered for acquisition by the Company and not purchased.
The consolidated financial statements include the accounts of the Company and
Joliet commons LLC, an Illinois limited liability company ("LLC"). The Company
entered into the LLC with an unaffiliated third party (the "Seller") in order to
purchase the Joliet Commons Shopping Center. The transaction was structured
such that the Company contributed approximately $52,000 for a 1% interest in an
LLC and the Seller contributed a property with a value of approximately
$19,733,000 and debt of approximately $14,569,000 to the LLC for a 99% interest.
The company is the managing member of the LLC. Due to the Company's ability as
managing member to directly control the LLC, it is consolidated for financial
reporting purposes. The Seller's interest is reflected as a minority interest
in the accompanying consolidated financial statements.
-19-
Year 2000 Issues
General
Many computer operating systems and software applications were designed such
that the year 1999 is the maximum date that can be processed accurately. In
conducting business, the Company relies on computers and operating systems
provided by equipment manufacturers, and also on application software developed
internally and, to a limited extent, by outside software vendors. The Company
has assessed its vulnerability to the so-called "Year-2000 Issue" with respect
to its equipment and computer systems.
State of Readiness
The Company has identified the following three areas for "Year-2000" compliance
efforts:
Business Computer Systems: The majority of the Company's information technology
systems were developed internally and include accounting, lease management,
investment portfolio tracking, and tax return preparation. The Company has
rights to the source code for these applications and employs programmers who are
knowledgeable regarding these systems. The process of testing these internal
systems to determine year 2000 compliance is nearly complete. The Company does
not anticipate any material costs relating to its business computer systems
regarding year 2000 compliance since the Company's critical hardware and
software systems use four digits to represent the applicable year. The Company
does use various computers, so-called "PC's", that may run software that may not
use four digits to represent the applicable year. The Company is in the process
of testing the PC hardware and software to determine year 2000 compliance, but
it must be noted that such PC's are incidental to the Company's critical
systems. The Company is considering independent testing of its critical
systems.
Tenants and Suppliers: The Company is in the process of surveying tenants,
suppliers and other parties with whom the Company does a significant amount of
business to identify the Company's potential exposure in the event such parties
are not year 2000 compliant in a timely manner. At this time, the Company is
not aware of any of these parties anticipating a material year 2000 compliance
issue. However, since this area involves some parties over which the Company
has no control, such as public utility companies, it is difficult, at best, to
judge the status of the outside companies' year 2000 compliance. The Company is
working closely with all suppliers of goods and services in an effort to
minimize the impact of the failure of any supplier to become year 2000 compliant
by December 31, 1999. The Company's investigations and assessments of possible
year 2000 issues are in a preliminary stage, and currently the Company is not
aware of any material impact on its business, operations or financial condition
due to year 2000 non-compliance by any of the Company's tenants or suppliers.
The Company will continue to investigate and assess its tenants through the year
ended December 31, 1999.
Non-Information Technology Systems: In the operation of its properties, the
Company has acquired equipment with embedded technology such as
microcontrollers, which operate heating, ventilation, and air conditioning
systems, fire alarms, security systems, telephones and other equipment utilizing
time-sensitive technology. The Company is in the process of evaluating its
potential exposure and costs if such non-information technology systems are not
year 2000 compliant and expects to be able to complete its assessment during the
second quarter of 1999.
-20-
Year 2000 Costs
The Company's Advisor and its Affiliates estimate that costs to achieve year
2000 compliance will not exceed $100,000. However, only approximately 10% of
these costs will be directly allocated to and paid by the Company. The balance
of the year 2000 compliance costs, approximately 90%, will be paid by the
Advisor and its Affiliates. Total year 2000 compliance costs are not expected
to be material.
Year 2000 Risks
The most reasonable likely worst case scenario for the Company with respect to
the year 2000 non-compliance of its business computer systems would be the
inability to access information which could result in the failure to issue
financial reports. The most reasonable likely worst case scenario for the
Company with respect to the year 2000 non-compliance of its tenants is failure
to receive rental income which could result in the Company being unable to meet
cash requirements for monthly expenses and distributions. The most reasonable
likely worst case scenario for the Company with respect to the year 2000 non-
compliance of its suppliers is the failure to supply necessary utilities;
including, but not limited to heating, as a result of a malfunctioning of non-
information technology systems in some of the Company's properties.
Contingency Plan
The Company expects to be year 2000 compliant in advance of the year 2000. The
Company will continue to monitor its progress and state of readiness, and is in
the process of formulating a contingency plan which the Company will be prepared
to adopt with respect to areas in which evidence arises that it may not become
year 2000 compliant in sufficient time. As part of its contingency plan, the
Company may consider obtaining a line of credit to meet short term cash needs.
In the event of a failure of the Company's business computer systems, the
Company may also consider the need to delay distributions until its business
computer systems could again process distributions or its tenants could begin
payment of rents. As information is obtained that may indicate such parties may
not become year 2000 compliant in sufficient time, the Company is prepared to
develop contingency plans, accordingly.
-21-
Funds from Operations
One of the Company's objectives is to provide cash distributions to its
Stockholders from cash generated by the Company's operations. Cash generated
from operations is not equivalent to the Company's net operating income as
determined under GAAP. Due to certain unique operating characteristics of real
estate companies, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a standard known as "Funds
from Operations" or "FFO" for short, which it believes more accurately reflects
the operating performance of a REIT such as the Company. As defined by NAREIT,
FFO means net income computed in accordance with GAAP, less extraordinary,
unusual and non-recurring items, excluding gains (or losses) from debt
restructuring and sales of property plus depreciation and amortization and after
adjustments for unconsolidated partnership and joint ventures in which the REIT
holds an interest. The Company has adopted the NAREIT definition for computing
FFO because management believes that, subject to the following limitations, FFO
provides a basis for comparing the performance and operations of the Company to
those of other REITs. The calculation of FFO may vary from entity to entity
since capitalization and expense policies tend to vary from entity to entity.
Items which are capitalized do not impact FFO, whereas items that are expensed
reduce FFO. Consequently, the presentation of FFO by the Company may not be
comparable to other similarly titled measures presented by other REITs. FFO is
not intended to be an alternative to "Net Income" as an indicator of the
Company's performance nor to "Cash Flows from Operating Activities" as
determined by GAAP as a measure of the Company's capacity to pay distributions.
FFO and funds available for distribution are calculated as follows:
March 31, March 31,
1999 1998
---- ----
Net income................................... $ 7,102,888 4,037,415
Depreciation net of minority interest........ 4,167,794 2,200,954
------------ ------------
Funds from operations(1)................... 11,270,682 6,238,369
Principal amortization of debt............... (55,095) (16,980)
Deferred rent receivable (2)................. (437,795) (289,037)
Acquisition cost expenses (3)................ 334,162 44,036
Rental income received under
master lease agreements (4)................. 515,250 542,940
------------ ------------
Funds available for distribution............. $11,627,204 6,519,328
============ ============
(1) FFO does not represent cash generated from operating activities calculated
in accordance with GAAP 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.
-22-
(2) 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.
(3) Acquisition cost expenses include costs and expenses relating to the
acquisition of properties. These costs are estimated to be up to .5% of
the Gross Offering Proceeds and are paid from the Proceeds of the
Offering.
(4) As part of several purchases, 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. GAAP
requires 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 following table lists the approximate physical occupancy levels for the
Company's properties as of the end of each quarter during 1998 and 1999. N/A
indicates the property was not owned by the Company at the end of the quarter.
1998 1999
------------------------ -------------------------
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, IL
Eagle Crest 95% 95% 100% 100% 100%
Naperville, IL
Montgomery-Goodyear 77% 77% 77% 77% 77%
Montgomery, IL
Hartford/Naperville Plaza 100% 100% 100% 100% 100%
Naperville, IL
Nantucket Square 96% 98% 100% 100% 100%
Schaumburg, IL
Antioch Plaza 68% 68% 68% 68% 68%
Antioch, IL
Mundelein Plaza 95% 95% 92% 100% 100%
Mundelein, IL
Regency Point 97% 97% 97% 97% 97%
Lockport, IL
Prospect Heights 83% 92% 92% 92% 92%
Prospect Heights, IL
Montgomery-Sears 95% 95% 100% 100% 100%
Montgomery,IL
Zany Brainy 100% 100% 100% 100% 100%
Wheaton, IL
Salem Square 97% 97% 97% 97% 97%
Countryside, IL
Hawthorn Village 100% 100% 100% 100% 100%
Vernon Hills, IL
-23-
1998 1999
------------------------ -------------------------
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
---------- ----- ----- ----- ----- ----- ----- ----- -----
Six Corners 93% 90% 82% 82% 88%
Chicago, IL
Spring Hill Fashion Ctr. 98% 100% 100% 95% 95%
West Dundee, IL
Crestwood Plaza 100% 100% 100% 100% 100%
Crestwood, IL
Park St. Claire 100% 100% 100% 100% 100%
Schaumburg, IL
Lansing Square 90% 90% 88% 98% 98%
Lansing, IL
Summit of Park Ridge 83% 87% 91% 87% 93%
Park Ridge, IL
Grand and Hunt Club 100% 100% 100% 100% 100%
Gurnee, IL
Quarry Outlot 100% 100% 100% 100% 100%
Hodgkins, IL
Maple Park Place 98% 98% 94% 99% 99%
Bolingbrook, IL
Aurora Commons 98% 98% 95% 95% 94%
Aurora, IL
Lincoln Park Place 60% 60% 60% 60% 60%
Chicago, IL
Ameritech 100% 100% 100% 100% 100%
Joliet, IL
Dominicks-Schaumburg 100% 100% 100% 100% 100%
Schaumburg, IL
Dominicks-Highland Park 100% 100% 100% 100% 100%
Highland Park, IL
Niles Shopping Center 60% 100% 100% 100% 100%
Niles, IL
Mallard Crossing 95% 95% 100% 97% 97%
Elk Grove Village, IL
Cobblers Crossing 89% 89% 92% 91% 92%
Elgin, IL
Calumet Square 100% 100% 100% 100% 100%
Calumet City, IL
Sequoia Shopping Center 93% 96% 100% 100% 100%
Milwaukee, WI
Riversquare Shopping Ctr. 95% 100% 100% 97% 95%
Naperville, IL
Rivertree Court 99% 99% 99% 99% 99%*
Vernon Hills, IL
Shorecrest Plaza 96% 96% 96% 87% 89%
Racine, WI
Dominicks-Glendale Heights 100% 100% 100% 100% 100%
Glendale Heights, IL
Party City Store 100% 100% 100% 100% 100%
Oak Brook Terrace, IL
Eagle Country Market 100% 100% 100% 100% 100%
Roselle, IL
-24-
1998 1999
------------------------ -------------------------
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
---------- ----- ----- ----- ----- ----- ----- ----- -----
Dominicks-Countryside 100% 100% 100% 100% 100%
Countryside, IL
Terramere Plaza 80% 86% 92% 95% 86%
Arlington Heights, IL
Wilson Plaza 100% 100% 100% 100% 100%
Batavia, IL
Iroquois Center 81% 81% 73% 73% 73%*
Naperville, IL
Fashion Square 80% 87% 97% 100% 100%
Skokie, IL
Naper West 88% 88% 90% 83% 91%*
Naperville, IL
Dominicks-West Chicago 100% 100% 100% 100% 100%
West Chicago, IL
Shops at Coopers Grove 96% 100% 100% 100% 100%
Country Club Hills, IL
Maple Plaza 100% 100% 100% 100% 100%
Downers Grove, IL
Orland Park Retail 84% 84% 100% 100% 100%
Orland Park, IL
Wisner/Milwaukee Plaza 100% 100% 100% 100% 100%
Chicago, IL
Homewood Plaza 100% 100% 100% 100% 100%
Homewood, IL
Elmhurst City Center 99% 99% 99% 100% 100%
Elmhurst, IL
Shoppes of Mill Creek 97% 98% 98% 98% 98%
Palos Park, IL
Oak Forest Commons 99% 95% 100% 100% 100%
Oak Forest, IL
Prairie Square 94% 90% 90% 90% 83%*
Sun Prairie, WI
Downers Grove Plaza 84% 100% 100% 100% 100%
Downers Grove, IL
St. James Crossing 88% 91% 91% 91% 91%*
Westmont, IL
Woodfield Plaza 97% 94% 94% 97% 97%*
Schaumburg, IL
Lake Park Plaza 95% 93% 76% 74% 74%*
Michigan City, IN
Chestnut Court 85% 86% 88% 98% 86%*
Darien, IL
Western & Howard N/A 100% 100% 100% 100%
Chicago, IL
High Point Center N/A 97% 97% 90% 94%*
Madison, WI
Wauconda Shopping Center N/A 100% 100% 100% 100%
Wauconda, IL
Berwyn Plaza N/A 100% 100% 100% 100%
Berwyn, IL
-25-
1998 1999
------------------------ -------------------------
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
---------- ----- ----- ----- ----- ----- ----- ----- -----
Woodland Heights N/A 86% 86% 81% 81%*
Streamwood, IL
Schaumburg Shopping Center N/A 93% 93% 93% 93%*
Schaumburg, IL
Bergen Plaza N/A 99% 98% 98% 97%*
Oakdale, MN
Walgreens-Woodstock N/A 100% 100% 100% 100%
Woodstock, IL
Winnetka Commons N/A N/A 100% 100% 100%
New Hope, MN
Eastgate Shopping Center N/A N/A 91% 91% 87%*
Lombard, IL
Fairview Heights Plaza N/A N/A 78% 78% 78%
Fairview Heights, IL
Orland Greens N/A N/A 100% 100% 100%
Orland Park, IL
Bakers Shoes N/A N/A 100% 100% 100%
Chicago, IL
Staples, Freeport, IL N/A N/A N/A 100% 100%
Two Rivers Plaza
Bolingbrook, IL N/A N/A N/A 100% 100%
Edinburgh Festival
Brooklyn Park, MN N/A N/A N/A 97% 100%*
Woodfield Commons-East/West
Schaumburg, IL N/A N/A N/A 89% 89%*
Riverplace Center
Noblesville, IN N/A N/A N/A 100% 100%
Rose Plaza,
Elmwood Park, IL N/A N/A N/A 100% 100%
Marketplace at Six Corners
Chicago, IL N/A N/A N/A 100% 100%
Joliet Commons,
Joliet, IL N/A N/A N/A 97% 97%*
Springboro Plaza
Springboro, OH N/A N/A N/A 100% 100%
Carmax-Schaumburg
Schaumburg, IL N/A N/A N/A 100% 100%
Carmax-Tinley Park
Tinley Park, IL N/A N/A N/A 100% 100%
Hollywood Video-Hammond
Hammond, IN N/A N/A N/A 100% 100%
Park Center Plaza
Tinley Park, IL N/A N/A N/A 71% 72%*
Plymouth Collection
Plymouth, MN N/A N/A N/A N/A 100%
Circuit City
Traverse City, MI N/A N/A N/A N/A 100%
Loehmann's Plaza
Brookfield, WI N/A N/A N/A N/A 100%
Baytown Square & Shoppes
Champaign, IL N/A N/A N/A N/A 97%*
-26-
1998 1999
------------------------ -------------------------
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
---------- ----- ----- ----- ----- ----- ----- ----- -----
Woodland Commons
Buffalo Grove, IL N/A N/A N/A N/A 100%
Cub Foods-Plymouth
Plymouth, MN N/A N/A N/A N/A 100%
Cub Foods-Indianapolis
Indianapolis, IN N/A N/A N/A N/A 100%
Gateway Square
Hinsdale, IL N/A N/A N/A N/A 96%
* As part of the purchase of these properties the Company receives rent under
master lease agreements on the vacant space, which results in economic
occupancy ranging from 97% to 100% at March 31, 1999 for each of these
centers. The master lease agreements are for periods ranging from one to
two years from the purchase date or until the spaces are leased.
Subsequent Events
In April 1999, the Company paid a distribution of $4,075,436 to the
Stockholders.
On April 18, 1999, the Board of Directors approved an increase in Distributions
effective June 1, 1999, payable beginning July 17, 1999, from the current level
of $.88 per Share per annum to $.89 per Share per annum.
Subsequent to March 31, 1999, the Company has purchased three additional
properties from unaffiliated third parties for a total purchase price of
approximately $16,285,000.
On May 10, 1999, the Company entered into a loan commitment in connection with a
$57,450,000 loan between the Company and Bear Stearns Funding, Inc. This loan
was funded May 13, 1999.
On behalf of the Company, the Advisor is currently exploring the purchase of
additional shopping centers from unaffiliated third parties.
-27-
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to interest rate changes primarily as a result of its
long-term debt used to maintain liquidity and fund capital expenditures and
expansion of the Company's real estate investment portfolio and operations. The
Company's interest rate risk management objectives is to limit the impact of
interest rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve its objectives the Company borrows primarily at
fixed rates and may enter into derivative financial instruments such as interest
rate swaps, caps and treasury locks in order to mitigate its interest rate risk
on a related financial instruments. The Company does not enter into derivative
or interest rate transactions for speculative purposes.
The fair value of the Company's debt approximates its carrying amount.
There have been no significant changes since December 31, 1998.
-28-
PART II - Other Information
Items 1 through 5 are omitted because of the absence of conditions under which
they are required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Required by the Securities and Exchange Commission
Regulations S-K. Item 601.
The following documents are incorporated by reference:
Registration Statement on Form S-11 and related exhibits, as amended,
File No. 333-45233, filed under the Securities Act of 1933.
The following documents are filed as part of this Quarterly report:
(27) Financial Data Schedule
(b) Report on Form 8-K/A dated January 15, 1999
Item 7. Financial Statements and Exhibits
Report on Form 8-K dated February 5, 1999
Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
Item 7. Financial Statements and Exhibits
Report on Form 8-K dated February 24, 1999
Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
Item 7. Financial Statements and Exhibits
Report on Form 8-K/A dated March 31, 1999
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements and Exhibits
-29-
SIGNATURES
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, thereunto duly authorized.
INLAND REAL ESTATE CORPORATION
/S/ ROBERT D. PARKS
By: Robert D. Parks
Chief Executive Officer
Date: May 13, 1999
/S/ KELLY TUCEK
By: Kelly Tucek
Chief Financial and Accounting Officer
Date: May 13, 1999
-30-
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