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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 September 30, 2000
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 November 10, 2000, there were 62,450,458 Shares of Common Stock outstanding.
Part I - Financial Statements
Item 1. Financial Statements
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(unaudited)
Assets
|
September 30, 2000 |
|
December 31, 1999 |
|
|
|
|
Investment properties (Note 3): |
|
|
|
Land |
$ 277,382,642 |
|
271,905,942 |
Construction in progress (Note 7) |
606,028 |
|
1,699,356 |
Building and improvements |
696,259,081 |
|
671,201,002 |
|
|
|
|
|
974,247,751 |
|
944,806,300 |
Less accumulated depreciation |
56,893,030 |
|
37,424,871 |
|
|
|
|
Net investment properties |
917,354,721 |
|
907,381,429 |
|
|
|
|
Cash and cash equivalents including amounts held by property manager (Note 1) |
7,559,980 |
|
19,424,343 |
Investment in securities (net of allowance for unrealized loss of $334,566 and $2,088,633 at September 30, 2000 and December 31, 1999, respectively) (Note 1) |
9,796,743 |
8,570,656 |
|
Investment in marketable securities |
260,000 |
|
260,000 |
Restricted cash |
7,586,985 |
|
15,340,902 |
Accounts and rents receivable (net of allowance for doubtful accounts of $1,975,028 and $1,064,256 at September 30, 2000 and December 31, 1999, respectively) (Note 4) |
26,125,776 |
|
19,794,687 |
Mortgage receivable (Note 5) |
12,905,851 |
|
6,495,541 |
Deposits and other assets |
85,273 |
|
358,986 |
Leasing fees (net of accumulated amortization of $132,838 and $39,031 at September 30, 2000 and December 31, 1999, respectively) |
626,220 |
|
360,486 |
Loan fees (net of accumulated amortization of $1,596,540 and $1,029,522 at September 30, 2000 and December 31, 1999, respectively) |
3,979,844 |
|
4,294,942 |
|
|
|
|
Total assets |
$ 986,281,393 |
|
982,281,972 |
|
|||
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
(continued)
September 30, 2000 and December 31, 1999
(unaudited)
Liabilities and Stockholders' Equity
|
September 30, 2000 |
|
December 31, 1999 |
Liabilities: |
|
|
|
Accounts payable |
$ 991,524 |
|
384,665 |
Accrued interest payable to Affiliates |
- |
|
4,468 |
Accrued interest payable to non-affiliates |
2,026,383 |
|
1,786,331 |
Accrued real estate taxes |
17,100,018 |
|
18,829,084 |
Distributions payable (Note 11) |
4,737,200 |
|
4,374,462 |
Security deposits |
1,950,299 |
|
1,976,082 |
Mortgages payable (Note 6) |
456,393,125 |
|
440,740,296 |
Prepaid rents and unearned income |
1,244,565 |
|
1,536,008 |
Other liabilities |
2,369,107 |
|
8,525,986 |
Due to Affiliates (Note 2) |
- |
|
1,517,775 |
|
|
|
|
Total liabilities |
486,812,221 |
|
479,675,157 |
|
|
|
|
Minority interest (Note 1) |
25,685,316 |
|
27,112,690 |
|
|
|
|
Stockholders' Equity (Notes 1 and 2): |
|
|
|
Preferred stock, $.01 par value, 6,000,000 Shares authorized; none issued and outstanding at September 30, 2000 and December 31, 1999 |
- |
|
- |
Common stock, $.01 par value, 100,000,000 Shares authorized; 62,356,051 and 55,398,888 Shares issued and outstanding at September 30, 2000 and December 31, 1999, respectively |
623,561 |
|
553,988 |
Additional paid-in capital (net of offering costs of $58,816,092, of which $52,218,524 was paid to Affiliates) |
589,744,573 |
|
512,567,043 |
Accumulated distributions in excess of net income |
(116,249,712) |
|
(35,538,273) |
Accumulated other comprehensive income (loss) |
(334,566) |
|
(2,088,633) |
|
|
|
|
Total stockholders' equity |
473,783,856 |
|
475,494,125 |
|
|
|
|
Commitments and contingencies (Notes 4, 6, 7 and 10) |
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
$ 986,281,393 |
|
982,281,972 |
|
|
|
|
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Operations
For the three and nine months ended September 30, 2000 and 1999
(unaudited)
|
Three months |
Three months |
Nine months |
Nine months |
|
ended |
ended |
ended |
ended |
|
Sept 30, 2000 |
Sept 30, 1999 |
Sept 30, 2000 |
Sept 30, 1999 |
Income: |
|
|
|
|
Rental income (Notes 1 and 4) |
$ 26,259,403 |
22,273,180 |
78,460,587 |
61,345,482 |
Additional rental income (Note 4) |
9,582,262 |
9,160,606 |
29,868,453 |
23,018,272 |
Interest income |
523,526 |
957,611 |
1,720,195 |
3,705,402 |
Other income |
324,957 |
61,970 |
1,590,753 |
350,234 |
|
36,690,148 |
32,453,367 |
111,639,988 |
88,419,390 |
Expenses: |
|
|
|
|
Professional services to Affiliates |
32,862 |
35,083 |
130,974 |
84,134 |
Professional services to non-affiliates |
55,713 |
71,985 |
277,842 |
292,713 |
General and administrative to Affiliates |
10,602 |
151,346 |
230,894 |
446,952 |
General and administrative expenses to non-affiliates |
955,405 |
95,628 |
1,394,521 |
447,962 |
General and administrative expenses - bad debt expense |
75,867 |
- |
1,412,736 |
- |
Advisor asset management fee |
- |
1,400,000 |
2,413,500 |
2,575,000 |
Property operating expenses to Affiliates |
- |
1,145,144 |
3,044,834 |
3,392,055 |
Property operating expenses to non- affiliates |
9,902,742 |
9,135,623 |
31,057,767 |
24,875,666 |
Mortgage interest to Affiliates |
- |
13,503 |
26,642 |
40,695 |
Mortgage interest to non-affiliates |
8,525,222 |
6,794,803 |
25,014,314 |
17,992,148 |
Depreciation |
6,403,000 |
5,209,186 |
19,468,159 |
14,149,684 |
Amortization |
71,372 |
29,390 |
158,620 |
63,881 |
Acquisition cost expenses to Affiliates |
55,926 |
52,857 |
137,729 |
334,958 |
Acquisition cost expenses to non- affiliates |
12,083 |
29,451 |
(8,821) |
178,847 |
Merger consideration costs |
68,057,088 |
- |
68,775,449 |
- |
|
|
|
|
|
|
94,157,882 |
24,163,999 |
153,535,160 |
64,874,695 |
Income (loss) before minority interest |
(57,467,734) |
8,289,368 |
(41,895,172) |
23,544,695 |
Minority interest |
(149,668) |
(19,438) |
(155,051) |
62,105 |
Net income (loss) before comprehensive income |
(57,617,402) |
8,269,930 |
(42,050,223) |
23,606,800 |
Other comprehensive income (loss): |
|
|
|
|
Unrealized holding gain (loss) on investment securities |
610,112 |
(948,253) |
1,754,067 |
(948,253) |
Comprehensive income (loss) |
$ (58,007,290) |
7,321,677 |
(40,296,156) |
22,658,547 |
Net income (loss) before comprehensive income per common share, basic and diluted (Note 8) |
$ (.93) |
.15 |
(.72) |
.45 |
Weighted average common stock shares outstanding |
62,280,418 |
54,437,746 |
58,006,977 |
52,208,291 |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Stockholders' Equity
September 30, 2000
(unaudited)
|
Common Stock |
Additional Paid-in Capital |
Accumulated Distributions in Excess of Net Income |
Accumulated Other Comprehensive Income (Loss) |
Total |
|
|
|
|
|
|
Balance January 1, 2000 |
$ 553,988 |
512,567,043 |
(35,538,273) |
(2,088,633) |
475,494,125 |
|
|
|
|
|
|
Net income (loss) |
- |
- |
(42,050,223) |
- |
(42,050,223) |
|
|
|
|
|
|
Other comprehensive income |
- |
- |
- |
1,754,067 |
1,754,067 |
Distributions declared ($.67 for the nine months ended September 30, 2000 per weighted average common stock shares outstanding) |
- |
- |
(38,661,216) |
- |
(38,661,216) |
|
|
|
|
|
|
Proceeds from DRP |
15,919 |
16,620,132 |
- |
- |
16,636,051 |
|
|
|
|
|
|
Shares issued as a result of Merger |
61,818 |
67,938,180 |
- |
- |
67,999,998 |
|
|
|
|
|
|
Treasury stock |
(8,164) |
(7,380,782) |
- |
- |
(7,388,946) |
|
|
|
|
|
|
Balance September 30, 2000 |
$ 623,561 |
589,744,573 |
(116,249,712) |
(334,566) |
473,783,856 |
|
|
|
|
|
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999
(unaudited)
|
Nine months |
|
Nine months |
|
ended |
|
ended |
|
Sept 30, 2000 |
|
Sept 30, 1999 |
Cash flows from operating activities: |
|
|
|
Net income (loss) |
$ (42,050,223) |
|
23,606,800 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
Merger consideration costs |
67,999,998 |
|
- |
Depreciation |
19,468,159 |
|
14,149,684 |
Amortization |
158,620 |
|
63,881 |
Minority interest |
155,051 |
|
(62,105) |
Rental income under master lease agreements |
1,096,145 |
|
1,222,602 |
Straight line rental income |
(2,776,676) |
|
(1,800,235) |
Interest on unamortized loan fees |
513,788 |
|
434,188 |
Changes in assets and liabilities: |
|
|
|
Accounts and rents receivable |
(3,554,413) |
|
(5,671,437) |
Other assets |
262,126 |
|
2,227,701 |
Accounts payable |
606,859 |
|
(111,186) |
Accrued interest payable |
235,584 |
|
(209,773) |
Accrued real estate taxes |
(1,729,066) |
|
5,409,762 |
Security deposits |
(25,783) |
|
402,849 |
Other liabilities |
(6,156,879) |
|
5,701,679 |
Due to Affiliates |
(1,517,775) |
|
1,384,457 |
Prepaid rents and unearned income |
(291,443) |
|
855,777 |
|
|
|
|
Net cash provided by operating activities |
32,394,072 |
|
47,604,644 |
|
|
|
|
Cash flows from investing activities: |
|
|
|
Restricted cash |
7,753,917 |
|
(7,514,101) |
Purchase of investment securities |
(699,968) |
|
(8,597,693) |
Sale of investment securities |
1,227,948 |
|
- |
Additions to investment properties |
(4,528,248) |
|
(3,544,668) |
Purchase of investment properties |
(27,102,676) |
|
(209,403,827) |
Mortgage receivable |
(6,410,310) |
|
(5,295,623) |
Construction in progress |
1,093,328 |
|
(892,080) |
Proceeds from sale of land |
- |
|
1,117,665 |
Leasing fees |
(359,541) |
|
(287,000) |
|
|
|
|
Net cash used in investing activities |
(29,025,550) |
|
(234,417,327) |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
(continued)
For the nine months ended September 30, 2000 and 1999
(unaudited)
|
Nine months |
|
Nine months |
|
Ended |
|
ended |
|
Sept 30, 2000 |
|
Sept 30, 1999 |
Cash flows from financing activities: |
|
|
|
Proceeds from offering, including DRP |
$ 16,636,051 |
|
30,681,203 |
Repurchases of shares |
(7,388,946) |
|
(2,705,743) |
Payments of offering costs |
- |
|
(2,173,244) |
Loan proceeds |
20,204,320 |
|
127,254,000 |
Loan fees |
(251,916) |
|
(1,364,894) |
Distributions paid |
(39,880,903) |
|
(35,692,074) |
Payoff of debt |
(4,196,898) |
|
(9,500,000) |
Principal payments of debt |
(354,593) |
|
(1,043,392) |
|
|
|
|
Net cash provided by (used in) financing activities |
(15,232,885) |
|
105,455,856 |
|
|
|
|
Net decrease in cash and cash equivalents |
(11,864,363) |
|
(81,356,827) |
|
|
|
|
Cash and cash equivalents at beginning of period |
19,424,343 |
|
123,056,702 |
|
|
|
|
Cash and cash equivalents at end of period |
$ 7,559,980 |
|
41,699,875 |
|
|
|
|
|
|
|
|
Supplemental schedule of noncash investing and financing activities: |
|
|
|
|
|
|
|
Increase in investment properties |
$ (27,102,676) |
|
(248,327,687) |
Assumption of mortgage debt |
- |
|
16,603,534 |
Minority interest |
- |
|
22,320,326 |
|
|
|
|
Purchase of investment properties |
$ (27,102,676) |
|
(209,403,827) |
|
|
|
|
|
|
|
|
Distributions payable |
$ 4,737,200 |
|
4,133,564 |
|
|
|
|
|
|
|
|
Cash paid for interest |
$ 24,291,584 |
|
17,808,428 |
|
|
|
|
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
September 30, 2000
(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, 1999, which are included in the Company's 1999 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
Inland Real Estate Corporation (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, some 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, as amended (the "Code").
On October 14, 1994, the Company commenced an initial public offering of common stock ("Shares"), on a best effort basis at $10 per Share followed by three additional offerings for a total of 51,642,397 Shares. As of September 30, 2000, the Company has issued 5,967,506 Shares through the Company's Distribution Reinvestment Program ("DRP"). As of September 30, 2000, the Company has repurchased a total of 1,432,670 Shares through the Company's Share Repurchase Program, for an aggregate amount of $12,968,414 repurchased through the Share Repurchase Program. As a result, offering proceeds outstanding as of September 30, 2000 total $649,184,226.
On July 1, 2000, the Company became a self-administered real estate investment trust by completing its acquisition of Inland Real Estate Advisory Service, Inc., the Company's advisor (the "Advisor") and Inland Commercial Property Management, Inc., the Company's property manager (the "Manager"), through a merger in which two wholly owned subsidiaries of the Company were merged with and into the Advisor and the Manager, respectively, with the Advisor and the Manager the surviving entities (the "Merger"). As a result of the Merger, the Company issued to Inland Real Estate Investment Corporation, the sole shareholder of the Advisor ("IREIC"), and The Inland Property Management Group, Inc., the sole shareholder of the Manager ("TIPMG"), an aggregate of 6,181,818 shares of the Company's common stock valued at $11 per share, or approximately 10% of the Company's common stock taking into account such issuance. The expense of these shares and additional costs relating to the Merger are reported as an operational expense on the Company's Consolidated Statements of Operations and are included in the Company's calculation of Funds from Operations.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
The Company classifies its investment in securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All securities not included in trading or held-to-maturity are classified as available for sale. Investment in securities at September 30, 2000 consists of preferred and common stock investments in various real estate investment trusts and is classified as available-for-sale securities. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Dividend income is recognized when earned and is included in other income in the accompanying consolidated financial statements. Sales of investment securities available-for-sale during the nine months ended September 30, 2000 resulted in a gain on sale of $46,650, which is included in other income.
The accompanying consolidated financial statements include the accounts of the Company, Inland Joliet Commons, LLC, Inland Ryan LLC and Inland Ryan Cliff Lake LLC (collectively the "LLCs"). Due to the Company's ability as managing member to directly control the LLCs, they are consolidated for financial reporting purposes. The third parties' interests are reflected as minority interest in the accompanying consolidated financial statements. The accompanying consolidated financial statements also include the accounts of the Company's wholly owned subsidiaries, the Advisor and Manager.
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 at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
The Company restated its previously filed quarterly reports on Form 10-Q for the three months ended March 31, 2000 and for the six months ended June 30, 2000, as filed with the Securities and Exchange Commission on May 12, 2000 and August 11, 2000, respectively. The restatement was done to correct an accounting error in the Company's real estate tax and common area maintenance accrual calculations. Accordingly, previously reported additional rental income was revised for the three months ended March 31, 2000 and the three and six months ended June 30, 2000. The revision, after adjusting for minority interest, decreased net income from $8,366,383 to $5,522,734, and decreased net income per share from $.15 to $.10, for the three months ended March 31, 2000. The revision, after adjusting for minority interest, decreased net income from $10,576,271 to $10,044,445 and $18,942,654 to $15,567,179, and decreased net income per share from $.19 to $.18 and $.34 to $.28 for the three and six months ended June 30, 2000, respectively. The restatements had no effect on the results being reported for the three and nine months ended September 30, 2000.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
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 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. 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 Company on potential real estate purchases or temporary investment of uninvested capital, the Company 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.
(2) Transactions with Affiliates
Subsequent to the Merger, previously related parties may provide to the Company the following services: general and administrative services, payroll preparation and management services, employee benefits management services, human resource management services, data processing, computer equipment and support services, insurance consultation and insurance coverage placement services, marketing communications services, property tax and processing services, office management services, and investor relation services. These services will be performed on the Company's behalf at cost, with no mark-up to the Company.
Prior to the Merger, the Advisor and its Affiliates were entitled to reimbursement for salaries and expenses of employees relating to the administration of the Company. Such costs of $130,974, $230,894 and $137,729 are allocated among professional services to Affiliates, general and administrative expenses to Affiliates and acquisition costs expenses to Affiliates, respectively, for the nine months ended September 30, 2000. Such costs of $84,134, $446,952 and $334,958 are allocated among professional services to Affiliates, general and administrative expenses to Affiliates and acquisition costs expenses to Affiliates, respectively, for the nine months ended September 30, 1999.
A previously related party holds the mortgage on the Walgreens, Decatur, IL property. As of September 30, 2000, the remaining balance of the mortgage is $689,108. For the nine months ended September 30, 2000, the Company paid principal and interest payments totaling $51,199 on this mortgage.
Prior to the Merger, the Advisor and its Affiliates were entitled to reimbursement for salaries and expenses of employees relating to selecting, evaluating and acquiring of properties. Such amounts are included in building and improvements for those costs relating to properties purchased. Such amounts are included in acquisition cost expenses to Affiliates for costs relating to properties not acquired. No such costs were incurred for the three months ended September 30, 2000.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
Prior to the Merger, the Advisor was entitled to 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 qualified as a REIT, the Advisor would have reimbursed the Company: (i) to the extent that the Advisor Asset Management Fee plus other operating expenses paid during the previous calendar year exceeded 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 an 8% current return. The Company incurred $2,413,500 and $2,575,000 of Advisor Asset Management Fees for the nine months ended September 30, 2000 and 1999, respectively, of which $0 and $1,500,000 was unpaid at September 30, 2000 and December 31, 1999, respectively. No fee was incurred for the three months ended September 30, 2000.
Prior to the Merger, the Manager was entitled to receive Property Management Fees for management and leasing services. Such fees could not exceed 4.5% of the gross income earned by the Company on properties managed. The Company incurred and paid Property Management Fees of $3,044,834 and $3,392,055 for the nine months ended September 30, 2000 and 1999, respectively. As of July 1, 2000, the date of the Merger, the net effect of these fees on a consolidated basis is zero.
(3) Investment Properties
In connection with the purchase of several properties, the Company will receive payments under master lease agreements covering spaces of several properties vacant at the time of acquisition of these properties. The payments have and will continue to be made to the Company for periods ranging from one to two years from the date of acquisition of the property or until the spaces are leased and tenants begin paying rent. GAAP requires the Company to reduce the purchase price of the property as these payments are received, rather than record the payments as rental income. The cumulative amount of such payments was $6,244,804 and $5,148,659 as of September 30, 2000 and December 31, 1999, respectively (Note 4).
(4) Operating Leases
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 consolidated financial statements include increases of $2,776,676 and $1,800,235 for the nine months ended September 30, 2000 and 1999, respectively, of rental income for the period of occupancy for which stepped rent increases apply and $8,174,702 and $5,398,026 in related accounts and rents receivable as of September 30, 2000 and December 31, 1999, respectively. The Company anticipates collecting these amounts over the terms of the leases as scheduled rent payments are made.
Pursuant to the lease agreements, tenants of the property are required to reimburse the Company for some or all of their pro rata share of the real estate taxes and operating expenses of the property. Estimated amounts are billed throughout the year and billings representing the difference between these estimates and the actual amounts due in the amount of approximately $673,000 for the year ended December 31, 1999 are included in the nine months ended September 30, 2000.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
(5) Mortgage Receivable
On May 28, 1999, the Company entered into a construction loan agreement with an unaffiliated third party, the borrower, for an aggregate loan amount of $15,500,000 secured by Thatcher Woods Shopping Center in River Grove, Illinois. The construction loan matures on June 29, 2001 and requires the borrower to make monthly interest-only payments on amounts disbursed at a rate of 9%. The Company, at its option, may elect to purchase this property, upon completion, subject to certain fair-value-based criteria stated in the contract. As of September 30, 2000, the principal balance of this mortgage receivable is $12,905,851.
(6) Mortgages Payable
The Company's mortgages payable are secured by certain of its investment properties and consist of the following at September 30, 2000 and December 31, 1999:
|
Interest Rate at Sept 30, 2000 |
Maturity Date |
Current Monthly Payment |
Balance at September 30, 2000 |
Balance at December 31, 1999 |
Mortgage payable to Affiliate: |
|
|
|
|
|
Inland Mortgage Servicing Corp. (a) |
7.65% |
05/2004 |
$ 5,689 |
$ 689,108 |
$ 700,381 |
|
|
|
|
|
|
Mortgages payable to non- affiliates: |
|
|
|
|
|
Bank One (a) (j) |
8.44% |
08/2000 |
(b) |
- |
4,241,187 |
LaSalle Bank N.A. |
7.85% |
10/2003 |
57,992 |
8,865,000 |
8,865,000 |
LaSalle Bank N.A. |
7.85% |
09/2003 |
25,872 |
3,955,000 |
3,955,000 |
LaSalle Bank N.A. |
7.59% |
01/2004 |
81,277 |
12,850,000 |
12,850,000 |
LaSalle Bank N.A. |
7.80% |
02/2004 |
83,460 |
12,840,000 |
12,840,000 |
John Hancock (a) (c) |
9.00% |
10/2001 |
85,423 |
8,834,116 |
9,000,328 |
LaSalle Bank N.A. |
7.65% |
06/2004 |
65,133 |
10,216,880 |
10,216,880 |
LaSalle Bank N.A. |
7.49% |
06/2004 |
61,116 |
9,791,500 |
9,791,500 |
LaSalle Bank N.A. |
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 Bank N.A.(d) |
5.18% |
12/2014 |
19,740 |
6,200,000 |
6,200,000 |
LaSalle Bank N.A. |
7.28% |
03/2005 |
25,041 |
4,050,000 |
4,050,000 |
LaSalle Bank N.A. |
6.99% |
04/2003 |
6,827 |
1,150,000 |
1,150,000 |
LaSalle Bank N.A. |
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 |
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 |
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
|
Interest Rate at Sept 30, 2000 |
Maturity Date |
Current Monthly Payment |
Balance at September 30, 2000 |
Balance at December 31, 1999 |
Allstate |
6.82% |
08/2005 |
$ 60,243 |
$ 10,600,000 |
$ 10,600,000 |
LaSalle Bank N.A. |
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 |
Allstate |
7.00% |
12/2003 |
65,333 |
11,200,000 |
11,200,000 |
Berkshire Mortgage (a) |
7.79% |
10/2007 |
105,719 |
14,352,873 |
14,447,153 |
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 |
10,734,710 |
10,734,710 |
Bear, Stearns secured financing (h) |
6.86% |
06/2004 |
328,662 |
57,450,000 |
57,450,000 |
LaSalle Bank N.A. |
7.93% |
10/2004 |
(i) |
34,017,000 |
34,017,000 |
Allstate |
8.28% |
10/2004 |
(i) |
35,787,000 |
35,787,000 |
Midland Loan Serv. (a) |
7.86% |
01/2008 |
37,649 |
5,082,741 |
5,121,280 |
LaSalle Bank N.A. |
7.93% |
12/2004 |
(i) |
8,910,000 |
8,910,000 |
LaSalle Bank N.A |
8.03% |
12/2004 |
(i) |
9,650,000 |
9,650,000 |
LaSalle Bank N.A. |
7.93% |
01/2005 |
(i) |
9,737,620 |
- |
LaSalle Bank N.A. |
8.03% |
03/2005 |
(i) |
2,400,000 |
- |
LaSalle Bank N.A |
8.03% |
04/2005 |
(i) |
2,467,700 |
- |
LaSalle Bank N.A |
8.03% |
06/2005 |
(i) |
2,867,000 |
- |
LaSalle Bank N.A |
8.03% |
06/2005 |
(i) |
2,732,000 |
- |
|
|
|
|
|
|
Mortgages Payable |
|
|
|
$ 456,393,125 |
440,740,296 |
|
|
|
|
|
|
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
(7) Construction in Progress
On August 4, 1999, in addition to the Company purchasing the first phase of Hickory Creek Market in Frankfort, Illinois, the Company acquired title to an additional approximately 3.5 acres of adjacent land to be developed into a 20,800 square foot building to be known as "Hickory Creek Market, Phase II" from an unaffiliated third party. Included in the purchase price was $1,600,149, which had been placed in a construction escrow for Phase II. As of September 30, 2000, the balance of the construction escrow was $1,076,568 and is included in restricted cash and $606,028 is recorded as construction in progress.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
(8) Earnings per Share
Basic earnings per share ("EPS") are 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 September 30, 2000, options to purchase 19,500 shares of common stock at prices ranging from $9.05 to $10.45 per share were outstanding.
As of September 30, 2000, warrants to purchase 1,156,520 shares of common stock at a price of $12.00 per share had been issued, but not exercised. These warrants are of no value.
The weighted average number of common shares outstanding was 58,006,977 and 52,208,291 for the nine months ended September 30, 2000 and 1999, respectively.
(9) Segment Reporting
The Company owns and seeks to acquire single-user, neighborhood and community retail shopping centers in the Midwest, generally within the states of Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. All of the Company's shopping centers are located within these states and 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.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
The property revenues, property net operations, and property assets of the reportable segments are summarized in the following tables as of September 30, 2000 and 1999, and for the nine-month periods then ended, along with a reconciliation to net income:
|
2000 |
|
1999 |
|
|
|
|
Total property revenues |
$ 109,919,793 |
|
84,713,988 |
Total property operating expenses |
(34,102,601) |
|
(28,267,721) |
Mortgage interest |
(25,040,956) |
|
(18,032,843) |
|
|
|
|
Net property operations |
50,776,236 |
|
38,413,424 |
|
|
|
|
Interest income |
1,720,195 |
|
3,705,402 |
Non property expenses: |
|
|
|
Professional services |
(408,816) |
|
(376,847) |
General and administrative |
(3,038,151) |
|
(894,914) |
Advisor asset management fee |
(2,413,500) |
|
(2,575,000) |
Depreciation and amortization |
(19,626,779) |
|
(14,213,565) |
Acquisition cost expense |
(128,908) |
|
(513,805) |
Merger consideration costs |
(68,775,449) |
|
- |
|
|
|
|
Income (loss) before minority interest |
$ (41,895,172) |
|
23,544,695 |
|
|
|
|
|
|
|
|
Net investment properties |
$ 917,354,721 |
|
866,322,801 |
|
|
|
|
(10) Commitments and Contingencies
In connection with a tax increment-financing district for three of the Company's properties, the Company is contingently liable for any shortfalls in the Tax Increment as defined. At September 30, 2000, the Company does not believe any shortfall under the Tax Increment will be due.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
September 30, 2000
(unaudited)
(11) Subsequent Events
In October 2000, the Company paid a distribution of $4,737,200 to its Stockholders.
On October 30, 2000, the Company secured debt on one of its previously unencumbered properties, Cub Foods, Buffalo Grove, Illinois. The loan amount was $3,650,000 and had an interest rate of 7.86% at closing, but adjusts monthly based on adjustments to the LIBOR 30-day rate index. The maturity date is October 2005.
On October 31, 2000, the Company acquired all of the LLC units held by the non-managing member of the Inland Joliet Commons, LLC for $5,164,280 using cash and cash equivalents.
The Company is currently exploring the purchase of additional shopping centers from unaffiliated third parties.
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.
On July 1, 2000, the Company became a self-administered real estate investment trust by completing its acquisition of Inland Real Estate Advisory Service, Inc., the Company's advisor (the "Advisor") and Inland Commercial Property Management, Inc., the Company's property manager (the "Manager"), through a merger in which two wholly owned subsidiaries of the Company were merged with and into the Advisor and the Manager, respectively, with the Advisor and the Manager the surviving entities (the "Merger"). As a result of the Merger, the Company issued to Inland Real Estate Investment Corporation, the sole shareholder of the Advisor ("IREIC"), and The Inland Property Management Group, Inc., the sole shareholder of the Manager ("TIPMG"), an aggregate of 6,181,818 shares of the Company's common stock valued at $11 per share, or approximately 10% of the Company's common stock taking into account such issuance. The expense of these shares and additional costs relating to the Merger are reported as an operational expense on the Company's Consolidated Statements of Operations and are included in the Company's calculation of Funds from Operations.
Liquidity and Capital Resources
Cash and cash equivalents consist of cash and short-term investments. Cash and cash equivalents at September 30, 2000 and December 31, 1999 were $7,559,980 and $19,424,343, respectively. The decrease in cash and cash equivalents since December 31, 1999 resulted primarily from the use of cash resources to purchase and upgrade properties, pay distributions, repurchase shares through the Share Repurchase Program and payoff debt. Partially offsetting the decrease in cash and cash equivalents was additional proceeds received through the Company's Distribution Reinvestment Program ("DRP") and loan proceeds received on previously unencumbered properties. 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 and proceeds from the Company's DRP.
As of September 30, 2000, the Company had acquired 119 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 nine months ended September 30, 2000 were $38,661,216 or $.67 per weighted average common stock shares outstanding, 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. Effective November 1, 2000, the Company will increase the distribution payable to stockholders in December 2000 from $.89 to $.92 per annum on weighted average shares.
The Company restated its previously filed quarterly reports on Form 10-Q for the three months ended March 31, 2000 and for the six months ended June 30, 2000, as filed with the Securities and Exchange Commission on May 12, 2000 and August 11, 2000, respectively. The restatement was done to correct an accounting error in the Company's real estate tax and common area maintenance accrual calculations. Accordingly, previously reported additional rental income was revised for the three months ended March 31, 2000 and the three and six months ended June 30, 2000. The revision, after adjusting for minority interest, decreased net income from $8,366,383 to $5,522,734, and decreased net income per share from $.15 to $.10, for the three months ended March 31, 2000. The revision, after adjusting for minority interest, decreased net income from $10,576,271 to $10,044,445 and $18,942,654 to $15,567,179, and decreased net income per share from $.19 to $.18 and $.34 to $.28 for the three and six months ended June 30, 2000, respectively. The restatements had no effect on the results being reported for the three and nine months ended September 30, 2000.
Cash Flows from Operating Activities
Net cash provided by operating activities decreased from $47,604,644 for the nine months ended September 30, 1999 to $32,394,072 for the nine months ended September 30, 2000. This decrease was primarily a result of a decrease in other assets, accrued real estate taxes, other liabilities, and due to Affiliates. This decrease was partially offset by an increase in depreciation and accounts and rents receivable. As of September 30, 2000, the Company had acquired 119 properties, as compared to 112 properties as of September 30, 1999. Included in the net cash provided by operating activities for the nine months ended September 30, 2000 are the expenses and additional costs relating to the Merger.
Cash Flows from Investing Activities
The Company used $29,025,550 in cash for investing activities for the nine months ended September 30, 2000 as compared to $234,417,327 for the nine months ended September 30, 1999. The decrease in cash used is due primarily to the Company purchasing four additional properties during the nine months ended September 30, 2000, as compared to twenty-five additional properties during the nine months ended September 30, 1999.
Cash Flows from Financing Activities
For the nine months ended September 30, 2000, the Company used $15,232,885 of cash flows from financing activities as compared to generating $105,455,856 for the nine months ended September 30, 1999. This decrease was due primarily to a decrease in loan proceeds received as a result of the decrease in the number of properties purchased during the nine months ended September 30, 2000 of $20,204,320, as compared to loan proceeds received during the nine months ended September 30, 1999 of $127,254,000. This decrease was also due to a decrease in proceeds from the offering and an increase in shares repurchased. This decrease was partially offset by a decrease in principal payments and payoffs of debt for the nine months ended September 30, 2000 as compared to the nine months ended September 30, 1999.
Results of Operations
At September 30, 2000, the Company owned 25 single-user retail properties, 74 Neighborhood Retail Centers and 20 Community Centers. Rental and additional rental income increased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to the purchase of additional properties in 2000 and a full nine months of operations on properties acquired during 1999. As of September 30, 2000, the Company had acquired 119 properties, as compared to 112 properties as of September 30, 1999. The purchase of additional properties also resulted in increases in net investment properties, property operating expenses to non-affiliates and depreciation expense.
Eagle Foods, a tenant at six of the Company's properties, filed for Chapter 11 bankruptcy protection under the Federal bankruptcy law in February 2000. Of the six stores affected, three remain open for business, one has a substitute tenant in place, and two closed in April 2000. On July 7, 2000, Eagle Foods rejected their lease on the two closed centers. Management of the Company is in the process of marketing these two spaces for replacement tenants and does not expect the Eagle Foods bankruptcy to have a material effect on the operations of the Company as a whole.
Interest income decreased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to a decrease in investing cash and cash equivalents in short-term investment instruments due to the use of cash resources to purchase and upgrade properties, pay distributions, repurchase shares through the Share Repurchase Program and payoff debt.
Other income increased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to the Company receiving dividend income on the investment in securities held by the Company. The Company began to purchase the investment in securities during July 1999. The Company had purchased a total of approximately $11,360,000 of investment in securities, of which approximately $1,228,000 was sold as of September 30, 2000. Also included in other income for the nine months ended September 30, 2000 is a one-time lease termination fee of $500,000 received upon termination of a lease at one of the Company's properties. The Company has signed a lease for this space and has begun receiving rent from the new tenant.
Professional services to Affiliates increased for the nine months ended September 30, 2000, as compared to the nine months ended September 30, 1999, due to services required on the increased number of investment properties and for services required for the preparation of the merger. Professional services to non-affiliates decreased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to a decrease in properties considered for acquisition.
General and administrative expenses to Affiliates decreased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to a reclassification of expenses from Affiliates to non-affiliates, as of July 1, 2000, the date of the Merger. General and administrative expenses to non-affiliates increased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to a reclassification of expenses from Affiliates to non-affiliates, as of July 1, 2000, the date of the Merger. In addition, as a result of the Merger, the Company is now incurring additional general and administrative expenses related to the self-administration of the Company.
General and administrative expenses - bad debt expense increased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due primarily to the increase in the allowance for doubtful accounts for the three and nine months ended September 30, 2000. The allowance was increased due to the increased number of investment properties.
For the nine months ended September 30, 2000, Advisor asset management fees were $2,413,500, as compared to $2,575,000 for the nine months ended September 30, 1999. As of July 1, 2000, the date of the Merger, the net effect of these fees on a consolidated basis is zero.
For the nine months ended September 30, 2000, property operating expenses to Affiliates were $3,044,834, as compared to $3,392,834 for the nine months ended September 30, 1999. This decrease is due to no management fees incurred on or after July 1, 2000, the date of the Merger.
Mortgage interest and accrued interest payable to non-affiliates increased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to an increase in mortgages payable on additional properties purchased to approximately $456,393,000 from approximately $422,297,000. This increase is also due to an increase in the interest rates charged on the variable rate debt.
Acquisition cost expenses to Affiliates and non-affiliates decreased for the three and nine months ended September 30, 2000, as compared to the three and nine months ended September 30, 1999, due to the decrease in properties being considered for acquisition by the Company.
Year 2000 Issues
As part of its year 2000 readiness plan, the Company had identified three areas for compliance efforts: business computer systems, tenants and suppliers and non-information technology systems. The Company has not experienced any problems relating to year 2000 issues in any of these areas. Total costs associated with year 2000 readiness were not material.
New Accounting Pronouncements
During the second quarter of 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement, effective for fiscal years beginning after June 15, 2000, establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments imbedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement also requires that the changes in the derivative's fair value be recognized in earnings unless specific hedge accounting criteria are met. Currently, the pronouncement is not expected to have an impact on the Company.
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, excluding gains (or losses) from debt restructuring and sales of property plus depreciation on real property 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:
|
Nine months ended |
|
Nine months ended |
|
September 30, 2000 |
|
September 30, 1999 |
|
|
|
|
Net income (loss) |
$ (42,050,223) |
|
23,606,800 |
Depreciation, net of minority interest |
18,461,990 |
|
13,648,957 |
|
|
|
|
Funds From Operations (1) |
(23,588,233) |
|
37,255,757 |
Merger consideration costs |
68,775,449 |
|
- |
Adjusted Funds From Operations (2) |
45,187,216 |
|
37,255,757 |
Deferred rent receivable, net of minority interest (3) |
(2,621,727) |
|
(1,713,490) |
Rental income received under master lease agreements, net of minority interest (4) |
1,095,516 |
|
1,157,511 |
|
|
|
|
Funds available for distribution |
$ 43,596,579 |
|
36,633,658 |
|
|
|
|
Funds From Operations per common share, basic and Diluted |
$ (.41) |
|
.71 |
|
|
|
|
Adjusted Funds From Operations per common share, basic and diluted |
$ .78 |
|
.71 |
|
|
|
|
Weighted average common stock shares outstanding |
58,006,977 |
|
52,208,291 |
The following table lists the approximate physical occupancy levels for the Company's properties as of the end of each quarter during 1999 and 2000. N/A indicates the property was not owned by the Company at the end of the quarter.
|
Gross |
|
|
|
|
|
|
|
|
|
Leasable |
|
|
|
|
|
|
|
|
|
Area |
03/31/99 |
06/30/99 |
09/30/99 |
12/31/99 |
03/31/00 |
06/30/00 |
09/30/00 |
12/31/00 |
Properties |
(Sq Ft) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
|
|
|
|
|
|
|
|
|
|
Ameritech, Joliet, IL |
4,504 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Antioch Plaza, Antioch, IL |
19,810 |
68 |
68 |
67 |
67 |
52 |
52 |
52 |
|
Aurora Commons, Aurora, IL |
127,302 |
94 |
94 |
94 |
93 |
93 |
93 |
95 |
|
Bakers Shoes, Chicago, IL |
20,000 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Bally's Total Fitness, St Paul, MN |
43,000 |
N/A |
N/A |
100 |
100 |
100 |
100 |
100 |
|
Baytowne Square, Champaign, IL |
118,842 |
97 |
97 |
98 |
97 |
97 |
96 |
96 |
|
Bergen Plaza, Oakdale, MN |
270,283 |
97 |
97 |
97 |
97 |
98 |
99 |
99 |
|
Berwyn Plaza, Berwyn, IL |
18,138 |
100 |
100 |
100 |
26 |
26 |
26 |
26(b) |
|
Burnsville Crossing, Burnsville, MN |
91,015 |
N/A |
N/A |
100 |
100 |
99 |
100 |
100 |
|
Byerly's Burnsville, Burnsville, MN |
72,365 |
N/A |
N/A |
84 |
84 |
84 |
84 |
100 |
|
Calumet Square, Calumet City, IL |
39,936 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Carmax, Schaumburg, IL |
93,333 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Carmax, Tinley Park, IL |
94,518 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Chatham Ridge, Chicago, IL |
175,774 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
100 |
|
Chestnut Court, Darien, IL |
170,027 |
86 |
95 |
95 |
95 |
95 |
95 |
97 |
|
Circuit City, Traverse City, MI |
21,337 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Cliff Lake Centre, Eagan, MN |
74,215 |
N/A |
N/A |
72 |
88 |
79 |
88 |
95(b) |
|
Cobblers Crossing, Elgin, IL |
102,643 |
92 |
92 |
98 |
100 |
100 |
98 |
98 |
|
Crestwood Plaza, Crestwood, IL |
20,044 |
100 |
68 |
68 |
68 |
100 |
100 |
100 |
|
Cub Foods, Buffalo Grove, IL |
56,192 |
N/A |
100 |
100 |
100 |
100 |
100 |
100 |
|
Cub Foods, Indianapolis, IN |
67,541 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Cub Foods, Plymouth, MN |
67,510 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Dominick's, Countryside, IL |
62,344 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Dominick's, Glendale Heights, IL |
68,879 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Dominick's, Hammond, IN |
71,313 |
N/A |
100 |
0 |
0 |
0 |
0 |
0(b) |
|
Dominick's, Highland Park, IL |
71,442 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Dominick's, Schaumburg, IL |
71,400 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Dominick's, West Chicago, IL |
78,158 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Downers Grove Mkt, Downers Grove, IL |
104,449 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Eagle Country Market, Roselle, IL |
42,283 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Eagle Crest, Naperville, IL |
67,632 |
100 |
94 |
94 |
94 |
92 |
92 |
92 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Leasable |
|
|
|
|
|
|
|
|
|
Area |
03/31/99 |
06/30/99 |
09/30/99 |
12/31/99 |
03/31/00 |
06/30/00 |
09/30/00 |
12/31/00 |
Properties |
(Sq Ft) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
|
|
|
|
|
|
|
|
|
|
Eagle Ridge Center, Lindenhurst, IL |
56,142 |
N/A |
100 |
100 |
100 |
100 |
100 |
100 |
|
Eastgate Shopping Center, Lombard, IL |
132,475 |
87 |
91 |
92 |
92 |
93 |
94 |
93 |
|
Edinburgh Festival, Brooklyn Park, MN |
91,536 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Elmhurst City Center, Elmhurst, IL |
39,481 |
100 |
100 |
66 |
62 |
62 |
62 |
62 |
|
Fairview Hts. Plaza, Fairview Hts., IL |
167,491 |
78 |
78 |
78 |
78 |
78 |
78 |
78(b) |
|
Fashion Square, Skokie, IL |
84,580 |
100 |
100 |
100 |
81 |
81 |
81 |
81(b) |
|
Gateway Square, Hinsdale, IL |
40,170 |
96 |
96 |
96 |
100 |
96 |
96 |
91 |
|
Goodyear, Montgomery, IL |
12,903 |
77 |
77 |
77 |
28 |
28 |
28 |
28(b) |
|
Grand and Hunt Club, Gurnee, IL |
21,222 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Hartford Plaza, Naperville, IL |
43,762 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Hawthorn Village, Vernon Hills, IL |
98,806 |
100 |
100 |
100 |
100 |
100 |
99 |
99(b) |
|
Hickory Creek Market, Frankfort, IL |
35,451 |
N/A |
N/A |
88 |
65 |
82 |
100 |
100 |
|
High Point Center, Madison, WI |
85,399 |
94 |
82 |
87 |
92 |
89 |
82 |
82(b) |
|
Hollywood Video, Hammond, IN |
7,488 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Homewood Plaza, Homewood, IL |
19,000 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Iroquois Center, Naperville, IL |
140,981 |
73 |
65 |
66 |
69 |
67 |
73 |
73(b) |
|
Joliet Commons, Joliet, IL |
158,922 |
97 |
97 |
93 |
96 |
100 |
100 |
100 |
|
Joliet Commons Phase II, Joliet, IL |
40,395 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
100 |
|
Lake Park Plaza, Michigan City, IN |
229,639 |
74 |
74 |
73 |
71 |
73 |
73 |
74(b) |
|
Lansing Square, Lansing, IL |
233,508 |
98 |
98 |
98 |
98 |
98 |
99 |
99(b) |
|
Lincoln Park Place, Chicago, IL |
10,678 |
60 |
60 |
60 |
60 |
60 |
60 |
100 |
|
Loehmann's Plaza, Brookfield, WI |
107,952 |
100 |
100 |
100 |
100 |
84 |
84 |
84(b) |
|
Mallard Crossing, Elk Grove Village, IL |
82,929 |
97 |
97 |
98 |
97 |
97 |
29 |
29 |
|
Maple Grove Retail, Maple Grove, MN |
79,130 |
N/A |
N/A |
81 |
100 |
81 |
81 |
91(b) |
|
Maple Park Place, Bolingbrook, IL |
220,095 |
99 |
97 |
97 |
97 |
97 |
98 |
100 |
|
Maple Plaza, Downers Grove, IL |
31,298 |
100 |
100 |
100 |
87 |
83 |
87 |
96 |
|
Marketplace at Six Corners, Chicago, IL |
117,000 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Mundelein Plaza, Mundelein, IL |
68,056 |
100 |
100 |
100 |
96 |
96 |
91 |
91(b) |
|
Nantucket Square, Schaumburg, IL |
56,981 |
100 |
100 |
100 |
100 |
100 |
100 |
99 |
|
Naper West, Naperville, IL |
164,812 |
91 |
92 |
92 |
93 |
92 |
92 |
92 |
|
Niles Shopping Center, Niles, IL |
26,109 |
100 |
100 |
100 |
87 |
100 |
100 |
100 |
|
Oak Forest Commons, Oak Forest, IL |
108,330 |
100 |
100 |
98 |
97 |
100 |
100 |
99(b) |
|
Oak Forest Commons III, Oak Forest, IL |
7,424 |
N/A |
72 |
72 |
82 |
62 |
62 |
50(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Leasable |
|
|
|
|
|
|
|
|
|
Area |
03/31/99 |
06/30/99 |
09/30/99 |
12/31/99 |
03/31/00 |
06/30/00 |
09/30/00 |
12/31/00 |
Properties |
(Sq Ft) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
|
|
|
|
|
|
|
|
|
|
Oak Lawn Town Center, Oak Lawn, IL |
12,506 |
N/A |
100 |
100 |
100 |
100 |
100 |
100 |
|
Orland Greens, Orland Park, IL |
45,031 |
100 |
97 |
97 |
97 |
94 |
94 |
86(b) |
|
Orland Park Retail, Orland Park, IL |
8,500 |
100 |
100 |
36 |
36 |
36 |
100 |
100 |
|
Park Center Plaza, Tinley Park, IL |
193,179 |
72 |
84 |
84 |
72 |
90 |
92 |
93(a) |
|
Park Place Plaza, St. Louis Park, MN |
84,999 |
N/A |
N/A |
100 |
100 |
100 |
100 |
100 |
|
Park St. Claire, Schaumburg, IL |
11,859 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Party City, Oakbrook Terrace, IL |
10,000 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Pine Tree Plaza, Janesville, WI |
187,413 |
N/A |
N/A |
N/A |
93 |
93 |
93 |
93(a) |
|
Plymouth Collection, Plymouth, MN |
40,815 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Prairie Square, Sun Prairie, WI |
35,755 |
83 |
83 |
83 |
83 |
81 |
77 |
77(b) |
|
Prospect Heights, Prospect Heights, IL |
28,080 |
92 |
15 |
15 |
25 |
25 |
25 |
25(b) |
|
Quarry Outlot, Hodgkins, IL |
9,650 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Quarry Retail, Minneapolis, MN |
273,648 |
N/A |
N/A |
99 |
99 |
99 |
99 |
99 |
|
Randall Square, Geneva, IL |
216,973 |
N/A |
87 |
82 |
94 |
93 |
93 |
99 |
|
Regency Point, Lockport, IL |
54,911 |
97 |
97 |
97 |
98 |
100 |
100 |
100 |
|
Riverdale Commons, Coon Rapids, MN |
168,277 |
N/A |
N/A |
98 |
99 |
97 |
100 |
100 |
|
Riverdale Outlot, Coon Rapids, MN |
6,566 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
100 |
|
Riverplace Center, Noblesville, IN |
74,414 |
100 |
100 |
100 |
94 |
94 |
94 |
94 |
|
Riversquare Center, Naperville, IL |
58,556 |
95 |
95 |
87 |
76 |
71 |
67 |
73(b) |
|
Rivertree Court, Vernon Hills, IL |
298,862 |
99 |
99 |
99 |
99 |
99 |
99 |
99 |
|
Rose Naper Plaza East, Naperville, IL |
11,658 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
100 |
|
Rose Naper Plaza West, Naperville, IL |
14,335 |
N/A |
N/A |
100 |
100 |
100 |
100 |
100 |
|
Rose Plaza, Elmwood Park, IL |
24,204 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Salem Square, Countryside, IL |
112,310 |
97 |
97 |
97 |
93 |
93 |
93 |
97 |
|
St. James Crossing, Westmont, IL |
49,994 |
91 |
91 |
91 |
83 |
90 |
94 |
94(b) |
|
Schaumburg Plaza, Schaumburg, IL |
61,485 |
93 |
93 |
93 |
93 |
90 |
93 |
93 |
|
Schaumburg Prom, Schaumburg, IL |
91,831 |
N/A |
N/A |
N/A |
100 |
100 |
100 |
100 |
|
Sears, Montgomery, IL |
34,300 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Sequoia Shopping Ctr, Milwaukee, WI |
35,407 |
100 |
100 |
100 |
93 |
93 |
80 |
80(b) |
|
Shingle Creek, Brooklyn Center, MN |
39,456 |
N/A |
N/A |
66 |
73 |
75 |
75 |
83(b) |
|
Shops/Coopers Grv, Ctry Club Hills, IL |
72,518 |
100 |
100 |
100 |
100 |
23 |
23 |
20 |
|
Shoppes of Mill Creek, Palos Park, IL |
102,406 |
98 |
98 |
96 |
97 |
98 |
94 |
96 |
|
Shorecrest Plaza, Racine, WI |
91,244 |
89 |
89 |
89 |
89 |
89 |
87 |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Leasable |
|
|
|
|
|
|
|
|
|
Area |
03/31/99 |
06/30/99 |
09/30/99 |
12/31/99 |
03/31/00 |
06/30/00 |
09/30/00 |
12/31/00 |
Properties |
(Sq Ft) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
(%) |
|
|
|
|
|
|
|
|
|
|
Six Corners, Chicago, IL |
80,650 |
88 |
90 |
90 |
89 |
89 |
89 |
86(b) |
|
Springboro Plaza, Springboro, OH |
154,034 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Spring Hill Fashion Ctr, W. Dundee, IL |
125,198 |
95 |
95 |
100 |
97 |
97 |
97 |
97 |
|
Staples, Freeport, IL |
24,049 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Stuart's Crossing, St. Charles, IL |
70,529 |
N/A |
N/A |
N/A |
100 |
93 |
90 |
90 |
|
Summit of Park Ridge, Park Ridge, IL |
33,252 |
93 |
88 |
88 |
84 |
88 |
98 |
98 |
|
Terramere Plaza, Arlington Heights, IL |
40,965 |
86 |
86 |
86 |
79 |
79 |
79 |
89(b) |
|
Two Rivers Plaza, Bolingbrook, IL |
57,900 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
United Audio Center, Schaumburg, IL |
9,988 |
N/A |
N/A |
100 |
100 |
100 |
100 |
100 |
|
Walgreens, Decatur, IL |
13,500 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Walgreens, Woodstock, IL |
15,856 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Wauconda Shopping Ctr, Wauconda, IL |
31,357 |
100 |
100 |
100 |
92 |
100 |
100 |
100 |
|
Western and Howard, Chicago, IL |
12,784 |
100 |
100 |
100 |
38 |
38 |
38 |
38(b) |
|
West River Crossing, Joliet, IL |
32,540 |
N/A |
N/A |
87 |
87 |
74 |
96 |
96 |
|
Wilson Plaza, Batavia, IL |
11,160 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Winnetka Commons, New Hope, MN |
42,415 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Wisner/Milwaukee Plaza, Chicago, IL |
14,677 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Woodfield Comm E/W, Schaumburg, IL |
207,583 |
89 |
86 |
86 |
95 |
95 |
95 |
100 |
|
Woodfield Plaza, Schaumburg, IL |
177,160 |
97 |
97 |
82 |
82 |
82 |
82 |
82(a) |
|
Woodland Commons, Buffalo Grove, IL |
170,070 |
100 |
99 |
97 |
97 |
98 |
99 |
99 |
|
Woodland Heights, Streamwood, IL |
120,436 |
81 |
81 |
81 |
81 |
82 |
82 |
82 |
|
Zany Brainy, Wheaton, IL |
12,499 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
|
|
|
|
|
|
|
|
|
9,246,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent Events
In October 2000, the Company paid a distribution of $4,737,200 to its Stockholders.
On October 30, 2000, the Company secured debt on one of its previously unencumbered properties, Cub Foods, Buffalo Grove, Illinois. The loan amount was $3,650,000 and had an interest rate of 7.86% at closing, but adjusts monthly based on adjustments to the LIBOR 30-day rate index. The maturity date is October 2005.
On October 31, 2000, the Company acquired all of the LLC units held by the non-managing member of the Inland Joliet Commons, LLC for $5,164,280 using cash and cash equivalents.
The Company is currently exploring the purchase of additional shopping centers from unaffiliated third parties.
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 closely monitors its variable rate debt and on each such debt it has the right to convert the interest rate to a fixed rate.
Approximately $108,568,000, or 24% of the Company's mortgages payable at September 30, 2000, have variable interest rates averaging 8.0%. An increase in the variable interest rate on certain mortgages payable constitutes a market risk.
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 exhibits are filed as part of this document:
Item No. |
Description |
|
|
3.1 |
Third Articles of Amendment and Restatement of the Company dated July 1, 2000 (7) |
|
|
3.2 |
Amend and Restated bylaws of Inland Real Estate Corporation (3) |
|
|
4.1 |
Specimen Stock Certificate (1) |
|
|
10.1 |
Advisory Agreement between Inland Real Estate Corporation and Inland Real Estate Advisory Services dated October 14, 1994 (2) |
|
|
10.1(a) |
Amendment No. 1 to the Advisory Agreement dated October 13, 1995 (4) |
|
|
10.1(b) |
Amendment No. 2 to the Advisory Agreement dated October 13, 1996 (4) |
|
|
10.1(c) |
Amendment No. 3 to the Advisory Agreement effective as of October 13, 1997 (1) |
|
|
10.1(d) |
Amendment No. 4 to the Advisory Agreement dated March 27, 1998 (5) |
|
|
10.1(e) |
Amendment No. 5 to the Advisory Agreement dated June 30, 1998 (5) |
|
|
10.2 |
Form of Management Agreement Between Inland Real Estate Corporation and Inland Commercial Property Management, Inc. (3) |
|
|
10.3 |
Amended and Restated Independent Director Stock Option Plan (2) |
|
|
10.4 |
Agreement and Plan of Merger by and among Inland Real Estate Corporation, Inland Advisors, Inc., Inland Management Corporation, Inland Real Estate Investment Corporation, Inland Real Estate Advisory Services, Inc., The Inland Property Management Group, Inc., Inland Commercial Property Management, Inc., and The Inland Group, Inc. dated March 7, 2000 (6) |
|
|
10.5 |
Employment Agreements between Inland Real Estate Corporation and (i) Norbert Treonis, (ii) Samuel A. Orticelli and (iii) Mark E. Zalatoris dated July 1, 2000 (7) |
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10.6 |
Consulting Agreement between Inland Real Estate Corporation and Robert D. Parks dated July 1, 2000 (7) |
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10.7 |
Sublease between Inland Real Estate Investment Corporation and Inland Real Estate Corporation dated July 1, 2000 (7) |
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27 |
Financial Data Schedule |
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(1) |
Included in the Registrant's Registration Statement on Form S-11 as filed by Registrant on January 30, 1998. |
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(2) |
Included in the Registrant's Registration Statement on Form S-11 (file number 333-6459) as filed by Registrant on June 20, 1996. |
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(3) |
Included in Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-11 (file number 333-6459) as filed by the Registrant on July 18, 1996. |
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(4) |
Included in Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-11 (file number 333-6459) as filed by the Registrant on November 1, 1996. |
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(5) |
Included in Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form S-11 (file number 333-45233) as filed by the Registrant on April 6, 1998. |
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(6) |
Included in Registrant's Current Report on Form 8-K (file number 000-28382) as filed by the Registrant on March 21, 2000. |
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(b) |
Report on Form 8-K dated July 1, 2000 Item 5. Other Events |
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(7)
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Included in Registrant's Current Report on Form 8-K (file number 000-28382) as filed by the Registrant on July 14, 2000. |
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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 |
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/S/ NORBERT TREONIS |
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By: |
Norbert Treonis |
Chief Executive Officer |
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Date: |
November 10, 2000 |
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/S/ MARK E. ZALATORIS |
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By: |
Mark E. Zalatoris |
Chief Financial and Accounting Officer |
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Date: |
November 10, 2000 |
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