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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 June 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 August 11, 2000, there were 62,207,615 Shares of Common Stock outstanding.
Part I - Financial Statements
Item 1. Financial Statements
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
(unaudited)
Assets
June 30, 2000 |
December 31, 1999 |
||
Investment properties (Note 3): |
|||
Land |
$ 277,382,642 |
271,905,942 |
|
Construction in progress (Note 7) |
2,047,811 |
1,699,356 |
|
Building and improvements |
692,459,369 |
671,201,002 |
|
971,889,822 |
944,806,300 |
||
Less accumulated depreciation |
50,490,030 |
37,424,871 |
|
Net investment properties |
921,399,792 |
907,381,429 |
|
Cash and cash equivalents including amounts held by property manager (Note 1) |
15,126,660 |
19,424,343 |
|
Investment in securities (net of allowance for unrealized loss of $944,678 and $2,088,633 at June 30, 2000 and December 31, 1999, respectively) (Note 1) |
8,486,663 |
|
8,570,656 |
Investment in marketable securities |
260,000 |
260,000 |
|
Restricted cash |
8,825,234 |
15,340,902 |
|
Accounts and rents receivable (net of allowance for doubtful accounts of $1,904,680 and $1,064,256 at June 30, 2000 and December 31, 1999, respectively) (Note 4) |
27,297,505 |
19,794,687 |
|
Mortgage receivable (Note 5) |
12,302,609 |
6,495,541 |
|
Deposits and other assets |
389,225 |
358,986 |
|
Leasing fees (net of accumulated amortization of $91,746 and $39,031 at June 30, 2000 and December 31, 1999, respectively) |
460,491 |
360,486 |
|
Loan fees (net of accumulated amortization of $1,403,251 and $1,029,522 at June 30, 2000 and December 31, 1999, respectively) |
4,170,696 |
4,294,942 |
|
Total assets |
$ 998,718,875 |
982,281,972 |
|
============= |
============= |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Balance Sheets
(continued)
June 30, 2000 and December 31, 1999
(unaudited)
Liabilities and Stockholders' Equity
June 30, 2000 |
December 31, 1999 |
||
Liabilities: |
|||
Accounts payable |
$ 958,096 |
384,665 |
|
Accrued interest payable to Affiliates |
4,421 |
4,468 |
|
Accrued interest payable to non-affiliates |
2,052,105 |
1,786,331 |
|
Accrued real estate taxes |
20,637,109 |
18,829,084 |
|
Distributions payable (Note 11) |
4,263,730 |
4,374,462 |
|
Security deposits |
1,947,753 |
1,976,082 |
|
Mortgages payable (Note 6) |
460,701,357 |
440,740,296 |
|
Prepaid rents and unearned income |
1,519,038 |
1,536,008 |
|
Other liabilities |
2,681,849 |
8,525,986 |
|
Due to Affiliates (Note 2) |
83,392 |
1,517,775 |
|
Total liabilities |
494,848,850 |
479,675,157 |
|
Minority interest (Note 1) |
26,794,209 |
27,112,690 |
|
Stockholders' Equity (Notes 1 and 2): |
|||
Preferred stock, $.01 par value, 6,000,000 Shares authorized; none issued and outstanding at June 30, 2000 and December 31, 1999 |
- |
- |
|
Common stock, $.01 par value, 100,000,000 Shares authorized; 55,919,919 and 55,398,888 Shares issued and outstanding at June 30, 2000 and December 31, 1999, respectivel y |
559,199 |
553,988 |
|
Additional paid-in capital (net of offering costs of $58,816,092, of which $52,218,524 was paid to Affiliates) |
518,784,647 |
512,567,043 |
|
Accumulated distributions in excess of net income |
(41,323,352) |
(35,538,273) |
|
Accumulated other comprehensive income (loss) |
(944,678) |
(2,088,633) |
|
Total stockholders' equity |
477,075,816 |
475,494,125 |
|
Commitments and contingencies (Notes 4, 6, 7 and 10) |
|||
Total liabilities and stockholders' equity |
$ 998,718,875 |
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 six months ended June 30, 2000 and 1999
(unaudited)
Three months |
Three months |
Six months |
Six months |
|
ended |
ended |
ended |
ended |
|
June 30, 2000 |
June 30, 1999 |
June 30, 2000 |
June 30, 1999 |
|
Income: |
||||
Rental income (Notes 1 and 4) |
$ 26,346,988 |
20,446,223 |
52,201,184 |
39,072,302 |
Additional rental income |
11,484,601 |
6,937,095 |
24,374,150 |
13,857,666 |
Interest income |
810,755 |
1,221,419 |
1,196,669 |
2,747,791 |
Other income |
858,461 |
170,925 |
1,265,796 |
288,264 |
39,500,805 |
28,775,662 |
79,037,799 |
55,966,023 |
|
Expenses: |
||||
Professional services to Affiliates |
19,281 |
26,269 |
98,112 |
49,051 |
Professional services to non-affiliates |
324,101 |
79,758 |
940,490 |
220,728 |
General and administrative to Affiliates |
83,170 |
149,205 |
220,292 |
295,606 |
General and administrative expenses to non-affiliates |
141,359 |
268,426 |
439,116 |
352,334 |
General and administrative expenses - bad debt expense |
188,541 |
- |
1,336,869 |
- |
Advisor asset management fee |
1,210,500 |
850,000 |
2,413,500 |
1,175,000 |
Property operating expenses to Affiliates |
1,554,561 |
1,175,157 |
3,044,834 |
2,246,911 |
Property operating expenses to non- affiliates |
9,653,590 |
7,791,855 |
21,155,025 |
15,740,043 |
Mortgage interest to Affiliates |
13,285 |
13,563 |
26,642 |
27,192 |
Mortgage interest to non-affiliates |
8,397,778 |
5,553,177 |
16,489,092 |
11,197,345 |
Depreciation |
6,801,646 |
4,611,544 |
13,065,159 |
8,940,498 |
Amortization |
48,266 |
7,372 |
87,248 |
34,491 |
Acquisition cost expenses to Affiliates |
43,773 |
67,397 |
81,803 |
282,101 |
Acquisition cost expenses to non- affiliates |
3,423 |
29,938 |
(20,904) |
149,396 |
28,483,274 |
20,623,661 |
59,377,278 |
40,710,696 |
|
Income before minority interest |
11,017,531 |
8,152,001 |
19,660,521 |
15,255,327 |
Minority interest |
(441,260) |
81,981 |
(717,867) |
81,543 |
Net income before comprehensive income |
10,576,271 |
8,233,982 |
18,942,654 |
15,336,870 |
Other comprehensive income: |
||||
Unrealized holding gain on investment securities |
582,161 |
- |
1,143,955 |
- |
Comprehensive income |
$ 11,158,432 |
8,233,982 |
20,086,609 |
15,336,870 |
========== |
========== |
========== |
=========== |
|
Net income before comprehensive income per common share, basic and diluted (Note 8) |
$ .19 |
.15 |
.34 |
.29 |
========== |
========== |
========== |
=========== |
|
Weighted average common stock shares outstanding |
55,963,197 |
54,141,838 |
55,861,712 |
53,350,495 |
========== |
========== |
========== |
=========== |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Stockholders' Equity
June 30, 2000
(unaudited)
Common Stock |
Additional Paid-in Capital |
Accumulated Distributions in Excess of Net Income |
Accumulated Other Comprehensive Loss |
Total |
|
Balance January 1, 2000 |
$ 553,988 |
512,567,043 |
(35,538,273) |
(2,088,633) |
475,494,125 |
Net income |
- |
- |
18,942,654 |
- |
18,942,654 |
Other comprehensive income |
- |
- |
- |
1,143,955 |
1,143,955 |
|
- |
- |
(24,727,733) |
- |
(24,727,733) |
Proceeds from Offering including DRP |
10,766 |
11,239,760 |
- |
- |
11,250,526 |
Treasury stock |
(5,555) |
(5,022,156) |
- |
- |
(5,027,711) |
Balance June 30, 2000 |
$ 559,199 |
518,784,647 |
(41,323,352) |
(944,678) |
477,075,816 |
|
========= |
========== |
========== |
========== |
=========== |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
For the six months ended June 30, 2000 and 1999
(unaudited)
Six months |
Six months |
||
ended |
ended |
||
June 30, 2000 |
June 30, 1999 |
||
Cash flows from operating activities: |
|||
Net income |
$ 18,942,654 |
15,336,870 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||
Depreciation |
13,065,159 |
8,940,498 |
|
Amortization |
87,248 |
34,491 |
|
Minority interest |
717,867 |
(81,543) |
|
Rental income under master lease agreements |
810,570 |
840,189 |
|
Straight line rental income |
(1,995,844) |
(973,891) |
|
Interest on unamortized loan fees |
339,196 |
227,085 |
|
Changes in assets and liabilities: |
|||
Accounts and rents receivable |
(5,506,974) |
(2,367,217) |
|
Other assets |
(30,239) |
1,332,744 |
|
Accounts payable |
573,431 |
847,008 |
|
Accrued interest payable |
265,727 |
(336,245) |
|
Accrued real estate taxes |
1,808,025 |
1,220,329 |
|
Security deposits |
(28,329) |
275,857 |
|
Other liabilities |
(5,844,137) |
6,975,541 |
|
Due to Affiliates |
(1,434,383) |
867,696 |
|
Prepaid rents and unearned income |
(16,970) |
937,693 |
|
Net cash provided by operating activities |
21,753,001 |
34,077,105 |
|
Cash flows from investing activities: |
|||
Restricted cash |
6,515,668 |
(6,225,849) |
|
Purchase of investment securities |
- |
(6,369,476) |
|
Sale of investment securities |
1,227,948 |
- |
|
Additions to investment properties |
(2,567,022) |
(2,877,058) |
|
Purchase of investment properties |
(24,978,615) |
(120,666,196) |
|
Mortgage receivable |
(5,807,068) |
(5,042,500) |
|
Construction in progress |
(348,455) |
(173,806) |
|
Proceeds from sale of land |
- |
1,117,665 |
|
Deposits on investment properties |
- |
100,000 |
|
Leasing fees |
(152,720) |
- |
|
Net cash used in investing activities |
(26,110,264) |
(140,137,220) |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Consolidated Statements of Cash Flows
(continued)
For the six months ended June 30, 2000 and 1999
(unaudited)
Six months |
Six months |
||
ended |
ended |
||
June 30, 2000 |
June 30, 1999 |
||
Cash flows from financing activities: |
|||
Proceeds from offering, including DRP |
$ 11,250,526 |
24,356,844 |
|
Repurchases of shares |
(5,027,711) |
(1,259,672) |
|
Payments of offering costs |
- |
(2,174,276) |
|
Loan proceeds |
20,204,320 |
57,450,000 |
|
Loan fees |
(249,483) |
(620,613) |
|
Distributions paid |
(25,874,813) |
(23,708,768) |
|
Principal payments of debt |
(243,259) |
(938,481) |
|
Net cash provided by financing activities |
59,580 |
53,105,034 |
|
Net decrease in cash and cash equivalents |
(4,297,683) |
(52,955,081) |
|
Cash and cash equivalents at beginning of period |
19,424,343 |
123,056,702 |
|
Cash and cash equivalents at end of period |
$ 15,126,660 |
70,101,621 |
|
============ |
============ |
||
Supplemental schedule of noncash investing and financing activities: |
|||
Increase in investment properties |
$ (24,978,615) |
(132,136,099) |
|
Assumption of mortgage debt |
- |
11,469,903 |
|
Purchase of investment properties |
$ (24,978,615) |
(120,666,196) |
|
============ |
============ |
||
Distributions payable |
$ 4,263,730 |
4,022,883 |
|
============ |
============ |
||
Cash paid for interest |
$ 15,910,811 |
11,118,153 |
|
=========== |
============ |
See accompanying notes to consolidated financial statements.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
June 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"). 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 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 June 30, 2000, the Company has issued
5,442,009 Shares through the Company's Distribution Reinvestment Program ("DRP"). As of June 30, 2000, the Company has repurchased a total of 1,164,487 Shares through the Company's Share Repurchase Program, for an aggregate amount of $10,541,359
repurchased through the Share Repurchase Program. As a result, gross offering proceeds from the Offerings ("Gross Offering Proceeds") total $578,159,938, as of June 30, 2000.
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 June 30, 2000
consists of preferred 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 three months ended June 30, 2000 resulted in a gain
on sale of $46,650.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
During the second quarter if 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 has no impact on the Company, as the Company has not utilized
derivative instruments or entered into any hedging activities.
The accompanying consolidated financial statements include the accounts of the Company, Inland Joliet Commons, LLC, Inland Ryan LLC and Inland Ryan Cliff Lake LLC. 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 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.
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 Advisor to 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 Advisor to 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, the Advisor 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.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
(2) Transactions with Affiliates
The Advisor and its Affiliates were 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 $98,112, $220,292 and $81,803 are allocated among
professional services to Affiliates, general and administrative expenses to Affiliates and acquisition costs expensed to Affiliates, respectively, for the six months ended June 30, 2000. Such costs of $49,051, $295,606 and $282,101 are allocated among
professional services to Affiliates, general and administrative expenses to Affiliates and acquisition costs expensed to Affiliates, respectively, for the six months ended June 30, 1999.
An Affiliate of the Advisor holds the mortgage on the Walgreens, Decatur, IL property. As of June 30, 2000, the remaining balance of the mortgage is $692,937. For the six months ended June 30, 2000, the Company paid principal and interest payments
totaling $34,133 on this mortgage.
The Advisor and its Affiliates were entitled to reimbursement for salaries and expenses of employees of the Advisor and its Affiliates 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.
The Advisor is 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 $1,175,000 of Advisor Asset Management Fees for the six months ended June 30, 2000 and 1999,
respectively, of which $10,500 and $1,500,000 was unpaid at June 30, 2000 and December 31, 1999, respectively. Remaining Advisor Asset Management Fees were forfeited by the Advisor and, accordingly, not accrued for in the accompanying consolidated
financial statements.
An Affiliate of the Advisor is 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 $2,246,911 for the six months ended June 30, 2000 and 1999, respectively.
Upon completion of the Merger (see Note 11), the Company became a self-administered real estate investment trust and will no longer incur the Advisor Asset Management Fee and Property Management Fees.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
(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 $5,959,229 and $5,148,659 as of June 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 $1,995,844 and $973,891 for the six months ended June 30, 2000 and 1999, respectively, of rental income for the period of occupancy for which
stepped rent increases apply and $7,393,870 and $5,398,026 in related accounts and rents receivable as of June 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 $796,000 are included in the six months ended June 30, 2000.
(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 December 31, 2000 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 June 30, 2000, the principal balance of this mortgage receivable is $12,149,805.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
(6) Mortgages Payable
The Company's mortgages payable are secured by certain of its investment properties and consist of the following at June 30, 2000 and December 31, 1999:
Interest |
|||||
Rate at |
Current |
Balance at |
|||
June 30, |
Maturity |
Monthly |
Balance at |
December 31, |
|
2000 |
Date |
Payment |
June 30, 2000 |
1999 |
|
Mortgage payable to Affiliate: |
|||||
Inland Mortgage Servicing Corp. (a) |
7.65% |
05/2004 |
$ 5,689 |
$ 692,937 |
$ 700,381 |
Mortgages payable to non- affiliates: |
|||||
Bank One (a) |
8.44% |
08/2000 |
(b) |
4,203,619 |
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 |
8,890,767 |
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 |
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 |
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
Interest |
|||||
Rate at |
Current |
Balance at |
|||
June 30, |
Maturity |
Monthly |
Balance at |
December 31, |
|
2000 |
Date |
Payment |
June 30, 2000 |
1999 |
|
Berkshire Mortgage (a) |
7.79% |
10/2007 |
$ 105,719 |
$ 14,383,907 |
$ 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. |
7.94% |
10/2004 |
(i) |
34,017,000 |
34,017,000 |
Allstate |
7.79% |
10/2004 |
(i) |
35,787,000 |
35,787,000 |
Midland Loan Serv. (a) |
7.86% |
01/2008 |
37,649 |
5,095,840 |
5,121,280 |
LaSalle Bank N.A. |
7.94% |
12/2004 |
(i) |
8,910,000 |
8,910,000 |
LaSalle Bank N.A |
8.04% |
12/2004 |
(i) |
9,650,000 |
9,650,000 |
LaSalle Bank N.A. |
7.94% |
01/2005 |
(i) |
9,737,620 |
- |
LaSalle Bank N.A. |
8.04% |
03/2005 |
(i) |
2,400,000 |
- |
LaSalle Bank N.A |
8.04% |
04/2005 |
(i) |
2,467,700 |
- |
LaSalle Bank N.A |
8.04% |
06/2005 |
(i) |
2,867,000 |
- |
LaSalle Bank N.A |
7.69% |
06/2005 |
(i) |
2,732,000 |
- |
Mortgages Payable |
$ 460,701,357 |
440,740,296 |
|||
These loans require payments of principal and interest monthly, all other loans listed are interest only.
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.
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%.
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 rate at June 30, 2000 is 5.18%. 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 trustee fee of $250
paid quarterly.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 30, 2000
(unaudited)
The Company received a subsidy at closing from the seller for a period of five years, which together with interest earnings on the initial 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.
The Company paid $636,000 of loan fees and $503,295 of other costs associated with this financing with Lehman Brothers Holdings, Inc. This 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.
The Company paid $37,125 of loan fees and $267,884 of other costs associated with this financing with Column Financial, Inc. This 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.
The Company paid $415,766 of loan fees and $134,429 of other costs associated with this financing with Bear, Stearns Funding, Inc. This 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.
Payments on these mortgages are calculated using a floating rate of interest based on LIBOR.
(7) Construction in Progress
On August 6, 1998, the Company acquired title to approximately 27 acres of land in St. Charles, Illinois, to be developed into a 204,640 square foot shopping center to be known as "Stuart's Crossing" from an unaffiliated third party. The initial purchase
price of $14,176,627 was funded with cash and cash equivalents. The purchase price consisted of $5,351,744 for land and $8,824,883 which has been placed in a development escrow for infrastructure development, construction, and a deposit on the final
purchase price of a 70,640 square foot Jewel Food Store and adjacent stores. In July 1999, the Jewel Food Store was completed and $6,069,437 was released from escrow that represents the final purchase price of the Jewel Food Store. Additionally,
$1,434,037 of construction in progress was recorded as operating property. In November 1999, the Company funded an additional $1,221,750 to escrow for the construction of a 15,000 square foot store space adjacent to the Jewel Food Store. Contingent upon
the lease-up of the 15,000 square foot space, the Company is required to deposit additional cash into the development escrow to fund the space's final purchase price. As of June 30, 2000, $152,804 of this development escrow is included in mortgage
receivable and $1,763,098 is included in construction in progress.
INLAND REAL ESTATE CORPORATION
(a Maryland corporation)
Notes to Consolidated Financial Statements
(continued)
June 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 June 30, 2000, options to purchase 16,500 shares of
common stock at prices ranging from $9.05 to $10.45 per share were outstanding.
As of June 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 have no value.
The weighted average number of common shares outstanding was 55,861,712 and 53,350,495 for the six months ended June 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)
June 30, 2000
(unaudited)
The property revenues, property net operations, and property assets of the reportable segments are summarized in the following tables as of June 30, 2000 and 1999, and for the six month periods then ended, along with a reconciliation to net income:
2000 |
1999 |
||
Total property revenues |
$ 77,841,130 |
53,218,232 |
|
Total property operating expenses |
24,199,859 |
17,986,954 |
|
Mortgage interest |
16,515,734 |
11,224,537 |
|
Net property operations |
37,125,537 |
24,006,741 |
|
Interest income |
1,196,669 |
2,747,791 |
|
Less non property expenses: |
|||
Professional services |
1,038,602 |
269,779 |
|
General and administrative |
1,996,277 |
647,940 |
|
Advisor asset management fee |
2,413,500 |
1,175,000 |
|
Depreciation and amortization |
13,152,407 |
8,974,989 |
|
Acquisition cost expense |
60,900 |
431,497 |
|
Income before minority interest |
$ 19,660,520 |
15,255,327 |
|
=========== |
========== |
||
Net investment properties |
$ 921,399,792 |
753,565,196 |
|
=========== |
========== |
(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 June 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)
June 30, 2000
(unaudited)
(11) Subsequent Events
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 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 will be reported as an
operational expense on the Company's Consolidated Statements of Operations and will be included in the Company's calculation of Funds from Operations.
In July 2000, the Company paid a distribution of $4,263,730 to its Stockholders.
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.
On August 1, 2000, the mortgage payable secured by the Regency Point property located in Lockport, Illinois matured. The mortgage, which had an interest rate of 8.44% and a principal balance of $4,196,898, was paid in full by the Company.
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
Cash and cash equivalents consist of cash and short-term investments. Cash and cash equivalents at June 30, 2000 and December 31, 1999 were $15,126,660 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 additional properties, pay distributions and repurchase shares through the Share Repurchase Program. Partially offsetting the decrease in cash and cash equivalents was additional proceeds
received through the Company's Distribution Reinvestment Program ("DRP"). 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 June 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 six months ended June 30, 2000 were $24,727,733 or $.44 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.
Cash Flows from Operating Activities
Net cash provided by operating activities decreased from $34,077,105 for the six months ended June 30, 1999 to $21,753,001 for the six months ended June 30, 2000. This decrease was primarily a result of a decrease in other liabilities, which are
third-parties escrow held, and an increase in accounts and rents receivable and depreciation expense resulting from the increase in properties owned by the Company. As of June 30, 2000, the Company had acquired 119 properties, as compared to 99
properties as of June 30, 1999.
Cash Flows from Investing Activities
The Company used $26,110,264 in cash for investing activities for the six months ended June 30, 2000 as compared to $140,137,220 for the six months ended June 30, 1999. The decrease in cash used is due primarily to the Company purchasing four additional
properties during the six months ended June 30, 2000, as compared to fourteen additional properties during the six months ended June 30, 1999.
Cash Flows from Financing Activities
For the six months ended June 30, 2000, the Company generated $59,580 of cash flows from financing activities as compared to $53,105,034 for the six months ended June 30, 1999. This decrease was due primarily to an decrease in loan proceeds received
during the six months ended June 30, 2000 of $20,204,320, as compared to loan proceeds received during the six months ended June 30, 1999 of $57,450,000. This decrease was also due to a decrease in proceeds received from the offering including the DRP.
With the termination of the Fourth Offering on December 31, 1998, proceeds were still being received from the subscriptions during the six months ended June 30, 1999. During the six months ended June 30, 2000, the proceeds received were solely from the
DRP. For the six months ended June 30, 2000, the Company had proceeds from the DRP of $11,250,526, compared to $24,356,844 from the offering and DRP for the six months ended June 30, 1999.
Results of Operations
At June 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 six months ended June 30, 2000, as compared to the three and
six months ended June 30, 1999, due to the purchase of additional properties in 2000 and a full six months of operations on properties acquired during 1999. As of June 30, 2000, the Company had acquired 119 properties, as compared to 99 properties as of
June 30, 1999. The purchase of additional properties also resulted in increases in net investment properties, accrued real estate taxes, property operating expenses to Affiliates and non-affiliates and depreciation expense.
Interest income decreased for the three and six months ended June 30, 2000, as compared to the three and six months ended June 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 additional properties.
Other income increased for the three and six months ended June 30, 2000, as compared to the three and six months ended June 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 $10,660,000 of investment in securities, of which approximately $1,228,000 was sold as of June 30, 2000. Also included in other income for the three
and six months ended June 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 and non-affiliates increased for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999, due to services required on the increased number of investment properties and for services required
for the preparation of the merger.
General and administrative expenses to Affiliates decreased for the three and six months ended June 30, 2000, as compared to the three and six months ended June 30, 1999, due to decreases in mortgage servicing fees, postage and data processing
expenses. General and administrative expenses to non-affiliates increased for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999, due to services required on the increased number of investment properties and for services
required for the preparation of the Merger.
General and administrative expenses - bad debt expense increased for the three and six months ended June 30, 2000, as compared to the three and six months ended June 30, 1999, due primarily to the increase in the allowance for doubtful accounts for the
three and six months ended June 30, 2000. The allowance was increased due to the increased number of investment properties.
The Advisor may receive an annual Advisor Asset Management Fee of not more than 1% of the Average Invested Assets, paid quarterly. The Company paid an Advisor Asset Management Fee that represented .50 of the 1% of the Average Invested Assets for the six
months ended June 30, 2000. Remaining Advisor Asset Management Fees have been forfeited by the Advisor and, accordingly, not accrued for in the accompanying consolidated financial statements. For the six months ended June 30, 2000, Advisor asset
management fees were $2,413,500, as compared to $1,175,000 for the six months ended June 30, 1999. This increase is due to the increase number of investment properties the Company owns. As of June 30, 2000, the Company had acquired 119 properties, as
compared to 99 properties as of June 30, 1999.
Upon completion of the Merger (see Note 11), the Company became a self-administered real estate investment trust and will no longer incur the Advisor Asset Management Fee and Property Management Fees.
Mortgage interest and accrued interest payable to non-affiliates increased for the six months ended June 30, 2000, as compared to the six months ended June 30, 1999, due to an increase in mortgages payable on additional properties purchased to
approximately $460,701,000 from approximately $356,963,000.
Acquisition cost expenses to Affiliates and non-affiliates decreased for the three and six months ended June 30, 2000, as compared to the three and six months ended June 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.
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:
Six months ended |
Six months ended |
||
June 30, 2000 |
June 30, 1999 |
||
Net income |
$ 18,942,654 |
15,336,870 |
|
Depreciation, net of minority interest |
12,386,073 |
8,618,178 |
|
Funds From Operations (1) |
31,328,727 |
23,955,048 |
|
Principal amortization of debt, net of minority interest |
(50,863) |
(103,122) |
|
Deferred rent receivable, net of minority interest (2) |
(1,896,239) |
(973,891) |
|
Rental income received under master lease agreements, net of minority interest (3) |
808,761 |
840,189 |
|
Funds available for distribution |
$ 30,190,386 |
23,718,224 |
|
=========== |
========== |
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.
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.
In connection with the purchase of several properties, the Company will receive payments under master lease agreements covering spaces vacant at the time of acquisition of those 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. 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 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 |
|
|
Antioch Plaza, Antioch, IL |
19,810 |
68 |
68 |
67 |
67 |
52 |
52 |
|
|
Aurora Commons, Aurora, IL |
127,302 |
94 |
94 |
94 |
93 |
93 |
93 |
|
|
Bakers Shoes, Chicago, IL |
20,000 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Bally's Total Fitness, St Paul, MN |
43,000 |
N/A |
N/A |
100 |
100 |
100 |
100 |
|
|
Baytowne Square, Champaign, IL |
118,842 |
97 |
97 |
98 |
97 |
97 |
96 |
|
|
Bergen Plaza, Oakdale, MN |
270,283 |
97 |
97 |
97 |
97 |
98 |
99(a) |
|
|
Berwyn Plaza, Berwyn, IL |
18,138 |
100 |
100 |
100 |
26 |
26 |
26(b) |
|
|
Burnsville Crossing, Burnsville, MN |
91,015 |
N/A |
N/A |
100 |
100 |
99 |
100 |
|
|
Byerly's Burnsville, Burnsville, MN |
72,365 |
N/A |
N/A |
84 |
84 |
84 |
84 |
|
|
Calumet Square, Calumet City, IL |
39,936 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Carmax, Schaumburg, IL |
93,333 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Carmax, Tinley Park, IL |
94,518 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Chatham Ridge, Chicago, IL |
175,730 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
|
|
Chestnut Court, Darien, IL |
170,027 |
86 |
95 |
95 |
95 |
95 |
95 |
|
|
Circuit City, Traverse City, MI |
21,337 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Cliff Lake Centre, Eagan, MN |
74,215 |
N/A |
N/A |
72 |
88 |
79 |
88 |
|
|
Cobblers Crossing, Elgin, IL |
102,643 |
92 |
92 |
98 |
100 |
100 |
98 |
|
|
Crestwood Plaza, Crestwood, IL |
20,044 |
100 |
68 |
68 |
68 |
100 |
100 |
|
|
Cub Foods, Buffalo Grove, IL |
56,192 |
N/A |
100 |
100 |
100 |
100 |
100 |
|
|
Cub Foods, Indianapolis, IN |
67,541 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Cub Foods, Plymouth, MN |
67,510 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Dominick's, Countryside, IL |
62,344 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Dominick's, Glendale Heights, IL |
68,879 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Dominick's, Hammond, IN |
71,313 |
N/A |
100 |
0 |
0 |
0 |
0(b) |
|
|
Dominick's, Highland Park, IL |
71,442 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Dominick's, Schaumburg, IL |
71,400 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Dominick's, West Chicago, IL |
78,158 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Downers Grove Mkt, Downers Grove, IL |
104,445 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Eagle Country Market, Roselle, IL |
42,283 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Eagle Crest, Naperville, IL |
67,632 |
100 |
94 |
94 |
94 |
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 |
|
|
Eastgate Shopping Center, Lombard, IL |
132,519 |
87 |
91 |
92 |
92 |
93 |
94 |
|
|
Edinburgh Festival, Brooklyn Park, MN |
91,536 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Elmhurst City Center, Elmhurst, IL |
39,481 |
100 |
100 |
66 |
62 |
62 |
62(a) |
|
|
Fairview Hts. Plaza, Fairview Hts., IL |
167,491 |
78 |
78 |
78 |
78 |
78 |
78(b) |
|
|
Fashion Square, Skokie, IL |
84,580 |
100 |
100 |
100 |
81 |
81 |
81(b) |
|
|
Gateway Square, Hinsdale, IL |
40,170 |
96 |
96 |
96 |
100 |
96 |
96 |
|
|
Goodyear, Montgomery, IL |
12,903 |
77 |
77 |
77 |
28 |
28 |
28(b) |
|
|
Grand and Hunt Club, Gurnee, IL |
21,222 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Hartford Plaza, Naperville, IL |
43,762 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Hawthorn Village, Vernon Hills, IL |
98,806 |
100 |
100 |
100 |
100 |
100 |
99 |
|
|
Hickory Creek Market, Frankfort, IL |
35,451 |
N/A |
N/A |
88 |
65 |
82 |
100 |
|
|
High Point Center, Madison, WI |
86,009 |
94 |
82 |
87 |
92 |
89 |
82(b) |
|
|
Hollywood Video, Hammond, IN |
7,488 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Homewood Plaza, Homewood, IL |
19,000 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Iroquois Center, Naperville, IL |
140,981 |
73 |
65 |
66 |
69 |
67 |
73(b) |
|
|
Joliet Commons, Joliet, IL |
158,915 |
97 |
97 |
93 |
96 |
100 |
100 |
|
|
Joliet Commons Phase II, Joliet, IL |
40,395 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
|
|
Lake Park Plaza, Michigan City, IN |
229,639 |
74 |
74 |
73 |
71 |
73 |
73(b) |
|
|
Lansing Square, Lansing, IL |
233,508 |
98 |
98 |
98 |
98 |
98 |
99 |
|
|
Lincoln Park Place, Chicago, IL |
10,678 |
60 |
60 |
60 |
60 |
60 |
60 |
|
|
Loehmann's Plaza, Brookfield, WI |
107,952 |
100 |
100 |
100 |
100 |
84 |
84 |
|
|
Mallard Crossing, Elk Grove Village, IL |
82,929 |
97 |
97 |
98 |
97 |
97 |
29 |
|
|
Maple Grove Retail, Maple Grove, MN |
79,130 |
N/A |
N/A |
81 |
100 |
81 |
81 |
|
|
Maple Park Place, Bolingbrook, IL |
220,095 |
99 |
97 |
97 |
97 |
97 |
98 |
|
|
Maple Plaza, Downers Grove, IL |
31,298 |
100 |
100 |
100 |
87 |
83 |
87 |
|
|
Marketplace at Six Corners, Chicago, IL |
117,000 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Mundelein Plaza, Mundelein, IL |
68,056 |
100 |
100 |
100 |
96 |
96 |
91 |
|
|
Nantucket Square, Schaumburg, IL |
56,981 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Naper West, Naperville, IL |
164,812 |
91 |
92 |
92 |
93 |
92 |
92 |
|
|
Niles Shopping Center, Niles, IL |
26,109 |
100 |
100 |
100 |
87 |
100 |
100 |
|
|
Oak Forest Commons, Oak Forest, IL |
108,330 |
100 |
100 |
98 |
97 |
100 |
100 |
|
|
Oak Forest Commons III, Oak Forest, IL |
7,424 |
N/A |
72 |
72 |
82 |
62 |
62(a) |
|
|
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 |
|
|
Orland Greens, Orland Park, IL |
45,031 |
100 |
97 |
97 |
97 |
94 |
94 |
|
|
Orland Park Retail, Orland Park, IL |
8,500 |
100 |
100 |
36 |
36 |
36 |
100 |
|
|
Park Center Plaza, Tinley Park, IL |
193,179 |
72 |
84 |
84 |
72 |
90 |
92(a) |
|
|
Park Place Plaza, St. Louis Park, MN |
84,999 |
N/A |
N/A |
100 |
100 |
100 |
100 |
|
|
Park St. Claire, Schaumburg, IL |
11,859 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Party City, Oakbrook Terrace, IL |
10,000 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Pine Tree Plaza, Janesville, WI |
187,413 |
N/A |
N/A |
N/A |
93 |
93 |
93(a) |
|
|
Plymouth Collection, Plymouth, MN |
40,815 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Prairie Square, Sun Prairie, WI |
35,755 |
83 |
83 |
83 |
83 |
81 |
77(b) |
|
|
Prospect Heights, Prospect Heights, IL |
28,080 |
92 |
15 |
15 |
25 |
25 |
25(b) |
|
|
Quarry Outlot, Hodgkins, IL |
9,650 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Quarry Retail, Minneapolis, MN |
273,648 |
N/A |
N/A |
99 |
99 |
99 |
99 |
|
|
Randall Square, Geneva, IL |
205,164 |
N/A |
87 |
82 |
94 |
93 |
93(a) |
|
|
Regency Point, Lockport, IL |
54,911 |
97 |
97 |
97 |
98 |
100 |
100 |
|
|
Riverdale Commons, Coon Rapids, MN |
168,277 |
N/A |
N/A |
98 |
99 |
97 |
100 |
|
|
Riverdale Outlot, Coon Rapids, MN |
6,566 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
|
|
Riverplace Center, Noblesville, IN |
74,414 |
100 |
100 |
100 |
94 |
94 |
94 |
|
|
Riversquare Center, Naperville, IL |
58,556 |
95 |
95 |
87 |
76 |
71 |
67(b) |
|
|
Rivertree Court, Vernon Hills, IL |
298,862 |
99 |
99 |
99 |
99 |
99 |
99 |
|
|
Rose Naper Plaza East, Naperville, IL |
11,658 |
N/A |
N/A |
N/A |
N/A |
100 |
100 |
|
|
Rose Naper Plaza West, Naperville, IL |
14,335 |
N/A |
N/A |
100 |
100 |
100 |
100 |
|
|
Rose Plaza, Elmwood Park, IL |
24,204 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Salem Square, Countryside, IL |
112,310 |
97 |
97 |
97 |
93 |
93 |
93 |
|
|
St. James Crossing, Westmont, IL |
49,994 |
91 |
91 |
91 |
83 |
90 |
94 |
|
|
Schaumburg Plaza, Schaumburg, IL |
61,485 |
93 |
93 |
93 |
93 |
90 |
93 |
|
|
Schaumburg Prom, Schaumburg, IL |
91,825 |
N/A |
N/A |
N/A |
100 |
100 |
100 |
|
|
Sears, Montgomery, IL |
34,300 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Sequoia Shopping Ctr, Milwaukee, WI |
35,407 |
100 |
100 |
100 |
93 |
93 |
80(b) |
|
|
Shingle Creek, Brooklyn Center, MN |
39,456 |
N/A |
N/A |
66 |
73 |
75 |
75(b) |
|
|
Shops/Coopers Grv, Ctry Club Hills, IL |
72,518 |
100 |
100 |
100 |
100 |
23 |
23(b) |
|
|
Shoppes of Mill Creek, Palos Park, IL |
102,443 |
98 |
98 |
96 |
97 |
98 |
94 |
|
|
Shorecrest Plaza, Racine, WI |
91,244 |
89 |
89 |
89 |
89 |
89 |
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 |
|
|
Springboro Plaza, Springboro, OH |
154,034 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Spring Hill Fashion Ctr, W. Dundee, IL |
125,198 |
95 |
95 |
100 |
97 |
97 |
97 |
|
|
Staples, Freeport, IL |
24,049 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Stuart's Crossing, St. Charles, IL |
70,529 |
N/A |
N/A |
N/A |
100 |
93 |
90 |
|
|
Summit of Park Ridge, Park Ridge, IL |
33,252 |
93 |
88 |
88 |
84 |
88 |
98 |
|
|
Terramere Plaza, Arlington Heights, IL |
40,965 |
86 |
86 |
86 |
79 |
79 |
79(b) |
|
|
Two Rivers Plaza, Bolingbrook, IL |
57,900 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
United Audio Center, Schaumburg, IL |
9,988 |
N/A |
N/A |
100 |
100 |
100 |
100 |
|
|
Walgreens, Decatur, IL |
13,500 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Walgreens, Woodstock, IL |
15,856 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Wauconda Shopping Ctr, Wauconda, IL |
31,157 |
100 |
100 |
100 |
92 |
100 |
100 |
|
|
Western and Howard, Chicago, IL |
12,784 |
100 |
100 |
100 |
38 |
38 |
38(b) |
|
|
West River Crossing, Joliet, IL |
31,132 |
N/A |
N/A |
87 |
87 |
74 |
96(a) |
|
|
Wilson Plaza, Batavia, IL |
11,160 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Winnetka Commons, New Hope, MN |
42,415 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Wisner/Milwaukee Plaza, Chicago, IL |
14,677 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
Woodfield Comm E/W, Schaumburg, IL |
207,583 |
89 |
86 |
86 |
95 |
95 |
95(a) |
|
|
Woodfield Plaza, Schaumburg, IL |
177,160 |
97 |
97 |
82 |
82 |
82 |
82(a) |
|
|
Woodland Commons, Buffalo Grove, IL |
170,070 |
100 |
99 |
97 |
97 |
98 |
99 |
|
|
Woodland Heights, Streamwood, IL |
120,436 |
81 |
81 |
81 |
81 |
82 |
82 |
|
|
Zany Brainy, Wheaton, IL |
12,499 |
100 |
100 |
100 |
100 |
100 |
100 |
|
|
|
9,233,331 |
||||||||
======== |
As part of the purchase of these properties the Company receives rent under master lease agreements on the space which was vacant at the time of the purchase which results in economic occupancy ranging from 90%
to 100% at June 30, 2000 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.
The Company received rent from tenants who have vacated but are still obligated under their lease terms which results in economic occupancy ranging from 69% to 100% at June 30, 2000 for each of these centers.
Subsequent Events
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 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 will be reported as an
operational expense on the Company's Consolidated Statements of Operations and will be included in the Company's calculation of Funds from Operations.
Upon closing and as an integral part of the Merger, the board appointed Norbert Treonis as President and Chief Executive Officer of the Company, Mark E. Zalatoris as Senior Vice President, Treasurer and Chief Financial Officer and Samuel A. Orticelli as
Senior Vice President, Secretary and General Counsel (individually an "Executive Officer" and collectively, the "Executive Officers"). Further, the Company entered into a 12 month Consulting Agreement with Robert D. Parks, one of the Company's directors,
pursuant to which Mr. Parks will provide consulting services to the Company, on a part time basis.
Upon closing, the Company entered into a Registration Rights Agreement with IREIC and TIPMG requiring the Company to include for registration the Merger Consideration on any registration statement filed by the Company, subject to certain restrictions.
The Company granted IREIC and TIPMG a one-time right to demand registration of all or part of the Merger Consideration upon the earlier of (a) the listing of the Company's shares of common stock on a national securities exchange or quotation system, (b) a
change of control of the Company whether by merger, sale of assets or acquisition of not less than 25% of the Company's equity voting securities, or (c) the 14 month anniversary of the date of the Registration Rights Agreement.
The Company entered into a number of ancillary agreements with The Inland Group, Inc. ("TIGI") and/or entities affiliated with TIGI including: (i) a Trademark and Tradename License Agreement under which TIGI grants the Company a perpetual, royalty-free
license to continue to use the name "Inland Real Estate Corporation" and the Company's logo; (ii) a Sublease Agreement for the Company's corporate headquarters for a period of 12 months with five one-year renewal options, which allows the Company to
remain at its current location; (iii) a Services Agreement under which senior and middle-level management personnel of IREIC, will, upon request of the Company, provide administrative services to the Company free of charge for the first 12 months of the
agreement and at cost thereafter, and employees of other affiliated of TIGI will, upon request of the Company, provide services to the Company at cost; and (iv) a Software License Agreement under which an affiliate of TIGI grants to the Company a
perpetual, royalty free license to use certain administrative software.
The Company's board of directors voted to expand the number of directors from five to seven and nominated and elected Mr. Treonis to fill one of the vacancies so created. The Company is currently reviewing candidates
to fill the other vacancy, which will be filled by a director deemed "independent" under the Company's governing documents.
Part II - Other Information
Items 1 through 3 and 5 are omitted because of the absence of conditions under which they are required.
Item 4. Submission of Matters to a Vote of Security Holders
For |
Against |
Withheld |
|
Directors: |
|||
Robert D. Parks |
30,065,346 |
- |
484,348 |
G. Joseph Cosenza |
29,986,279 |
- |
563,415 |
Roland W. Burris |
30,078,561 |
- |
471,133 |
Joel G. Herter |
30,073,065 |
- |
476,629 |
Heidi N. Lawton |
30,076,519 |
- |
473,175 |
Ratification of KPMG LLP |
29,863,128 |
142,898 |
543,668 |
Agreement and Plan of Merger |
29,468,993 |
371,909 |
708,792 |
Amendment to Governing Charter |
29,323,193 |
390,962 |
835,539 |
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) |
10.6 |
Consulting Agreement between Inland Real Estate Corporation and Robert D. Parks dated July 1, 2000 (7) |
10.7 |
Sublease between Inland Real Estate Investment Corporation and Inland Real Estate Corporation dated July 1, 2000 (7) |
27 |
Financial Data Schedule |
(1) |
Included in the Registrant's Registration Statement on Form S-11 as filed by Registrant on January 30, 1998. |
(2) |
Included in the Registrant's Registration Statement on Form S-11 (file number 333-6459) as filed by Registrant on June 20, 1996. |
(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. |
(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. |
(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. |
(6) |
Included in Registrant's Current Report on Form 8-K (file number 000-28382) as filed by the Registrant on March 21, 2000. |
(b) |
Report on Form 8-K dated July 1, 2000 |
|
|
(7) |
Included in Registrant's Current Report on Form 8-K (file number 000-28382) as filed by the Registrant on July 14, 2000. |
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/ NORBERT TREONIS |
By: |
Norbert Treonis |
|
Chief Executive Officer |
Date: |
August 11, 2000 |
|
/S/ MARK E. ZALATORIS |
By: |
Mark E. Zalatoris |
|
Chief Financial and Accounting Officer |
Date: |
August 11, 2000 |
|