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, 2004
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 #0-18431
Inland Land Appreciation Fund, L.P.
(Exact name of registrant as specified in its charter)
|
Delaware |
#36-3544798 |
|
(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
Indicate by a checkmark whether the registrant is an accelerated filer (as defined in Securities Exchange Act Rule 12b-2) Yes No X
-1-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
September 30, 2004 and December 31, 2003
(unaudited)
Assets
|
2004 |
2003 |
||
|
Current assets: |
|||
|
Cash and cash equivalents (Note 1) |
$ |
4,587,429 |
965,756 |
|
Accounts and accrued interest receivable (net of allowance for doubtful accounts of $969,028 at September 30, 2004 and December 31, 2003) (Note 5) |
34, 290 |
392 |
|
|
Mortgage loans receivable (net of allowance for doubtful accounts of $2,101,007 at September 30, 2004 and December 31, 2003) (Note 5) |
- |
- |
|
|
Other current assets |
4,121 |
6,816 |
|
|
Total current assets |
4,625,840 |
972,964 |
|
|
Other assets |
5,729 |
16,840 |
|
|
Deferred loan fees (net of accumulated amortization of $76,257 and $57,399 at September 30, 2004 and December 31, 2003, respectively) |
1,250 |
20,108 |
|
|
Investments in land and improvements, at cost (including acquisition fees paid to Affiliates of $495,417 and $704,853 at September 30, 2004 and December 31, 2003, respectively) (Note 3) |
14,603,652 |
20,517,279 |
|
|
Total assets |
$ |
19,236,471 |
21,527,191 |
|
|
See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
September 30, 2004 and December 31, 2003
(unaudited)
Liabilities and Partners' Capital
|
2004 |
2003 |
||
|
Current liabilities: |
|||
|
Accounts payable |
$ |
99,090 |
3,455 |
|
Accrued real estate taxes |
32,504 |
55,718 |
|
|
Due to Affiliates (Notes 2 and 6) |
160,437 |
351,391 |
|
|
Current portion of notes payable to Affiliate (Note 6) |
139,625 |
1,515,000 |
|
|
Unearned income |
11,423 |
19,280 |
|
|
Total current liabilities |
443,079 |
1,944,844 |
|
|
Notes payable to Affiliate, less current portion (Note 6) |
- |
941,682 |
|
|
Total liabilities |
443,079 |
2,886,526 |
|
|
Partners' capital: |
|||
|
General Partner: |
|||
|
Capital contribution |
500 |
500 |
|
|
Cumulative net income |
3,568,991 |
1,435,462 |
|
|
Cumulative cash distributions |
(3,554,592) |
(1,419,042) |
|
|
|
14,899 |
16,920 |
|
|
Limited Partners: |
|||
|
Units of $1,000. Authorized 30,001 Units, 29,593 outstanding at September 30, 2004 and December 31, 2003, (net of offering costs of $3,768,113, of which $1,069,764 was paid to Affiliates) |
25,873,403 |
25,873,403 |
|
|
Cumulative net income |
22,974,996 |
14,955,798 |
|
|
Cumulative cash distributions |
(30,069,906) |
(22,205,456) |
|
|
18,778,493 |
18,623,745 |
||
|
Total Partners' capital |
18,793,392 |
18,640,665 |
|
|
Total liabilities and Partners' capital |
$ |
19,236,471 |
21,527,191 |
See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the three and nine months ended September 30, 2004 and 2003
(unaudited)
|
Three months |
Three months |
Nine months |
Nine months |
||
|
ended |
ended |
ended |
ended |
||
|
September 30, |
September 30, |
September 30, |
September 30, |
||
|
2004 |
2003 |
2004 |
2003 |
||
|
Income: |
|||||
|
Sale of investments in land and improvements (Notes 1 and 3) |
$ |
237,243 |
478,570 |
16,847,378 |
12,621,260 |
|
Rental income (Note 4) |
41,573 |
52,443 |
126,266 |
172,991 |
|
|
Interest income |
15,689 |
24,254 |
41,164 |
33,244 |
|
|
Other income |
2,300 |
2,405 |
6,225 |
7,205 |
|
|
296,805 |
557,672 |
17,021,033 |
12,834,700 |
||
|
Expenses: |
|||||
|
Cost of land sold |
133,976 |
372,957 |
6,492,519 |
4,171,399 |
|
|
Professional services to Affiliates |
3,594 |
8,618 |
22,467 |
23,153 |
|
|
Professional services to non-affiliates |
5,079 |
3,998 |
53,653 |
38,319 |
|
|
General and administrative expenses to Affiliates |
3,295 |
4,913 |
15,787 |
19,267 |
|
|
General and administrative expenses to non-affiliates |
7,405 |
5,812 |
161,844 |
23,150 |
|
|
Marketing expenses to Affiliates |
18,640 |
5,753 |
29,724 |
11,595 |
|
|
Marketing expenses to non-affiliates |
3,281 |
13,898 |
24,376 |
35,429 |
|
|
Land operating expenses to non- affiliates |
21,701 |
26,771 |
49,078 |
55,629 |
|
|
Amortization |
11,730 |
15,002 |
18,858 |
31,943 |
|
|
Bad debt expense |
- |
- |
- |
2,060,419 |
|
|
208,701 |
457,722 |
6,868,306 |
6,470,303 |
||
|
Net income |
$ |
88,104 |
99,950 |
10,152,727 |
6,364,397 |
See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and nine months ended September 30, 2004 and 2003
(unaudited)
|
Three months |
Three months |
Nine months |
Nine months |
||
|
ended |
ended |
ended |
ended |
||
|
September 30, |
September 30, |
September 30, |
September 30, |
||
|
2004 |
2003 |
2004 |
2003 |
||
|
Net income (loss) allocated to: |
|||||
|
General Partner |
$ |
(151) |
2,367 |
2,133,529 |
155 |
|
Limited Partners |
88,255 |
97,583 |
8,019,198 |
6,364,242 |
|
|
Net income |
$ |
88,104 |
99,950 |
10,152,727 |
6,364,397 |
|
Net income (loss) allocated to the one General Partner Unit |
$ |
(151) |
2,367 |
2,133,529 |
155 |
|
Net income per Unit, basic and diluted, allocated to Limited Partners per weighted average Limited Partnership Units (29,593 for the three and nine months ended September 30, 2004 and 2003) |
$ |
2.98 |
3.30 |
270.98 |
215.06 |
See accompanying notes to financial statements
-5-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the nine months ended September 30, 2004 and 2003
(unaudited)
|
2004 |
2003 |
||
|
Cash flows from operating activities: |
|||
|
Net income |
$ |
10,152,727 |
6,364,397 |
|
Adjustments to reconcile net income to net cash used in |
|||
|
Gain on sale of investments in land and improvements |
(10,354,859) |
(8,449,861) |
|
|
Amortization |
- |
31,943 |
|
|
Bad debt expense |
18,858 |
2,060,419 |
|
|
Changes in assets and liabilities: |
|||
|
Accounts and accrued interest receivable |
(33,858) |
(36,290) |
|
|
Other assets |
13,806 |
(4,591) |
|
|
Accounts payable |
95,635 |
(53,581) |
|
|
Accrued real estate taxes |
(23,214) |
(37,253) |
|
|
Due to Affiliates |
(190,954) |
(46,716) |
|
|
Unearned income |
(7,857) |
(661,613) |
|
|
Net cash used in operating activities |
(329,756) |
(833,146) |
|
|
Cash flows from investing activities: |
|||
|
Additions to investments in land and improvements |
(578,892) |
(713,668) |
|
|
Proceeds from disposition of investments in land and improvements |
16,847,378 |
12,621,260 |
|
|
Net cash provided by investing activities |
16,268,486 |
11,907,592 |
|
|
Cash flows from financing activities: |
|||
|
Distributions |
(10,000,000) |
- |
|
|
Principal payments on notes payable to Affiliates |
(2,317,057) |
(2,969,908) |
|
|
Net cash used in financing activities |
(12,317,057) |
(2,969,908) |
|
|
Net increase in cash and cash equivalents |
3,621,673 |
8,104,538 |
|
|
Cash and cash equivalents at beginning of period |
965,756 |
1,350,883 |
|
|
Cash and cash equivalents at end of period |
$ |
4,587,429 |
9,455,421 |
See accompanying notes to financial statements.
-6-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
September 30, 2004
(unaudited)
Readers of this quarterly report should refer to the Partnership's audited financial statements for the fiscal year ended December 31, 2003, which are included in the Partnership's 2003 annual report, as certain footnote disclosures which would duplicate those contained in such audited financial statements have been omitted from this report.
(1) Organization and Basis of Accounting
The Registrant, Inland Land Appreciation Fund, L.P. (the "Partnership"), was formed in October 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, the Partnership commenced an offering of 10,000 (subject to increase to 30,000) limited partnership units ("Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. Inland Real Estate Investment Corporation is the General Partner. The offering terminated on October 6, 1989, with total sales of 30,000 Units, at $1,000 per Unit, not including the General Partner or the Initial Limited Partner. All of the holders of these Units were admitted to this Partnership. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investments according to the number of Units held. As of September 30, 2004, the Partnership has repurchased a
total of 407.75 Units for $359,484 from various Limited Partners through the Unit Repurchase Program.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Except as described in footnote (b) to Note 4 of these notes, the Partnership uses the area method of allocation, which approximates the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price.
In January 2003, FASB issued Interpretation No. 46 ("FIN 46") "Consolidation of Variable Interest Entities and Interpretation of Accounting Research Bulletin (ARB) No. 51", which was revised in December 2003. The primary objectives of FIN No. 46 are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (Variable Interest Entities) and how to determine when and which business enterprise should consolidate the Variable Interest Entity (the Primary Beneficiary). FIN 46 became effective for the Partnership as of March 31, 2004. FIN 46 does not have a material impact on the Partnership's financial condition and results of operations.
-7-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
September 30, 2004
(unaudited)
(2) Transactions with Affiliates
The General Partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the General Partner and its affiliates relating to the administration of the Partnership. Such costs are included in professional services and general and administrative expenses to affiliates, of which $7,298 and $5,672 were unpaid as of September 30, 2004 and December 31, 2003, respectively.
An affiliate of the General Partner performed marketing and advertising services for the Partnership and was reimbursed (as set forth under terms of the Partnership Agreement) for direct costs. Such costs of $29,724 and $11,595 have been incurred and are included in marketing expenses to affiliates for the nine months ended September 30, 2004 and 2003, respectively, all of which was paid as of September 30, 2004 and December 31, 2003.
An affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. For the nine months ended September 30, 2004 and 2003, the Partnership incurred $168,997 and $282,354, respectively, of such costs. The affiliate did not recognize a profit on any project. Such costs are included in investments in land and improvements, of which $45,646 and $30,187 were unpaid as of September 30, 2004 and December 31, 2003, respectively.
- -8-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
September 30, 2004 (unaudited)
(3) Investments in Land and Improvements
|
Initial Costs |
|||||||||||
|
Illinois |
Gross Acres Purchased |
Purchase/Sales |
Original |
Acquisition |
Total |
Costs Capitalized Subsequent to |
Costs of Property |
Total Remaining Costs of Parcels at |
Current Year Gain on Sale |
||
|
Parcel |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
09/30/04 |
Recognized |
|
|
1 |
Kendall |
84.7360 |
01/19/89 |
$ |
423,680 |
61,625 |
485,305 |
5,462,589 |
5,947,894 |
- |
- |
|
|
|
(3.5200) |
12/24/96 |
||||||||
|
|
|
(.3520) |
11/25/97 |
||||||||
|
|
|
(80.8640) |
12/29/97 |
||||||||
|
2 |
McHenry |
223.4121 |
01/19/89 |
650,000 |
95,014 |
745,014 |
26,816 |
771,830 |
- |
- |
|
|
|
|
(183.3759) |
12/27/90 |
||||||||
|
(40.0362) |
05/11/00 |
||||||||||
|
3 |
Kendall |
20.0000 |
02/09/89 |
189,000 |
13,305 |
202,305 |
- |
202,305 |
- |
- |
|
|
|
|
(20.0000) |
05/08/90 |
||||||||
|
4 |
Kendall |
69.2760 |
04/18/89 |
508,196 |
38,126 |
546,322 |
1,149,757 |
1,361,115 |
334,964 |
414,460 |
|
|
|
|
(.4860) |
02/28/91 |
||||||||
|
|
|
(27.5750) |
08/25/95 |
||||||||
|
(4.4000) |
Var 2001 |
||||||||||
|
(2.1470) |
Var 2002 |
||||||||||
|
(23.1033) |
Var 2003 |
||||||||||
|
(6.7800) |
Var 2004 |
||||||||||
|
5 |
Kendall (a) |
372.2230 |
05/03/89 |
2,532,227 |
135,943 |
2,668,170 |
456,398 |
3,124,568 |
- |
- |
|
|
|
(Option) |
04/06/90 |
|||||||||
|
(372.2230) |
06/20/03 |
||||||||||
|
6 |
Kendall (b) |
78.3900 |
06/21/89 |
416,783 |
31,691 |
448,474 |
1,273,575 |
43,735 |
1,678,314 |
- |
|
|
(3.9500) |
11/01/00 |
||||||||||
|
|
|||||||||||
|
7 |
Kendall (b) |
77.0490 |
06/21/89 |
84,754 |
8,163 |
92,917 |
1,233,470 |
- |
1,326,387 |
- |
|
|
|
|||||||||||
|
8 |
Kendall (b) |
5.0000 |
06/21/89 |
60,000 |
5,113 |
65,113 |
- |
65,113 |
- |
- |
|
|
|
(5.0000) |
10/06/89 |
|||||||||
-9-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
September 30, 2004 (unaudited)
(3) Investments in Land and Improvements (continued)
|
Initial Costs |
||||||||||||||||||||||
|
Illinois |
Gross Acres Purchased |
Purchase/Sales |
Original |
Acquisition |
Total |
Costs Capitalized Subsequent to |
Costs of Property |
Total Remaining Costs of Parcels at |
Current Year Gain on Sale |
|||||||||||||
|
Parcel |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
09/30/04 |
Recognized |
||||||||||||
|
9 |
McHenry (b) |
51.0300 |
08/07/89 |
$ |
586,845 |
22,482 |
609,327 |
44,775 |
- |
654,102 |
- |
|||||||||||
|
10 |
McHenry (b) |
123.9400 |
08/07/89 |
91,939 |
7,224 |
99,163 |
600 |
99,763 |
- |
- |
||||||||||||
|
|
(123.9400) |
12/06/89 |
||||||||||||||||||||
|
11 |
McHenry (b) |
30.5920 |
08/07/89 |
321,216 |
22,641 |
343,857 |
50,000 |
- |
393,857 |
- |
||||||||||||
|
|
||||||||||||||||||||||
|
12 |
Kendall |
90.2710 |
10/31/89 |
907,389 |
41,908 |
949,297 |
246,964 |
1,196,261 |
- |
2,332,495 |
||||||||||||
|
|
|
(.7090) |
04/26/91 |
|||||||||||||||||||
|
(89.562) |
03/10/04 |
|||||||||||||||||||||
|
13 |
McHenry |
92.7800 |
11/07/89 |
251,306 |
19,188 |
270,494 |
18,745 |
289,239 |
- |
- |
||||||||||||
|
|
|
(2.0810) |
09/18/97 |
|||||||||||||||||||
|
(90.6990) |
02/15/01 |
|||||||||||||||||||||
|
14 |
McHenry |
76.2020 |
11/07/89 |
|
419,111 |
23,402 |
442,513 |
125,619 |
- |
568,132 |
- |
|||||||||||
|
15 |
Lake |
84.5564 |
01/03/90 |
|
1,056,955 |
85,283 |
1,142,238 |
1,661,344 |
2,803,582 |
- |
- |
|||||||||||
|
|
|
(10.5300) |
Var 1996 |
|||||||||||||||||||
|
|
|
(5.4680) |
Var 1997 |
|||||||||||||||||||
|
|
|
(68.5584) |
Var 1998 |
|||||||||||||||||||
|
16 |
Kane/ |
72.4187 |
01/29/90 |
|
1,273,537 |
55,333 |
1,328,870 |
706,718 |
2,035,588 |
- |
- |
|||||||||||
|
|
Kendall |
(30.9000) |
07/10/98 |
|||||||||||||||||||
|
|
|
(10.3910) |
12/15/99 |
|||||||||||||||||||
|
(3.1000) |
12/12/00 |
|||||||||||||||||||||
|
(28.0277) |
05/19/03 |
|||||||||||||||||||||
|
17 |
McHenry |
99.9240 |
01/29/90 |
|
739,635 |
61,038 |
800,673 |
925,842 |
320,961 |
1,405,554 |
- |
|||||||||||
|
|
|
(27.5100) |
01/29/99 |
|||||||||||||||||||
-10-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
September 30, 2004 (unaudited)
(3) Investments in Land and Improvements (continued)
|
Initial Costs |
||||||||||||||||||
|
Illinois |
Gross Acres Purchased |
Purchase/Sales |
Original |
Acquisition |
Total |
Costs Capitalized Subsequent to |
Costs of Property |
Total Remaining Costs of Parcels at |
Current Year Gain on Sale |
|||||||||
|
Parcel |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
09/30/04 |
Recognized |
||||||||
|
18 |
McHenry |
71.4870 |
01/29/90 |
$ |
496,116 |
26,259 |
522,375 |
203,314 |
11,109 |
714,580 |
- |
|||||||
|
|
|
(1.0000) |
Var 1990 |
|||||||||||||||
|
|
|
(.5200) |
03/11/93 |
|||||||||||||||
|
19 |
McHenry |
63.6915 |
02/23/90 |
|
490,158 |
29,158 |
519,316 |
120,857 |
- |
640,173 |
- |
|||||||
|
20 |
Kane |
224.1480 |
02/28/90 |
|
2,749,800 |
183,092 |
2,932,892 |
1,938,930 |
4,871,822 |
- |
7,607,904 |
|||||||
|
|
|
(.2790) |
10/17/91 |
|||||||||||||||
|
(223.869) |
02/20/04 |
|||||||||||||||||
|
21 |
Kendall |
172.4950 |
03/08/90 |
1,327,459 |
75,822 |
1,403,281 |
954,415 |
2,357,696 |
- |
- |
||||||||
|
|
|
(172.4950) |
Var 1998 |
|||||||||||||||
|
22 |
McHenry |
254.5250 |
04/11/90 |
|
2,608,881 |
136,559 |
2,745,440 |
243,024 |
- |
2,988,464 |
- |
|||||||
|
23 |
Kendall |
140.0210 |
05/08/90 |
1,480,000 |
116,240 |
1,596,240 |
909,395 |
2,505,635 |
- |
- |
||||||||
|
|
|
(4.4100) |
Var 1993 |
|||||||||||||||
|
|
|
(35.8800) |
Var 1994 |
|||||||||||||||
|
|
|
(3.4400) |
Var 1995 |
|||||||||||||||
|
|
|
(96.2910) |
08/26/99 |
|||||||||||||||
|
24 |
Kendall |
298.4830 |
05/23/90 |
|
1,359,774 |
98,921 |
1,458,695 |
67,823 |
436,638 |
1,089,880 |
- |
|||||||
|
|
|
|||||||||||||||||