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, 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 #0-19220
Inland Land Appreciation Fund II, L.P.
(Exact name of registrant as specified in its charter)
|
Delaware |
#36-3664407 |
|
(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 II, L.P.
(a limited partnership)
Balance Sheets
June 30, 2004 and December 31, 2003
(unaudited)
Assets
|
2004 |
2003 |
||
|
Current assets: |
|||
|
Cash and cash equivalents (Note 1) |
$ |
8,985,774 |
3,165,895 |
|
Restricted cash |
183,921 |
182,879 |
|
|
Accounts and accrued interest receivable (net of allowance for |
513,394 |
103,262 |
|
|
Other current assets |
277,410 |
7,029 |
|
|
Total current assets |
9,960,499 |
3,459,065 |
|
|
Mortgage loans receivable (net of allowance for doubtful accounts of $1,208,378 at June 30, 2004 and December 31, 2003) (Note 5) |
14,416,805 |
14,795,872 |
|
|
Investment properties (including acquisition fees paid to Affiliates of $697,337 and $951,392 at June 30, 2004 and December 31, 2003, respectively) (Note 3): |
|||
|
Land and improvements |
16,516,057 |
21,019,622 |
|
|
Total assets |
$ |
40,893,361 |
39,274,559 |
See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Balance Sheets
(continued)
June 30, 2004 and December 31, 2003
(unaudited)
Liabilities and Partners' Capital
|
2004 |
2003 |
||
|
Current liabilities: |
|||
|
Accounts payable |
$ |
502,280 |
48,989 |
|
Accrued real estate taxes |
34,089 |
56,313 |
|
|
Due to Affiliates (Note 3) |
38,544 |
45,267 |
|
|
Unearned income |
1,124,849 |
1,203,176 |
|
|
Total current liabilities |
1,699,762 |
1,353,745 |
|
|
Deferred gain on sale of investment properties (Note 5) |
8,429,131 |
8,651,061 |
|
|
Total liabilities |
10,128,893 |
10,004,806 |
|
|
Partners' capital: |
|||
|
General Partner: |
|||
|
Capital contribution |
500 |
500 |
|
|
Cumulative net income |
7,865,312 |
3,750,834 |
|
|
Cumulative cash distributions |
(7,488,195) |
(3,376,293) |
|
|
|
377,617 |
375,041 |
|
|
Limited Partners: |
|||
|
Units of $1,000. Authorized 60,000 Units, 50,068 Units outstanding |
42,559,909 |
42,559,909 |
|
|
Cumulative net income |
42,892,776 |
30,512,539 |
|
|
Cumulative cash distributions |
(55,065,834) |
(44,177,736) |
|
|
|
30,386,851 |
28,894,712 |
|
|
Total Partners' capital |
30,764,468 |
29,269,753 |
|
|
Total liabilities and Partners' capital |
$ |
40,893,361 |
39,274,559 |
See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
For the three and six months ended June 30, 2004 and 2003
(unaudited)
|
Three months |
Three months |
Six months |
Six months |
||
|
ended |
ended |
Ended |
ended |
||
|
June 30, 2004 |
June 30, 2003 |
June 30, 2004 |
June 30, 2003 |
||
|
Income: |
|||||
|
Sale of investment properties (Note 3) |
$ |
1,890,270 |
2,998,011 |
21,810,441 |
3,376,608 |
|
Deferred gain recognized |
- |
- |
221,930 |
- |
|
|
Rental income (Note 4) |
35,052 |
45,416 |
68,791 |
90,331 |
|
|
Interest income |
238,208 |
250,927 |
482,386 |
496,491 |
|
|
Other income |
4,700 |
3,000 |
7,175 |
6,100 |
|
|
2,168,230 |
3,297,354 |
22,590,723 |
3,969,530 |
||
|
Expenses: |
|||||
|
Cost of investment properties sold |
1,164,101 |
1,516,063 |
5,795,222 |
1,824,337 |
|
|
Professional services to Affiliates |
11,910 |
10,889 |
23,548 |
17,966 |
|
|
Professional services to non-affiliates |
7,168 |
3,405 |
48,236 |
38,905 |
|
|
General and administrative expenses to Affiliates |
9,794 |
9,583 |
18,728 |
23,406 |
|
|
General and administrative expenses to non-affiliates |
27,549 |
10,866 |
153,783 |
68,901 |
|
|
Marketing expenses to Affiliates |
6,267 |
3,851 |
11,097 |
12,293 |
|
|
Marketing expenses to non-affiliates |
11,832 |
14,753 |
25,006 |
32,337 |
|
|
Land operating expenses to non-affiliates |
7,931 |
11,503 |
20,388 |
50,179 |
|
|
Impairment loss on land |
- |
154,000 |
- |
154,000 |
|
|
1,246,552 |
1,734,913 |
6,096,008 |
2,222,324 |
||
|
Net income |
$ |
921,678 |
1,562,441 |
16,494,715 |
1,747,206 |
See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Operations
(continued)
For the three and six months ended June 30, 2004 and 2003
(unaudited)
|
Three months |
Three months |
Six months |
Six months |
||
|
ended |
ended |
ended |
ended |
||
|
June 30, 2004 |
June 30, 2003 |
June 30, 2004 |
June 30, 2003 |
||
|
Net income allocated to: |
|||||
|
General Partner |
$ |
955 |
2,345 |
4,114,478 |
3,489 |
|
Limited Partners |
920,723 |
1,560,096 |
12,380,237 |
1,743,717 |
|
|
Net income |
$ |
921,678 |
1,562,441 |
16,494,715 |
1,747,206 |
|
Net income allocated to the one |
$ |
955 |
2,345 |
4,114,478 |
3,489 |
|
Net income per Unit, basic and |
$ |
18.39 |
31.16 |
247.27 |
34.83 |
See accompanying notes to financial statements.
-5-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Statements of Cash Flows
For the six months ended June 30, 2004 and 2003
(unaudited)
|
2004 |
2003 |
||
|
Cash flows from operating activities: |
|||
|
Net income |
$ |
16,494,715 |
1,747,206 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|||
|
Gain on sale of investment properties |
(16,015,219) |
(1,552,271) |
|
|
Recognition of deferred gain on sale of investment properties |
(221,930) |
- |
|
|
Impairment loss on land |
- |
154,000 |
|
|
Changes in assets and liabilities: |
|||
|
Accounts and accrued interest receivable |
(410,132) |
(398,098) |
|
|
Other current assets |
(270,381) |
- |
|
|
Accounts payable |
336,958 |
(165,643) |
|
|
Accrued real estate taxes |
(22,224) |
(55,188) |
|
|
Due to Affiliates |
(6,723) |
(22,718) |
|
|
Unearned income |
(78,327) |
91,699 |
|
|
Restricted cash |
(1,042) |
- |
|
|
Net cash used in operating activities |
(194,305) |
(201,013) |
|
|
Cash flows from investing activities: |
|||
|
Principal payments collected |
379,067 |
- |
|
|
Additions to investment properties |
(1,175,324) |
(789,440) |
|
|
Proceeds from sale of investment properties |
21,810,441 |
3,376,608 |
|
|
Net cash provided by investing activities |
21,014,184 |
2,587,168 |
|
|
Cash flows from financing activities: |
|||
|
Distributions |
(15,000,000) |
- |
|
|
Net cash used in financing activities |
(15,000,000) |
- |
|
|
Net increase in cash and cash equivalents |
5,819,879 |
2,386,155 |
|
|
Cash and cash equivalents at beginning of period |
3,165,895 |
2,247,179 |
|
|
Cash and cash equivalents at end of period |
$ |
8,985,774 |
4,633,334 |
Supplemental disclosure of non-cash investing activities:
Accounts payable at June 30, 2004 includes $116,333 for the purchase of land improvements.
See accompanying notes to financial statements.
-6-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements
June 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 substantially 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 II, L.P. (the "Partnership"), is a limited partnership formed on June 28, 1989, 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 25, 1989, the Partnership commenced an offering of 30,000 (subject to increase to 60,000) limited partnership units or Units pursuant to a Registration under the Securities Act of 1933. The Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provides for Inland Real Estate Investment Corporation to be the General Partner. On October 24, 1991, the Partnership terminated its offering of Units, with total sales of 50,476.17 Units, at $1,000 per Unit, resulting in $50,476,170 in gross offering proceeds, not including the General Partner's capital contribution of $500. All of the holders of these Units have been admitted to the Partnership. As of June 30, 2004, t he Partnership has repurchased a total of 408.65 Units for $383,822 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.
In the opinion of management, the financial statements contain all the adjustments necessary 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 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). The effective date for the Partnership is 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 II, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
June 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 to affiliates and general and administrative expenses to Affiliates, of which $19,019 and $8,354 was unpaid as of June 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 term of the Partnership Agreement) for direct costs. Such costs of $11,097 and $12,293 have been incurred and are included in marketing expenses to affiliates for the six months ended June 30, 2004 and 2003, respectively, all of which was paid as of June 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 six months ended June 30, 2004, the Partnership incurred $108,285 of such costs. The affiliate did not recognize a profit on any project. Such costs are included in investment properties, of which $19,525 and $36,913 was unpaid as of June 30, 2004 and December 31, 2003, respectively.
- -8-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
June 30, 2004 (unaudited)
(3) Investment Properties
|
Gross Acres |
Purchase/ |
Initial Costs |
Costs Capitalized |
Costs of |
Total Remaining Costs of |
Current Year Gain (Loss) |
||||||
|
Parcel |
Illinois |
Purchased |
Sales |
Original |
Acquisition |
Total |
Subsequent to |
Property |
Parcels at |
on Sale |
||
|
# |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
06/30/04 |
Recognized |
||
|
1 |
McHenry |
372.759 |
04/25/90 |
$ |
2,114,295 |
114,070 |
2,228,365 |
630,703 |
2,859,068 |
- |
11,275,601 |
|
|
(372.759) |
02/23/04 |
|||||||||||
|
2 |
Kendall |
41.118 |
07/06/90 |
|
549,639 |
43,889 |
593,528 |
60,305 |
51,652 |
602,181 |
- |
|
|
(3.47) |
08/29/03 |
|||||||||||
|
3 |
Kendall |
120.817 |
11/06/90 |
|
1,606,794 |
101,863 |
1,708,657 |
171,603 |
- |
1,880,260 |
- |
|
|
4 |
Kendall |
299.025 |
06/28/91 |
|
1,442,059 |
77,804 |
1,519,863 |
430,142 |
- |
1,950,005 |
- |
|
|
5 |
Kane |
189.0468 |
02/28/91 |
|
1,954,629 |
94,569 |
2,049,198 |
349,845 |
2,399,043 |
- |
- |
|
|
(189.0468) |
05/16/01 |
|||||||||||
|
6 |
Lake |
57.3345 |
04/16/91 |
|
904,337 |
71,199 |
975,536 |
32,895 |
4,457 |
1,003,974 |
- |
|
|
|
|
(.258) |
10/01/94 |
|||||||||
|
7 |
McHenry |
56.7094 |
04/22/91 |
|
680,513 |
44,444 |
724,957 |
3,210,451 |
3,935,408 |
- |
- |
|
|
|
(12.6506) |
Var 1997 |
||||||||||
|
|
(15.7041) |
Var 1998 |
||||||||||
|
|
(19.6296) |
Var 1999 |
||||||||||
|
(8.7251) |
Var 2000 |
|||||||||||
|
|
||||||||||||
|
8 |
Kane |
325.394 |
06/14/91 |
|
3,496,700 |
262,275 |
3,758,975 |
42,607 |
1,909,034 |
1,892,548 |
726,169 |
|
|
|
(.870) |
04/03/96 |
||||||||||
|
(63.000) |
01/23/01 |
|||||||||||
|
(80.000) |
05/11/04 |
|||||||||||
|
9 (c) |
Will |
9.867 |
08/13/91 |
|
- |
- |
- |
- |
- |
- |
- |
|
|
(9.867) |
09/16/02 |
|||||||||||
|
10 |
Will |
150.66 |
08/20/91 |
|
1,866,716 |
89,333 |
1,956,049 |
22,644 |
- |
1,978,693 |
- |
|
|
11 |
Will |
138.447 |
08/20/91 |
|
289,914 |
20,376 |
310,290 |
2,700 |
312,990 |
- |
- |
|
|
|
(138.447) |
05/03/93 |
||||||||||
-9-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
June 30, 2004 (unaudited)
(3) Investment Properties (continued)
|
Gross Acres |
Purchase/ |
Initial Costs |
Costs Capitalized |
Costs of |
Total Remaining Costs of |
Current Year Gain (Loss) |
||||||
|
Parcel |
Illinois |
Purchased |
Sales |
Original |
Acquisition |
Total |
Subsequent to |
Property |
Parcels at |
on Sale |
||
|
# |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
06/30/04 |
Recognized |
||
|
12 (c) |
Will |
44.732 |
08/20/91 |
$ |
- |
- |
- |
- |
- |
- |
- |
|
|
(44.732) |
09/16/02 |
|||||||||||
|
13 |
Will |
6.342 |
09/23/91 |
139,524 |
172 |
139,696 |
- |
139,696 |
- |
- |
||
|
|
|
(6.342) |
05/03/93 |
|||||||||
|
14 |
Kendall |
44.403 |
09/03/91 |
|
888,060 |
68,210 |
956,270 |
1,259,583 |
2,215,853 |
- |
130,963 |
|
|
(15.392) |
04/16/01 |
|||||||||||
|
(14.2110) |
Var 2002 |
|||||||||||
|
(13.6000) |
04/11/03 |
|||||||||||
|
(1.2000) |
02/19/04 |
|||||||||||
|
15 |
Kendall |
100.364 |
09/04/91 |
|
1,050,000 |
52,694 |
1,102,694 |
117,829 |
1,220,523 |
- |
- |
|
|
|
(5.000) |
09/01/93 |
||||||||||
|
|
(11.000) |
12/01/94 |
||||||||||
|
|
(84.364) |
08/14/98 |
||||||||||
|
16 |
McHenry |
168.905 |
09/13/91 |
|
1,402,058 |
69,731 |
1,471,789 |
97,766 |
1,569,555 |
- |
- |
|
|
(168.905) |
08/03/01 |
|||||||||||
|
17 |
Kendall |
3.462 |
10/30/91 |
|
435,000 |
22,326 |
457,326 |
113,135 |
570,461 |
- |
- |
|
|
(2.113) |
03/06/01 |
|||||||||||
|
(1.349) |
08/23/02 |
|||||||||||
|
18 |
McHenry |
139.1697 |
11/07/91 |
|
1,160,301 |
58,190 |
1,218,491 |
1,460,374 |
- |
2,678,865 |
- |
|
|
19 |
Kane |
436.236 |
12/13/91 |
|
4,362,360 |
321,250 |
4,683,610 |
187,211 |
4,870,821 |
- |
- |
|
|
(436.236) |
05/16/01 |
|||||||||||
|
20 |
Kane & |
|||||||||||
|
Kendall |
400.129 |
01/31/92 |
|
1,692,623 |
101,318 |
1,793,941 |
1,427,366 |
1,250,469 |
1,970,838 |
- |
||
|
|
(21.138) |
06/30/99 |
||||||||||
-10-
INLAND LAND APPRECIATION FUND II, L.P.
(a limited partnership)
Notes to Financial Statements (continued)
June 30, 2004 (unaudited)
(3) Investment Properties (continued)
|
Gross Acres |
Purchase/ |
Initial Costs |
Costs Capitalized |
Costs of |
Total Remaining Costs of |
Current Year Gain (Loss) |
||||||
|
Parcel |
Illinois |
Purchased |
Sales |
Original |
Acquisition |
Total |
Subsequent to |
Property |
Parcels at |
on Sale |
||
|
# |
County |
(Sold) |
Date |
Costs |
Costs |
Costs |
Acquisition |
Sold |
06/30/04 |
Recognized |
||
|
21 |
Kendall |
15.013 |
05/26/92 |
$ |
250,000 |
23,844 |
273,844 |
18,860 |
18,798 |
273,906 |
- |
|
|
|
(1.000) |
03/16/99 |
||||||||||
|
22 |
Kendall |
391.959 |
10/30/92 |
3,870,000 |
283,186 |
4,153,186 |
1,761,128 |
5,526,715 |
387,599 |
3,856,954 |
||
|
|
(10.000) |
01/06/94 |
||||||||||
|
|
(5.538) |
01/05/96 |
||||||||||
|
|
(2.400) |
07/27/99 |
||||||||||
|
(73.395) |
Var 2001 |
|||||||||||
|
(136.000) |
08/14/02 |
|||||||||||
|
(34.1400) |
05/27/03 |
|||||||||||
|
(99.09) |
01/09/04 |
|||||||||||
|
23 |
Kendall |
133.2074 |
10/30/92 |
|
3,231,942 |
251,373 |
3,483,315 |
4,665,998 |
8,149,313 |
- |
- |
|
|
|
(11.525) |
07/16/93 |
||||||||||
|
|
(44.070) |
Var 1995 |
||||||||||
|
|
(8.250) |
Var 1996 |
||||||||||
|
|
(2.610) |
Var 1997 |
||||||||||
|
|
(10.6624) |
Var 1998 |
||||||||||
|
|
(5.8752) |
Var 1999 |
||||||||||
|
(49.0120) |
Var 2000 |
|||||||||||
|
(.2028) |
Var 2001 |
|||||||||||
|
(1.0000) |
Var 2002 |
|||||||||||
|
23A(a) |
Kendall |
.2676 |
10/30/92 |
|
170,072 |
12,641 |
182,713 |
- |
182,713 |
- |
- |
|
|
|
(.2676) |
03/16/93 |
||||||||||
|
24 |
Kendall |
3.908 |
01/21/93 |
|
645,000 |
56,316 |
701,316 |
30,436 |
731,752 |
- |
- |
|