Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
COMMISSION FILE NUMBER: 0-18431
Inland Land Appreciation Fund, L.P.
(Exact name of registrant as specified in its charter)
Delaware | 36-3544798 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2901 Butterfield Road, Oak Brook, IL 60523
(Address of principal executive offices)(Zip Code)
630-218-8000
(Registrants telephone number, including area code)
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 check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) |
Accelerated filer ¨ Smaller reporting company X |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No X
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
March 31, 2013 and December 31, 2012
(unaudited)
Assets | 2013 | 2012 | ||||||||
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Current assets: |
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Cash and cash equivalents (Note 1) |
$ | 2,134,482 | 2,070,810 | |||||||
Other assets |
1,784 | 2,442 | ||||||||
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Total current assets |
2,136,266 | 2,073,252 | ||||||||
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Investment properties, at cost (including acquisition fees paid to affiliates of $216,239 at March 31, 2013 and December 31, 2012) (Note 4): |
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Land and improvements |
8,409,715 | 8,403,480 | ||||||||
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Total assets |
$ | 10,545,981 | 10,476,732 | |||||||
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Liabilities and Partners Capital |
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Current liabilities: |
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Accounts payable |
$ | 12,719 | 18,580 | |||||||
Accrued real estate taxes |
9,258 | 7,283 | ||||||||
Due to affiliates (Note 3) |
19,090 | 17,079 | ||||||||
Unearned income |
109,570 | 0 | ||||||||
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|
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Total current liabilities |
150,637 | 42,942 | ||||||||
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Partners capital: |
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General Partner: |
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Capital contribution |
500 | 500 | ||||||||
Cumulative net income |
5,351,288 | 5,351,661 | ||||||||
Cumulative cash distributions |
(5,335,451 | ) | (5,335,451) | |||||||
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16,337 | 16,710 | |||||||||
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Limited Partners: |
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Units of $1,000. Authorized 30,001 Units, 29,593 Units outstanding at March 31, 2013 and December 31, 2012, (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 |
27,985,821 | 28,022,788 | ||||||||
Cumulative cash distributions |
(43,480,217 | ) | (43,479,111) | |||||||
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10,379,007 | 10,417,080 | |||||||||
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Total Partners capital |
10,395,344 | 10,433,790 | ||||||||
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Total liabilities and Partners capital |
$ | 10,545,981 | 10,476,732 | |||||||
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See accompanying notes to financial statements.
-2-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the three months ended March 31, 2013 and 2012
(unaudited)
2013 | 2012 | |||||||||
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Revenues: |
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Rental income (Note 5) |
$ | 36,234 | 50,399 | |||||||
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Total revenues |
36,234 | 50,399 | ||||||||
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Expenses: |
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Professional services to affiliates |
14,346 | 10,577 | ||||||||
Professional services to non-affiliates |
37,331 | 32,314 | ||||||||
General and administrative expenses to affiliates |
4,266 | 2,899 | ||||||||
General and administrative expenses to non-affiliates |
17,354 | 16,909 | ||||||||
Marketing expenses to affiliates |
130 | 0 | ||||||||
Land operating expenses to non-affiliates |
2,883 | 4,577 | ||||||||
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Total expenses |
76,310 | 67,276 | ||||||||
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Operating loss |
(40,076 | ) | (16,877) | |||||||
Interest income |
1,236 | 2,442 | ||||||||
Other income |
1,500 | 2,850 | ||||||||
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Loss from continuing operations |
(37,340 | ) | (11,585) | |||||||
Discontinued operations (Note 2): |
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Operating income, net |
0 | 13,990 | ||||||||
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Income from discontinued operations |
0 | 13,990 | ||||||||
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Net income (loss) |
$ | (37,340 | ) | 2,405 | ||||||
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Net income (loss) allocated to: |
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General Partner |
$ | (373 | ) | 24 | ||||||
Limited Partners |
(36,967 | ) | 2,381 | |||||||
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Net income (loss) |
$ | (37,340 | ) | 2,405 | ||||||
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Net income (loss) allocated to the one General Partner Unit |
$ | (373 | ) | 24 | ||||||
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Net income (loss) per Unit, allocated to Limited Partners per weighted average Limited Partnership Units (29,593 for the three months ended March 31, 2013 and 2012): |
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Continuing operations |
$ | (1.25 | ) | (.39) | ||||||
Discontinued operations |
0 | .47 | ||||||||
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$ | (1.25 | ) | .08 | |||||||
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See accompanying notes to financial statements.
-3-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the three months ended March 31, 2013 and 2012
(unaudited)
2013 | 2012 | |||||||||||
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Cash flows from operating activities: |
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Net income (loss) |
$ | (37,340 | ) | 2,405 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities (including discontinued operations): |
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Changes in assets and liabilities: |
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Accounts receivable |
0 | (125) | ||||||||||
Other assets |
658 | 0 | ||||||||||
Accounts payable |
(5,861 | ) | (6,545) | |||||||||
Accrued real estate taxes |
1,975 | (2,132) | ||||||||||
Due to affiliates |
2,011 | 6,322 | ||||||||||
Unearned income |
109,570 | 149,491 | ||||||||||
Liabilities associated with discontinued operations |
0 | 53,884 | ||||||||||
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Net cash provided by operating activities |
71,013 | 203,300 | ||||||||||
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Cash flows from investing activities: |
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Additions to investment properties |
(6,235 | ) | (211) | |||||||||
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Net cash used in investing activities |
(6,235 | ) | (211) | |||||||||
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Cash flows from financing activities: |
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Distributions |
(1,106 | ) | (1,538) | |||||||||
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Net cash used in financing activities |
(1,106 | ) | (1,538) | |||||||||
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Net increase in cash and cash equivalents |
63,672 | 201,551 | ||||||||||
Cash and cash equivalents at beginning of period |
2,070,810 | 1,983,495 | ||||||||||
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Cash and cash equivalents at end of period |
$ | 2,134,482 | 2,185,046 | |||||||||
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See accompanying notes to financial statements.
-4-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
March 31, 2013
(unaudited)
Readers of this quarterly report should refer to the Partnerships audited financial statements for the fiscal year ended December 31, 2012 which are included in the Partnerships 2012 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, 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. Between October 12, 1988 and October 6, 1989, the Partnership sold 30,000 Limited Partnership Units (Units) at $1,000 per Unit, which does not include the General Partner or the Initial Limited Partner, resulting in gross offering proceeds of $30,000,000. Inland Real Estate Investment Corporation is the General Partner. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnerships real property investments according to the number of Units held. Through March 31, 2013, the Partnership had repurchased a total of 407.75 Units for $359,484 from various Limited Partners through a 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 periods presented herein. Results of interim periods are not necessarily indicative of results to be expected for the year.
The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents and are carried at cost, which approximates market value. The Partnership maintains its cash and cash equivalents at a financial institution. The account balances at the financial institution exceed the Federal Depository Insurance Corporation (FDIC) insurance coverage of $250,000 and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Partnership believes that the risk is not significant, and the Partnership does not anticipate the financial institutions non-performance.
The Partnership recognizes income from the sale of land parcels in accordance with the full accrual method of accounting.
The Partnerships escrow agent holds earnest money deposits from a prospective purchaser when an agreement for sale is executed. Generally, these funds are not the Partnerships until the closing has occurred or the buyer under the sale agreement has committed a default which would entitle the Partnership to the earnest money.
Except as described in footnote (b) to the Investment Properties table on page 15, the Partnership uses the area 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. Repairs and maintenance expenses are charged to operations as incurred.
-5-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 2013
(unaudited)
(2) Discontinued Operations and Investment Property Held for Sale
On May 4, 2012, the Partnership sold approximately 212 acres of Parcel 24 located in Kendall County, Illinois for approximately $2,220,000, which resulted in net sales proceeds of approximately $2,160,000 and a gain on sale of approximately $1,085,000. This property qualified for held for sale accounting treatment under GAAP during the first quarter of 2012. As such, the assets and liabilities are separately classified as held for sale on the accompanying balance sheet as of March 31, 2012 and the operations for the three months ended March 31, 2012 are included in discontinued operations on the accompanying statements of operations. There is no investment property classified as held for sale as of March 31, 2013.
(3) 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 of $18,612 and $13,476 have been incurred and are included in professional services to affiliates and general and administrative expenses to affiliates for the three months ended March 31, 2013 and 2012, respectively, of which $19,090 and $17,079 was unpaid as of March 31, 2013 and December 31, 2012, 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 $130 and $0 have been incurred and are included in marketing expenses to affiliates for the three months ended March 31, 2013 and 2012, respectively, all of which was paid as of March 31, 2013 and December 31, 2012, respectively.
As of March 31, 2013, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the General Partner.
(4) Investment Properties
As of March 31, 2013, the Partnership owned six parcels of land consisting of approximately 491 acres. There were no land sales during the three months ended March 31, 2013. During 2012, the Partnership sold the remaining balance of Parcel 24, consisting of approximately 212 acres, Parcel 25, consisting of 225 acres, and Parcel 14, consisting of approximately 76 acres.
(a) | Reconciliation of investment properties owned: |
March 31, 2013 |
December 31, 2012 |
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Balance at January 1, |
$ | 8,403,480 | 13,238,394 | |||||||
Additions during period |
6,235 | 8,275 | ||||||||
Sales during period |
0 | (4,843,189 | ) | |||||||
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Balance at end of period, |
$ | 8,409,715 | 8,403,480 | |||||||
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-6-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
March 31, 2013
(unaudited)
(b) | The Partnership has taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the costs of insurance expense and real estate taxes. Our remaining land is not encumbered by debt and is located in areas that we believe are in the paths of future development. As such, the Partnership has the ability and management has the intent to hold the remaining parcels until such time as reasonable and acceptable offers are received. On a quarterly basis, the Partnership reviews impairment indicators and if necessary, conducts an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If this were to occur, the Partnership would be required to record an impairment loss equal to the excess of the carrying value over the estimated fair value. |
In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions and managements intent to hold the remaining parcels until such time as reasonable and acceptable offers are received. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from managements judgment, the valuation could be negatively or positively affected. |
The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on managements continuous process of analyzing each property. For the three months ended March 31, 2013 and 2012, respectively, no impairment provisions were recorded by the Partnership. |
(5) Rental Income
The Partnership has determined that all leases relating to the farm parcels are operating leases. Accordingly, rental income is reported when earned. Farm rent is fully collected during the first quarter. As such, a portion of the farm rent is classified as unearned income. As of March 31, 2013, unearned income was $109,570.
As of March 31, 2013, the Partnership had farm leases of generally one year in duration, for approximately 431 acres of the approximately 491 acres owned.
(6) Subsequent Events
The Partnership evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded in and/or disclosed in the Partnerships financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the Securities and Exchange Commission. There are no subsequent events to report that would have a material impact on the Partnerships financial statements.
-7-
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Managements 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 our 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, adverse changes in real estate, financing and general economic or local conditions; the ability to obtain annexation and zoning approvals required to develop our properties; the approval of local governing bodies to develop our properties; successful lobbying of local no growth or limited development homeowner groups; eminent domain proceedings; changes in the environmental conditions or changes in the environmental positions of governmental bodies; and potential conflicts of interest between us and our affiliates, including our general partner.
We electronically file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the Securities and Exchange Commission (SEC). The public may read and copy any of the reports that are filed with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)-SEC-0330. The SEC maintains an Internet site at (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.
Critical Accounting Policies
The SEC previously issued Financial Reporting Release (FRR) or FRR No. 60 Cautionary Advice Regarding Disclosure About Critical Accounting Policies. A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgments in certain circumstances. We believe that our most critical accounting policies relate to how we value, classify, and allocate costs of investment properties and revenue recognition. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. The purpose of the FRR is to provide investors with an understanding of how management forms these policies. Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with accounting principles generally accepted in the United States of America or GAAP. GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. The following disclosure discusses judgments known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.
Valuation of Investment Properties - On a quarterly basis, we review impairment indicators and if necessary, conduct an impairment analysis to ensure that the carrying value of each investment property does not exceed its estimated fair value. If an investment property is considered impaired, we would be required to record an impairment loss equal to the excess of carrying value over the estimated fair value.
In determining the value of an investment property and whether the property is impaired, management considers several indicators which require difficult, complex and/or subjective judgments, such as projected sales prices, capital expenditures, assessment of current economic conditions, and managements intent to hold the remaining parcels until such time as reasonable and acceptable offers are received. These indicators are considered by management in determining the value of any particular property. The value of any particular property is sensitive to the actual results of any of these uncertain indicators, either individually or taken as a whole. Should the actual results differ from managements judgment, the valuation could be negatively or positively affected.
The valuation and possible subsequent impairment of investment properties is a significant estimate that can and does change based on managements continuous process of analyzing each property. For the three months ended March 31, 2013 and 2012, respectively, we have not recorded any such impairment.
Cost Allocation We use the area method of cost 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.
-8-
Revenue Recognition - We recognize income from the sale of land parcels in accordance with the full accrual method of accounting.
Assets Held for Sale - In determining whether to classify an asset as held for sale, we consider whether: (i) management has committed to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the asset is probable; (v) the due diligence period as defined in the sales agreement has expired and a closing date has been set; (vi) we are actively marketing the asset for sale at a price that is reasonable in relation to its current value; and (vii) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made to the plan.
If all of the above criteria are met, we classify the asset as held for sale. The assets and liabilities associated with those assets that are held for sale are classified separately on the balance sheets for the most recent reporting period. Additionally, the operations for the periods presented are included in the statements of operations as discontinued operations for all periods presented. As of March 31, 2013, we have not classified any investment properties as investment property held for sale.
From time to time, we may determine that a held for sale property no longer meets the criteria to continue to be classified as held for sale. If this occurs, we record the property at the lower of the carrying amount before the property was classified as held for sale or the fair value at the decision date not to sell.
Liquidity and Capital Resources
Between October 12, 1988 and October 6, 1989, we sold 30,000 limited partnership units to the public at $1,000 per unit resulting in $30,000,000 in gross offering proceeds.
We used $25,187,069 of gross offering proceeds to purchase on an all-cash basis twenty-five parcels of undeveloped land and an option to purchase undeveloped land. These investments include the payment of the purchase price, acquisition fees and acquisition costs of such properties. Fourteen of the parcels were purchased during 1989 and eleven during 1990. Through March 31, 2013, we have had multiple sales transactions disposing of approximately 2,611 acres of the approximately 3,102 acres originally owned. As of March 31, 2013, cumulative distributions to the limited partners have totaled $43,480,217, which is equivalent to 145% of the original capital raised which was $30,000,000, and $5,335,451 to the general partner. Through March 31, 2013, we have used $20,316,911 of working capital for rezoning and other activities. Such amounts have been capitalized and are included in investment properties.
Our capital needs and resources will vary depending upon a number of factors, including the extent to which we conduct rezoning and other activities relating to utility access, the installation of roads, subdivision and/or annexation of land to a municipality, changes in real estate taxes affecting our land, and the amount of revenue received from leasing. As of March 31, 2013, we own, in whole or in part, six of our twenty-five original parcels, the majority of which are leased to local farmers and are generating sufficient cash flow from farm leases to cover real estate taxes and insurance expense.
At March 31, 2013, we had cash and cash equivalents of $2,134,482 which is available to be used for our costs and liabilities, cash distributions to partners and other activities with respect to some or all of our land parcels.
There were no land sales for the three months ended March 31, 2013 and 2012, respectively. We believe we have taken the steps necessary to reduce costs and maintain sufficient reserves of cash and cash equivalents to cover all our costs for an extended period of time. We have farm leases in place which generate sufficient income to cover the costs of insurance expense and real estate taxes. Our remaining land is not encumbered by debt and is located in areas that we believe are in the paths of future development. As land sales occur, net sales proceeds will be used to cover our current and future operations, including land improvements and land use activities. We will evaluate our cash needs throughout the year to determine future distributions.
We have been successful in pre-development activities such as rezoning, annexation and /or land planning of approximately 410 acres of Parcels 17, 18, 19 and 22 in McHenry, Illinois. Further pre-development activities are on hold pending significant improvements in the real estate market as well as demand for improved land zoned for residential and commercial use.
-9-
We continue to closely monitor the real estate market trends, especially within the areas where our remaining parcels are located. We have seen modest improvements in the residential resale real estate market, however, new home starts in these middle class communities remain weak. That, coupled with strict lender requirements, adversely impact sales activity, especially sales of residential lots and sales of vacant land for retail purposes. We are aware of farm parcel sales in surrounding communities from both speculators looking to hold land until the market rebounds, as well as farmers looking to increase their farming businesses. Inquiries on the Partnerships land holdings have also increased.
Transactions with Related Parties
Our general partner and its affiliates are entitled to reimbursement for salaries and expenses of their employees relating to our administration. Such costs of $18,612 and $13,476 have been incurred and are included in professional services to affiliates and general and administrative expenses to affiliates for the three months ended March 31, 2013 and 2012, respectively, of which $19,090 and $17,079 was unpaid as of March 31, 2013 and December 31, 2012, respectively.
An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs. Such costs of $130 and $0 have been incurred and are included in marketing expenses to affiliates for the three months ended March 31, 2013 and 2012, respectively, all of which was paid as of March 31, 2013 and December 31, 2012, respectively.
As of March 31, 2013, the Partnership held all cash and cash equivalents with Inland Bank and Trust, an affiliate of the General Partner.
Results of Operations
As of March 31, 2013, we owned six parcels of land consisting of approximately 491 acres. Of the 491 acres owned, approximately 431 acres are leased to local farmers and generate sufficient cash flow to cover real estate taxes and insurance expense. Rental income was $36,234 and $50,399 for the three months ended March 31, 2013 and 2012, respectively. Rental income decreased approximately $20,030 due to fewer farm leases, as three farms were sold in 2012. The decrease was offset by an increase in rent of approximately $5,865 from the remaining farms. Farm rent payments are fully collected during the first quarter. A portion of the farm rent collected is classified as unearned income of $109,570 as of March 31, 2013.
We have been successful in pre-development activities such as rezoning, annexation and/or land planning of approximately 410 acres of Parcels 17, 18, 19 and 22 in McHenry, Illinois. Parcels 17 and 18 are within the planning jurisdiction of the City of Woodstock. Parcel 22 was forcibly annexed into the corporate limits of the Village of Bull Valley and subject to that villages restrictions. For land planning purposes, it was our intent to have most if not all three parcels annexed to the City of Woodstock. In a prior year, we entered into a Settlement and Annexation Agreement with the Village of Bull Valley which moved the boundary line favorably for us allowing us to proceed with the land planning for these parcels with the City of Woodstock. The settlement with Bull Valley provided the prospect of allowing us to develop the property with sewer and water facilities from the City of Woodstock and with a land use that could not have been developed in Bull Valley. In consideration for the release of land, we simultaneously conveyed approximately 51 acres of Parcel 22 to the Village of Bull Valley. Also as part of the settlement, we received favorable zoning for the remaining land that lies within the limits of the Village of Bull Valley. Due to the downturn in the real estate and financial markets the decision was made to discontinue the land planning process of these parcels until such time as the market rebounds and homebuilders and developers enter back into these markets.
Parcel 19 previously received approval required from certain Village of McHenry municipal departments for a preliminary plan approving a 41 unit well and septic residential subdivision to be called Hunters Woods. Following the downturn in the real estate market, we sought an extension in the time limit for recording the final plat for the Hunters Woods Subdivision. The extension expired on May 5, 2011. During the first quarter of 2011, we submitted a formal request for an additional one year extension as allowed by the Village of McHenry. We received a response which required addressing minor storm water comments raised by the McHenry County Department of Planning and Development. These matters have been addressed in a formal response. We are awaiting further comments and/or a date when our request for a plat extension will be submitted for approval. It is our intent to preserve the validity of our preliminary plan until such time as the market rebounds and homebuilders resume new home construction in this area.
-10-
While new home construction has not significantly improved in these markets, we have seen signs of investors and farmers re-entering these markets to acquire land either for future development or to expand farming operations.
Professional services to affiliates and non-affiliates were $51,677 and $42,891 for the three months ended March 31, 2013 and 2012, respectively. Professional services primarily include accounting and legal fees. Professional services to affiliates and non-affiliates increased due to additional accounting fees for state tax filings, XBRL filing requirements, and audit fees.
General and administrative expenses to affiliates and non-affiliates were $21,620 and $19,808 for the three months ended March 31, 2013 and 2012, respectively. General and administrative expenses primarily include data processing costs, postage, printing expenses and farm management fees. General and administrative expenses to affiliates and non-affiliates increased primarily due to an increase in printing and postage costs as a result of the mini-tender offer.
Marketing expenses to affiliates were $130 and $0 for the three months ended March 31, 2013 and 2012, respectively. Marketing expenses to affiliates were for signage costs.
Land operating expenses to non-affiliates were $2,883 and $4,577 for the three months ended March 31, 2013 and 2012, respectively. These costs primarily include real estate taxes and insurance. The decrease is due to a decrease in both real estate taxes and insurance since three parcels were sold during 2012.
Interest income was $1,236 and $2,442 for the three months ended March 31, 2013 and 2012, respectively. Interest income is primarily a result of the cash available to invest on a short term basis. The decrease in interest income is due to a decrease in interest rates.
Other income was $1,500 and $2,850 for the three months ended March 31, 2013 and 2012, respectively. Other income is due primarily to transfer fee income as a result of the number of completed unit transfers. The decrease is due to less transfer fee income as a result of a decrease in the number of completed unit transfers.
Income from discontinued operations was $0 and $13,990 for the three months ended March 31, 2013 and 2012, respectively. Included in income from discontinued operations are rental income, insurance and real estate taxes pertaining to the investment property held for sale as of March 31, 2012. There is no investment property held for sale as of March 31, 2013.
-11-
Investment Properties
We acquired fee ownership of the following real property investments. The table below summarizes the detail activity of all the land parcels owned by the Partnership from the purchase date through the quarter ending March 31, 2013.
Investment properties activity:
Parcel |
Illinois County |
Gross (Sold) |
Purchase/ Sales Date |
Initial Costs | Costs Acquisition |
Costs of Sold |
Total 3/31/13 |
Current Year Recognized |
||||||||||||||||||||||||||||||||||
Original Costs |
Acquisition Costs |
Total Costs |
||||||||||||||||||||||||||||||||||||||||
1 |
Kendall | 84.7360 | 01/19/89 | $ | 423,680 | 61,625 | 485,305 | 5,462,589 | 5,947,894 | 0 | 0 | |||||||||||||||||||||||||||||||
(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 | 0 | 0 | ||||||||||||||||||||||||||||||||
(183.3759 | ) | 12/27/90 | ||||||||||||||||||||||||||||||||||||||||
(40.0362 | ) | 05/11/00 | ||||||||||||||||||||||||||||||||||||||||
3 |
Kendall | 20.0000 | 02/09/89 | 189,000 | 13,305 | 202,305 | 0 | 202,305 | 0 | 0 | ||||||||||||||||||||||||||||||||
(20.0000 | ) | 05/08/90 | ||||||||||||||||||||||||||||||||||||||||
4 |
Kendall | 69.2760 | 04/18/89 | 508,196 | 38,126 | 546,322 | 1,223,376 | 1,769,698 | 0 | 0 | ||||||||||||||||||||||||||||||||
(.4860 | ) | 02/28/91 | ||||||||||||||||||||||||||||||||||||||||
(27.5850 | ) | 08/25/95 | ||||||||||||||||||||||||||||||||||||||||
(4.4017 | ) | Var 2001 | ||||||||||||||||||||||||||||||||||||||||
(2.1400 | ) | Var 2002 | ||||||||||||||||||||||||||||||||||||||||
(23.0933 | ) | Var 2003 | ||||||||||||||||||||||||||||||||||||||||
(6.7800 | ) | Var 2004 | ||||||||||||||||||||||||||||||||||||||||
(4.7900 | ) | Var 2005 | ||||||||||||||||||||||||||||||||||||||||
5 |
Kendall (a) | 372.2230 | 05/03/89 | 2,532,227 | 135,943 | 2,668,170 | 456,398 | 3,124,568 | 0 | 0 | ||||||||||||||||||||||||||||||||
(Option | ) | 04/06/90 | ||||||||||||||||||||||||||||||||||||||||
(372.2230 | ) | 06/20/03 | ||||||||||||||||||||||||||||||||||||||||
6 |
Kendall (b) | 78.3900 | 06/21/89 | 416,783 | 31,691 | 448,474 | 1,461,256 | 1,909,730 | 0 | 0 | ||||||||||||||||||||||||||||||||
(3.9500 | ) | 11/01/00 | ||||||||||||||||||||||||||||||||||||||||
(30.0000 | ) | 07/12/05 | ||||||||||||||||||||||||||||||||||||||||
(33.4270 | ) | 07/27/06 | ||||||||||||||||||||||||||||||||||||||||
(11.0130 | ) | 08/22/07 | ||||||||||||||||||||||||||||||||||||||||
7 |
Kendall (b) | 77.0490 | 06/21/89 | 84,754 | 8,163 | 92,917 | 1,438,727 | 1,531,644 | 0 | 0 | ||||||||||||||||||||||||||||||||
(71.2070 | ) | 08/22/07 | ||||||||||||||||||||||||||||||||||||||||
(5.8420 | ) | 03/20/08 |
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INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Investment properties activity (continued)
Parcel | Illinois County |
Gross Acres Purchased (Sold) |
Purchase/ Sales Date |
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Costs of Property Sold |
Total Remaining Costs of Parcels at 3/31/13 |
Current Year Gain(Loss) on Sale Recognized |
||||||||||||||||||||||||||||||||||
Original Costs |
Acquisition Costs |
Total Costs |
||||||||||||||||||||||||||||||||||||||||
8 |
Kendall (b) | 5.0000 | 06/21/89 | $ | 60,000 | 5,113 | 65,113 | 0 | 65,113 | 0 | 0 | |||||||||||||||||||||||||||||||
(5.0000 | ) | 10/06/89 | ||||||||||||||||||||||||||||||||||||||||
9 |
McHenry (b) | 51.0300 | 08/07/89 | 586,845 | 22,482 | 609,327 | 94,659 | 0 | 703,986 | 0 | ||||||||||||||||||||||||||||||||
10 |
McHenry (b) | 123.9400 | 08/07/89 | 91,939 | 7,224 | 99,163 | 600 | 99,763 | 0 | 0 | ||||||||||||||||||||||||||||||||
(123.9400 | ) | 12/06/89 | ||||||||||||||||||||||||||||||||||||||||
11 |
McHenry (b) | 30.5920 | 08/07/89 | 321,216 | 22,641 | 343,857 | 94,534 | 0 | 438,391 | 0 | ||||||||||||||||||||||||||||||||
12 |
Kendall | 90.2710 | 10/31/89 | 907,389 | 41,908 | 949,297 | 246,964 | 1,196,261 | 0 | 0 | ||||||||||||||||||||||||||||||||
(.7090 | ) | 04/26/91 | ||||||||||||||||||||||||||||||||||||||||
(89.5620 | ) | 03/10/04 | ||||||||||||||||||||||||||||||||||||||||
13 |
McHenry | 92.7800 | 11/07/89 | 251,306 | 19,188 | 270,494 | 18,745 | 289,239 | 0 | 0 | ||||||||||||||||||||||||||||||||
(2.0810 | ) | 09/18/97 | ||||||||||||||||||||||||||||||||||||||||
(90.6990 | ) | 02/15/01 | ||||||||||||||||||||||||||||||||||||||||
14 |
McHenry | 76.2020 | 11/07/89 | 419,111 | 23,402 | 442,513 | 206,810 | 649,323 | 0 | 0 | ||||||||||||||||||||||||||||||||
(76.2020 | ) | 09/13/12 | ||||||||||||||||||||||||||||||||||||||||
15 |
Lake | 84.5564 | 01/03/90 | 1,056,955 | 85,283 | 1,142,238 | 1,661,344 | 2,803,582 | 0 | 0 | ||||||||||||||||||||||||||||||||
(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 | 0 | 0 | ||||||||||||||||||||||||||||||||
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 | 1,254,202 | 320,961 | 1,733,914 | 0 | ||||||||||||||||||||||||||||||||
(27.5100 | ) | 01/29/99 |
-13-
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Investment properties activity (continued)
Parcel | Illinois County |
Gross Acres Purchased (Sold) |
Purchase/ Sales Date |
Initial Costs | Costs Capitalized Subsequent to Acquisition |
Costs of Property Sold |
Total Remaining Costs of Parcels at 3/31/13 |
Current Year Gain (Loss) on Sale Recognized |
||||||||||||||||||||||||||||||||||
Original Costs |
Acquisition Costs |
Total Costs |
||||||||||||||||||||||||||||||||||||||||
18 |
McHenry | 71.4870 | 01/29/90 | $ | 496,116 | 26,259 | 522,375 | 517,216 | 11,109 | 1,028,482 | 0 | |||||||||||||||||||||||||||||||
(1.0000 | ) | Var 1990 | ||||||||||||||||||||||||||||||||||||||||
(.5200 | ) | 03/11/93 | ||||||||||||||||||||||||||||||||||||||||
19 |
McHenry | 63.6915 | 02/23/90 | 490,158 | 29,158 | 519,316 | 662,697 | 0 | 1,182,013 | 0 | ||||||||||||||||||||||||||||||||
20 |
Kane | 224.1480 | 02/28/90 | 2,749,800 | 183,092 | 2,932,892 | 1,938,930 | 4,871,822 | 0 | 0 | ||||||||||||||||||||||||||||||||
(.2790 | ) | 10/17/91 | ||||||||||||||||||||||||||||||||||||||||
(223.8690 | ) | 02/20/04 | ||||||||||||||||||||||||||||||||||||||||
21 |
Kendall | 172.4950 | 03/08/90 | 1,327,459 | 75,822 | 1,403,281 | 954,415 | 2,357,696 | 0 | 0 | ||||||||||||||||||||||||||||||||
(172.4950 | ) | Var 1998 | ||||||||||||||||||||||||||||||||||||||||
22 |
McHenry | 254.5250 | 04/11/90 | 2,608,881 | 136,559 | 2,745,440 | 577,489 | 0 | 3,322,929 | 0 | ||||||||||||||||||||||||||||||||
(51.000 | ) | 10/02/08 | ||||||||||||||||||||||||||||||||||||||||
23 |
Kendall | 140.0210 | 05/08/90 | 1,480,000 | 116,240 | 1,596,240 | 909,395 | 2,505,635 | 0 | 0 | ||||||||||||||||||||||||||||||||
(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 | 101,991 | 1,560,686 | 0 | 0 | ||||||||||||||||||||||||||||||||
(12.4570 | ) | 05/25/90 | ||||||||||||||||||||||||||||||||||||||||
(4.6290 | ) | 04/01/96 | ||||||||||||||||||||||||||||||||||||||||
(69.8200 | ) | 11/26/02 | ||||||||||||||||||||||||||||||||||||||||
(211.577 | ) | 05/04/12 | ||||||||||||||||||||||||||||||||||||||||
25 |
Kane | 225.0000 | 06/01/90 | 2,600,000 | 168,778 | 2,768,778 | 301,040 | 3,069,818 | 0 | 0 | ||||||||||||||||||||||||||||||||
(225.0000 | ) | 09/07/12 | ||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||
Totals | $ | 23,624,761 | 1,562,308 | 25,187,069 | 20,316,911 | 37,094,265 | 8,409,715 | 0 | ||||||||||||||||||||||||||||||||||
|
|
-14-
(a) | Included in the purchase agreement of Parcel 5 was a condition that required the Partnership to buy an option to purchase an additional 243 acres immediately to the west of this parcel. The 1990 sale transaction relates to the sale of this option. |
(b) | The Partnership purchased from two third parties, two sets of three contiguous parcels of land (Parcels 6, 7 and 8; and Parcels 9, 10 and 11). The General Partner believes that the total value of this land will be maximized if it is treated and marketed to buyers as six separate parcels and closed the transactions as six separate purchases to facilitate this. Parcels 6, 7 and 8 were treated as one parcel and Parcels 9, 10 and 11 will continue to be treated as one parcel for purposes of computing Parcel Capital (as defined in the Partnership Agreement) and distributions to the partners. |
Subsequent Events
The Partnership evaluates subsequent events occurring between the most recent balance sheet date and the date that the financial statements are available to be issued in order to determine whether the subsequent events are to be recorded in and/or disclosed in the Partnerships financial statements and footnotes. The financial statements are considered to be available to be issued at the time that they are filed with the SEC. There are no subsequent events to report that would have a material impact on the Partnerships financial statements.
Other Items
In accordance with Article XVI Section 16.1 of the Inland Land Appreciation Fund, L.P. Partnership Agreement and Treasury Regulation Section 1.7704-1(j), we have not yet reached the maximum threshold of limited partnership units that may be transferred/assigned directly between parties during 2013. Therefore, we may authorize additional sales of partnership units directly between parties during 2013. For the benefit of interested limited partners, we have a relationship with a qualified matching service as defined under Treasury Regulation Section 1.7704-1(g). In accordance with this Treasury Regulation and the IRS private letter ruling obtained by the qualified matching service, we understand that limited partnership units may be transferred/assigned up to a separate maximum threshold each taxable year (in addition to the maximum threshold that may be transferred/assigned directly between parties discussed above). However, there can be no assurance that the IRS private letter ruling will apply to transfers of our units, or that any particular transfer will not violate the transfer restrictions contained in our partnership agreement or the provisions of Treasury Regulation Section 1.7704-1(g). If you have any interest in participating in a transfer/assignment of partnership units through this qualified matching service, please contact American Partnership Board directly at 800-736-9797. You are strongly encouraged to consult your personal legal, financial and tax advisors in connection with any such transfer/assignment.
The Illinois Department of Revenue regulates Illinois income tax withholding requirements for nonresident partners. Payment of the required withholding amount of $1,106 was made to the Illinois Department of Revenue during March 2013 and was recorded as a distribution to the limited partners. We are also required to pay a withholding tax to the Internal Revenue Service with respect to a partners allocable share of our taxable net income, if the partner is a foreign person. We will first pay the withholding tax from the distributions to any nonresident and/or foreign partners, and to the extent that the tax exceeds the amount of distributions withheld, or if there have been no distributions to withhold, the excess will be accounted for as a distribution to such nonresident and/or foreign partners. During April 2013, we paid $6 to the Internal Revenue Service on behalf of foreign partners and recorded it as a distribution to the limited partners.
Off-Balance Sheet Arrangements, Contractual Obligations, Liabilities and Contracts and Commitments
None
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Item 4. Controls and Procedures
-15-
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to us is made known to the members of senior management and the Audit Committee.
Based on managements evaluation as of March 31, 2013, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.
Managements Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of March 31, 2013. This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
There were no changes to our internal controls over financial reporting during the three months ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - Other Information
Items 1 through 5 are omitted because of the absence of conditions under which they are required.
Item 6. Exhibits
Exhibits:
31.1 | Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer | |
32.1 | Section 1350 Certification by Principal Executive Officer | |
32.2 | Section 1350 Certification by Principal Financial Officer | |
101 | The following financial information from our Quarterly Report on Form 10-Q for the three months ended March 31, 2013 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) related notes. This information is furnished but should not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
-16-
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 LAND APPRECIATION FUND, L.P. |
||||||
By: | Inland Real Estate Investment Corporation |
|||||
Its: | General Partner |
|||||
By: | /S/ BRENDA G. GUJRAL |
|||||
By: | Brenda G. Gujral |
|||||
Its: | Principal Executive Officer with respect to Inland Land Appreciation Fund, L.P. |
|||||
Date: | May 7, 2013 |
|||||
By: | /S/ GUADALUPE GRIFFIN |
|||||
By: | Guadalupe Griffin |
|||||
Its: | Senior Vice President |
|||||
Date: | May 7, 2013 |
|||||
By: | /S/ DONNA URBAIN |
|||||
By: | Donna Urbain |
|||||
Its: | Principal Financial Officer with respect to Inland Land Appreciation Fund, L.P. |
|||||
Date: | May 7, 2013 |
-17-