-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OTdahsSceFgdiKwik24oPXkIXi6tE8y2iHWdY0ZwzNL3fZOmalExcOvj/HqsV7wu LwlfleKkWmBzPfc7dm2Q/w== 0000923284-97-000008.txt : 19970801 0000923284-97-000008.hdr.sgml : 19970801 ACCESSION NUMBER: 0000923284-97-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970717 ITEM INFORMATION: Bankruptcy or receivership FILED AS OF DATE: 19970731 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INLAND REAL ESTATE CORP CENTRAL INDEX KEY: 0000923284 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363953261 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28382 FILM NUMBER: 97648836 BUSINESS ADDRESS: STREET 1: 2901 BUTTERFIELD RD CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7082188000 MAIL ADDRESS: STREET 1: 2901 BUTTERFIELD RD CITY: OAK BROOK STATE: IL ZIP: 60521 FORMER COMPANY: FORMER CONFORMED NAME: INLAND MONTHLY INCOME FUND III INC DATE OF NAME CHANGE: 19940518 8-K 1 As filed with the Securities and Exchange Commission on July 31, 1997. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report: July 17, 1997 (Date of earliest event reported) Inland Real Estate Corporation (Exact name of registrant as specified in the charter) Maryland 333-26701 36-3953261 (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 2901 Butterfield Road Oak Brook, Illinois 60521 (Address of Principal Executive Offices) (630) 218-8000 (Registrant's telephone number including area code) n/a (Former name or former address, if changed since last report) -1- Item 2. Acquisition or Disposition of Assets Rivertree Court, Vernon Hills, Illinois On July 17, 1997, the Company acquired a Neighborhood Retail Center located at 701 N. Milwaukee Avenue in Vernon Hills, Illinois known as Rivertree Court from JMB Income Properties, LTD., - XIII, an unaffiliated third party, for approximately $31,750,000. As part of the acquisition, the Company assumed the existing first mortgage loan of $15,700,000. The mortgage requires interest only payments at a rate of 10.03% per annum until the maturity date of January 1, 1999. The balance of the purchase price was funded using cash and cash equivalents. The purchase price was approximately $106.17 per square foot, which the Company concluded was fair and reasonable and within the range of values indicated in an appraisal received by the Company and presented to the Company's board of directors. Rivertree Court was built in 1988 and consists of three one-story, multi-tenant retail facilities aggregating 299,055 rentable square feet. As of July 17, 1997, Rivertree Court was 97% leased (100% leased if the master lease, which lasts for one year, is considered). In evaluating Rivertree Court as a potential acquisition, the Company considered a variety of factors including location, demographics, tenant mix, price per square foot, existing rental rates compared to market rates, and occupancy. The Company believes that the center is located within a vibrant economic area. Although approximately 28% of the rentable square feet at Rivertree Court is leased to two tenants, the Company's management believes that retenanting of any space which is vacated in the future should be accomplished relatively quickly and at rental rates comparable to those currently paid by the tenants at the facility. As part of the purchase, the Company received a $250,000 credit at close for any rent loss from current or anticipated vacancies. The Company did not consider any other factors materially relevant to the decision to acquire the property. The Company does not anticipate making any significant repairs and improvements to Rivertree Court over the next few years. Nevertheless, a substantial portion of any cost of repairs and improvements would be paid by the tenants. The table below sets forth certain information with respect to the occupancy rate at Rivertree Court expressed as a percentage of total gross leasable area and the average effective annual base rent per square foot. Occupancy Rate as of Effective Year Ending December 31, Annual Rental December 31, of Each Year Per Square Ft 1996 90% $11.98 1995 99% 11.50 1994 98% 11.78 1993 97% 11.75 1992 90% 11.10 -2- Tenants leasing more than 10% of the total square footage include Best Buy, an electronic and appliance chain, which leases 44,384 square feet, or approximately 15% of the rentable square feet and Plitt Theatres, a movie theater, which leases 40,000 square feet, or approximately 13% of the rentable square feet. The lease with Best Buy requires Best Buy to pay base rent equal to $8.78 per square foot per annum payable monthly until January 31, 2001, $9.48 per square foot per annum payable monthly until January 31, 2006 and $10.18 per square foot per annum payable monthly until January 31, 2011. The lease with Best Buy contains no option to renew. The lease with Plitt Theatres, requires Plitt Theatres to pay base rent equal to $18.00 per square foot per annum payable monthly until February 28, 1998, $20.00 per square foot per annum payable monthly until February 28, 2003 and $22.00 per square foot per annum payable monthly until February 28, 2008. The lease with Plitt Theatres contains two five year options to renew. If the first option is exercised, Plitt Theatres will be required to pay base rent equal to $22.00 per square foot per annum payable monthly until February 28, 2013. If the second option is exercised, Plitt Theatres will be required to pay base rent equal to $23.83 per square foot per annum payable monthly until February 28, 2018. For federal income tax purposes, the Company's depreciable basis in Rivertree Court will be approximately $24,000,000. Depreciation expense, for tax purposes, will be computed using the straight-line method. Buildings and improvements are depreciated based upon estimated useful lives of 40 years. Information regarding real estate taxes payable in 1997 for the tax year ended 1996 (the most recent tax year for which information is generally available) were $607,457. The real estate taxes payable were calculated by multiplying Rivertree Court's assessed value by an equalizer of 1.0% and a tax rate of 7.422%. On July 17, 1997, a total of 289,829 square feet was leased to forty-one tenants at Rivertree Court. The following tables set forth certain information with respect to the amount of and expiration of the lease at this Neighborhood Retail Center. Square Feet Lease Renewal Current Rent per Lessee Leased Ends Option Annual Rent Square Foot Cannine Design 1,196 04/1999 1/5 yr. $ 23,322 $19.50 Offshore 1,196 10/2000 - 21,528 18.00 Susi Masa Restaurant 1,196 07/1998 1/5 yr. 21,528 18.00 Kuts 'N Play 1,081 03/2001 1/10 yr. 20,539 19.00 State Farm Ins. 1,000 03/1998 - 18,980 18.98 Great Clips 1,000 07/2000 1/5 yr. 19,000 19.00 Dan Howard Maternity 1,000 03/2000 1/10 yr. 16,500 16.50 Cafe Pyrenee's 3,000 06/2001 1/7 yr. 48,000 16.00 Silborne's Bakery 2,000 08/2001 1/8 yr. 45,320 22.66 -3- Square Feet Lease Renewal Current Rent per Lessee Leased Ends Option Annual Rent Square Foot Office Depot 26,555 01/2007 1/12 yr. 180,574 6.80 Old Country Buffet 10,400 12/2007 - 72,280 6.95 Harlem Furniture 15,140 06/2001 1/5 yr. 133,989 8.85 Crown Books 8,291 06/2001 1/13 yr. 107,783 13.00 Famous Footwear 5,600 04/1998 1/10 yr. 70,000 12.50 Peacock Restaurant 2,631 02/1999 1/8 yr. 46,043 17.50 Quizno's Classic Subs 1,950 09/1999 1/5 yr. 33,150 17.00 Jennifer Sofa Beds 2,318 12/2002 1/11 yr. 37,088 16.00 T.J. Maxx 25,020 04/2003 1/15 yr. 162.630 6.50 Eddie Z's 1,735 06/2002 - 43,375 25.00 Sizes Unlimited 4,942 03/1998 - 84,014 17.00 Spoke & Ski 4,942 01/2007 - 84,014 17.00 Karen's Hallmark 4,942 02/2004 - 69,188 14.00 Atlantis Bedrooms 4,942 01/2000 1/11 yr. 79,072 16.00 Petsmart 24,181 01/2012 - 312,902 12.94 Noodle Kidoodle 11,250 01/2006 1/11 yr. 157,500 14.00 Gino Bavaro Hair 2,246 05/1998 - 42,674 19.00 Golf Link 2,995 05/1999 - 44,925 15.00 Cyber Exchange 1,500 05/2002 - 24,750 16.50 Sara Lee Bakery 2,246 03/1999 1/5 yr. 34,701 15.45 Play It Again Sports 2,250 10/1997 - 32,625 14.50 Michael's Crafts 17,100 03/1998 1/10 yr. 171,000 10.00 Frame Art 1,800 05/1999 1/5 yr. 31,050 17.25 Best Buy 44,384 01/2011 - 389,692 8.78 -4- Square Feet Lease Renewal Current Rent per Lessee Leased Ends Option Annual Rent Square Foot Beauty and The Bead 800 06/2000 - 16,000 20.00 Cruise Center 1,000 03/1999 - 23,000 23.00 Ben & Jerry's 1,000 04/1998 1/10 yr. 31,000 31.00 Alphagraphics 2,000 11/2001 - 36,080 18.04 One Hour Moto Photo 1,000 01/2004 1/7 yr. 19,000 19.00 Tan Lines 1,000 11/2002 1/8 yr. 20,000 20.00 Currency Exchange 1,000 12/1998 - 20,000 20.00 Plitt Theatres 40,000 03/2008 2/5 yr. 720,000 18.00 Vacant 9,226
Average Percent of Percent of Base Rent Total Building Annual Base Approx. GLA Annual Base Per Square GLA Rent Number of of Expiring Rent of Foot Under Represented Represented by Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases 1997 1 2,250 $ 32,625 $3,551,487 $14.50 0.75% 0.92% 1998 8 34,084 461,588 3,548,759 13.54 11.40 13.01 1999 8 15,014 262,236 3,193,974 17.47 5.02 8.21 2000 5 8,823 153,692 2,940,960 17.42 2.95 5.23 2001 5 30,431 391,185 2,799,698 12.85 10.18 13.97 2002 4 6,553 131,031 2,455,560 20.00 2.19 5.34 2003 1 25,020 174,140 2,326,529 7.00 8.37 7.53 2004 2 5,942 91,188 2,231,389 15.35 1.99 4.09 2005 - - - 2,140,201 - - - 2006 1 11.250 168.750 2,140,201 15.00 3.76 7.88 (1) No assumptions were made regarding the releasing of expired leases. It is the opinion of the Company's management that the space will be released at market rates.
-5- The Company received an appraisal prepared by an independent appraiser who is a member in good standing of the American Institute of Real Estate Appraisers which reported a fair market value for the Rivertree Court property, as of July 10, 1997, of $32,000,000. Appraisals are estimates of value and should not be relied on as a measure of true worth or realizable value. Shorecrest Plaza, Racine, Wisconsin On July 25, 1997, the Company acquired a Neighborhood Retail Center located at 3900 Erie Street in Racine, Wisconsin known as Shorecrest Plaza from Shorecrest Shopping Center, L.L.C., an unaffiliated third party, for approximately $5,956,000. The purchase price was funded using cash and cash equivalents. The purchase price was approximately $65.32 per square foot, which the Company concluded was fair and reasonable and within the range of values indicated in an appraisal received by the Company and presented to the Company's board of directors. Shorecrest Plaza was built in 1977 and consists of a one-story, multi-tenant retail facility aggregating 91,272 rentable square feet. As of July 25, 1997, Shorecrest Plaza was 96% leased (100% leased if the master lease, which lasts for one year is considered). In evaluating Shorecrest Plaza as a potential acquisition, the Company considered a variety of factors including location, demographics, tenant mix, price per square foot, existing rental rates compared to market rates, and occupancy. The Company believes that the center is located within a vibrant economic area. Although approximately 61% of the rentable square feet at Shorecrest Plaza is leased to two tenants, the Company's management believes that retenanting of any space which is vacated in the future should be accomplished relatively quickly and at rental rates comparable to those currently paid by the tenants at the facility. The Company did not consider any other factors materially relevant to the decision to acquire the property. The Company does not anticipate making any significant repairs and improvements to Shorecrest Plaza over the next few years. Nevertheless, a substantial portion of any cost of repairs and improvements would be paid by the tenants. The table below sets forth certain information with respect to the occupancy rate at Shorecrest Plaza expressed as a percentage of total gross leasable area and the average effective annual base rent per square foot. The Seller acquired the property in 1996 and information for prior years was not available. Occupancy Rate as of Year Ending December 31, Effective Annual Rental December 31, of Each Year Per Square Foot 1996 93% $7.47 -6- Tenants leasing more than 10% of the total square footage include Schultz Savo Piggly-Wiggly, a grocery store, which leases 41,262 square feet, or approximately 45% of the rentable square feet and Wisconsin Health and Fitness, a health club, which leases 14,475 square feet or approximately 16% of the rentable square feet. The lease with Schultz Savo Piggly Wiggly requires Schultz Savo Piggly Wiggly to pay base rent equal to $6.50 per square foot per annum payable monthly until January 31, 2010. The lease with Schultz Savo Piggly Wiggly contains four options to renew, each for five years and at a base rent equal to $6.50 per square foot per annum payable monthly. The lease with Wisconsin Health and Fitness requires Wisconsin Health and Fitness to pay base rent equal to $6.00 per square foot per annum payable monthly until March 31, 1999, $6.25 per square foot per annum payable monthly until March 31, 2000, $6.50 per square foot per annum payable monthly until March 31, 2001, $6.75 per square foot per annum payable monthly until March 31, 2002, $7.00 per square foot per annum payable monthly until March 31, 2005 and $7.58 per square foot per annum payable monthly until March 31, 2007. The lease with Wisconsin Health and Fitness contains one option to renew for five years and requires Wisconsin Health and Fitness to pay base rent equal to $7.58 per square foot per annum payable monthly until March 31, 2010 and $8.00 per square foot per annum payable monthly until March 31, 2012. For federal income tax purposes, the Company's depreciable basis in Shorecrest Plaza will be approximately $4,800,000. Depreciation expense, for tax purposes, will be computed using the straight-line method. Buildings and improvements are depreciated based upon estimated useful lives of 40 years. Real estate taxes payable in 1997 for the tax year ended 1997 are $100,591. On July 25, 1997, a total of 87,372 square feet was leased to thirteen tenants at Shorecrest Plaza. The following tables set forth certain information with respect to the amount of and expiration of leases at this Neighborhood Retail Center. Square Feet Lease Renewal Current Rent per Lessee Leased Ends Option Annual Rent Square Ft Mail Retail 1,366 01/2000 - $ 13,114 $ 9.60 Lehman's Bakery 553 04/1998 - 6,083 11.00 H & R Block 720 04/1999 - 7,920 11.00 Masters of Movement Dan 2,160 12/2000 - 19,440 9.00 -7- Square Feet Lease Renewal Current Rent per Lessee Leased Ends Option Annual Rent Square Ft Schultz Savo Piggly Wiggly 41,262 01/2010 4/5 yr. 268,203 6.50 Shorecrest Pharmacy 7,320 11/2002 - 58,560 8.00 Wisconsin Health and Fitness 14,475 04/2007 1/5 yr. 86,850 6.00 Main Moon Chinese Restaurant 1,725 11/2005 - 15,698 9.10 Touch of Elegance 1,300 07/2000 1/5 yr. 13,299 10.23 Struck Brothers Inc. 2,466 01/2006 - 21,578 8.75 M & M Shorecrest Liquor 2,258 04/2000 - 18,064 8.00 Sports Physical Therapy 3,900 07/2000 1/5 yr. 45,786 11.74 Planet Video of Racine 7,867 08/2000 1/4 yr. 78,670 10.00 Foto Haus - 01/2000 - 1,500 1,500.00 Vacant* 3,900 *Master leased until April of 1998.
Average Percent of Percent of Base Rent Total Building Annual Base Approx. GLA Annual Base Per Square GLA Rent Number of of Expiring Rent of Foot Under Represented Represented by Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases 1997 - - - $651,822 - - - 1998 1 553 $ 6,083 666,155 $ 11.00 0.18% 0.91% 1999 1 720 8,280 665,903 11.50 0.24 1.24 2000 6 18,671 203,778 677,746 10.91 6.24 30.52 2001 1 - 1,500 468,252 1,500.00 0.00 0.32 2002 1 7,320 65,880 471,062 9.00 2.45 13.99 -8- Average Percent of Percent of Base Rent Total Building Annual Base Approx. GLA Annual Base Per Square GLA Rent Number of of Expiring Rent of Foot Under Represented Represented by Year Ending Leases Leases Expiring Total Annual Expiring by Expiring Expiring December 31, Expiring (square feet) Leases Base Rent (1) Leases Leases Leases 2003 - - - 409,516 - - - 2004 - - - 410,255 - - - 2005 1 1,725 15,698 410,995 9.10 0.58 3.82 2006 1 2,466 26,534 399,681 10.76 0.82 6.64 (1) No assumptions were made regarding the releasing of expired leases. It is the opinion of the Company's management that the space will be released at market rates.
The Company received an appraisal prepared by an independent appraiser who is a member in good standing of the American Institute of Real Estate Appraisers which reported a fair market value for the Shorecrest Plaza property, as of June 25, 1997, of $6,000,000. Appraisals are estimates of value and should not be relied on as a measure of true worth or realizable value. Item 5. Other Events The Company's Board has approved an increase in Distributions, beginning August 1, 1997, from the current level of $.85 per Share to $.87 per Share. -9- Item 7. Financial Statements and Exhibits Index to Financial Statements Page Independent Auditors' Report........................................ F-1 Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 1996 of Rivertree Court............. F-2 Notes to Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 1996 of Rivertree Court.... F-3 Independent Auditors' Report........................................ F-5 Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 1996 of Shorecrest Plaza............ F-6 Notes to Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 1996 of Shorecrest Plaza... F-7 Pro Forma Balance Sheet (unaudited) at March 31, 1997............... F-9 Notes to Pro Forma Balance Sheet (unaudited) at March 31, 1997...... F-11 Pro Forma Statement of Operations (unaudited) of the Company for the year ended March 31, 1997................................... F-16 Notes to Pro Forma Statement of Operations (unaudited) for the year ended March 31, 1997....................................... F-18 Pro Forma Statement of Operations (unaudited) of the Company for the year ended December 31, 1996.............................. F-21 Notes to Pro Forma Statement of Operations (unaudited) for the year ended December 31, 1996........................................ F-23 -10- SIGNATURE 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 hereunto duly authorized. Inland Real Estate Corporation (Registrant) By: /s/ Kelly Tucek Kelly Tucek Chief Financial and Accounting Officer Date: July 31, 1997 -11- Independent Auditors' Report The Board of Directors Inland Real Estate Corporation: We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) of Rivertree Court Shopping Center for the year ended December 31, 1996. This Historical Summary is the responsibility of the management of the Inland Real Estate Corporation. Our responsibility is to express an opinion on the Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Registration Statement on Form S-11 of Inland Real Estate Corporation, as described in note 2. It is not intended to be a complete presentation of Rivertree Court Shopping Center's revenues and expenses. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 for the year ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois July 14, 1997 F-1 Rivertree Court Shopping Center Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 Gross income: Base rental income.............................. $3,233,884 Operating expense and real estate tax recoveries................................ 1,121,942 Other income.................................... 27,365 ----------- Total Gross Income.............................. $4,383,191 ----------- Direct operating expenses: Real estate taxes............................... 749,542 Operating expenses.............................. 221,715 Management fees................................. 100,897 Utilities....................................... 83,668 Insurance....................................... 52,090 ----------- Total direct operating expenses................. $1,207,912 ----------- Excess of gross income over direct operating expenses.............................. $3,175,279 =========== See accompanying notes to historical summary of gross income and direct operating expenses. F-2 Rivertree Court Shopping Center Notes to Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 1. Business Rivertree Court Shopping Center (Rivertree Court) is located in Vernon Hills, Illinois. It consists of approximately 297,000 square feet of gross leasable area and was 90% leased and occupied at December 31, 1996. Inland Real Estate Corporation has signed a sale and purchase agreement for the purchase of Rivertree Court from an unaffiliated third party (Seller). 2. Basis of Presentation The Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Registration Statement on Form S-11 of Inland Real Estate Corporation and is not intended to be a complete presentation of Rivertree Court's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of Rivertree Court to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. 3. Gross Income Rivertree Court leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which Rivertree Court is reimbursed for common area, real estate, and insurance costs. Real estate tax recoveries reflected in the Historical Summary include amounts for 1996 real estate tax expense for which the tenants have not yet been billed. Base rentals are reported as income over the lease term as they become receivable under the lease provisions. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments decreased base rental income by $78,267 for the year ended December 31, 1996. F-3 Rivertree Court Shopping Center Notes to Historical Summary of Gross Income and Direct Operating Expenses Year ended December 31, 1996 Minimum rents to be received from tenants under operating leases in effect at December 31, 1996 are as follows: Year Amount 1997 $ 3,240,935 1998 2,819,999 1999 2,444,952 2000 2,252,172 2001 2,063,932 Thereafter 11,865,994 ------------ $24,687,894 ============ 4. Direct Operating Expenses Direct operating expenses include only those costs expected to be comparable to the proposed future operations of Rivertree Court. Costs such as mortgage interest, depreciation, amortization, and professional fees are excluded from the Historical Summary. Rivertree Court has not received its final real estate tax bill for 1996. Real estate tax expense is estimated based upon bills for 1995. The difference between the estimate and the final tax bill is not expected to have a material impact on the Historical Summary. Rivertree Court is managed by an affiliate of the Seller pursuant to the terms of a management agreement for an annual fee of 3% of rental income (as defined). Subsequent to the sale of Rivertree Court (note 1), the current management agreement will cease. Any new management agreement may cause future management fees to differ from the amounts reflected in the Historical Summary. F-4 Independent Auditors' Report The Board of Directors Inland Real Estate Corporation: We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) of Shorecrest Plaza Shopping Center for the year ended May 31, 1997. This Historical Summary is the responsibility of the management of the Inland Real Estate Corporation. Our responsibility is to express an opinion on the Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion. The accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Registration Statement on Form S-11 of Inland Real Estate Corporation, as described in note 2. The presentation is not intended to be a complete presentation of Shorecrest Plaza Shopping Center's revenues and expenses. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 of Shorecrest Plaza Shopping Center for the year ended May 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois June 19, 1997 F-5 Shorecrest Plaza Shopping Center Historical Summary of Gross Income and Direct Operating Expenses Year ended May 31, 1997 Gross income: Base rental income.............................. $ 601,514 Operating expense and real estate tax recoveries................................ 167,936 ----------- Total Gross Income.............................. 769,450 ----------- Direct operating expenses: Real estate taxes............................... 111,445 Operating expenses.............................. 46,457 Management fees................................. 33,834 Utilities....................................... 10,362 Insurance....................................... 4,229 ----------- Total direct operating expenses................. 206,327 ----------- Excess of gross income over direct operating expenses.............................. $ 563,123 =========== See accompanying notes to historical summary of gross income and direct operating expenses. F-6 Shorecrest Plaza Shopping Center Notes to Historical Summary of Gross Income and Direct Operating Expenses Year ended May 31, 1997 1. Business Shorecrest Plaza Shopping Center (Shorecrest Plaza) is located in Racine, Wisconsin. It consists of approximately 91,000 square feet of gross leasable area and was approximately 93% leased and occupied at May 31, 1997. Inland Real Estate Corporation has signed a sale and purchase agreement for the purchase of Shorecrest Plaza from an unaffiliated third party (Seller). 2. Basis of Presentation The Historical Summary of Gross Income and Direct Operating Expenses (Historical Summary) has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Registration Statement on Form S-11 of Inland Real Estate Corporation and is not intended to be a complete presentation of Shorecrest Plaza's revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of Shorecrest Plaza to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. 3. Gross Income Shorecrest Plaza leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. The leases include provisions under which Shorecrest Plaza is reimbursed for common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected in the Historical Summary include amounts for 1996 and 1997 expenses for which the tenants have not yet been billed. Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by $70,690 the year ended May 31, 1997. F-7 Shorecrest Plaza Shopping Center Notes to Historical Summary of Gross Income and Direct Operating Expenses Year ended May 31, 1997 Minimum rents to be received from tenants under operating leases in effect at May 31, 1997 are as follows: Year Amount 1998 $ 643,824 1999 648,105 2000 594,760 2001 538,520 2002 535,430 Thereafter 2,409,914 ------------ $ 5,370,553 ============ 4. Direct Operating Expenses Direct operating expenses include only those costs expected to be comparable to the proposed future operations of Shorecrest Plaza. Costs such as mortgage interest, depreciation, amortization, and professional fees are excluded from the Historical Summary. Shorecrest Plaza has not received its final real estate tax bill for 1997. Real estate tax expense is estimated based upon bills for 1996. The difference between the estimate and the final tax bill is not expected to have a material impact on the Historical Summary. Shorecrest Plaza is managed pursuant to the terms of a management agreement for an annual fee of 5% of gross revenues (as defined). Subsequent to the sale of Shorecrest Plaza (note 1), the current management agreement will cease. Any new management agreement may cause future management fees to differ from the amounts reflected in the Historical Summary. F-8 Inland Real Estate Corporation Pro Forma Balance Sheet March 31, 1997 (unaudited) The following unaudited Pro Forma Balance Sheet of the Company is presented to give effect to the acquisitions of the properties indicated in Note B of the Notes to the Pro Forma Balance Sheet as though these transactions occurred March 31, 1997. This unaudited Pro Forma Balance Sheet should be read in conjunction with the March 31, 1997 Financial Statements and the notes thereto as included herein. This unaudited Pro Forma Balance Sheet is not necessarily indicative of what the actual financial position would have been at March 31, 1997, nor does it purport to represent the future financial position of the Company. Unless otherwise defined, capitalized terms used herein shall have the same meaning as in the Prospectus. F-9 Inland Real Estate Corporation Pro Forma Balance Sheet March 31, 1997 (unaudited) March 31, March 31, 1997 1997 Pro Forma Pro Forma Historical(A) Adjustments(B) Balance Sheet ------------- ------------- -------------- Assets - ------ Net investment in properties.................. $121,755,366 95,747,900 217,503,266 Cash and cash equivalents..... 22,647,158 - 22,647,158 Restricted cash............... 1,117,333 - 1,117,333 Accounts and rents receivable.................. 2,666,872 1,983,862 4,650,734 Other assets.................. 3,323,680 - 3,323,680 ------------- ------------- ------------- Total assets.................. $151,510,409 97,731,762 249,242,171 ============= ============= ============= Liabilities and Stockholders' Equity - ------------------------------------ Accounts payable and accrued expenses.................... $ 1,318,463 - 1,318,463 Accrued real estate taxes..... 3,134,066 2,131,743 5,265,809 Distributions payable (C)..... 749,856 - 749,856 Security deposits............. 320,966 85,612 406,578 Mortgages payable............. 53,182,067 15,700,000 68,882,067 Unearned income............... 375,570 - 375,570 Due to Affiliates............. 247,191 - 247,191 ------------- ------------- ------------- Total liabilities............. 59,328,179 17,917,355 77,245,534 ------------- ------------- ------------- Common Stock (D).............. 108,280 92,807 201,087 Additional paid in capital (net of Offering costs) (D). 94,623,475 79,721,600 174,345,075 Accumulated distributions in excess of net income........ (2,549,525) - (2,549,525) ------------- ------------- ------------- Total Stockholders' equity.... 92,182,230 79,814,407 171,996,637 ------------- ------------- ------------- Total liabilities and Stockholders' equity........ $151,510,409 97,731,762 249,242,171 ============= ============= ============= See accompanying notes to pro forma balance sheet. F-10 Inland Real Estate Corporation Notes to Pro Forma Balance Sheet (continued) March 31, 1997 (unaudited) (A) The March 31, 1997 Historical column represents the historical balance sheet as presented in the unaudited March 31, 1997 10-Q as filed with the SEC. (B) The following pro forma adjustment relates to the acquisition of the subject properties as though they were acquired on March 31, 1997. The terms are described in the notes that follow. Pro Forma Adjustments -------------------------------------------------- Niles Shopping Cobblers Mallard Ameritech Center Mall Mall Outlot ------------ ------------ ------------ ----------- Assets - ------ Net investment in properties............ $ 3,280,000 10,953,000 8,099,900 1,050,000 Accounts and rents receivable............ 154,001 493,734 397,602 6,941 ------------ ------------ ------------ ------------ Total assets............ $ 3,434,001 11,446,734 8,497,502 1,056,941 ============ ============ ============ ============ Liabilities and Stockholders' Equity - ------------------------------------ Accrued real estate taxes................. $ 154,001 542,971 429,322 $ 6,941 Security deposits....... 14,250 - - - ------------ ------------ ------------ ----------- Total liabilities....... 168,251 542,971 429,322 6,941 ------------ ------------ ------------ ----------- Common Stock............ 3,797 12,679 9,382 1,221 Additional paid in capital (net of Offering Costs)................ 3,261,953 10,891,084 8,058,798 $1,048,779 ------------ ------------ ------------ ----------- Total Stockholders' equity................ 3,265,750 10,903,763 8,068,180 1,050,000 ------------ ------------ ------------ ----------- Total liabilities and Stockholders' equity.. $ 3,434,001 11,446,734 8,497,502 1,056,941 ============ ============ ============ ============ F-11 Inland Real Estate Corporation Notes to Pro Forma Balance Sheet (continued) March 31, 1997 (unaudited) (B) Continued Pro Forma Adjustments -------------------------------------------------- Highland Calumet Sequoia Park Schaumburg Square Plaza Dominicks Dominicks ----------- ------------ ----------- ----------- Assets - ------ Net investment in properties........... $ 2,108,000 3,010,000 12,800,000 10,691,000 Accounts and rents receivable........... 176,750 123,968 - - ------------ ------------ ------------ ----------- Total assets........... $ 2,284,750 3,133,968 12,800,000 10,691,000 ============ ============ ============ =========== Liabilities and Stockholders' Equity - ------------------------------------ Accrued real estate taxes................ $ 176,750 132,411 - - Security deposits...... - - - - ------------ ------------ ------------ ----------- Total liabilities...... 176,750 132,411 - - ------------ ------------ ------------ ----------- Common Stock........... 2,451 3,490 14,884 12,431 Additional paid in capital (net of Offering Costs)............... $ 2,105,549 2,998,067 12,785,116 10,678,569 ------------ ------------ ------------ ----------- Total Stockholders' equity............... 2,108,000 3,001,557 12,800,000 10,691,000 ------------ ------------ ------------ ----------- Total liabilities and Stockholders' equity. $ 2,284,750 3,133,968 12,800,000 10,691,000 ============ ============ ============ =========== F-12 Inland Real Estate Corporation Notes to Pro Forma Balance Sheet (continued) March 31, 1997 (unaudited) (B) Continued Pro Forma Adjustments ---------------------------------------------------- Total River Rivertree Shorecrest Pro Forma Square Court Plaza Adjustments ------------ ------------ ------------ ------------- Assets - ------ Net investment in properties........... $ 6,050,000 31,750,000 5,956,000 95,747,900 Accounts and rents receivable........... 198,200 410,033 22,633 1,983,862 ------------ ------------ ------------ ------------- Total assets........... $ 6,248,200 32,160,033 5,978,633 97,731,762 ============ ============ ============ ============= Liabilities and Stockholders' Equity - ------------------------------------ Accrued real estate taxes................ $ 208,600 455,600 25,147 2,131,743 Security deposits...... - 47,795 23,567 85,612 Mortgage payable....... - 15,700,000 - 15,700,000 ------------ ------------ ------------ ------------- Total liabilities...... 208,600 16,203,395 48,714 17,917,355 ------------ ------------ ------------ ------------- Common Stock........... 7,023 18,554 6,895 92,807 Additional paid in capital (net of Offering Costs)............... 6,032,577 15,938,084 5,923,024 79,721,600 ------------ ------------ ------------ ------------- Total Stockholders' equity............... 6,039,600 15,956,638 5,929,919 79,814,407 ------------ ------------ ------------ ------------- Total liabilities and Stockholders' equity. $ 6,248,200 32,160,033 5,978,633 97,731,762 ============ ============ ============ ============= F-13 Inland Real Estate Corporation Notes to Pro Forma Balance Sheet (continued) March 31, 1997 (unaudited) Acquisition of Properties: On April 11, 1997, the Company acquired Niles Shopping Center, Niles, Illinois from an unaffiliated third party for the purchase price of $3,280,000 on an all cash basis, funded from cash and cash equivalents. On May 6, 1997, the Company acquired Cobblers Mall, Elgin, Illinois from an unaffiliated third party for the purchase price of $10,953,000 on an all cash basis, funded from cash and cash equivalents. On May 6, 1997, the Company acquired Mallard Mall, Elk Grove Village, Illinois from an unaffiliated third party for the purchase price of $8,099,900 on an all cash basis, funded from cash and cash equivalents. On May 9, 1997, the Company acquired Ameritech Outlot, Joliet, Illinois from an unaffiliated third party for the purchase price of $1,050,000 on an all cash basis, funded from cash and cash equivalents. On May 30, 1997, the Company acquired Schaumburg Dominick's, Schaumburg, Illinois from an unaffiliated third party for the purchase price of $10,691,000 on an all cash basis, funded from cash and cash equivalents. On June 2, 1997, the Company acquired Calumet Square, Calumet, Illinois from an unaffiliated third party for the purchase price of $2,108,000 on an all cash basis, funded from cash and cash equivalents. On June 16, 1997, the Company acquired Sequoia Plaza, Milwaukee, Wisconsin from an unaffiliated third party for the purchase price of $3,010,000 on an all cash basis, funded from cash and cash equivalents. On June 16, 1997, the Company acquired Highland Park Dominick's, Highland Park, Illinois from an unaffiliated third party for the purchase price of $12,800,000 on an all cash basis, funded from cash and cash equivalents. On June 19, 1997, the Company acquired River Square, Naperville, Illinois from an unaffiliated third party for the purchase price of $6,050,000 on an all cash basis, funded from cash and cash equivalents. On July 17, 1997, the Company acquired Rivertree Court, Vernon Hills, Illinois from an unaffiliated third party for the purchase price of $31,750,000. As part of the acquisition, the Company assumed the existing first mortgage loan of $15,700,000. The mortgage requires interest only payments at a rate of 10.03% per annum until the maturity date of January 1, 1999. The balance of the purchase price was funded from cash and cash equivalents. On July 25, 1997, the Company acquired Shorecrest Plaza, Racine, Wisconsin from an unaffiliated third party for the purchase price of $5,956,000 on an all cash basis, funded from cash and cash equivalents. F-14 Inland Real Estate Corporation Notes to Pro Forma Balance Sheet (continued) March 31, 1997 (unaudited) (C) No pro forma assumptions have been made for the additional payment of distributions resulting from the additional proceeds raised. (D) Additional Offering Proceeds of $92,807,000, net of additional Offering costs of $12,992,593 are reflected as received as of March 31, 1997, prior to the purchase of the properties. Offering costs consist principally of registration costs, printing and selling costs, including commissions. F-15 Inland Real Estate Corporation Pro Forma Statement of Operations For the three months ended March 31, 1997 (unaudited) The following unaudited Pro Forma Statement of Operations of the Company is presented to effect the acquisitions of the properties indicated in Note B of the Notes to the Pro Forma Statement of Operations as though they occurred on January 1, 1997. This unaudited Pro Forma Statement of Operations should be read in conjunction with the March 31, 1997 Financial Statements and the notes thereto as filed on Form 10-Q. This unaudited Pro Forma Statement of Operations is not necessarily indicative of what the actual results of operations would have been for the three months ended March 31, 1997, nor does it purport to represent the future financial position of the Company. Unless otherwise defined, capitalized terms used herein shall have the same meaning as in the Prospectus. F-16 Inland Real Estate Corporation Pro Forma Statement of Operations For the three months ended March 31, 1997 (unaudited) Pro Forma Adjustments ----------------------- 1997 1997 Historical Acquisitions 1997 (A) (B) Pro Forma ----------- ----------- ----------- Rental income..... $3,603,584 2,562,162 6,165,746 Additional rental income.......... 1,061,507 845,986 1,907,493 Interest income(C)....... 156,436 - 156,436 Other income...... 36,244 - 36,244 ----------- ----------- ------------ Total income.... 4,857,771 3,408,148 8,265,919 ----------- ----------- ------------ Professional services and general and administrative fees............ 85,158 - 85,158 Advisor asset management fee.(F) 233,337 239,370 472,707 Property operating expenses........ 1,859,461 995,527 2,854,988 Interest expense.. 1,005,741 420,396 1,426,137 Depreciation (D).. 741,920 624,974 1,366,894 Amortization...... 38,364 - 38,364 Acquisition costs expensed........ 9,090 - 9,090 ----------- ----------- ------------ Total expenses.... 3,973,071 2,280,267 6,253,338 ----------- ----------- ------------ Net income...... $ 884,700 1,127,881 2,012,581 =========== =========== ============ Weighted average common stock shares outstanding (E). 9,384,792 18,665,492 =========== ============ Net income per weighted average common stock outstanding (E). $ .09 .11 =========== ============ See accompanying notes to pro forma statement of operations. F-17 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations For the three months ended March 31, 1997 (unaudited) (A) The 1997 Historical column represents the historical statement of operations of the Company for the three months ended March 31, 1997 (unaudited), as filed with the SEC on Form 10-Q. (B) Total pro forma adjustments for the three months ended March 31, 1997 are as though the 1997 acquisitions of the following properties occurred on January 1, 1997 on an all cash basis except for Maple Park, Aurora Commons, Lincoln Park Place and Rivertree Court. Proforma adjustments for interest expense on these properties were based on the following terms. Maple Park Shopping Center The Company funded the purchase using (i) the proceeds of a short-term loan maturing April 7, 1997 in the amount of $8 million from Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the Company (the "Short- Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears interest at a rate of 9.0% per annum and requires a loan fee of 1/4%. Aurora Commons Shopping Center As part of the acquisition of Aurora Commons Shopping Center, the Company assumed the existing mortgage loan, maturing December 31, 2001, with the balance funded with cash and cash equivalents. The loan bears interest at a rate of 9% per annum with monthly payments of principal and interest on the first day of each month. Lincoln Park Place Shopping Center The Company funded the purchase of Lincoln Park Place Shopping Center using the proceeds of a short-term loan maturing February 7, 1997 in the amount of $2,016,110 from Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-Term Loan"). The Company did not pay any fees in connection with the Short-Term Loan, which bears interest at a rate of 9% per annum. Rivertree Court As part of the acquisition of Rivertree Court, the Company assumed the existing first mortgage loan, maturing January 1, 1999, with a balance of $15,700,000. The loan requires interest only monthly payments at a rate of 10.03% per annum. F-18 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the three months ended March 31, 1997 (unaudited) (B) Total pro forma adjustments for 1997 acquisitions are as though they were acquired January 1, 1997.
Niles Maple Park Aurora Lincoln Shopping Cobblers Mallard Calumet Ameritech Place Commons Park Place Center Mall Mall Square Outlot ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- Rental income..... 39,736 82,740 14,159 98,780 255,790 267,028 78,398 27,576 Additional rental 27,576 income.......... 8,168 26,594 5,714 39,507 142,382 103,809 87,939 6,068 ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- Total income...... 47,904 109,334 19,873 138,287 398,172 370,837 166,337 33,644 ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- Advisor asset management fee.. - - - - - - - - Property operating - expenses........ 10,039 30,055 6,352 43,952 153,892 121,290 91,467 7,309 Interest expense.. - - - - - - - - Depreciation...... - - - - - - - - ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- Total expenses.... 10,039 30,055 6,352 43,952 153,892 121,290 91,467 7,309 ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- Net income (loss). 37,865 79,279 13,521 94,335 244,280 249,547 74,870 26,335 =========== =========== =========== =========== =========== =========== =========== =========== Total Highland 1997 Schaumburg Sequoia Park River Rivertree Shorecrest Pro Forma Acquisitions Dominicks Plaza Dominicks Square Court Plaza Adjustments Pro Forma ----------- ----------- ----------- ----------- ----------- ------------ ------------ ----------- Rental income..... 161,706 99,580 220,994 195,372 886,696 133,607 - 2,562,162 Additional rental income.......... - 36,786 - 86,058 271,800 31,161 - 845,986 ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ Total income...... 161,706 136,366 220,994 281,430 1,158,496 164,768 - 3,408,148 ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ Advisor asset management fee.. - - - - - - 239,370 239,370 Property operating expenses........ 3,234 42,744 4,420 90,587 338,255 51,931 - 995,527 Interest expense.. - - - - - - 420,396 420,396 Depreciation...... - - - - - - 624,974 624,974 ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ Total expenses.... 3,234 42,744 4,420 90,587 338,255 51,931 1,284,740 2,280,267 ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------ Net income (loss). 158,472 93,622 216,574 190,843 820,241 112,837 (1,284,740) 1,127,881 =========== =========== =========== =========== =========== ============ ============ ============
F-19 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the three months ended March 31, 1997 (unaudited) (C) No pro forma adjustment has been made relating to interest income which would have been earned on the additional Offering Proceeds raised. (D) Depreciation expense is computed using the straight-line method, based upon an estimated useful life of thirty years. (E) The pro forma weighted average common stock shares for the three months ended March 31, 1997 was calculated by estimating the additional shares sold to purchase each of the Company's properties on a weighted average basis. (F) Advisor Asset Management Fees are calculated as 1% of the Average Invested Assets (as defined). F-20 Inland Real Estate Corporation Pro Forma Statement of Operations For the year ended December 31, 1996 (unaudited) The following unaudited Pro Forma Statement of Operations of the Company is presented to effect the acquisitions of the properties indicated in Note B and Note C of the Notes to the Pro Forma Statement of Operations as though they occurred the earlier of January 1, 1996 or the date operations commenced. Grand and Hunt Club and the Quarry Outlot were constructed in 1996, and had not commenced significant operations prior to acquisition, therefore, no operations relating to these properties are presented on the unaudited Pro Forma Statement of Operations for December 31, 1996. This unaudited Pro Forma Statement of Operations should be read in conjunction with the December 31, 1996 Financial Statements and the notes thereto as filed on Form 10-K. This unaudited Pro Forma Statement of Operations is not necessarily indicative of what the actual results of operations would have been for the year ended December 31, 1996, nor does it purport to represent the future financial position of the Company. Unless otherwise defined, capitalized terms used herein shall have the same meaning as in the Prospectus. F-21 Inland Real Estate Corporation Pro Forma Statement of Operations For the year ended December 31, 1996 (unaudited) Pro Forma Adjustments ------------------------ 1996 1996 1997 Historical Acquisitions Acquisitions 1996 (A) (B) (C) Pro Forma ----------- ------------ ----------- ----------- Rental income..... $4,467,903 6,127,326 12,405,131 23,000,360 Additional rental income.......... 1,336,809 3,198,250 3,801,917 8,336,976 Interest income(E)....... 438,188 - - 438,188 Other income...... 84,834 - - 84,834 ----------- ----------- ----------- ------------ Total income.... 6,327,734 9,325,576 16,207,048 31,860,358 ----------- ----------- ----------- ------------ Professional services and general and administrative fees............ 183,559 - - 183,559 Advisor asset management fee.(I) 238,108 708,222 1,246,100 2,192,430 Property operating expenses........ 1,873,174 3,656,698 4,613,374 10,143,246 Interest expense.. 597,485 949,958 3,359,143 4,906,586 Depreciation (F).. 939,144 1,448,017 3,174,761 5,561,922 Amortization (H).. 17,367 11,428 6,457 35,252 Acquisition costs expensed........ 26,676 - - 26,676 ----------- ----------- ----------- ------------ Total expenses.... 3,875,513 6,774,323 12,399,835 23,049,671 ----------- ----------- ----------- ------------ Net income...... $2,452,221 2,551,253 3,807,213 8,810,687 =========== =========== =========== ============ Weighted average common stock shares outstanding (G). 4,494,620 14,655,620 =========== ============ Net income per weighted average common stock outstanding (G). $ .55 .60 =========== ============ See accompanying notes to pro forma statement of operations. F-22 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations For the year ended December 31, 1996 (unaudited) (A) The 1996 Historical column represents the historical statement of operations of the Company for the year ended December 31, 1996, as filed with the SEC on Form 10-K. (B) Total pro forma adjustments for the year ended December 31, 1996 are as though the 1996 acquisitions of the following properties occurred on January 1, 1996 on an all cash basis except for Regency Point, Hawthorn Village Commons, Crestwood and Lansing Square. Proforma adjustments for interest expense on these properties were based on the following terms. Regency Point In the purchase of Regency Point the Company assumed the existing first mortgage loan of $4,473,200, along with a related interest rate swap agreement. The first mortgage loan has a floating interest rate of 180 basis points over the 30-day LIBOR rate, which rate is adjusted monthly. The interest rate swap agreement, in conjunction with the first mortgage, provides for Bank One, Chicago, to receive from or pay to the Company the difference between 6.11% and the 30-day LIBOR rate, so that the first mortgage loan has an effective rate of 7.91% per annum. The pro forma adjustment for interest expense for 1996 was estimated using the described loan terms. The related interest rate swap agreement was terminated on April 18, 1996 resulting in $48,419 proceeds to the Company. The pro forma adjustment does not give effect to the termination of this agreement. Hawthorn Village Commons The Company funded the purchase of Hawthorn Village Commons using: (i) the proceeds of a short-term loan maturing August 23, 1996 in the amount of $2.9 million from Inland Mortgage Investment Corporation ("IMIC"), an Affiliate of the Company (the "Short-Term Loan"), and (ii) cash and cash equivalents. The Company did not pay any fees in connection with the Short-Term Loan, which bears interest at a rate of eight percent per annum. Crestwood Plaza Shopping Center As part of the December 27, 1996 purchase of Crestwood Plaza, the Company assumed the existing first mortgage loan of $1,330,253. F-23 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Lansing Square Shopping Center The Company funded the purchase using: (i) the proceeds of five long-term loans totaling $12,850,000 from LaSalle Bank of which approximately $8,000,000 was used to purchase this property and (ii) cash and cash equivalents. The Company paid a one point fee in connection with these long-term loans. The loans have a term of seven years and, prior to the maturity date, require payments of interest only, at 7.6%, fixed for five years with the remaining two years at prime plus 1/2%. Total pro forma adjustments for 1996 acquisitions are as though they were acquired the earlier of January 1, 1996 or date that operations commenced (related to Zany Brainy). Mundelein Regency Prospect Montgomery- Zany Plaza Point Heights Sears Brainy ----------- ----------- ----------- ----------- ----------- Rental income..... $ 163,381 139,271 89,105 163,700 137,489 Additional rental income.......... 32,975 16,034 83,593 57,012 24,144 ----------- ----------- ----------- ----------- ----------- Total income...... 196,356 155,305 172,698 220,712 161,633 ----------- ----------- ----------- ----------- ----------- Property operating expenses........ 53,986 19,046 91,364 66,944 30,331 ----------- ----------- ----------- ----------- ----------- Total expenses.... 53,986 19,046 91,364 66,944 30,331 ----------- ----------- ----------- ----------- ----------- Net income........ $ 142,370 136,259 81,334 153,768 131,302 =========== =========== =========== =========== =========== F-24 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Hawthorn Salem Village Six Spring Square Commons Corners Hill Crestwood ----------- ----------- ----------- ----------- ----------- Rental income..... $ 422,146 548,667 790,888 948,906 203,007 Additional rental income.......... 260,832 270,570 517,804 234,837 69,315 ----------- ----------- ----------- ----------- ----------- Total income...... 682,978 819,237 1,308,692 1,183,743 272,322 ----------- ----------- ----------- ----------- ----------- Property operating expenses........ 270,756 293,132 640,772 300,842 78,450 ----------- ----------- ----------- ----------- ----------- Total expenses.... 270,756 293,132 640,772 300,842 78,450 ----------- ----------- ----------- ----------- ----------- Net income........ $ 412,222 526,105 667,920 882,901 193,872 =========== =========== =========== =========== =========== Total 1996 Park Lansing Park Pro Forma Acquisitions St. Claire Square Ridge Adjustments Pro Forma ----------- ----------- ----------- ----------- ------------ Rental income..... $ 178,596 2,001,855 340,315 - 6,127,326 Additional rental income.......... 62,194 1,332,149 236,791 - 3,198,250 ----------- ----------- ----------- ----------- ----------- Total income...... 240,790 3,334,004 577,106 - 9,325,576 ----------- ----------- ----------- ----------- ----------- Advisor asset management fee.. - - - 708,222 708,222 Property operating expenses........ 103,386 1,507,941 299,748 - 3,656,698 Interest Expense.. - - - 949,958 949,958 Depreciation...... - - - 1,448,017 1,448,017 Amortization...... - - - 11,428 11,428 ----------- ----------- ----------- ----------- ----------- Total expenses.... 103,386 1,507,941 299,748 3,117,625 6,774,323 ----------- ----------- ----------- ----------- ----------- Net income (loss). $ 137,404 1,826,063 277,358 (3,117,625) 2,551,253 =========== =========== =========== =========== =========== F-25 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) (C) Total pro forma adjustments for 1997 acquisitions are as though they were acquired the earlier of January 1, 1996 or the date operations commenced.
Niles Maple Park Aurora Lincoln Shopping Cobblers Mallard Calumet Ameritech Place Commons Park Place Center Mall Mall Square Outlot ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Rental income..... 1,844,314 1,341,448 228,218 375,349 1,014,342 992,972 222,072 106,283 Additional rental income.......... 405,864 534,247 111,997 104,619 376,560 412,024 179,854 18,265 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total income...... 2,250,178 1,875,695 340,215 479,968 1,390,902 1,404,996 401,926 124,548 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Advisor asset management fee.. 152,621 115,000 21,000 32,800 109,530 80,999 21,080 10,500 Property operating expenses........ 444,390 632,131 130,176 141,974 548,023 420,090 214,748 18,500 Interest expense.. 720,000 882,983 181,450 - - - - - Depreciation...... 404,905 334,573 42,260 81,600 273,825 202,498 52,700 26,250 Amortization...... 2,857 - 3,600 - - - - - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total expenses.... 1,724,773 1,964,687 378,486 256,374 931,378 703,587 228,528 55,250 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss). 525,405 (88,992) (38,271) 223,594 459,524 701,409 113,398 69,298 =========== =========== =========== =========== =========== =========== =========== =========== Total Highland 1997 Schaumburg Sequoia Park River Rivertree Shorecrest Acquisitions Dominicks Plaza Dominicks Square Court Plaza Pro Forma ----------- ----------- ----------- ----------- ----------- ----------- ------------ Rental income..... 646,825 361,986 883,976 619,034 3,233,884 534,428 12,405,131 Additional rental income.......... - 135,404 - 253,031 1,149,307 120,745 3,801,917 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total income...... 646,825 497,390 883,976 872,065 4,383,191 655,173 16,207,048 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Advisor asset management fee.. 106,910 30,100 128,000 60,500 317,500 59,560 1,246,100 Property operating expenses........ 12,937 164,126 17,680 362,348 1,304,258 201,993 4,613,374 Interest expense.. - - - - 1,574,710 - 3,359,143 Depreciation...... 267,000 75,250 320,000 151,250 793,750 148,900 3,174,761 Amortization...... - - - - - - 6,457 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total expenses.... 386,847 269,476 465,680 574,098 3,990,218 410,453 12,399,835 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss). 259,978 227,914 418,296 297,967 392,973 244,720 3,807,213 =========== =========== =========== =========== =========== =========== ===========
F-26 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Maple Park Shopping Center, Bolingbrook, Illinois The Company funded the purchase using (i) the proceeds of a short-term loan maturing April 7, 1997 in the amount of $8 million from Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the Company (the "Short- Term Loan"), and (ii) cash and cash equivalents. The Short-Term Loan bears interest at a rate of 9.0% per annum and requires a loan fee of 1/4%. Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Maple Park Place ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $1,844,314 - 1,844,314 Additional rental income......... 405,864 - 405,864 ----------- ----------- ----------- Total income..................... 2,250,178 - 2,250,178 ----------- ----------- ----------- Advisor asset management fee..... - 152,621 152,621 Property operating expenses...... 444,390 - 444,390 Interest expense................. - 720,000 720,000 Depreciation..................... - 404,905 404,905 Amortization..................... - 2,857 2,857 ----------- ----------- ----------- Total expenses................... 444,390 1,280,383 1,724,773 ----------- ----------- ----------- Net income (loss)................ $1,807,788 (1,280,383) 525,405 =========== =========== =========== Acquisition of Aurora Commons Shopping Center, Aurora, Illinois As part of the acquisition of Aurora Commons Shopping Center, the Company assumed the existing mortgage loan, maturing December 31, 2001, with the balance funded with cash and cash equivalents. The loan bears interest at a rate of 9% per annum with monthly payments of principal and interest on the first day of each month. Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Aurora Commons ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $1,314,448 - 1,341,448 Additional rental income......... 534,247 - 534,247 ----------- ----------- ----------- Total income..................... 1,875,695 - 1,875,695 ----------- ----------- ----------- Advisor asset management fee..... - 115,000 115,000 Property operating expenses...... 659,205 (27,074) 632,131 Interest expense................. - 882,983 882,983 Depreciation..................... - 334,573 334,573 ----------- ----------- ----------- Total expenses................... 659,205 1,193,482 1,964,687 ----------- ----------- ----------- Net income (loss)................ $1,216,490 (1,193,482) (88,992) =========== =========== =========== F-27 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Lincoln Park Place Shopping Center, Chicago, Illinois The Company funded the purchase of Lincoln Park Place Shopping Center using the proceeds of a short-term loan maturing February 7, 1997 in the amount of $2,016,110 from Inland Mortgage Investment Corporation ("IMIC"), an affiliate of the Company (the "Short-Term Loan"). The Company did not pay any fees in connection with the Short-Term Loan, which bears interest at a rate of 9% per annum. Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Lincoln Park Place ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $ 228,218 - 228,218 Additional rental income......... 111,997 - 111,997 ----------- ----------- ----------- Total income..................... 340,215 - 340,215 ----------- ----------- ----------- Advisor asset management fee..... - 21,000 21,000 Property operating expenses...... 130,176 - 130,176 Interest expense................. - 181,450 181,450 Depreciation..................... - 42,260 42,260 Amortization..................... - 3,600 3,600 ----------- ----------- ----------- Total expenses................... 130,176 248,310 378,486 ----------- ----------- ----------- Net income (loss)................ $ 210,039 (248,310) (38,271) =========== =========== =========== Acquisition of Niles Shopping Center, Niles, Illinois Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Niles Shopping Center ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $ 375,349 - 375,349 Additional rental income......... 104,619 - 104,619 ----------- ----------- ----------- Total income..................... 479,968 - 479,968 ----------- ----------- ----------- Advisor asset management fee..... - 32,800 32,800 Property operating expenses...... 141,974 - 141,974 Depreciation..................... - 81,600 81,600 ----------- ----------- ----------- Total expenses................... 141,974 114,400 256,374 ----------- ----------- ----------- Net income (loss)................ $ 337,995 (114,400) 223,594 =========== =========== =========== F-28 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Cobblers Mall, Elgin, Illinois Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Cobblers Mall ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $1,014,342 - 1,014,342 Additional rental income......... 376,560 - 376,560 ----------- ----------- ----------- Total income..................... 1,390,902 - 1,390,902 ----------- ----------- ----------- Advisor asset management fee................. - 109,530 109,530 Property operating expenses....................... 548,023 - 548,023 Depreciation..................... - 273,825 273,825 ----------- ----------- ----------- Total expenses................... 548,023 383,355 931,378 ----------- ----------- ----------- Net income (loss)................ $ 842,879 (383,355) 459,524 =========== =========== =========== Acquisition of Mallard Mall, Elk Grove Village, Illinois Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Mallard Mall ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income.................... $ 992,972 - 992,972 Additional rental income......... 412,024 - 412,024 ----------- ----------- ----------- Total income..................... 1,404,996 - 1,404,996 ----------- ----------- ----------- Advisor asset management fee................. - 80,999 80,999 Property operating expenses....................... 420,090 - 420,090 Depreciation..................... - 202,498 202,498 ----------- ----------- ----------- Total expenses................... 420,090 283,497 703,587 ----------- ----------- ----------- Net income (loss)................ $ 984,906 (283,497) 701,409 =========== =========== =========== F-29 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Calumet Square Shopping Center, Calumet City, Illinois This pro forma adjustment reflects the purchase of Calumet Square as if the Company had acquired the property as of January 1, 1996 and is based on information provided by the Seller. Calumet Square ------------------------------------- Year ended December 31, Pro Forma 1996 Adjustments Total ----------- ----------- ----------- Rental income............. $ 222,072 - 222,072 Additional rental income.. 179,854 - 179,854 ----------- ----------- ----------- Total income.............. 401,926 - 401,926 ----------- ----------- ----------- Advisor asset management fee.......... - 21,080 21,080 Property operating expenses................ 214,748 - 214,748 Depreciation.............. - 52,700 52,700 ----------- ----------- ----------- Total expenses............ 214,748 73,780 288,528 ----------- ----------- ----------- Net income (loss)......... $ 187,178 (73,780) 113,398 =========== =========== =========== Acquisition of Ameritech Outlot, Joliet, Illinois This pro forma adjustment reflects the purchase of Ameritech as if the Company had acquired the property as of January 1, 1996 and is based on information provided by the Seller. Ameritech Outlot ------------------------------------- Year ended December 31, Pro Forma 1996 Adjustments Total ----------- ----------- ----------- Rental income............. $ 106,283 - 106,283 Additional rental income.. 18,265 - 18,265 ----------- ----------- ----------- Total income.............. 124,548 - 124,548 ----------- ----------- ----------- Advisor asset management fee.......... - 10,500 10,500 Property operating expenses................ 18,500 - 18,500 Depreciation.............. - 26,250 26,250 ----------- ----------- ----------- Total expenses............ 18,500 36,750 55,250 ----------- ----------- ----------- Net income (loss)......... $ 106,048 (36,750) 69,298 =========== =========== =========== F-30 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Dominicks, Schaumburg, Illinois This pro forma adjustment reflects the purchase of Schaumburg Dominicks as if the Company had acquired the property as of June 1, 1996, the date operations commenced and is based on information provided by the Seller. Schaumburg Dominicks ------------------------------------- Year ended December 31, Pro Forma 1996 Adjustments Total ----------- ----------- ----------- Rental income............. $ 646,825 - 646,825 Additional rental income.. - - - ----------- ----------- ----------- Total income.............. 646,825 - 646,825 ----------- ----------- ----------- Advisor asset management fee.......... - 106,910 106,910 Property operating expenses................ 12,937 - 12,937 Depreciation.............. - 267,000 267,000 ----------- ----------- ----------- Total expenses............ 12,937 373,910 386,847 ----------- ----------- ----------- Net income (loss)......... $ 633,888 (373,910) 259,978 =========== =========== =========== Acquisition of Sequoia Plaza, Milwaukee, Wisconsin Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Sequoia Plaza ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income............. $ 361,986 - 361,986 Additional rental income.. 135,404 - 135,404 ----------- ----------- ----------- Total income.............. 497,390 - 497,390 ----------- ----------- ----------- Advisor asset management fee.......... - 30,100 30,100 Property operating expenses................ 164,126 - 164,126 Depreciation.............. - 75,250 75,250 ----------- ----------- ----------- Total expenses............ 164,126 105,350 269,476 ----------- ----------- ----------- Net income (loss)......... $ 333,264 (105,350) 227,914 =========== =========== =========== F-31 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Dominicks, Highland Park, Illinois This pro forma adjustment reflects the purchase of Highland Park Dominicks as if the Company had acquired the property as of May 1, 1996, the date operations commenced and is based on information provided by the Seller. Highland Park Dominicks ------------------------------------- Year ended December 31, Pro Forma 1996 Adjustments Total ----------- ----------- ----------- Rental income............. $ 883,976 - 883,976 Additional rental income.. - - - ----------- ----------- ----------- Total income.............. 883,976 - 883,976 ----------- ----------- ----------- Advisor asset management fee.......... - 128,000 128,000 Property operating expenses................ 17,680 - 17,680 Depreciation.............. - 320,000 320,000 ----------- ----------- ----------- Total expenses............ 17,680 448,000 465,680 ----------- ----------- ----------- Net income (loss)......... $ 866,296 (448,000) 418,296 =========== =========== =========== Acquisition of River Square, Naperville, Illinois This pro forma adjustment reflects the purchase of Highland Park Dominicks as if the Company had acquired the property as of May 1, 1996, the date operations commenced and is based on information provided by the Seller. River Square ----------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income............. $ 619,034 - 619,034 Additional rental income.. 253,031 - 253,031 ----------- ----------- ----------- Total income.............. 872,065 - 872,065 ----------- ----------- ----------- Advisor asset management fee.......... - 60,500 60,500 Property operating expenses................ 362,348 - 362,348 Depreciation.............. - 151,250 151,250 ----------- ----------- ----------- Total expenses............ 362,348 211,750 574,098 ----------- ----------- ----------- Net income (loss)......... $ 509,717 (211,750) 297,967 =========== =========== =========== F-32 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) Acquisition of Rivertree Court, Vernon Hills, Illinois Reconciliation of Gross income and Direct Operating Expenses for the year ended December 31, 1996 prepared in accordance with Rule 3.14 of Regulation S-X (*) to the Pro Forma Adjustments: Rivertree Court ------------------------------------- *As Pro Forma Reported Adjustments Total ----------- ----------- ----------- Rental income............. $3,233,884 - 3,233,884 Additional rental income.. 1,149,307 - 1,149,307 ----------- ----------- ----------- Total income.............. 4,383,191 - 4,383,191 ----------- ----------- ----------- Advisor asset management fee.......... - 317,500 317,500 Property operating expenses................ 1,207,912 96,346 1,304,258 Interest expense.......... - 1,574,710 1,574,710 Depreciation.............. - 793,750 793,750 ----------- ----------- ----------- Total expenses............ 1,207,912 2,782,306 3,990,218 ----------- ----------- ----------- Net income (loss)......... $3,175,279 (2,782,306) 392,973 =========== =========== =========== Acquisition of Shorecrest Plaza, Racine, Wisconsin This pro forma adjustment reflects the purchase of Shorecrest Plaza as if the Company had acquired the property as of January 1, 1996, and is based on information provided by the Seller. Sequoia Plaza ------------------------------------- Year ended December 31, Pro Forma 1996 Adjustments Total ----------- ----------- ----------- Rental income............. $ 534,428 - 534,428 Additional rental income.. 120,745 - 120,745 ----------- ----------- ----------- Total income.............. 655,173 - 655,173 ----------- ----------- ----------- Advisor asset management fee.......... - 59,560 59,560 Property operating expenses................ 201,993 - 201,993 Depreciation.............. - 148,900 148,900 ----------- ----------- ----------- Total expenses............ 201,993 208,460 410,453 ----------- ----------- ----------- Net income (loss)......... $ 453,180 (208,460) 244,720 =========== =========== =========== F-33 Inland Real Estate Corporation Notes to Pro Forma Statement of Operations (continued) For the year ended December 31, 1996 (unaudited) (E) No pro forma adjustment has been made relating to interest income which would have been earned on the additional Offering Proceeds raised. (F) Depreciation expense is computed using the straight-line method, based upon an estimated useful life of thirty years. (G) The pro forma weighted average common stock shares for the year ended December 31, 1996 was calculated by estimating the additional shares sold to purchase each of the Company's properties on a weighted average basis. (H) Loan fees are amortized over the term of the related loan. (I) Advisor Asset Management Fees are calculated as 1% of the Average Invested Assets (as defined). F-34 -----END PRIVACY-ENHANCED MESSAGE-----