Item 1. Business
Inland Land Appreciation Fund, L.P. was formed in October 1987 to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, we commenced an offering of 10,000 (subject to increase to 30,000) limited partnership units ("units") at $1,000 per unit, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. The offering terminated on October 6, 1989, after we sold 30,000 units, at $1,000 per unit, resulting in gross offering proceeds of $30,000,000, which does not include proceeds from our general partner or our initial limited partner. All of the holders of our units have been admitted to our partnership. Inland Real Estate Investment Corporation is our general partner. 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. Our limited partners share in their portion of benefits of ownership of our real property investments according to the number of units held. As of December 31, 2002, we have repurchased a total of 407.75 Units for $359,484 from various limited partners through the unit repurchase program. Under this program limited partners may under certain circumstances have their units repurchased for an amount equal to their original capital as reduced by distributions from net sale proceeds.
We purchased on an all-cash basis, twenty-five parcels of undeveloped land and are engaged in the rezoning and resale of the parcels. All of the investments were made in the Chicago metropolitan area. The anticipated holding period of the land was approximately two to seven years from the completion of the land portfolio acquisitions. As of December 31, 2002, we have had multiple sales transactions, through which we have disposed of approximately 1,147 acres of the approximately 3,102 acres originally owned.
We are engaged in the business of real estate investment which management considers being a single operating segment. A presentation of information about operating segments would not be material to an understanding of our business taken as a whole.
We had no employees during 2002.
Our general partner and its affiliates provide services to us. Our general partner and its affiliates are reimbursed for salaries and expenses of employees of the general partner and its affiliates relating to the administration of the partnership. An affiliate of the general partner performs marketing and advertising services for us and is reimbursed for direct costs. An affiliate of the general partner performs property upgrades, rezoning, annexation and other activities to prepare our parcels for sale and is reimbursed for salaries and direct costs.
Item 2.
Item 2. Properties
We acquired fee ownership of the following real property investments:
Gross Acres
Purchase/Sales
Parcel & Location
Purchased/Sold
Date
Parcel 1, Kendall County, Illinois
84.7360
01/19/89
(3.5200
sold 12/24/96)
(.3520
sold 11/25/97)
(80.8640
sold 12/29/97)
Parcel 2, McHenry County, Illinois
223.4121
01/19/89
(183.3759
sold 12/27/90)
(40.0362
sold 05/11/00)
Gross Acres
Purchase/Sales
Parcel & Location
Purchased/Sold
Date
Parcel 3, Kendall County, Illinois
20.0000
02/09/89
(20.0000
sold 05/08/90)
Parcel 4, Kendall County, Illinois
69.2760
04/18/89
(.4860
sold 02/28/91)
(27.5750
sold 08/25/95)
(3.9500
sold 11/01/00)
(4.4000
sold various 2001)
(2.1417
sold various 2002)
Parcel 5, Kendall County, Illinois
372.2230 (a)
05/03/89
(Option
sold 04/06/90)
Parcel 6, Kendall County, Illinois
78.3900
06/21/89
Parcel 7, Kendall County, Illinois
77.0490
06/21/89
Parcel 8, Kendall County, Illinois
5.0000
06/21/89
(5.0000
sold 10/06/89)
Parcel 9, McHenry County, Illinois
51.0300
08/07/89
Parcel 10, McHenry County, Illinois
123.9400
08/07/89
(123.9400
sold 12/06/89)
Parcel 11, McHenry County, Illinois
30.5920
08/07/89
Parcel 12, Kendall County, Illinois
90.2710
10/31/89
(.7090
sold 04/26/91)
Parcel 13, McHenry County, Illinois
92.7800
11/07/89
(2.0810
sold 09/18/97)
(90.6990
sold 02/15/01)
Parcel 14, McHenry County, Illinois
76.2020
11/07/89
Parcel 15, Lake County, Illinois
84.5564
01/03/90
(10.5300
sold various 1996)
(5.4680
sold various 1997)
(68.5584
sold various 1998)
As part of the purchase agreement for this parcel, we were required to buy an option to purchase an additional 243 acres immediately to the west of this parcel.
Gross Acres
Purchase/Sales
Parcel & Location
Purchased/Sold
Date
Parcel 16, Kane/Kendall Counties,
72.4187
01/29/90
Illinois
(30.9000
sold 07/10/98)
(10.3910
sold 12/15/99)
(3.1000
sold 12/12/00)
Parcel 17, McHenry County, Illinois
99.9240
01/29/90
(27.5100
sold 01/29/99)
Parcel 18, McHenry County, Illinois
71.4870
01/29/90
(1.0000
sold various 1990)
(.5200
sold 03/11/93)
Parcel 19, McHenry County, Illinois
63.6915
02/23/90
Parcel 20, Kane County, Illinois
224.1480
02/28/90
(.2790
sold 10/17/91)
Parcel 21, Kendall County, Illinois
172.4950
03/08/90
(172.4950
sold various 1998)
Parcel 22, McHenry County, Illinois
254.5250
04/11/90
Parcel 23, Kendall County, Illinois
140.0210
05/08/90
(4.4100
sold various 1993)
(35.8800
sold various 1994)
(3.4400
sold various 1995)
(96.2910
sold 08/26/99)
Parcel 24, Kendall County, Illinois
298.4830
05/23/90
(12.4570
sold 05/25/90)
(4.6290
sold 04/01/96)
(69.82
sold 11/26/02)
Parcel 25, Kane County, Illinois
225.0000
06/01/90
The General Partner anticipates that land purchased by us will produce sufficient income to pay property taxes, insurance and other miscellaneous expenses. Income will be derived through leases to farmers or from other activities compatible with undeveloped land. The majority of the parcels purchased by us consist of land which generates revenue from farming or other leasing activities. It is not expected that we will generate cash distributions to limited partners from farm leases or other activities.
Item 3.
Item 3. Legal Proceedings
We are not subject to any material pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of our security holders during 2002.
PART II
Item 5.
Item 5. Market for the Partnership's Limited Partnership Units and Related Security Holder Matters
As of December 31, 2002, there were 3,090 holders of our units. There is no public market for units nor is it anticipated that any public market for units will develop.
Although we have established a unit repurchase program, funds for repurchase of units are limited. Units will be repurchased from limited partners at a price equal to 100% of their original capital as reduced by distributions from net sale proceeds. As of December 31, 2002, we had approximately $44,000 available for the repurchase of units.
Item 6.
Item 6. Selected Financial Data
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
For the years ended December 31, 2002, 2001, 2000, 1999, and 1998
(not covered by Independent Auditors' Report)
Total assets
$
27,611,879
26,413,426
25,475,076
24,680,969
25,809,385
Total income
$
1,906,799
1,289,468
1,383,351
4,021,769
8,008,204
Net income
$
314,651
652,753
845,328
1,882,472
2,030,823
Net income (loss) allocated to the one general partner unit
$
(8,513)
2,807
3,335
4,063
2,529
Net income allocated per limited partnership unit (b)
$
10.92
21.96
28.45
63.46
68.47
Distributions per limited partnership unit from sales (b)(c)
$
51.76
-
50.68
89.55
115.68
Weighted average limited partnership units
29,593
29,593
29,596
29,599
29,621
The above selected financial data should be read in conjunction with the financial statements and related notes appearing elsewhere in this annual report.
The net income per unit and distributions per unit data is based upon the weighted average number of units outstanding.
Distributions from sales represent a return of original capital.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this annual report on Form 10-K 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, 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; adverse changes in real estate, financing and general economic or local conditions; 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.
Liquidity and Capital Resources
On October 12, 1988, we commenced an offering of 10,000 (subject to increase to 30,000) limited partnership units pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On October 6, 1989, the offering terminated after we had sold 30,000 units to the public at $1,000 per unit resulting in $30,000,000 in gross offering proceeds, which does not include proceeds from the initial limited partner and the general partner. All of the holders of our units have been admitted to our partnership. Our limited partners share in their portion of benefits of ownership of our real property investments according to the number of units held.
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. As of December 31, 2002, we have had multiple sales transactions, through which we have disposed of approximately 1,147 acres of the approximately 3,102 acres originally owned. As of December 31, 2002, cumulative distributions to the limited partners have totaled $15,105,323 (which represents a return of original capital) and $153,743 to the general partner. Through December 31, 2002, we have used $16,361,202 of working capital for rezoning and other activities. Such amounts have been capitalized and are included in investments in land.
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 December 31, 2002, we own, in whole or in part, sixteen 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 property taxes and insurance.
At December 31, 2002, we had cash and cash equivalents of $1,350,883, of which approximately $44,000 is reserved for the repurchase of units through the unit repurchase program. The remaining $1,306,883 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. We have increased our parcel sales effort in anticipation of rising land values.
We plan to enhance the value of our land through pre-development activities such as rezoning, annexation and land planning. We have already been successful in, or are in the process of, pre-development activity on a majority of our land investments. Parcels 4, 6 and 7 have completed two phases of improvements for an industrial park and sites are being marketed. Parcel 16 has been zoned with development and sales marketing underway. Parcel 12 was annexed and zoned during 2002 and marketing has begun. Zoning discussions have begun on Parcel 12, 17, 18 and 22.
Transactions with Related Parties
Our general partner and its affiliates are entitled to reimbursement for salaries and expenses of employees of the general partner and its affiliates relating to our administration. Such costs are included in professional services and general and administrative expenses to affiliates, of which $6,242 and $3,342 were unpaid as of December 31, 2002 and 2001, respectively.
An affiliate of our general partner performed marketing and advertising services for us and was reimbursed for direct costs. Such costs of $16,346, $32,627 and $14,216 have been incurred and are included in marketing expenses to affiliates for the years ended December 31, 2002, 2001 and 2000, respectively, of which $10,905 was unpaid as of December 31, 2002 and all of which was paid as of December 31, 2001.
An affiliate of the general partner performed property upgrades, rezoning, annexation and other activities to prepare our parcels for sale and was reimbursed for salaries and direct costs. The affiliate did not recognize a profit on any project. Such costs are included in investments in land.
Results of Operations
As of December 31, 2002, we owned sixteen parcels of land consisting of approximately 1,955 acres. Of the 1,955 acres owned, approximately 1,848 acres are tillable, leased to local farmers and generate sufficient cash flow to cover property taxes, insurance and other miscellaneous expenses. Sales of investments in land and improvements of $1,609,108 and cost of land sold of $450,778 for the year ended December 31, 2002 is a result of the sale of two lots of Parcel 4 and the sale of approximately 70 acres of Parcel 24. Sale of investments in land and improvements of $750,900 and cost of land sold of $384,614 for the year ended December 31, 2001 is a result of the sale of four lots of Parcel 4 and the sale of the balance of 91 acres of Parcel 13. Sale of investments in land and improvements of $770,078 and cost of land sold of $298,882 for the year ended December 31, 2000 is a result of the sale of approximately 40 acres of Parcel 2, the sale of an additional lot of Parcel 4 and the sale of 3 acres of Parcel 16.
Interest income decreased from $259,774 for the year ended December 31, 2001 to $6,827 for the year ended December 31, 2002, as a result of our stopping the accrual of interest income on the mortgage loans receivable relating to Parcels 1, 15, 21 and 23. Interest income decreased from $311,036 for the year ended December 31, 2000 to $259,774 for the year ended December 31, 2001, primarily as a result of less interest income earned on the mortgage loans receivable as we received paydowns on the mortgages generated from the sales. We also had less cash available to invest on a short term basis during the year which also resulted in a decrease in interest income earned.
Professional services to affiliates increased from $24,388 for the year ended December 31, 2001 to $37,398 for the year ended December 31, 2002, due to an increase in legal services. Professional services to Affiliates decreased from $32,696 for the year ended December 31, 2000 to $24,388 for the year ended December 31, 2001, due to a decrease in legal services.
General and administrative expenses to Affiliates decreased from $22,339 for the year ended December 31, 2000 to $15,745 for the year ended December 31, 2001, due to a decrease in investor service expense and data processing expense. General and administrative expenses to non-affiliates increased from $22,387 for the year ended December 31, 2001 to $27,864 for the year ended December 31, 2002, due to an increase in postage expense. General and administrative expenses to non-affiliates decreased from $31,544 for the year ended December 31, 2000 to $22,387 for the year ended December 31, 2001, due to decreases in the Illinois Replacement Tax paid and printing costs.
Marketing expenses to non-affiliates increased from $49,668 for the year ended December 31, 2001 to $125,569 for the year ended December 31, 2002, due to an increase in marketing, advertising and travel expenses relating to marketing the land portfolio to prospective purchasers. Marketing expenses to Affiliates and non-affiliates increased for the year ended December 31, 2001, as compared to the year ended December 31, 2000, due to an increase in advertising related to marketing the land portfolio to prospective purchasers.
Land operating expenses to non-affiliates increased from $66,249 for the year ended December 31, 2001 to $106,588 for the year ended December 31, 2002, due to an increase in real estate tax expense. Land operating expenses to non-affiliates decreased from $85,245 for the year ended December 31, 2000 to $66,249 for the year ended December 31, 2001, due to a decrease in real estate tax expense in 2001 and one time costs incurred in 2000 relating to a proposed spec building. This decrease was partially offset by an increase in grounds maintenance expenses of our land investments.
We determined that the maximum value of Parcels 1, 15, 21 and 23 could be realized if the parcels were developed and sold as individual lots. However, if we developed and sold individual lots directly to buyers, we could be deemed a dealer of real estate and our limited partners could be subject to unrelated business taxable income. Therefore, we sold the parcels to a third party developer whereby a significant portion of the sales price was represented by notes receivable from the buyer. These transactions were deemed installment sales. The velocity of the developer's individual lot sales was slower than was originally projected and consequently, the developer's carrying costs were higher. As a result of the development's financial difficulties, the net sale proceeds available to us are lower than projected. For the year ended December 31, 2002, we have recorded an allowance for doubtful accounts of $767,248 relating to the accrued interest receivable on mortgage loans resulting from the sale of these parcels.
Selected Quarterly Financial Data (unaudited)
The following represents the results of operations for each quarter during the years ended December 31, 2002, 2001 and 2000.
Inflation
Inflation in future periods may cause capital appreciation of our investments in land. Rental income levels (from leases to new tenants or renewals of existing tenants) will rise and fall in accordance with normal agricultural market conditions and may or may not be affected by inflation. To date, our operations have not been significantly affected by inflation.
Item 7(a). Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Index
Page
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 2002 and 2001
Statements of Operations, for the years ended December 31, 2002, 2001, and 2000
Statements of Partners' Capital, for the years ended December 31, 2002, 2001, and 2000
Statements of Cash Flows, for the years ended December 31, 2002, 2001, and 2000
Notes to Financial Statements
Schedules not filed:
All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
To the Partners of
Inland Land Appreciation Fund, L.P.
We have audited the accompanying balance sheets of Inland Land Appreciation Fund, L.P. (a limited partnership) ("the Partnership") as of December 31, 2002 and 2001, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Inland Land Appreciation Fund, L.P. as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
January 30, 2003
Chicago, Illinois
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
December 31, 2002 and 2001
Assets
Current assets:
Cash and cash equivalents (Note 1)
$
1,350,883
188,806
Accounts and accrued interest receivable (net of allowance for
doubtful accounts of $767,248 at December 31, 2002) (Note 6)
202,172
969,028
Current portion of mortgage loans receivable (Note 6)
2,101,007
144,557
Other current assets
-
5,172
Total current assets
3,654,062
1,307,563
Other assets
16,840
16,840
Deferred loan fees (net of accumulated amortization of $21,891 and
$10,284 at December 31, 2002 and 2001, respectively)
55,616
19,716
Mortgage loans receivable, less current portion (Note 6)
-
2,291,799
Investments in land and improvements, at cost (including acquisition fees paid to Affiliates of $830,551 and $850,016 at December 31, 2002 and 2001, respectively) (Notes 3 and 4)
23,885,361
22,777,508
Total assets
$
27,611,879
26,413,426
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Balance Sheets
(continued)
December 31, 2002 and 2001
Liabilities and Partners' Capital
Current liabilities:
Accounts payable
$
71,485
11,035
Accrued real estate taxes
82,966
46,903
Due to Affiliates (Notes 3 and 7)
355,351
56,006
Current portion of notes payable to Affiliate (Note 7)
2,520,984
3,993,750
Unearned income
669,280
269,280
Total current liabilities
3,700,066
4,376,974
Notes payable to Affiliate, less current portion (Note 7)
3,100,000
-
Deferred gain on sale of investments in land and improvements (Note 6)
242,368
249,958
Partners' capital:
General Partner:
Capital contribution
Cumulative net income
170,170
178,683
Cumulative cash distributions
(153,743)
(153,743)
16,927
25,440
Limited Partners:
Units of $1,000. Authorized 30,001 Units, 29,593 outstanding at December 31, 2002 and 2001, (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
9,784,438
9,461,274
Cumulative cash distributions
(15,105,323)
(13,573,623)
20,552,518
21,761,054
Total Partners' capital
20,569,445
21,786,494
Total liabilities and Partners' capital
$
27,611,879
26,413,426
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Operations
For the years ended December 31, 2002, 2001 and 2000
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Partners' Capital
For the years ended December 31, 2002, 2001 and 2000
General
Limited
Partner
Partners
Total
Balance at January 1, 2000
$
19,298
21,770,897
21,790,195
Net income (Note 2)
3,335
841,993
845,328
Distributions to Partners ($50.68 per weighted average Limited Partnership Units of 29,596) (Note 2)
-
(1,500,000)
(1,500,000)
Repurchase of Limited Partnership Units
-
(1,782)
(1,782)
Balance at December 31, 2000
22,633
21,111,108
21,133,741
Net income (Note 2)
2,807
649,946
652,753
Balance at December 31, 2001
25,440
21,761,054
21,786,494
Net income (loss) (Note 2)
(8,513)
323,164
314,651
Distributions to Partners ($51.76 per weighted average Limited Partnership Units of 29,593) (Note 2)
-
(1,531,700)
(1,531,700)
Balance at December 31, 2002
$
16,927
20,552,518
20,569,445
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
For the years ended December 31, 2002, 2001 and 2000
Cash flows from operating activities:
Net income
$
314,651
652,753
845,328
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of investments in land and improvements
(1,158,330)
(366,286)
(471,196)
Recognition of deferred gain on sale of investments in land and improvements
(7,590)
(5,800)
(40,599)
Bad debt expense
767,248
-
-
Amortization of deferred loan fees
11,607
10,284
-
Changes in assets and liabilities:
Accounts and accrued interest receivable
(392)
(228,598)
(278,221)
Other assets
5,172
(3,662)
26,005
Accounts payable
60,450
6,154
(4,736)
Accrued real estate taxes
36,063
(940)
2,744
Due to Affiliates
299,345
36,183
(22,921)
Unearned income
400,000
250,000
16,073
Net cash provided by operating activities
728,224
350,088
72,477
Cash flows from investing activities:
Principal payments collected on mortgage loans receivable
335,349
222,030
516,657
Additions to investments in land and improvements
(1,558,631)
(2,055,105)
(1,103,222)
Proceeds from disposition of investments in land and improvements
1,609,108
750,900
770,078
Net cash flow provided by (used in) investing activities
385,826
(1,082,175)
183,513
Cash flows from financing activities:
Repurchase of Limited Partnership Units
-
-
(1,782)
Net proceeds from notes payable to Affiliate
1,627,234
-
1,500,000
Loan fees
(47,507)
-
(30,000)
Cash distributions
(1,531,700)
-
(1,500,000)
Net cash flow provided by (used in) financing activities
48,027
-
(31,782)
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Statements of Cash Flows
(continued)
For the years ended December 31, 2002, 2001 and 2000
Net increase (decrease) in cash and cash equivalents
$
1,162,077
(732,087)
224,208
Cash and cash equivalents at beginning of year
188,806
920,893
696,685
Cash and cash equivalents at end of year
$
1,350,883
188,806
920,893
Cash paid for interest
$
3,797
271,932
191,523
Supplemental schedule of non-cash investing and financing activities:
Reduction in investments in land and improvements
$
450,778
384,614
298,882
Gain on sale of investments in land and improvements
1,158,330
366,286
471,196
Proceeds from disposition of investments in land and improvements
$
1,609,108
750,900
770,078
See accompanying notes to financial statements.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
For the years ended December 31, 2002, 2001 and 2000
(1) Organization and Basis of Accounting
The Registrant, Inland Land Appreciation Fund, L.P. (the "Partnership"), was formed in October 1987, pursuant to the Delaware Revised Uniform Limited Partnership Act, to invest in undeveloped land on an all-cash basis and realize appreciation of such land upon resale. On October 12, 1988, the Partnership commenced an Offering of 10,000 (subject to increase to 30,000) Limited Partnership Units ("Units") pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. Inland Real Estate Investment Corporation is the General Partner. The Offering terminated on October 6, 1989, with total sales of 30,000 Units, at $1,000 per Unit, not including the General Partner or the Initial Limited Partner. All of the holders of these Units have been admitted to this Partnership. The Limited Partners of the Partnership share in their portion of benefits of ownership of the Partnership's real property investments according to the number of Units held. As of December 31, 2002, the Partnership has repurchased a total of 407.75 Units for $359,484 from various Limited Partners through the Unit Repurchase Program. Under this program Limited Partners may under certain circumstances have their Units repurchased for an amount equal to their Invested Capital.
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.
Offering costs have been offset against the Limited Partners' capital accounts.
The Partnership considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents which are carried at cost, which approximates market.
The Partnership recognizes income from the sale of land parcels in accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate".
Except as described in footnote (b) to Note 4 of these notes, the Partnership uses the area method of allocation, which approximates the relative sales method of allocation, whereby a per acre price is used as the standard allocation method for land purchases and sales. The total cost of the parcel is divided by the total number of acres to arrive at a per acre price.
Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121") requires the Partnership to record an impairment loss on its property to be held for investment whenever its carrying value cannot be fully recovered through estimated undiscounted future cash flows from their operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the properties estimated fair value. As of December 31, 2001, the Partnership had not recognized any such impairment losses under SFAS 121.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", ("SFAS No. 144"). SFAS 144 addresses accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of". The provisions of this statement are effective for the Partnership beginning January 1, 2002. SFAS No. 144 established new rules for the recognition, measurement and reporting of long-lived assets which are impaired and
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
either held for sale or in use by the Partnership. The adoption of this statement did not have a material impact on the financial position or results of operations of the Partnership.
A presentation of information about operating segments as required in SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" would not be material to an understanding of the Partnership's business taken as a whole as the Partnership is engaged in the business of real estate investment which management considers to be a single operating segment.
Effective January 1, 2001, the Partnership adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS Nos. 137 and 138. This statement standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. It also provides for matching the timing of gain or loss recognition on the hedging instrument with the recognition of (a) the changes in fair value of the hedged asset or liability attributable to the hedged risk or (b) the earnings effect of the hedged forecasted transaction. The net impact of the adoption of SFAS No. 133 has no effect on the Partnership's financial statements.
The Partnership is required to pay a withholding tax to the Internal Revenue Service with respect to a Partner's allocable share of the Partnership's taxable net income, if the Partner is a foreign person. The Partnership will first pay the withholding tax from the distributions to any foreign partner, 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 the foreign partner. Withholding tax payments are made every April, June, September and December.
No provision for Federal income taxes has been made as the liability for such taxes is that of the Partners rather than the Partnership.
The Partnership's records are maintained on the accrual basis of accounting in accordance GAAP. The Federal income tax return has been prepared from such records after making appropriate adjustments, if any, to reflect the Partnership's accounts as adjusted for Federal income tax reporting purposes. Such adjustments are not recorded in the records of the Partnership. The net effect of these items is summarized as follows:
The net income per Unit is based upon the weighted average number of Units of 29,593 during 2002 and 2001.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(2) Partnership Agreement
The Partnership Agreement defines the allocation of profits and losses, and available cash. If and to the extent that real estate taxes and insurance payable with respect to the Partnership's land during a given year exceed revenues of the Partnership, the General Partner will make a Supplemental Capital Contribution of such amount to the Partnership to ensure that it has sufficient funds to make such payments.
Profits and losses from operations (other than capital transactions) will be allocated 99% to the Limited Partners and 1% to the General Partner. The net gain from a sale of Partnership properties is first allocated among the Partners in proportion to the negative balances, if any, in their respective capital accounts. Thereafter, except as provided below, net gain is allocated to the General Partner in an amount equal to the proceeds distributed to the General Partner from such sale and the balance of any net gain is allocated to the Limited Partners. If the amount of net gain realized from a sale is less than the amount of cash distributed to the General Partner from such sale, the Partnership will allocate income or gain to the General Partner in an amount equal to the excess of the cash distributed to the General Partner with respect to such sale as quickly as permitted by law. Any net loss from a sale will be allocated to the Limited Partners.
Distributions of Net Sale Proceeds will be allocated between the General Partner and the Limited Partners based upon both an aggregate overall return to the Limited Partners and a separate return with respect to each parcel of land purchased by the Partnership.
As a general rule, Net Sale Proceeds will be distributed 90% to the Limited Partners and 10% to the General Partner until the Limited Partners have received from Net Sale Proceeds (i) a return of their Original Capital plus (ii) a noncompounded Cumulative Preferred Return of 15% of their Invested Capital. However, with respect to each parcel of land, the General Partner's 10% share will be subordinated until the Limited Partners receive a return of the Original Capital attributed to such parcel ("Parcel Capital") plus a 6% per annum noncompounded Cumulative Preferred Return thereon.
After the amounts described in items (i) and (ii) above and any previously subordinated distributions to the General Partner have been paid, and the amount of any Supplemental Capital Contributions have been repaid to the General Partner, subsequent distributions shall be paid 75% to the Limited Partners and 25% to the General Partner without considering Parcel Capital. If, after all Net Sale Proceeds have been distributed, the General Partner has received more than 25% of all Net Sale Proceeds (exclusive of distributions made to the Limited Partners to return their Original Capital), the General Partner shall contribute to the Partnership for distribution to the Limited Partners an amount equal to such excess.
Any distributions from Net Sale Proceeds at a time when Invested Capital is greater than zero shall be deemed applied first as a reduction of such Invested Capital before application to payment of any deficiency in the 15% Cumulative Preferred Return.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(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 are included in professional services and general and administrative expenses to Affiliates, of which $6,242 and $3,342 were unpaid as of December 31, 2002 and 2001, 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 $16,346, $32,627 and $14,216 have been incurred and are included in marketing expenses to Affiliates for the years ended December 31, 2002, 2001 and 2000, respectively, of which $10,905 was unpaid as of December 31, 2002 and all of which was paid as of December 31, 2001.
An Affiliate of the General Partner performed property upgrades, rezoning, annexation and other activities to prepare the Partnership's land investments for sale and was reimbursed (as set forth under terms of the Partnership Agreement) for salaries and direct costs. The Affiliate did not recognize a profit on any project. Such costs are included in investments in land.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investments in Land and Improvements
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investments in Land and Improvements (continued)
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investments in Land and Improvements (continued)
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(4) Investments in Land and Improvements (continued)
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 sale transaction relates to the sale of this option.
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 will be treated as one parcel and Parcels 9, 10 and 11 will be treated as one parcel for purposes of computing Parcel Capital (as defined) and distributions to the Partners.
Reconciliation of investments in land and improvements owned:
Balance at January 1,
$
22,777,508
21,107,017
Additions during year
1,558,631
2,055,105
Sales during year
(450,778)
(384,614)
Balance at December 31,
$
23,885,361
22,777,508
The aggregate cost of investments in land and improvements owned at December 31, 2002 for Federal income tax purposes was approximately $23,885,000 (unaudited).
(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.
As of December 31, 2002, the Partnership had farm leases of generally one year in duration, for approximately 1,848 acres of the approximately 1,955 acres owned.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
(6) Mortgage Loans Receivable
Mortgage loans receivable are the result of sales of Parcels, in whole or in part. The Partnership has recorded a deferred gain on these sales. The deferred gain will be recognized over the life of the related mortgage loan receivable as principal payments are received. The fair market value of the mortgage loans receivable was approximately $2,028,000 and $2,559,000 at December 31, 2002 and 2001, respectively.
(7) Notes Payable to Affiliate
On December 31, 1998, the Partnership obtained a loan from the General Partner in the amount of $2,493,750 solely collateralized by Parcel 5. During 2002, the General Partner advanced an additional $12,234. The note accrues interest at prime plus .5% and has a maturity date which was extended to December 29, 2003. For the years ended December 31, 2002 and 2001, respectively, interest of $138,435 and $182,059, respectively, was capitalized, of which $168,859 and $30,424 was unpaid as of December 31, 2002 and 2001, respectively.
On December 6, 2000, the Partnership obtained a loan from the General Partner in the amount of $1,500,000 collateralized by Parcels 17, 18 and 22. During 2002, the General Partner advanced an additional $15,000. The note accrues interest at prime plus .5% and has a maturity date of November 30, 2004. For the years ended December 31, 2002 and 2001, interest of $127,040 and $142,536, respectively, was capitalized, of which $149,279 and $22,240 was unpaid as of December 31, 2002 and 2001, respectively.
On May 9, 2002, the General Partner advanced the Partnership a loan in the amount of $200,000. The note accrued interest at 5.25%. This advance was repaid in full on September 17, 2002. For the year ended December 31, 2002, interest of $3,797 was capitalized, all of which was paid on December 31, 2002.
INLAND LAND APPRECIATION FUND, L.P.
(a limited partnership)
Notes to Financial Statements
(continued)
On September 17, 2002, the Partnership obtained a loan from the General Partner in the amount of $1,600,000, collateralized by Parcels 4, 6 and 7. The note accrues interest at a rate of prime plus .5% and has a maturity date of September 17, 2005. For the year ended December 31, 2002, interest of $20,066 was capitalized, all of which was unpaid as of December 31, 2002.
The fair market value of the notes payable to Affiliate was approximately $5,671,000 and $4,097,000 at December 31, 2002 and 2001, respectively.
Item 9.
Item 9. Changes in and Disagreements with Independent Auditors on Accounting and Financial Disclosure
There were no disagreements on accounting or financial disclosure matters during 2002.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Our general partner, Inland Real Estate Investment Corporation, was organized in 1984 for the purpose of acting as general partner of limited partnerships formed to acquire, own and operate real properties. Our general partner is a wholly owned subsidiary of The Inland Group, Inc. In 1990, Inland Real Estate Investment Corporation became the replacement general partner for an additional 301 privately owned real estate limited partnerships syndicated by affiliates. The general partner has responsibility for all aspects of our operations. The relationship of the general partner to its affiliates is described under the caption "Conflicts of Interest" at pages 11 to 13 of the prospectus, a copy of which description is hereby incorporated herein by reference.
Officers and Directors
The officers, directors, and key employees of The Inland Group, Inc. and its Affiliates ("Inland") that are likely to provide services to us are as follows:
Functional Title
Daniel L. Goodwin
Chairman and Chief Executive Officer
Robert H. Baum
Executive Vice President-General Counsel
G. Joseph Cosenza
Senior Vice President-Acquisitions
Robert D. Parks
Senior Vice President-Investments
Brenda G. Gujral
President and Chief Operating Officer-IREIC
Catherine L. Lynch
Treasurer
Roberta S. Matlin
Assistant Vice President-Investments
Patricia A. DelRosso
Vice President-Asset Management
Kelly Tucek
Assistant Vice President-Partnership Accounting
DANIEL L. GOODWIN (age 59) is Chairman of the Board of Directors of The Inland Group, Inc., a billion-dollar real estate and financial organization located in Oak Brook, Illinois. Among Inland's subsidiaries is the largest property management firm in Illinois and one of the largest commercial real estate and mortgage banking firms in the Midwest.
Mr. Goodwin has served as Director of the Avenue Bank of Oak Park and as a director of the Continental Bank of Oakbrook Terrace. He was Chairman of the Bank Holding Company of American National Bank of DuPage. Currently he is the Chairman of the Board of Inland Mortgage Corporation.
Mr. Goodwin has been in the housing industry for more than 30 years, and has demonstrated a lifelong interest in housing-related issues. He is a licensed real estate broker and a member of the National Association of Realtors, the Illinois Association of Realtors and the Northern Illinois Commercial Association of Realtors. He has developed thousands of housing units in the Midwest, New England, Florida, and the Southwest. He is also the author of a nationally recognized real estate reference book for the management of residential properties.
Mr. Goodwin has served on the Board of the Illinois State Affordable Housing Trust Fund for six years and was recently appointed to serve once again by Governor George Ryan. He is an advisor for the Office of Housing Coordination Services of the State of Illinois, and a member of the Seniors Housing Committee of the National Multi-Housing Council. He was appointed Chairman of the Housing Production Committee for the Illinois State Affordable Housing Conference by former Governor Edgar. He also served as a member of the Cook County Commissioner's Economic Housing Development Committee, and he was the Chairman of the DuPage County Affordable Housing Task Force. The 1992 Catholic Charities Award was presented to Mr. Goodwin for his work in addressing affordable housing needs. The City of Hope designated him as the Man of the Year for the Illinois construction industry. In 1989, the Chicago Metropolitan Coalition on Aging presented Mr. Goodwin with an award in recognition of his efforts in making housing more affordable to Chicago's Senior Citizens. On May 4, 1995, PADS, Inc. (Public Action to Deliver Shelter) presented Mr. Goodwin with the affordable housing award, recognizing The Inland Group as the leading corporate provider of transitional housing for the homeless people of DuPage County. Mr. Goodwin also serves as Chairman of New Directions Housing Corporation, which provides affordable housing in the Midwest.
Mr. Goodwin is a product of Chicago-area schools, and obtained his Bachelor's and Master's Degrees from Illinois Universities. Following graduation, he taught for five years in the Chicago Public Schools. His commitment to education has continued through his work with the BBF Family Services' Pilot Elementary School in Chicago, and the development of the Inland Vocational Training Center for the Handicapped located at Little City in Palatine, Illinois. He personally established an endowment which funds a perpetual scholarship program for inner-city disadvantaged youth. In 1990 he received the Northeastern Illinois University President's Meritorious Service Award. Mr. Goodwin holds a Master's Degree in Education and in 1986, he was awarded an Honorary Doctorate from Northeastern Illinois University College of Education. More than 12 years ago, under Mr. Goodwin's direction, Inland instituted a program to educate disabled students about the workplace. Most of those original students are employed at Inland today, and Inland continues as one of the largest employers of the disabled in DuPage County. Mr. Goodwin has served as a member of the Board of Governors of Illinois State Colleges and Universities, and he is currently Vice Chairman of the Board of Trustees of Benedictine University. Since January 1996, he has been Chairman of the Northeastern Illinois University Board of Trustees.
In 1988 Mr. Goodwin received the Outstanding Business Leader Award from the Oak Brook Jaycees and in March 1994 he won the Excellence in Business Award from the DuPage Area Association of Business and Industry. Additionally, he was honored by Little Friends on May 17, 1995 for rescuing their Parent-Handicapped Infant Program. He was the recipient of the 1995 March of Dimes Life Achievement Award and was recognized as the 1998 Corporate Leader of the Year by the Oak Brook Area Association of Commerce and Industry. The Ray Graham Association for People with Disabilities honored Mr. Goodwin as the 1999 Employer of the Year. Also, in 1999, the YWCA DuPage District bestowed the Corporate Recognition Award for Inland's policies and practices that demonstrate a commitment to the advancement of women in the workplace. For many years, he has been Chairman of the National Football League Players Association Mackey Awards for the benefit of inner-city youth and he served as the recent Chairman of the Speakers Club of the Illinois House of Representatives.
ROBERT H. BAUM (age 58) has been with The Inland Group, Inc. and its affiliates since 1968 and is one of the four original principals. Mr. Baum is Vice Chairman and Executive Vice President-General Counsel of The Inland Group, Inc. In his capacity as General Counsel, Mr. Baum is responsible for the supervision of the legal activities of The Inland Group, Inc. and its affiliates. This responsibility includes the supervision of The Inland Law Department and serving as liaison with outside counsel. Mr. Baum has served as a member of the North American Securities Administrators Association Real Estate Advisory Committee and as a member of the Securities Advisory Committee to the Secretary of State of Illinois. He is a member of the American Corporation Counsel Association and has also been a guest lecturer for the Illinois State Bar Association. Mr. Baum has been admitted to practice before the Supreme Court of the United States, as well as the bars of several federal courts of appeals and federal district courts and the State of Illinois and is a licensed real estate broker. He has served as a director of American National Bank of DuPage and currently serves as a director of Westbank. Mr. Baum also is a member of the Governing Council of Wellness House, a charitable organization that provides educational and emotional support for cancer patients and their families.
G. JOSEPH COSENZA (age 58) has been with The Inland Group, Inc. and its affiliates since 1968 and is one of the four original principals. Mr. Cosenza is a Director and Vice Chairman of The Inland Group, Inc. and oversees, coordinates and directs Inland's many enterprises. In addition, Mr. Cosenza immediately supervises a staff of ten persons who engage in property acquisition. Mr. Cosenza has been a consultant to other real estate entities and lending institutions on property appraisal methods. He has directly overseen the purchase of close to $4 billion of income producing real estate from 1968 to the present.
Mr. Cosenza received his B.A. Degree from Northeastern Illinois University and his M.S. Degree from Northern Illinois University. From 1967 to 1968, he taught in the LaGrange, Illinois School District and from 1968 to 1972, he served as Assistant Principal and taught in the Wheeling, Illinois School District. Mr. Cosenza has been a licensed real estate broker since 1968 and an active member of various national and local real estate associations, including the National Association of Realtors and the Urban Land Institute.
Mr. Cosenza has also been Chairman of the Board of American National Bank of DuPage, and has served on the Board of Directors of Continental Bank of Oakbrook Terrace. He was the Chairman and is presently a Director on the Board of Westbank in Westchester, Hillside and Lombard, Illinois.
ROBERT D. PARKS (age 59) has been with The Inland Group Inc. ("Inland") and its affiliates since 1968 and is one of the four original principals; Chairman of Inland Real Estate Investment Corporation and Director of Inland Securities Corporation. Mr. Parks is president, chief executive officer, and a director of Inland Real Estate Corporation. He is Chairman, Chief Executive Officer and Affiliated Director of Inland Retail Real Estate Trust, Inc. He is a director of Inland Real Estate Advisory Services, Inc., Inland Investment Advisors, Inc., Partnership Ownership Corp., Inland Southern Acquisitions, Inc. and Inland Southeast Investment Corp., and he is a Trustee of Inland Mutual Fund Trust.
Mr. Parks is responsible for the ongoing administration of existing investment programs, corporate budgeting and administration for Inland Real Estate Investment Corporation. He oversees and coordinates the marketing of all investments and investor relations.
Prior to joining Inland, Mr. Parks was a school teacher in Chicago's public schools. He received his B.A. Degree from Northeastern Illinois University and his M.A. Degree from the University of Chicago. He is a registered Direct Participation Program Limited Principal with the National Association of Securities Dealers, Inc. He is also a member of the Real Estate Investment Association, the Financial Planning Association, the Foundation for Financial Planning, as well as a member of the National Association of Real Estate Investments Trusts, Inc.
BRENDA G. GUJRAL (age 61) is President and Chief Operating Officer and a director of Inland Real Estate Investment Corporation (IREIC). She is also President and Chief Operating Officer and a director of Inland Securities Corporation (ISC), a member firm of the National Association of Securities Dealers (NASD). Mrs. Gujral is also a director of Inland Investment Advisors, Inc., an investment advisor.
Mrs. Gujral has overall responsibility for the operations of IREIC, including the distribution of checks to over 50,000 investors, review of periodic communications to those investors, the filing of quarterly and annual reports for Inland's publicly registered investment programs with the Securities and Exchange Commission, compliance with other SEC and NASD securities regulations both for IREIC and ISC, review of asset management activities, and marketing and communications with the independent broker/dealer firms selling Inland's current and prior programs. Mrs. Gujral works with internal and outside legal counsel in structuring and registering the prospectuses for IREIC's investment programs and in connection with the preparation of its offering documents and registering the related securities with the Securities and Exchange Commission and state securities commissions.
Mrs. Gujral has been with the Inland organization for 22 years, becoming an officer in 1982. Prior to joining Inland, she worked for the Land Use Planning Commission establishing an office in Portland, Oregon, to implement land use legislation for that state.
She is a graduate of California State University. She holds Series 7, 22, 39 and 63 licenses from the NASD. Mrs. Gujral is a member of the National Association of Real Estate Investment Trusts (NAREIT), the Financial Planning Association (FPA), the Foundation for Financial Planning (FFP) and the National Association for Female Executives.
CATHERINE L. LYNCH (age 44) joined Inland in 1989 and is the Treasurer of Inland Real Estate Investment Corporation. Ms. Lynch is responsible for managing the Corporate Accounting Department. Prior to joining Inland, Ms. Lynch worked in the field of public accounting for KPMG Peat Marwick since 1980. She received her B.S. Degree in Accounting from Illinois State University. Ms. Lynch is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. She is registered with the National Association of Securities Dealers as a Financial Operations Principal.
ROBERTA S. MATLIN (age 58) joined Inland in 1984 as Director of Investor Administration and currently serves as Senior Vice President of Inland Real Estate Investment Corporation ("IREIC") directing the day-today internal operations. Ms. Matlin is a Director of IREIC and of Inland Securities Corporation. Since 1998 she has been Vice President of Administration of Inland Retail Real Estate Trust, Inc. and was Vice President of Administration of Inland Real Corporation from 1995 until 2000. She is President and Director of Inland Investment Advisors, Inc. and Intervest Southern Real Estate Corporation, and a Trustee and Executive Vice President of Inland Mutual Fund Trust.
Prior to joining Inland, Ms. Matlin worked for the Chicago Region of the Social Security Administration of the Untied States Department of Health and Human Services.
Ms. Matlin is a graduate of the University of Illinois. She holds Series 7,22,24,39,63, and 65 licenses from the National Association of Securities Dealers.
PATRICIA A. DELROSSO (age 50) joined Inland in 1985. Ms. DelRosso serves as Senior Vice President of Inland Real Estate Investment Corporation in the area of Asset Management. As head of the Asset Management Department, she develops operating and disposition strategies for all investment-owned properties. Ms. DelRosso also serves as President of the newly formed Inland Real Estate Exchange Corporation. In this capacity, she develops, implements and evaluates business plans for tenant-in-common and customized 1031 tax-deferred exchange replacement property offerings. Ms. DelRosso received her Bachelor's degree from George Washington University and her Master's from Virginia Tech University. Ms. DelRosso is a licensed real estate broker, NASD registered securities sales representative, a member of the Urban Land Institute and a member of the Northern Illinois Commercial Association of Realtors.
KELLY TUCEK (age 40) joined Inland in 1989 and is an Assistant Vice President of Inland Real Estate Investment Corporation. As of August 1996, Ms. Tucek is responsible for the Investment Accounting Department which includes all public partnership accounting functions along with quarterly and annual SEC filings. Prior to joining Inland, Ms. Tucek was on the audit staff of Coopers and Lybrand since 1984. She received her B.A. Degree in Accounting and Computer Science from North Central College.
Item 11.
Item 11. Executive Compensation
Our general partner is entitled to receive a share of cash distributions of net sales proceeds based upon both an aggregate overall return to the limited partners and a separate return with respect to each parcel of land purchased by us as described under the caption "Cash Distributions" and a share of profits or losses as described under the caption "Allocation of Profits or Losses" at page 38 of the prospectus, and at pages A-6 to A-9 of the partnership agreement, included as an exhibit to the prospectus, a copy of which descriptions is incorporated herein by reference.
We are permitted to engage in various transactions involving affiliates of our general partner, as described under the captions "Compensation and Fees" at pages 7-9 and "Conflicts of Interest" at pages 9-11 of the prospectus, and at pages A-10 through A-19 of the partnership agreement, included as an exhibit to the prospectus, a copy of which is incorporated herein by reference. The relationship of the general partner (and its directors and officers) to its affiliates is set forth above in Item 10.
Our general partner and it's affiliates may be reimbursed for their expenses or out-of-pocket costs relating to the our administration. For the year ended December 31, 2002, such costs were $52,890, of which $6,242 was unpaid as of December 31, 2002.
Our general partner was entitled to receive an asset management fee equal to one-quarter of 1% of our original cost of undeveloped land annually, limited to a cumulative total over the life of our partnership of 2% of the land's original cost to us. As of June 30, 1998, we had met this limit.
An affiliate of the general partner performed marketing and advertising services for us and was reimbursed (as set forth under terms of the partnership agreement) for direct costs. For the year ended December 31, 2002, we incurred $16,346 of such costs, of which $10,905 was unpaid as of December 31, 2002.
An affiliate of the general partner performed property upgrades, rezoning, annexation and other activities to prepare our land investments for sale and was reimbursed (as set forth under terms of the partnership agreement) for salaries and direct costs. For the year ended December 31, 2002, we incurred $436,459 of such costs, all of which was paid and included in the investments in land and improvements. As of December 31, 2002, notes payable to an affiliate totaled $5,620,984. For the year ended December 31, 2002, interest of $289,338 was capitalized.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person or group is known by us to own beneficially more than 5% of the outstanding units of our partnership
The officers and directors of our general partner own as a group the following units of our partnership:
Amount and Nature
of Beneficial
Percent
Title of Class
Ownership
of Class
Limited partnership units
314 Units directly
1%
No officer or director of our general partner possesses a right to acquire beneficial ownership of units of our partnership.
All of the outstanding shares of our general partner are owned by an affiliate or its officers and directors as set forth above in Item 10.
There exists no arrangement, known to us, the operation of which may at a subsequent date result in a change in our control.
Item 13.
Item 13. Certain Relationships and Related Transactions
There were no significant transactions or business relationships with the general partner, affiliates or their management other than those described in Items 10 and 11 above. Reference is made to Note 3 of the Notes to Financial Statements (Item 8 of this Annual Report) for information regarding related party transactions.
Item 14:
Item 14: Controls and Procedures
Within 90 days prior to the filing date of this report, the general partner conducted, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information that is required to be disclosed in the periodic reports that we must file with the Securities and Exchange Commission.
There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The financial statements listed in the index at page 12 of this annual report are filed as part of this annual report.
Exhibits. The following exhibits are incorporated herein by reference:
3 Restated Certificate of Limited Partnership and amended and restated Agreement of Limited Partnership, included as Exhibits A and B of the Prospectus dated October 12, 1988 as supplemented, are incorporated herein by reference thereto.
4 Form of Certificate of Ownership representing interests in the registrant filed as Exhibits 4(a) and 4(b) to Registration Statement on Form S-11, File No. 33-18607, is incorporated herein by reference thereto.
28 Prospectus, to Form S-11 Registration Statement, File No. 33-18607, as filed with Securities Exchange Commission on October 12, 1988, as supplemented to date, is incorporated herein by reference thereto.
99.1 Section 906 Certification by the Principal Executive Officer.
99.2 Section 906 Certificate by the Principal Financial Officer.
Financial Statement Schedules.
All schedules have been omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
Reports on Form 8-K:
None.
No annual report or proxy material for the year 2002 has been sent to our limited partners. An annual report will be sent to the limited partners subsequent to this filing and we will furnish copies of such report to the commission when it is sent to the limited partners.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Inland Real Estate Investment Corporation
General Partner
/s/
Brenda G. Gujral
By:
Brenda G. Gujral
President and Director
Date:
March 25, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
By:
Inland Real Estate Investment Corporation
General Partner
/s/
Brenda G. Gujral
By:
Brenda G. Gujral
President and Director
Date:
March 25, 2003
/s/
Patricia A. DelRosso
By:
Patricia A. DelRosso
Senior Vice President
Date:
March 25, 2003
/s/
Kelly Tucek
By:
Kelly Tucek
Assistant Vice President
Date:
March 25, 2003
/s/
Robert D. Parks
By:
Robert D. Parks
Chairman
Date:
March 25, 2003
/s/
Daniel L. Goodwin
By:
Daniel L. Goodwin
Director
Date:
March 25, 2003
Section 302 CERTIFICATION
I, Brenda G. Gujral, President, certify that:
I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund, L.P.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
By: Inland Real Estate Investment Corporation
General Partner
/S/ Brenda G. Gujral
Name: Brenda G. Gujral
Title: President of the General Partner and
Principal Executive Officer of Inland Land Appreciation Fund, L.P
Date: March 25, 2003
Section 302 CERTIFICATION
I, Kelly Tucek, Assistant Vice President, certify that:
I have reviewed this annual report on Form 10-K of Inland Land Appreciation Fund, L.P.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
By: Inland Real Estate Investment Corporation
General Partner
/S/ Kelly Tucek
Name: Kelly Tucek
Title: Assistant Vice President of the General Partner and
Principal Executive Officer of Inland Land Appreciation Fund, L.P
Date: March 25, 2003