Inland Real Estate Corporation Reports Financial Results for Second Quarter 2008

OAK BROOK, Ill.--(Business Wire)--
Inland Real Estate Corporation (NYSE: IRC) today announced
financial and operational results for the second quarter ended June
30, 2008.

Quarter and Recent Highlights

-- Funds from Operations (FFO) of $23.8 million or $0.36 per
share (basic and diluted) for second quarter 2008,
representing increases of 3.8 percent and 2.9 percent,
respectively, over second quarter 2007

-- Second quarter total revenue increased 4.6 percent to $47.7
million and joint venture fee income increased 201.7 percent
to $1.4 million, year-over-year

-- Same store net operating income up 3.2 percent and 1.3 percent
for the three and six-month periods, respectively

-- Total of 68 leases executed for rental of 334,195 aggregate
square feet; second quarter average base rents for new and
renewal leases up 14.9 percent and 12.6 percent, respectively,
over expiring rates

-- Five properties, four Bank of America office buildings and
University of Phoenix building acquired through the asset
management joint venture with Inland Real Estate Exchange
Corporation (IREX)

Financial Results

The Company reported that FFO, a widely accepted measure of
performance for real estate investment trusts (REITs), for the three
months ended June 30, 2008, was $23.8 million, an increase of 3.8
percent or approximately $0.9 million, compared to $23.0 million for
the three months ended June 30, 2007. On a per share basis, FFO was
$0.36 (basic and diluted) for the three months ended June 30, 2008, an
increase of $0.01 or 2.9 percent compared to the three months ended
June 30, 2007. The increases in FFO and FFO per share for the quarter
were primarily due to a deferred partnership gain of $3.2 million
recognized upon repayment of the related mortgage receivable. Also
contributing was an increase in fee income related to the IREX joint
venture, greater gains on the sale of certain investment securities
compared to the second quarter 2007, plus an increase in same store
net operating income. These gains were partially offset by the
recording of a non-cash charge of $2.5 million related to a decline in
value of certain investment securities which were determined to be
other than temporary during the period, and to a $0.7 million
impairment recorded to adjust the book value of a consolidated
property currently under contract for sale.

The Company reported that net income was $10.0 million for the
three months ended June 30, 2008, a decrease of 6.8 percent compared
to net income of $10.7 million for the three months ended June 30,
2007. On a per share basis, net income was $0.15 per share (basic and
diluted) for the three months ended June 30, 2008, a decrease of 6.3
percent compared to $0.16 per share (basic and diluted) for the three
months ended June 30, 2007. Second quarter net income and net income
per share decreased primarily due to the aforementioned items as well
as greater depreciation expense, primarily resulting from the
write-off of tenant improvements related to vacancies.

FFO decreased $0.4 million or 0.9 percent to $46.7 million for the
six months ended June 30, 2008. On a per share basis, FFO decreased by
1.4 percent or $0.01 to $0.71 from $0.72 for the same year ago period.

Net income was $20.4 million for the six months ended June 30,
2008, a decrease of $2.0 million or 8.9 percent compared to net income
of $22.4 million for the six months ended June 30, 2007. Net income
per share was $0.31 (basic and diluted) for the six months ended June
30, 2008, a decrease of $0.03 or 8.8 percent from the prior year
period.

The decreases in FFO and FFO per share and net income and net
income per share for the six-month period are primarily due to the
aforementioned items and greater gains from sales of vacant land
parcels through our unconsolidated joint ventures in the prior year
same period.

A reconciliation of FFO to net income and FFO per share to net
income per share is provided at the end of this release.

"I am pleased to report FFO growth of 3.8 percent for the quarter,
notwithstanding a difficult market environment that has impacted
certain near term operations," said Mark Zalatoris, Inland Real Estate
Corporation's president and chief executive officer. "We enjoyed
successful leasing results, due to the in-demand locations of our
properties, which resulted in an increase of more than 3 percent in
same store net operating income this quarter. As well, our joint
venture initiatives generated $2.4 million in fee income in the first
half of the fiscal year, an increase of more than 116 percent over the
same period last year." Mr. Zalatoris added, "We believe a resilient
platform of well-located value and necessity-based retail assets in
stable Midwest markets, combined with controlled growth initiatives,
will sustain and benefit the Company over the long term."

Portfolio Performance

For the quarter, total revenues increased $2.1 million or 4.6
percent to $47.7 million from $45.6 million in the second quarter
2007. Total revenues for the six months ended June 30, 2008, increased
$4.4 million or 4.8 percent to $97.8 million from $93.3 million in the
same period prior year. The increases in revenues for the three and
six-month periods ended June 30, 2008, were primarily the result of
increased fee income from unconsolidated joint ventures and increased
tenant recovery income due to a larger amount of recoverable expense
compared to the same periods prior year.

The Company evaluates its overall portfolio by analyzing the
operating performance of properties that have been owned and operated
for the same three and six month periods during each year. A total of
126 of the Company's investment properties satisfied this criterion
during these periods and are referred to as "same store" properties.
Same store net operating income (excluding the impact of straight-line
and intangible lease rent) for the quarter was $31.5 million, an
increase of $1.0 million or 3.2 percent compared to $30.5 million in
the second quarter 2007. For the six months ended June 30, 2008, same
store net operating income increased $0.8 million or 1.3 percent to
$61.8 million from $61.0 million in the same period prior year. The
three and six month increases in same store net operating income were
primarily due to lease termination income of approximately $1.1
million recorded during the quarter, as well as ongoing leasing gains
and a decrease in non-reimbursable tenant-related expenses from the
comparable periods prior year. These items were partially offset by
the impact on revenue of certain previously disclosed big-box
vacancies. Adjusted for the impact of lease termination income in the
quarter, same store net operating income would have been essentially
flat compared to the same periods prior year.

As of June 30, 2008, financial occupancy for the Company's same
store portfolio was 93.1 percent, compared to 94.3 percent as of March
31, 2008, and 93.9 percent as of June 30, 2007.

Leasing

The Company reported consistently strong leasing activity across
its portfolio during the quarter. For the three months ended June 30,
2008, the Company executed a total of 68 leases aggregating 334,195
square feet of gross leasable area (GLA). This included 15 new leases
comprising 99,857 square feet with an average rental rate of $10.17
per square foot, representing a 14.9 percent increase over the average
expiring rate. The 50 renewal leases comprise 230,200 square feet with
an average rental rate of $12.90 per square foot, representing a 12.6
percent increase over the average expiring rate. The 3 non-comparable
leases, consisting of new, previously unleased space, comprise 4,138
square feet with an average base rent of $24.17. As of June 30, 2008,
the Company's total portfolio was 93.6 percent leased, compared to
95.2 percent leased as of March 31, 2008, and 95.7 percent leased as
of June 30, 2007. Financial occupancy for the entire portfolio was
93.6 percent as of June 30, 2008, compared to 94.8 percent as of March
31, 2008, and 94.8 percent as of June 30, 2007. The decrease in leased
and financial occupancy can be attributed in most part to the
vacancies created by the Wickes Furniture bankruptcy.

EBITDA, Balance Sheet, Market Value and Liquidity

Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $36.8 million for the quarter, a decrease of 1.4 percent
compared to $37.3 million for the second quarter 2007. For the
six-month period ended June 30, 2008, EBITDA was $73.3 million, a
decrease of 1.1 percent from $74.2 million in the prior year same
period. A definition and reconciliation of EBITDA to income from
continuing operations is provided at the end of this news release.

EBITDA coverage of interest expense was 2.8 times for the three
months ended June 30, 2008, compared to 2.7 times reported in the
prior quarter and the 2.6 times reported for the second quarter 2007.
The Company has provided EBITDA and related non-GAAP coverage ratios
as supplemental disclosure because the Company believes such
disclosure provides useful information regarding its ability to
service and incur debt.

As of June 30, 2008, the Company had an equity market
capitalization of approximately $952.4 million and $1.0 billion of
total debt outstanding (including the pro-rata share of debt in
unconsolidated joint ventures) for a total market capitalization of
approximately $2.0 billion and a debt-to-total market capitalization
of 51.7 percent. Including the convertible notes, 82.8 percent of this
debt was fixed at a weighted average interest rate of 5.06 percent.

During the quarter the Company renewed its three-year $150.0
million unsecured line of credit, and negotiated an increase to $155.0
million, with an expanded lending group comprised of KeyBank,
Wachovia, Bank of America, Wells Fargo and Bank of Montreal. As of
June 30 2008, the Company had $85.0 million outstanding on its
unsecured line of credit, with up to $70.0 million available. The
Company uses this for acquisitions, capital improvements, tenant
improvements, leasing costs and working capital.

Acquisitions

During the quarter the Company acquired through its joint venture
with IREX an 18,018 square-foot, single-tenant office property in
Merrillville, IN, for $5.6 million. The office building is currently
leased to the University of Phoenix, Inc., a wholly-owned subsidiary
of the Apollo Group, Inc.

Subsequent to the end of the quarter, the Company contributed
approximately $60.8 million in cash to the IREX joint venture to
acquire four office buildings in sale-leaseback transactions from Bank
of America, N.A., for an aggregate purchase price of $152.6 million,
including approximately $90.0 million of mortgage debt. The buildings
in Pennsylvania, Nevada, Maryland and New Mexico comprise a total of
approximately 840,000 square feet of space and are 100 percent leased
by Bank of America.

Dispositions

The Company sold Wilson Plaza, an 11,160 square foot neighborhood
shopping center in Batavia, IL, for approximately $1.7 million during
the quarter. Proceeds from this disposition were used to pay down debt
and for general corporate purposes.

Joint Venture Activity

During the quarter the Company contributed to its joint venture
with IREX, Fox Run Square, a 143,512 square foot neighborhood shopping
center in Naperville, IL, anchored by Dominick's Finer Foods and Ace
Hardware that was acquired in January 2008. In addition, in July the
Company closed the sales of three office properties acquired in
sale-leaseback transactions with AT&T Services and the Greenfield
Commons shopping center to 1031 exchange investors. As of mid-July,
all properties acquired through the IREX joint venture in 2007 have
been sold. The Company has recovered, through sales to 1031 exchange
investors, the capital originally invested to acquire the properties
and has recycled that capital into additional IREX joint venture
acquisitions.

During the quarter the Company sold for $2.4 million 4.7 acres of
land at the North Aurora Towne Centre development in North Aurora, IL,
to Ashley Furniture for the development of a 50,000 square foot
furniture store. Subsequent to the end of the quarter, the Company
sold for $1.2 million 1.2 acres of land at the Orchard Crossing
development in Ft. Wayne, IN, to Arby's for construction of a 3,500
square foot restaurant.

Dividends

In May, June and July 2008, the Company paid monthly cash
dividends to stockholders of $0.08167 per common share. The Company
currently pays annual dividends at the rate of $0.98 per share. The
July dividend is the 153rd consecutive monthly dividend paid by Inland
Real Estate Corporation to stockholders.

Guidance

The Company reiterates original guidance that FFO per common share
(basic and diluted) for fiscal year 2008 will be in the range of $1.46
to $1.49.

Conference Call/Webcast

The Company will host a management conference call to discuss its
financial results on Tuesday, August 5, 2008 at 2:00 p.m. CT (3:00
p.m. ET). Hosting the conference call for the Company will be Mark
Zalatoris, President and Chief Executive Officer; Brett Brown, Chief
Financial Officer, and Scott Carr, President of Property Management.
The live conference call can be accessed by dialing 1-800-860-2442 or
1-412-858-4600 for international callers. The conference call also
will be available via live webcast on the Company's website at
www.inlandrealestate.com. The conference call will be recorded and
available for replay beginning at 4:00 p.m. CT (5:00 p.m. ET) on
August 5, 2008, until 8:00 a.m. CT (9:00 a.m. ET) on August 13, 2008.
Interested parties can access the replay of the conference call by
dialing 1-877-344-7529 or 1-412-317-0088 for international callers,
and entering the replay passcode 421300#. An online playback of the
webcast will be archived for at least 60 days in the investor
relations section of the Company's website.

About Inland Real Estate Corporation

Inland Real Estate Corporation is a self-administered and
self-managed publicly traded real estate investment trust (REIT) that
currently owns interests in 146 neighborhood, community, power, and
lifestyle retail centers and single tenant properties located
primarily in the Midwestern United States, with aggregate leasable
space of more than 14 million square feet. Additional information on
Inland Real Estate Corporation, including a copy of the Company's
supplemental financial information for the three and six months ended
June 30, 2008, is available at www.inlandrealestate.com.

This press release contains forward-looking statements.
Forward-looking statements are statements that are not historical,
including statements regarding management's intentions, beliefs,
expectations, representations, plans or predictions of the future, and
are typically identified by such words as "believe," "expect,"
"anticipate," "intend," "estimate," "may," "will," "should" and
"could." The Company intends that such forward-looking statements be
subject to the safe harbors created by Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
There are numerous risks and uncertainties that could cause actual
results to differ materially from those set forth in the
forward-looking statements. Please refer to the documents filed by
Inland Real Estate Corporation with the SEC, specifically the
Company's Annual Report on Form 10-K for the year ended December 31,
2007, for a more complete discussion of these risks and uncertainties.
Inland Real Estate Corporation disclaims any intention or obligation
to update or revise any forward-looking statements whether as a result
of new information, future events or otherwise.

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INLAND REAL ESTATE CORPORATION
Consolidated Balance Sheets
June 30, 2008 and December 31, 2007
(In thousands except per share data)

June 30,
2008 December 31,
(unaudited) 2007
------------ ------------
Assets:

Investment properties:
Land $ 349,974 347,804
Construction in progress 2,913 1,573
Building and improvements 936,895 970,231
------------ ------------

1,289,782 1,319,608
Less accumulated depreciation 263,001 250,433
------------ ------------

Net investment properties 1,026,781 1,069,175

Cash and cash equivalents 16,706 18,378
Investment in securities 17,397 18,074
Accounts and mortgage receivable 49,486 63,986
Investment in and advances to
unconsolidated joint ventures 97,833 103,952
Acquired lease intangibles, net 22,560 27,409
Deferred costs, net 9,632 9,592
Other assets 9,317 10,753
------------ ------------

Total assets $ 1,249,712 1,321,319
============ ============

Liabilities:

Accounts payable and accrued expenses $ 34,146 35,590
Acquired below market lease intangibles,
net 3,201 3,429
Distributions payable 5,394 5,363
Mortgages payable 562,830 606,680
Line of credit 85,000 100,000
Convertible notes 180,000 180,000
Other liabilities 17,982 24,404
------------ ------------

Total liabilities 888,553 955,466
------------ ------------

Commitments and contingencies

Minority interest 2,337 2,494
------------ ------------

Stockholders' Equity:

Preferred stock, $0.01 par value, 6,000
Shares authorized; none issued and no
change
outstanding at June 30, 2008 and December
31, 2007 - -
Common stock, $0.01 par value, 500,000
Shares authorized; 66,047 and 65,669
Shares issued and outstanding at June 30,
2008 and December 31 2007, respectively 661 657
Additional paid-in capital (net of
offering costs of $58,816) 620,959 615,298
Accumulated distributions in excess of
net income (260,150) (248,262)
Accumulated other comprehensive loss (2,648) (4,334)
------------ ------------

Total stockholders' equity 358,822 363,359
------------ ------------

Total liabilities and stockholders' equity $ 1,249,712 1,321,319
============ ============
*T

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INLAND REAL ESTATE CORPORATION
Consolidated Statements of Operations
For the three and six months ended June 30, 2008 and 2007 (unaudited)
(In thousands except per share data)

Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Revenues:
Rental income $ 32,430 33,354 65,562 64,989
Tenant recoveries 12,355 10,657 27,789 25,385
Other property income 1,495 1,118 1,985 1,839
Fee income from unconsolidated
joint ventures 1,433 475 2,449 1,131
-------- -------- -------- --------
Total revenues 47,713 45,604 97,785 93,344
-------- -------- -------- --------

Expenses:
Property operating expenses 6,051 4,962 15,225 12,865
Real estate tax expense 8,225 7,841 16,625 15,942
Depreciation and amortization 11,866 10,950 22,678 20,919
Provision for asset impairment 666 - 666 -
General and administrative
expenses 3,538 3,040 6,591 6,364
-------- -------- -------- --------
Total expenses 30,346 26,793 61,785 56,090
-------- -------- -------- --------

Operating income 17,367 18,811 36,000 37,254

Other income (expense) (270) 1,310 1,084 2,540
Gain on sale of joint venture
interest 3,321 307 3,975 2,229
Gain on extinguishment of debt - 319 - 319
Interest expense (10,869) (12,357) (22,609) (23,761)
Minority interest (103) (111) (216) (219)
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated joint ventures,
income tax expense of taxable REIT
subsidiary and discontinued
operations 9,446 8,279 18,234 18,362

Income tax benefit (expense) of
taxable REIT subsidiary (163) 10 (406) (424)
Equity in earning of
unconsolidated joint ventures 389 1,010 1,352 2,943
-------- -------- -------- --------
Income from continuing operations 9,672 9,299 19,180 20,881
Income from discontinued
operations 303 1,406 1,223 1,517
-------- -------- -------- --------

Net income available to common
stockholders 9,975 10,705 20,403 22,398

Other comprehensive income:
Unrealized gain (loss) on
investment securities 1,146 127 1,707 (285)
Unrealized gain (loss) on
derivative instruments 367 - (21) -
-------- -------- -------- --------
Comprehensive income $ 11,488 10,832 22,089 22,113
======== ======== ======== ========

Basic and diluted earnings
available to common shares per
weighted average common share:

Income from continuing operations $ 0.15 0.14 0.29 0.32
Discontinued operations - 0.02 0.02 0.02
-------- -------- -------- --------
Net income available to common
stockholders per weighted
average common share - basic and
diluted $ 0.15 0.16 0.31 0.34
======== ======== ======== ========

Weighted average number of common
shares outstanding - basic 65,929 65,178 65,839 65,109
======== ======== ======== ========
Weighted average number of common
shares outstanding - diluted 65,989 65,248 65,899 65,179
======== ======== ======== ========
*T

Non-GAAP Financial Measures

We consider FFO a widely accepted and appropriate measure of
performance for a REIT. FFO provides a supplemental measure to compare
our performance and operations to other REITs. Due to certain unique
operating characteristics of real estate companies, NAREIT has
promulgated a standard known as FFO, which it believes more accurately
reflects the operating performance of a REIT such as ours. As defined
by NAREIT, FFO means net income computed in accordance with U.S. GAAP,
excluding gains (or losses) from sales of operating property, plus
depreciation and amortization and after adjustments for unconsolidated
partnership and joint ventures in which the REIT holds an interest. We
have adopted the NAREIT definition for computing FFO. Management uses
the calculation of FFO for several reasons. We use FFO in conjunction
with our acquisition policy to determine investment capitalization
strategy and we also use FFO to compare our performance to that of
other REITs in our peer group. Additionally, FFO is used in certain
employment agreements to determine incentives payable by us to certain
executives, based on our performance. The calculation of FFO may vary
from entity to entity since capitalization and expense policies tend
to vary from entity to entity. Items that are capitalized do not
impact FFO whereas items that are expensed reduce FFO. Consequently,
our presentation of FFO may not be comparable to other similarly
titled measures presented by other REITs. FFO does not represent cash
flows from operations as defined by U.S. GAAP, it is not indicative of
cash available to fund all cash flow needs and liquidity, including
our ability to pay distributions and should not be considered as an
alternative to net income, as determined in accordance with U.S. GAAP,
for purposes of evaluating our operating performance. The following
table reflects our FFO for the periods presented, reconciled to net
income available to common stockholders for these periods:

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Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------

Net income available to common
stockholders $ 9,975 10,705 20,404 22,398
Gain on sale of investment
properties, net of minority
interest (517) (1,223) (1,348) (1,223)
Equity in depreciation of
unconsolidated joint ventures 2,582 2,490 5,124 4,952
Amortization on in-place lease
intangibles 753 946 1,612 1,644
Amortization on leasing
commissions 312 194 507 362
Depreciation, net of minority
interest 10,719 9,845 20,435 19,020
-------- -------- -------- --------

Funds From Operations $ 23,824 22,957 46,734 47,153
======== ======== ======== ========

Net income available to common
stockholders per weighted
average common share - basic and
diluted $ 0.15 0.16 0.31 0.34
======== ======== ======== ========

Funds From Operations, per common
share - basic and diluted $ 0.36 0.35 0.71 0.72
======== ======== ======== ========

Weighted average number of common
shares outstanding, basic 65,929 65,178 65,839 65,109
======== ======== ======== ========

Weighted average number of common
shares outstanding, diluted 65,989 65,248 65,899 65,179
======== ======== ======== ========
*T

EBITDA is defined as earnings (losses) from operations excluding:
(1) interest expense; (2) income tax benefit or expenses; (3)
depreciation and amortization expense; and (4) gains (loss) on
non-operating property. We believe EBITDA is useful to us and to an
investor as a supplemental measure in evaluating our financial
performance because it excludes expenses that we believe may not be
indicative of our operating performance. By excluding interest
expense, EBITDA measures our financial performance regardless of how
we finance our operations and capital structure. By excluding
depreciation and amortization expense, we believe we can more
accurately assess the performance of our portfolio. Because EBITDA is
calculated before recurring cash charges such as interest expense and
taxes and is not adjusted for capital expenditures or other recurring
cash requirements, it does not reflect the amount of capital needed to
maintain our properties nor does it reflect trends in interest costs
due to changes in interest rates or increases in borrowing. EBITDA
should be considered only as a supplement to net earnings and may be
calculated differently by other equity REITs.

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Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------

Income from continuing operations $ 9,672 9,299 19,180 20,881
Gain on non-operating property (256) - (681) (1,312)
Income tax benefit (expense) of
taxable REIT subsidiary 163 (10) 406 424
Income (loss) from discontinued
operations, excluding gains (214) 183 (123) 294
Interest expense 10,869 12,357 22,609 23,761
Interest expense associated with
discontinued operations - 113 29 289
Interest expense associated with
unconsolidated joint ventures 2,067 1,770 4,050 3,675
Depreciation and amortization 11,866 10,950 22,678 20,919
Depreciation and amortization
associated with discontinued
operations 4 117 43 271
Depreciation and amortization
associated with unconsolidated
joint ventures 2,582 2,490 5,124 4,952
-------- -------- -------- --------

EBITDA $ 36,753 37,269 73,315 74,154
======== ======== ======== ========

Total Interest Expense $ 12,936 14,240 26,688 27,725
======== ======== ======== ========

EBITDA: Interest Expense Coverage
Ratio 2.8x 2.6x 2.7x 2.7x
======== ======== ======== ========
*T

Inland Real Estate Corporation (Investors/Analysts):
Dawn Benchelt, Investor Relations Director
(630) 218-7364
benchelt@inlandrealestate.com
or
Inland Communications, Inc. (Media):
Matthew Tramel, Media Relations Director
(630) 218-8000 x4896
tramel@inlandgroup.com

Copyright Business Wire 2008