<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
June 30, 1995
For the period ended ____________________________________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
0-12537
Commission File Number: _________________________________________________
First Capital Income Properties, Ltd. - Series VIII
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2192277
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
Not applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated July 28, 1982, included
in the Partnership's Registration Statement on Form S-11, is incorporated herein
by reference in Part I of this report.
<PAGE>
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 6,486,700 $ 7,260,400
Buildings and improvements 30,911,500 36,197,000
----------------------------------------------------------------------------
37,398,200 43,457,400
Accumulated depreciation and amortization (10,704,100) (11,909,800)
----------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 26,694,100 31,547,600
Investment in mortgage loan receivable 1,064,000
----------------------------------------------------------------------------
26,694,100 32,611,600
Cash and cash equivalents 14,941,300 8,356,100
Rents receivable 167,300 259,700
Other assets (net of accumulated amortization on
loan acquisition costs of $163,300 and $104,500,
respectively) 58,200 115,700
----------------------------------------------------------------------------
$41,860,900 $41,343,100
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 397,900 $ 237,900
Due to Affiliates 152,600 115,200
Security deposits 67,200 110,800
Distributions payable 6,139,000 777,800
Other liabilities 19,500 4,900
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6,776,200 1,246,600
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Partners' capital:
General Partners 186,800 178,000
Limited Partners (70,000 Units authorized, issued
and outstanding) 34,897,900 39,918,500
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35,084,700 40,096,500
----------------------------------------------------------------------------
$41,860,900 $41,343,100
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1995 and the year ended December 31, 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1994 $ (44,600) $38,345,100 $38,300,500
Net income for the year ended December
31, 1994 533,700 19,423,400 19,957,100
Distributions for the year ended December
31, 1994 (311,100) (17,850,000) (18,161,100)
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Partners' capital, December 31, 1994 178,000 39,918,500 40,096,500
Net income for the six months ended
June 30, 1995 186,600 1,829,600 2,016,200
Distributions for the six months ended
June 30, 1995 (177,800) (6,850,200) (7,028,000)
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Partners' capital,
June 30, 1995 $ 186,800 $34,897,900 $35,084,700
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</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $1,342,900 $ 1,387,600
Interest on short-term investments 187,500 242,500
Interest on mortgage loan receivable 29,200
Gain on sale of property 877,000 18,964,600
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2,407,400 20,623,900
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Expenses:
Interest 203,300
Depreciation and amortization 304,900 317,100
Property operating:
Affiliates 103,900 76,600
Nonaffiliates 153,200 164,400
Real estate taxes 153,400 163,600
Insurance--Affiliate 9,900 19,700
Repairs and maintenance 142,700 132,500
General and administrative:
Affiliates 9,800 11,800
Nonaffiliates 52,300 31,000
------------------------------------------------------------------------------
930,100 1,120,000
------------------------------------------------------------------------------
Net income before extraordinary (loss) on early
extinguishment of debt 1,477,300 19,503,900
Extraordinary (loss) on early extinguishment of debt (914,300)
------------------------------------------------------------------------------
Net income $1,477,300 $18,589,600
------------------------------------------------------------------------------
Net income allocated to General Partners $ 97,700 $ 302,900
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Net income allocated to Limited Partners $1,379,600 $18,286,700
------------------------------------------------------------------------------
Net income before extraordinary (loss) on early
extinguishment of debt allocated to Limited Partners
per Unit (70,000 Units authorized, issued and
outstanding) $ 19.71 $ 274.14
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Net income allocated to Limited Partners per Unit
(70,000 Units authorized, issued and outstanding) $ 19.71 $ 261.24
------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $2,721,300 $ 3,592,800
Interest on short-term investments 311,800 319,400
Interest on mortgage loan receivable 16,300 58,300
Gain on sale of property 877,000 18,964,600
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3,926,400 22,935,100
------------------------------------------------------------------------------
Expenses:
Interest 794,600
Depreciation and amortization 682,300 831,000
Property operating:
Affiliates 194,000 152,100
Nonaffiliates 331,900 331,800
Real estate taxes 290,900 324,300
Insurance--Affiliate 29,600 39,400
Repairs and maintenance 266,900 264,700
General and administrative:
Affiliates 19,400 16,100
Nonaffiliates 95,200 84,200
------------------------------------------------------------------------------
1,910,200 2,838,200
------------------------------------------------------------------------------
Net income before extraordinary (loss) on early
extinguishment of debt 2,016,200 20,096,900
Extraordinary (loss) on early extinguishment of debt (914,300)
------------------------------------------------------------------------------
Net income $2,016,200 $19,182,600
------------------------------------------------------------------------------
Net income allocated to General Partners $ 186,600 $ 380,700
------------------------------------------------------------------------------
Net income allocated to Limited Partners $1,829,600 $18,801,900
------------------------------------------------------------------------------
Net income before extraordinary (loss) on early
extinguishment of debt allocated to Limited Partners
per Unit (70,000 Units authorized, issued and
outstanding) $ 26.14 $ 281.50
------------------------------------------------------------------------------
Net income allocated to Limited Partners per Unit
(70,000 Units authorized, issued and outstanding) $ 26.14 $ 268.60
------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,016,200 $19,182,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 682,300 831,000
(Gain) on sale of property (877,000) (18,964,600)
Forgiveness of principal on mortgage loan
receivable 20,000
Extraordinary loss on early extinguishment of debt 914,300
Changes in assets and liabilities:
Decrease in rents receivable 92,400 19,500
(Increase) decrease in other assets (1,300) 21,400
Increase in accounts payable and accrued expenses 160,000 184,600
Increase (decrease) in due to Affiliates 37,400 (9,100)
Increase (decrease) in other liabilities 14,600 (137,200)
------------------------------------------------------------------------------
Net cash provided by operating activities 2,144,600 2,042,500
------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of property 5,181,000 43,302,700
Payments for capital and tenant improvements (74,000) (307,800)
Proceeds from retirement of mortgage loan
receivable 1,044,000
(Increase) in escrow deposits (79,500)
Maturity of restricted certificate of deposit 75,000
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Net cash provided by investing activities 6,151,000 42,990,400
------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on mortgage loans payable (21,611,600)
Prepayment cost on mortgage loan payable (914,300)
Distributions paid to Partners (1,666,800) (16,823,300)
(Decrease) increase in security deposits (43,600) 11,500
------------------------------------------------------------------------------
Net cash (used for) financing activities (1,710,400) (39,337,700)
------------------------------------------------------------------------------
Net increase in cash and cash equivalents 6,585,200 5,695,200
Cash and cash equivalents at the beginning of the
period 8,356,100 10,171,300
------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $14,941,300 $15,866,500
------------------------------------------------------------------------------
Supplemental information:
Interest paid during the period $ 794,600
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement on Form S-11, filed with the
Securities and Exchange Commission. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles. Under this method of accounting, revenues are
recorded when earned and expenses are recorded when incurred.
The financial information included in these financial statements is unaudited;
however, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter and six months ended June 30, 1995, are not necessarily indicative
of the operating results for the year ending December 31, 1995.
The 1994 financial statements included the Partnership's 50% interest in a
joint venture with an Affiliated partnership. This joint venture was formed for
the purpose of acquiring an interest in the El Paso Natural Gas Building ("El
Paso") which was operated under the common control of the Managing General
Partner, prior to its sale on April 6, 1994. Accordingly, the Partnership's pro
rata share of the venture's revenues, expenses, assets, liabilities and capital
was included in the financial statements.
Certain reclassifications have been made to the previously reported 1994
statements in order to provide comparability with the 1995 statements. These
reclassifications have no effect on net income or Partners' capital.
Cash equivalents are considered all highly liquid investments purchased with a
maturity of three months or less.
Property sales or dispositions are recorded when title transfers and sufficient
consideration has been received by the Partnership. Upon disposition, the
related costs and accumulated depreciation and amortization are removed from
the respective accounts. Any gain or loss on sale or disposition is recognized
in accordance with generally accepted accounting principles.
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim or as otherwise
disclosed herein.
2. RELATED PARTY TRANSACTIONS:
Subsequent to December 23, 1982, the Termination of the Offering, the General
Partners are entitled to 10% of distributable Cash Flow (as defined by the
Partnership Agreement), as a Partnership Management Fee. In accordance with the
Partnership Agreement, Net Profits (exclusive of Net Profits from the sale or
disposition of Partnership properties) shall be allocated first to the General
Partners in an amount equal to the greater of the General Partners' Partnership
Management Fee, or 1% of such Net Profits and the balance, if any, to the Unit
Holders. Net Profits from the sale of a Partnership property shall be
allocated: first, to the General Partners and the Unit Holders with negative
balances in their capital accounts, pro rata in proportion to such respective
negative balances, to the extent of the total of such negative balances;
second, to the General Partners, in an amount necessary to make the aggregate
amount of their capital accounts equal to the greater of the Sale Proceeds to
be distributed to the General Partners or 1% of such Net Profits; and third,
the balance, if any, to the Unit Holders. In all events there shall be
allocated to the General Partners not less than 1% of Net Profits from the sale
of a Partnership property. For the quarter and six months ended June 30, 1995,
the General Partners were allocated distributable Cash Flow (as defined by the
Partnership Agreement), and accordingly, Net Profits from operations of
approximately $88,900 and $177,800, respectively, and Net Profits from the sale
of a Partnership property of approximately $8,800.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Paid
-------------------
Quarter Six Months Payable
------------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $ 95,800 $153,600 $106,200
Reimbursement of property insurance premiums, at
cost 29,600 29,600 None
Real estate commissions (a) None 37,700
Reimbursement of expenses, at cost:
(1) Accounting 4,600 11,300 5,700
(2) Investor communication 1,400 3,900 1,400
(3) Mortgage servicing None None 1,600
(4) Legal 12,300 14,400 None
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$143,700 $212,800 $152,600
------------------------------------------------------------------------------
</TABLE>
(a) As of June 30, 1995, $37,700 was due to the Managing General Partner for
real estate commissions earned in connection with the sale of the five
buildings comprising the Atlanta Gateway Park Industrial Center. These
commissions have been accrued but not paid. Under the terms of the
Partnership Agreement, these commissions will not be paid until such time
as the Limited Partners have received cumulative distributions of Sale or
Refinancing Proceeds equal to 100% of their Original Capital Contribution
plus a cumulative return (including all Cash Flow as defined by the
Partnership Agreement) which has been distributed to the Limited Partners
from the initial date of investment) of 6% simple interest per annum on
their Capital Investment from the initial date of investment.
Revco D. S., Inc. ("Revco"), a drug store company, of which a 20% ownership
interest was acquired by Zell Chilmark Fund L.P., an Affiliate of the Managing
General Partner, on June 1, 1992, is obligated to the Partnership under a lease
of office space at Walker Springs Plaza. During the quarter and six months
ended June 30, 1995, Revco paid rent of approximately $22,000 and $32,300,
respectively. The rents paid by Revco are comparable to those paid by other
tenants at Walker Springs Plaza.
3. INVESTMENT IN MORTGAGE LOAN RECEIVABLE:
On April 30, 1986, the Partnership acquired a first mortgage loan with an
aggregate outstanding principal balance of $1,064,000. The loan was purchased
at a discount of $50,700, which amount was amortized over the life of the loan.
The real property mortgaged by this loan was held as collateral under the loan
agreement. In addition, payment of the mortgage loan was guaranteed by the
original holder of the loan if the borrower were to be declared in default by
the Partnership. As of December 31, 1994, the loan balance remained at
$1,064,000, earning interest at a rate of 10%. The maturity date of this
mortgage loan investment, which was June 1, 1993, was extended until December
31, 1994 and then again to January 31, 1995. All unpaid interest and an
extension fee of approximately 1.5% of the principal balance were received from
the obligor of the loan as consideration for the extension from June 1, 1993 to
December 31, 1994. On February 24, 1995, the Partnership received approximately
$1,060,300, including approximately $16,300 in accrued interest from January 1,
1995, in full satisfaction of this mortgage loan receivable.
4. PROPERTY SALE:
On June 16, 1995 the Partnership sold its interest in the Tuckerstone Commons /
Rooker Royal I & II Warehouses, located in Atlanta, Georgia, for a sale price
of $5,300,000. The Partnership incurred selling expenses of approximately
$119,000, including approximately $5,900 in legal expenses paid to an Affiliate
of the Managing General Partner. The Partnership received net sale proceeds of
approximately $5,181,000. The net gain reported by the Partnership for
financial statement purposes was approximately $877,000. For tax reporting
purposes the Partnership will report a net gain of approximately $1,957,600 for
the year ending December 31, 1995. This sale was an all-cash sale.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a discussion of the Partnership's business.
During the disposition phase of the Partnership's life cycle, results of net
income and cash flows as defined by generally accepted accounting principals
("GAAP") as well as Cash Flow (as defined by the Partnership Agreement) are
complicated to compare between periods. These results are generally expected
to decline as real property interests are sold or disposed of since the
Partnership no longer receives the results generated from such real property
interests. Accordingly, rental income, interest expense, property operating
expenses, real estate taxes, insurance and repairs and maintenance expenses
are expected to decline as well, but will continue to comprise the significant
components of net income and cash flows as defined by GAAP as well as Cash
Flow (as defined by the Partnership Agreement) until the final property is
sold. Also, during the disposition phase, cash and cash equivalents increase
as Sale Proceeds are received and decrease as the Partnership utilizes these
proceeds for the purposes of distributions to Limited Partners and making
capital improvements to the Partnership's remaining properties. Prior to being
utilized for such purposes, these proceeds are invested in short-term money
market instruments. Sale and Refinancing Proceeds are excluded from the
determination of Cash Flow (as defined by the Partnership Agreement).
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the quarters and six months ended June 30, 1995
and 1994. The discussion following the table should be read in conjunction
with the Financial Statements and Notes thereto appearing in this report.
<TABLE>
<CAPTION>
Comparative Operating Results (a)
For the Six Months
For the Quarters Ended Ended
6/30/95 6/30/94 6/30/95 6/30/94
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BROOKWOOD METROPLEX OFFICE BUILDINGS I & II
Rental revenues $ 612,200 $ 556,800 $1,176,800 $1,091,200
---------------------------------------------------------------------------------
Property net income (loss) $ 174,300 $ (34,300) $ 246,100 $ (72,800)
---------------------------------------------------------------------------------
Average occupancy 100% 99% 99% 96%
---------------------------------------------------------------------------------
OLD MILL PLACE SHOPPING CENTER
Rental revenues $ 313,300 $ 336,000 $ 667,200 $ 648,900
---------------------------------------------------------------------------------
Property net income $ 112,600 $ 129,500 $ 278,400 $ 241,700
---------------------------------------------------------------------------------
Average occupancy 91% 96% 91% 96%
---------------------------------------------------------------------------------
WALKER SPRINGS PLAZA SHOPPING CENTER
Rental revenues $ 231,300 $ 277,600 $ 511,000 $ 552,300
---------------------------------------------------------------------------------
Property net income $ 84,300 $ 135,700 $ 241,600 $ 281,400
---------------------------------------------------------------------------------
Average occupancy 100% 99% 100% 97%
---------------------------------------------------------------------------------
TUCKERSTONE COMMONS/ROOKER ROYAL I & II WAREHOUSES (B)
Rental revenues $ 182,900 $ 154,400 $ 383,100 $ 296,800
---------------------------------------------------------------------------------
Property net income $ 100,700 $ 51,500 $ 177,700 $ 84,600
---------------------------------------------------------------------------------
Average occupancy 100% 82% 99% 85%
---------------------------------------------------------------------------------
EL PASO NATURAL GAS BUILDING (C)
Rental revenues $ 62,700 $1,003,400
---------------------------------------------------------------------------------
Property net income $ 19,900 $ 325,500
---------------------------------------------------------------------------------
Average occupancy 100% 100%
---------------------------------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are either not directly
related to individual property operating results such as interest income
and general and administrative expenses or are related to properties
previously owned by the Partnership.
(b) Tuckerstone Commons/Rooker Royal I & II Warehouses ("Rooker")
was sold on June 16, 1995. The property net income excludes a gain on sale
of property of $877,000 which is included in the Statements of Income and
Expenses for the quarter and six months ended June 30, 1995.
(c) El Paso Natural Gas Building ("El Paso") was sold on April 6, 1994. The
property net income excludes the gain on sale of approximately $18,964,600
and a prepayment penalty of approximately ($914,300) which were in the
Statements of Income and Expenses for the quarter and six months ended
June 30, 1994.
Net income for the Partnership for the quarter and six months ended June 30,
1995 decreased approximately $17,112,300 and $17,166,400, respectively, when
compared to the quarter and six months ended June 30, 1994. The decreases were
primarily due to 1) a lower gain on the sale of Rooker in 1995 when compared
to the net gain on the sale (including the extraordinary loss on the early
extinguishment of debt) of El Paso in 1994 and 2) the absence of the
operations of El Paso in 1995.
Excluding the net gains on sold properties and the operations of El Paso in
1994, net income for the Partnership for the quarter and six months ended June
30, 1995 increased approximately $81,000 or 16% and $332,400 or 41%,
respectively, when compared to the prior year quarter and six months. The
impact of the absence in 1995 of interest expense payments on the
Partnership's mortgage loan collateralizing Brookwood Metroplex Office
Buildings I & II ("Brookwood") was the primary factor contributing to the
increase in net income for the quarter and six month periods under comparison.
In addition, increases in rental revenues, decreases in real estate tax
expense and insurance expense contributed to the increase in net income for
the periods under comparison. Partially offsetting the increase in net income
exclusive of the net gains on sold properties and the operations of El Paso 1n
1994 were: 1) lower income earned on the mortgage loan receivable of $29,200
or 100% and $42,000 or 72%, respectively, as a result of the payoff of the
loan on February 24, 1995; 2) increased property operating expenses; 3)
increased general and administrative expenses of $19,300 or 45% and $14,300 or
14%, respectively, due to an increase in printing and mailing expenses and
professional service costs; 4) lower interest income earned on short-term
investments of approximately $55,000 or 23% and $7,600 or 2%, respectively,
due primarily to 1994 having an increase in funds available for investment
prior to the distribution to Limited Partners of a portion of Sale Proceeds
from El Paso and the repayment of the mortgage loan collateralized by
Brookwood and 5) increased repair and maintenance expenses.
For purposes of the following comparative discussion, the operating results of
El Paso have been excluded.
Total rental revenues increased approximately $18,000 or 1.4% and $131,900 or
5.1%, respectively, for the quarter and six months ended June 30, 1995 when
compared to the quarter and six months ended June 30, 1994. The primary
factors which caused the increases in rental revenues were increases at: 1)
Rooker due to an increase in the average occupancy rates and 2) Brookwood and
Old Mill Place Shopping Center ("Old Mill") due to increases in tenant expense
reimbursements as a result of reimbursements in 1995 which included prior year
reimbursements that were greater than had been previously estimated and an
increase in the average base rental rates charged to new and renewing tenants.
Partially offsetting the increases in rental revenues was a decrease in tenant
real estate tax reimbursements at Walker Springs Plaza Shopping Center
("Walker Springs") as a result of reimbursements in 1994 which included prior
year reimbursements that were greater than had been previously estimated.
Total real estate tax expense decreased approximately $10,200 or 6% and
$33,400 or 10%, respectively, for the quarter and six months ended June 30,
1995 when compared to the quarter and six months ended June 30, 1994. The
decreases were due to lower estimated real estate tax liabilities in 1995 for
Old Mill and Rooker and the receipt in 1995 of a partial refund of 1993 real
estate taxes for Walker Springs.
Total property operating expenses increased approximately $13,100 or 5% and
$49,300 or 10%, respectively, for the comparable periods. The primary factors
which caused the increase in property operating expenses were increases in
property management and leasing fees as well as utilities at Brookwood and in
professional service costs at Old Mill.
Insurance expense decreased by approximately $9,800 or 50% and $9,800 or 25%,
respectively, during the quarter and six months ended June 30, 1995, when
compared to the comparable 1994 periods. These decreases were primarily due to
lower group rates on the Partnership's
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
combined insurance coverage as a result of a minimal amount of claims made over
the past several years, which provided a good loss experience relative to the
Partnership's properties.
To increase and or maintain occupancy levels at the Partnership's properties,
the Managing General Partner, through its Affiliated asset and property
management groups, continues to take the following actions: 1) implementation
of marketing programs, including hiring of third-party leasing agents or
providing on-site leasing personnel, advertising, direct mail campaigns and
development of building brochures; 2) early lease renewal of existing tenants
and addressing any expansion needs these tenants may have; 3) promotion of
local broker events and networking with local brokers; 4) networking with
national level retailers; 5) cold-calling other businesses and tenants in the
market area; and 6) providing rental concessions or competitively pricing
rental rates depending on market conditions.
LIQUIDITY AND CAPITAL RESOURCES
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its properties.
Notwithstanding the Partnership's intention relative to the sale of its
properties, another primary objective of the Partnership is to provide cash
distributions to Limited Partners from Partnership operations. To the extent
cash distributions exceed net income, such excess distributions will be treated
as a return of capital. Cash Flow (as defined by the Partnership Agreement) is
generally not equal to Partnership net income or cash flows as defined by GAAP,
since certain items are treated differently under the Partnership Agreement
than under GAAP. Management believes that to facilitate a clear understanding
of the Partnership's operations, an analysis of Cash Flow (as defined by the
Partnership Agreement) should be examined in conjunction with an analysis of
net income or cash flows as defined by GAAP. The following table includes a
reconciliation of Cash Flow (as defined by the Partnership Agreement) to cash
flow provided by operating activities as determined by GAAP, is not indicative
of actual distributions to Partners and should not be considered as an
alternative to the results disclosed in the Statements of Income and Expenses
and Statements of Cash Flows.
<TABLE>
<CAPTION>
Comparative Cash Flow
Results For the Six
Months Ended
6/30/95 6/30/94
------------------------------------------------------------------------------
<S> <C> <C>
Amount of Cash Flow (as defined in the Partnership
Agreement) $ 1,821,500 $ 1,730,200
Items of reconciliation:
Forgiveness of principal on mortgage loan
receivable 20,000
Principal payments on mortgage loan payable 233,100
Decrease in current assets 91,100 40,900
Increase in current liabilities 212,000 38,300
------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,144,600 $ 2,042,500
------------------------------------------------------------------------------
Net cash provided by investing activities $ 6,151,000 $ 42,990,400
------------------------------------------------------------------------------
Net cash (used for) financing activities $(1,710,400) $(39,337,700)
------------------------------------------------------------------------------
</TABLE>
The increase in Cash Flow (as defined by the Partnership Agreement) of
approximately $91,300 for the six months ended June 30, 1995 when compared to
six months ended June 30, 1994 was primarily due to the increase in net income
exclusive of the operations of El Paso, as previously discussed.
The increase in the Partnership's cash position as of June 30, 1995 when
compared to December 31, 1994 was primarily due to the proceeds received from
the sale of Rooker, the net cash provided by operating activities and the net
cash received on the retirement of the mortgage loan receivable exceeding the
distributions paid to Partners and the payments for capital and tenant
improvements. The liquid assets of the Partnership as of June 30, 1995, are
comprised of Sale and Refinancing Proceeds and undistributed cash provided by
operating activities retained for working capital purposes.
Net cash provided by operating activities increased approximately $102,100 for
the six months ended June 30, 1995 when compared to the six months ended June
30, 1994. This increase was primarily due to an increase in the operating
results of the Partnership's remaining properties, particularly Brookwood, as
well as to the timing of the collection of tenant's rental payments and the
payment of certain Partnership expenses, partially offset by the absence of
operating results generated from El Paso.
Net cash provided by investing activities decreased approximately $36,839,400
for the six months ended June 30, 1995 when compared to the six months ended
June 30, 1994. This decrease was primarily due to the fact that the net
proceeds received on the sale of El Paso in April 1994 were greater than the
net proceeds received on the retirement of the mortgage loan receivable and the
sale of Rooker in February and June 1995, respectively. Partially offsetting
the decrease in net cash provided by investing activities was the decrease in
payments made for capital and tenant improvements of $233,800.
During the six months ended June 30, 1995, the Partnership spent approximately
$74,000 for capital and tenant improvements and has budgeted to spend
approximately $400,000 during the remainder of 1995. Of the remaining budgeted
amount, approximately $145,000, $135,000, and $120,000 relates to anticipated
capital and tenant improvements and leasing costs expected to be incurred at
Old Mill, Brookwood and Walker Springs, respectively. The Managing General
Partner believes these improvements will be necessary to secure new tenants and
to maintain occupancy levels as existing tenant leases expire.
On February 24, 1995, the Partnership received approximately $1,060,300,
including approximately $16,300 in accrued interest from January 1, 1995, in
full satisfaction of the mortgage loan receivable. The maturity date of this
mortgage loan investment, which was originally June 1, 1993, had been extended
until January 31, 1995.
On June 16, 1995 the Partnership sold its interest in Rooker, located in
Atlanta, Georgia, for a sale price of $5,300,000. The Partnership incurred
selling expenses of approximately $119,000, including approximately $5,900 in
legal expenses paid to an Affiliate of the Managing General Partner. The
Partnership received net sale proceeds of approximately $5,181,000. The
Partnership will distribute $5,250,000, or $75 per Unit, as Sale Proceeds to
the Limited Partners in late August 1995.
Net cash (used for) financing activities changed from $39,337,700 for the six
months ended June 30, 1994 to $1,710,400 for the six months ended June 30,
1995. This change was primarily due to the payoff of the mortgage loan
collateralized by El Paso, including a prepayment penalty, and the
distributions paid to Partners in 1994 exceeding the distributions paid to
Partners in 1995. Partially offsetting the change was a decrease in security
deposits, primarily as a result of the sale of Rooker.
The Managing General Partner continues to take a conservative approach to
projections of future rental income and to maintain higher levels of cash
reserves for the Partnership. The higher levels of cash reserves are needed due
to the anticipated capital and tenant improvements necessary to be made to the
Partnership's properties during the next several years. The Managing General
Partner believes that Cash Flow (as defined by the Partnership Agreement) is
one of the best and least expensive sources of cash. As a result of this, cash
continues to be retained to supplement working capital reserves. For the six
months ended June 30, 1995, Cash Flow (as defined by the Partnership Agreement)
retained to supplement working capital reserves approximated $43,500.
Distributions to Limited Partners for the quarter ended June 30, 1995 were
declared in the amount of $11.43 per Unit. Cash distributions are made 60 days
after the quarter-end. The amount of future distributions to Limited Partners
will ultimately be dependent upon the performance of the Partnership's
investments as well as the amount of cash retained for future cash
requirements. Accordingly, there can be no assurance of the availability of
cash for distribution to Partners.
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K dated June 16, 1995 was filed reporting the
sale of the Tuckerstone Commons/Rooker Royal I & II Warehouses,
located in Atlanta, Georgia.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES VIII
BY: FIRST CAPITAL FINANCIAL CORPORATION
MANAGING GENERAL PARTNER
Date: August 14, 1995 By: /s/ DOUGLAS CROCKER II
--------------- ---------------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1995 By: /s/ NORMAN M. FIELD
--------------- ---------------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
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<NAME> FIRST CAPITAL INCOME PROPERTIES - SERIES VIII
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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