<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
For the period ended June 30, 1996
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ___________________
Commission File Number: 0-12537
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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
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(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
Not applicable
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(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,
1996 December 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 6,086,700 $ 6,086,700
Buildings and improvements 29,631,100 29,524,100
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35,717,800 35,610,800
Accumulated depreciation and amortization (11,572,500) (11,217,400)
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Total investment properties, net of accumulated
depreciation and amortization 24,145,300 24,393,400
Cash and cash equivalents 2,153,800 9,248,100
Investment in debt securities 7,003,300
Rents receivable 139,600 255,300
Other assets 16,400 13,200
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$33,458,400 $33,910,000
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 409,900 $ 572,300
Due to Affiliates 88,300 66,600
Distributions payable 4,826,100 836,100
Security deposits 52,900 63,200
Other liabilities 2,500 32,800
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5,379,700 1,571,000
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Partners' capital:
General Partners 0 0
Limited Partners (70,000 Units issued and
outstanding) 28,078,700 32,339,000
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28,078,700 32,339,000
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$33,458,400 $33,910,000
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1996 (Unaudited)
and the year ended December 31, 1995
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital, January 1, 1995 $ 178,000 $39,918,500 $40,096,500
Net income for the year ended
December 31, 1995 167,000 775,700 942,700
Distributions for the year ended
December 31, 1995 (345,000) (8,355,200) (8,700,200)
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Partners' capital, December 31, 1995 0 32,339,000 32,339,000
Net income for the six months ended
June 30, 1996 167,200 1,234,700 1,401,900
Distributions for the six months ended
June 30, 1996 (167,200) (5,495,000) (5,662,200)
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Partners' capital, June 30, 1996 $ 0 $28,078,700 $28,078,700
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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, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Income:
Rental $1,435,000 $1,342,900
Interest on investments 122,300 187,500
Gain on sale of property 877,000
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1,557,300 2,407,400
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Expenses:
Depreciation and amortization 177,000 304,900
Property operating:
Affiliates 85,900 103,900
Nonaffiliates 146,600 153,200
Real estate taxes 137,800 153,400
Insurance--Affiliate 12,200 9,900
Repairs and maintenance 117,100 142,700
General and administrative:
Affiliates 12,000 9,800
Nonaffiliates 36,400 52,300
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725,000 930,100
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Net income $ 832,300 $1,477,300
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Net income allocated to General Partners $ 83,600 $ 97,700
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Net income allocated to Limited Partners $ 748,700 $1,379,600
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Net income allocated to Limited Partners per Unit
(70,000 Units outstanding) $ 10.70 $ 19.71
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $2,608,100 $2,721,300
Interest on investments 242,800 311,800
Interest on mortgage loan receivable 16,300
Gain on sale of property 877,000
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2,850,900 3,926,400
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Expenses:
Depreciation and amortization 355,100 682,300
Property operating:
Affiliates 159,600 194,000
Nonaffiliates 302,600 331,900
Real estate taxes 277,500 290,900
Insurance--Affiliate 24,400 29,600
Repairs and maintenance 222,200 266,900
General and administrative:
Affiliates 22,300 19,400
Nonaffiliates 85,300 95,200
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1,449,000 1,910,200
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Net income $1,401,900 $2,016,200
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Net income allocated to General Partners $ 167,200 $ 186,600
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Net income allocated to Limited Partners $1,234,700 $1,829,600
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Net income allocated to Limited Partners per Unit
(70,000 Units outstanding) $ 17.64 $ 26.14
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,401,900 $ 2,016,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 355,100 682,300
(Gain) on sale of property (877,000)
Forgiveness of principal on mortgage loan receivable 20,000
Changes in assets and liabilities:
Decrease in rents receivable 115,700 92,400
(Increase) in other assets (3,200) (1,300)
(Decrease) increase in accounts payable and accrued
expenses (162,400) 160,000
Increase in due to Affiliates 21,700 37,400
(Decrease) increase in other liabilities (30,300) 14,600
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Net cash provided by operating activities 1,698,500 2,144,600
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Cash flows from investing activities:
Proceeds from sale of property 5,181,000
Proceeds from retirement of mortgage loan receivable 1,044,000
(Increase) in investments in debt securities (7,003,300)
Payments for capital and tenant improvements (107,000) (74,000)
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Net cash (used for) provided by investing activities (7,110,300) 6,151,000
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Cash flows from financing activities:
Distributions paid to Partners (1,672,200) (1,666,800)
(Decrease) in security deposits (10,300) (43,600)
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Net cash (used for) financing activities (1,682,500) (1,710,400)
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Net (decrease) increase in cash and cash equivalents (7,094,300) 6,585,200
Cash and cash equivalents at the beginning of the
period 9,248,100 8,356,100
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Cash and cash equivalents at the end of the period $2,153,800 $14,941,300
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
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 filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is included in the Registration Statement and
incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Under this method of accounting,
revenues are recorded when earned and expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with 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.
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, 1996 are not necessarily indicative
of the operating results for the year ending December 31, 1996.
Commercial rental properties held for investment are recorded at cost, net of
any provisions for value impairment, and depreciated (exclusive of amounts, if
any, allocated to land and value impairments) on the straight-line method over
their estimated useful lives. Upon classifying a commercial rental property as
held for disposition, no further depreciation or amortization of such property
is provided for in the financial statements. Rental guarantees from the sellers
of properties are treated as a reduction of the purchase price of the property
for accounting purposes and are not treated as Cash Flow (as defined in the
Partnership Agreement) for Partnership distribution purposes. Lease acquisition
fees are recorded at cost and amortized over the life of the lease. Repair and
maintenance costs are expensed as incurred; expenditures for improvements are
capitalized and depreciated over the estimated life of the improvements.
During the first quarter of 1996, the Partnership adopted Financial Accounting
Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The
Standard established guidance for determining if the value of defined assets
are impaired, and if so, how impairment losses should be measured and reported
in the financial statements. The Standard also addressed the accounting for
long-lived assets that are expected to be disposed of. The adoption of the
Standard did not have a material effect on the Partnership's financial
statements.
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 GAAP.
Cash equivalents are considered all highly liquid investments with an original
maturity of three months or less when purchased.
Investments in debt securities are comprised of corporate debt securities and
are classified as held-to-maturity. These investments are carried at their
amortized cost basis in the financial statements. As of June 30, 1996, these
securities had a fair market value of $6,999,000 and unrealized losses of
$4,300. Substantially all of these securities had maturities of less than one
year when purchased.
Certain reclassifications have been made to the previously reported 1995
statements in order to provide comparability with the 1996 statements. These
reclassifications had no effect on net income or Partners' capital.
Reference is made to the Partnership's annual report for the year ended
December 31, 1995 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:
In accordance with the Partnership Agreement, subsequent to December 23, 1982,
the Termination of the Offering, the General Partners are entitled to 10% of
distributable Cash Flow (as defined in the Partnership Agreement), as a
Partnership Management Fee. In addition, Net Profits (exclusive of Net Profits
from the sale or disposition of Partnership properties) are allocated: first,
to the General Partners, in an amount equal to the greater of the General
Partners' Partnership Management Fee for such fiscal year, or 1% of such Net
Profits; and second, the balance, if any, to the Limited Partners. Net Profits
from the sale or disposition of a Partnership property are allocated: first, to
the General Partners and the Limited Partners 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 or Refinancing Proceeds to be
distributed to the General Partners with respect to the sale or disposition of
such property or 1% of such Net Profits; and third, the balance, if any, to the
Limited Partners. Net Losses (exclusive of Net Losses from the sale,
disposition or provision for value impairment of Partnership properties) are
allocated 1% to the General Partners and 99% to the Limited Partners. Net
Losses from the sale, disposition or provision for value impairment of
Partnership properties are allocated: first, to the extent that the balance in
the General Partners' capital accounts exceeds their Capital Investment or the
balance in the capital accounts of the Limited Partners exceeds the amount of
their Capital Investment (the "Excess Balances"), to the General Partners and
the Limited Partners pro rata in proportion to such Excess Balances until such
Excess Balances are reduced to zero; second, to the General Partners and the
Limited Partners pro rata in proportion to
4
<PAGE>
the balances in their respective capital accounts until the balances in their
capital accounts shall be reduced to zero; third, the balance, if any, 99% to
the Limited Partners and 1% to the General Partners. In all events there shall
be allocated to the General Partners not less than 1% of Net Profits and Net
Losses from the sale, disposition or provision for value impairment of a
Partnership property. For the quarter and six months ended June 30, 1996, the
General Partners were entitled to distributable Cash Flow (as defined in the
Partnership Agreement), and accordingly, allocated Net Profits, of $83,600 and
$167,200, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Paid
-------------------
Quarter Six Months Payable
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $ 70,300 $130,100 $45,600
Reimbursement of property insurance premiums, at
cost 24,400 24,400 None
Real estate commissions (a) None None 37,700
Reimbursement of expenses, at cost:
--Accounting 7,900 19,700 4,200
--Investor communication 2,100 4,800 800
--Legal 8,000 10,300 None
- -----------------------------------------------------------------------------
$112,700 $189,300 $88,300
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</TABLE>
(a) As of June 30, 1996, the Partnership owed $37,700 to the Managing General
Partner for real estate commissions earned in connection with the sale of
five of the warehouses comprising a portion of the Atlanta Gateway Park
Industrial Center. These commissions have been accrued but not paid. In
accordance with the Partnership Agreement, the Partnership will not pay the
General Partners or any Affiliates a real estate commission from the sale
of a Partnership property until 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 in 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 20% is owned by
Zell Chilmark Fund, L.P., an Affiliate of the Managing General Partner, is
obligated to the Partnership under a lease for store space at Walker Springs
Plaza Shopping Center. During the quarter and six months ended June 30, 1996,
Revco paid rent of $29,400 and $39,700, respectively. The per square foot rent
paid by Revco is comparable to that paid by other tenants at this property.
On-site property management for the Partnership's properties is provided by
Affiliates of the Managing General Partner for fees ranging from 3% to 6% of
gross rents received from the properties.
3. ASSET HELD FOR DISPOSITION:
During 1996, the Managing General Partner determined that, based on economic
conditions in the region where Old Mill Place Shopping Center ("Old Mill") is
located, it was in the best interest of the Partnership to sell Old Mill.
Accordingly, the Partnership is currently marketing Old Mill for sale and
expects the disposition to be final by late 1996 or early 1997. The carrying
basis, net of accumulated depreciation and
amortization, of Old Mill on the Partnership's Balance Sheet as of June 30,
1996 was $8,502,600, which does not exceed the estimated fair value, less costs
to sell. Net income for Old Mill, included in the Partnership's Statements of
Income and Expenses, for the quarter and six months ended June 30, 1996 was
$402,200 and $594,300, respectively. Net income for Old Mill, included in the
Partnership's Statements of Income and Expenses, for the quarter and six months
ended June 30, 1995 was $112,600 and $278,400, respectively.
5
<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, 1995, for a discussion of the Partnership's business.
As the Partnership progresses through the disposition phase of its life cycle,
management's discussion and analysis of financial condition and results of
operations is complicated with respect to comparisons between periods. Results
of operations and cash flows as defined by generally accepted accounting
principles ("GAAP") as well as Cash Flow (as defined in the Partnership
Agreement) are generally expected to decline as real property interests are
sold or disposed of since the Partnership no longer realizes the results
generated from such real property interests. Accordingly, rental income,
depreciation and amortization expense, property operating expenses, repairs and
maintenance expenses, real estate taxes and insurance are expected to decline,
but will continue to comprise significant components of net income and cash
flows as defined by GAAP as well as Cash Flow (as defined in the Partnership
Agreement) until the final property is sold. Also, during the disposition
phase, cash and cash equivalents increase as Sale and Refinancing Proceeds are
received and decrease as the Partnership utilizes these proceeds for the
purposes of repayments of mortgage loans, distributions to Limited Partners,
making capital improvements to the Partnership's remaining properties or other
working capital requirements. Prior to being utilized for such purposes, these
proceeds are invested in short-term money market instruments and investment
grade corporate debt securities. Sale and Refinancing Proceeds are excluded
from the determination of Cash Flow (as defined in the Partnership Agreement).
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's remaining properties for the quarters and six months ended June
30, 1996 and 1995. 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 Quarters For the Six Months
Ended Ended
6/30/96 6/30/95 6/30/96 6/30/95
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
BROOKWOOD METROPLEX OFFICE BUILDINGS I & II
Rental revenues $593,800 $612,200 $1,191,200 $1,176,800
- ------------------------------------------------------------
Property net income $210,100 $174,300 $ 385,900 $ 246,100
- ------------------------------------------------------------
Average occupancy 100% 100% 100% 100%
- ------------------------------------------------------------
OLD MILL PLACE SHOPPING CENTER
Rental revenues $559,300 $313,300 $ 860,600 $ 667,200
- ------------------------------------------------------------
Property net income $402,200 $112,600 $ 594,300 $ 278,400
- ------------------------------------------------------------
Average occupancy 86% 91% 86% 91%
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</TABLE>
<TABLE>
<CAPTION>
Comparative Operating Results (a)
For the Quarters For the Six
Ended Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
- --------------------------------------------------------
<S> <C> <C> <C> <C>
WALKER SPRINGS PLAZA SHOPPING CENTER
Rental revenues $281,900 $231,300 $556,600 $511,000
- --------------------------------------------------------
Property net income $143,000 $ 84,300 $287,300 $241,600
- --------------------------------------------------------
Average occupancy 100% 100% 100% 100%
- --------------------------------------------------------
TUCKERSTONE COMMONS/ROOKER ROYAL I & II WAREHOUSES (B)
Rental revenues $182,900 $383,100
- --------------------------------------------------------
Property net income $100,600 $177,700
- --------------------------------------------------------
Average occupancy 100% 99%
- --------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are either not directly
related to individual property operating results such as interest income on
investments and the mortgage loan receivable and general and administrative
expenses or are related to properties previously disposed of by the
Partnership.
(b) Tuckerstone Commons/Rooker Royal I & II Warehouses ("Rooker") was sold on
June 16, 1995. The property net income excludes the net gain of $877,000
from the sale of this property, which was included in the Statement of
Income and Expenses for the quarter and six months ended June 30, 1995.
Unless otherwise disclosed, discussions of fluctuations between 1996 and 1995
refer to both the quarters and six months ended June 30, 1996 and 1995.
Net income for the quarter and six months ended June 30, 1996 decreased
$645,000 and $614,300, respectively, when compared to the quarter and six
months ended June 30, 1995. The decrease was primarily due to the effects of
the sale of Rooker. Net income, exclusive of the operating results and gain on
the sale of Rooker, increased $332,600 and $440,400 for the quarter and six
months ended June 30, 1996 when compared to the quarter and six months ended
June 30, 1995, respectively. The increases were primarily due to improved
operating results at all of the Partnership's remaining properties. Partially
offsetting the increases in net income were decreases in interest income
primarily due to a decrease in rates on and funds available for the
Partnership's investments.
For purposes of the following comparative discussion, the operating results of
Rooker have been excluded.
Rental revenues increased $278,200 or 24%, and $253,400 or 10.8%, for the
quarter and six months ended June 30, 1996, respectively, when compared to the
quarter and six months ended June 30, 1995. The primary factors which caused
the increases in rental revenues were the 1996 receipts of payments as
consideration for the early termination of two tenant's leases at Old Mill
Place Shopping Center ("Old Mill") in order to vacate the spaces prior to the
expiration of their respective leases. These spaces have been subsequently
filled by a major new tenant. This major new tenant's lease term runs from July
1, 1996 to June 30, 2011 and has one five-year renewal option. The tenant took
occupancy of its space, part of which was previously left
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
vacant by one of the preceding tenants, in July 1996 and will begin to pay
monthly base rent in December 1996 at $5.25 per square foot. The new tenant
occupies 53,128 square feet, or approximately 35%, of Old Mill. In addition,
rental revenues increased at Walker Springs Plaza Shopping Center ("Walker
Springs") primarily due to an
increase in tenant expense reimbursements. Rental revenues at Brookwood
Metroplex Office Buildings I & II ("Brookwood") increased for the six-month
periods under comparison primarily due to an increase in the average base
rental rate and decreased for the quarterly periods under comparison primarily
due to lower tenant expense reimbursements.
Depreciation and amortization expense decreased $85,900 and $233,400 for the
quarterly and six-month periods under comparison, respectively, primarily due
to the fact that effective January 1, 1996, the Partnership ceased the periodic
depreciation and amortization expense for depreciable and amortizable assets at
Old Mill in connection with classifying the property as held for disposition.
In addition, amortization expense decreased as a result of the write off in
1995 of the unamortized loan acquisition costs in connection with the early
repayment of the mortgage loan collateralized by Brookwood.
Repairs and maintenance expenses decreased $17,400 and $18,200 for the
quarterly and six-month periods under comparison, respectively, primarily due
to decreases at Brookwood in the cost of janitorial services as well as the
absence of expenditures incurred in 1995 to enhance the exterior of the
property.
Property operating expenses decreased $9,500 and $14,900 for the quarterly and
six-month periods under comparison, respectively, primarily due to decreases in
property management and leasing fees as well as utility costs at Brookwood. The
decreases were partially offset by increases in property management and leasing
fees as well as professional service fees at Old Mill as a result of the lease
terminations and signing of the new major tenant at the property.
Real estate tax expenses increased $17,600 for the six-month periods under
comparison primarily due to a refund received in 1995 of $17,700 for 1993 taxes
at Walker Springs. Real estate tax expense for the quarters under comparison
remained stable.
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 renewal of existing tenant leases
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 remaining
properties. Notwithstanding the Partnership's intention relative to property
sales, another primary objective of the Partnership is to provide cash
distributions to Partners from Partnership operations. To the extent cumulative
cash
distributions exceed net income, such excess distributions are treated as a
return of capital. Cash Flow (as defined in the Partnership Agreement) is
generally not equal to 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 in 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 in the Partnership Agreement) to cash
flows provided by operating activities as defined by GAAP. Such amounts are not
indicative of actual distributions to Partners and should not necessarily 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
6/30/96 6/30/95
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flow (as defined in the Partnership Agreement) $ 1,757,000 $ 1,821,500
Items of reconciliation:
Forgiveness of principal on mortgage loan receivable 20,000
Decrease in current assets 112,500 91,100
(Decrease) increase in current liabilities (171,000) 212,000
- -------------------------------------------------------------------------------
Net cash provided by operating activities $ 1,698,500 $ 2,144,600
- -------------------------------------------------------------------------------
Net cash (used for) provided by investing activities $(7,110,300) $ 6,151,000
- -------------------------------------------------------------------------------
Net cash (used for) financing activities $(1,682,500) $(1,710,400)
- -------------------------------------------------------------------------------
</TABLE>
The decrease in Cash Flow (as defined in the Partnership Agreement) of $64,500
for the six months ended June 30, 1996 when compared to six months ended June
30, 1995 was primarily due to the absence of the operating results generated by
Rooker in 1995. Exclusive of Rooker, Cash Flow (as defined in the Partnership
Agreement) increased $207,100 due to the increases in net income of the
Partnership's remaining properties, exclusive of depreciation and amortization
expense, as previously discussed.
The decrease in the Partnership's cash position of $7,094,300 as of June 30,
1996 when compared to December 31, 1995 was primarily due to the fact that
investments in debt securities, the distributions paid to Partners and the
expenditures made for capital and tenant improvements and leasing costs
exceeded the net cash provided by operating activities. The liquid assets of
the Partnership as of June 30, 1996 are comprised of amounts held for working
capital purposes.
Net cash provided by operating activities decreased by $446,100 for the six
months ended June 30, 1996 when
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
compared to the six months ended June 30, 1995. This decrease was primarily due
to the decrease in current liabilities at all of the Partnership's remaining
properties and the absence of the operating results generated by Rooker.
Partially offsetting the decrease was the increase in the net
income, exclusive of depreciation and amortization expense, of the
Partnership's remaining properties.
Net cash provided by (used for) investing activities changed from $6,151,000
for the six months ended June 30, 1995 to $(7,110,300) for the six months ended
June 30, 1996. This change was primarily due to the net proceeds received in
1995 on the sale of Rooker as well as the retirement of the mortgage loan
receivable, compared to the 1996 investments in debt securities and increase in
payments made for capital and tenant improvements. The increase in investments
in debt securities is a result of the extension of the maturities of certain of
the Partnership's short-term investments in an effort to maximize the return on
these amounts as they are held for working capital purposes. These investments
are of investment grade and generally mature less than one year from their date
of purchase. The Partnership maintains working capital reserves to pay for
capital expenditures such as building and tenant improvements and leasing
costs. During the six months ended June 30, 1996, the Partnership spent
$107,000 for capital and tenant improvements and leasing costs and has
projected to spend approximately $495,000 during the remainder of 1996. Of the
projected amount, approximately $255,000, $140,000, and $100,000 relates to
anticipated capital, tenant improvement and leasing costs expected to be
incurred at Old Mill, Walker Springs and Brookwood, respectively. The Managing
General Partner believes these improvements and leasing costs are necessary in
order to increase and/or maintain occupancy levels in very competitive markets,
maximize rental rates charged to new and renewing tenants and to prepare the
remaining properties for eventual disposition.
The decrease in net cash used for financing activities of $27,900 was primarily
due to a decrease in tenant 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 due to the anticipated capital, tenant improvement and leasing costs
necessary to be made at the Partnership's properties during the next several
years. As a result of this, cash continues to be retained to supplement working
capital reserves. For the six months ended June 30, 1996, Cash Flow (as defined
in the Partnership Agreement) retained to supplement working capital reserves
approximated $84,800.
Distributions to Limited Partners for the six months ended June 30, 1996 were
declared in the amount of $752,500, or $10.75 per Unit. Cash distributions are
made 60 days after the last day of each fiscal quarter. The amount of future
distributions to Partners will ultimately be dependent upon the performance of
the Partnership's investments as well as the Managing General Partner's
determination of the amount of cash necessary to supplement working capital
reserves to meet future liquidity requirements of the Partnership. Accordingly,
exclusive of the special distribution of Sale Proceeds, there can be no
assurance as to the amounts, and/or availability of cash for future
distributions to Partners.
As a result of the performance of the Partnership's remaining properties, the
Managing General Partner has determined that Sale Proceeds previously reserved
for working capital purposes can be distributed to Limited Partners.
Accordingly, the Partnership has declared a special distribution in the amount
of $3,990,000, or $57.00 per Unit, to Limited Partners of record as of October
1, 1996. This special distribution will be included with the third quarter
distribution to Limited Partners on November 30, 1996.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
A report on Form 8-K dated April 1, 1996, was filed reporting the
change in the Partnership's certifying accountants.
<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, 1996 By: /s/ DOUGLAS CROCKER II
--------------- -------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1996 By: /s/ NORMAN M. FIELD
--------------- -------------------------------------
NORMAN M. FIELD
Vice President-Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,153,800
<SECURITIES> 7,003,300
<RECEIVABLES> 139,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,296,700
<PP&E> 35,717,800
<DEPRECIATION> 11,572,500
<TOTAL-ASSETS> 33,458,400
<CURRENT-LIABILITIES> 5,339,500
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,078,700
<TOTAL-LIABILITY-AND-EQUITY> 33,458,400
<SALES> 0
<TOTAL-REVENUES> 2,850,900
<CGS> 0
<TOTAL-COSTS> 986,300
<OTHER-EXPENSES> 107,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,401,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,401,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,401,900
<EPS-PRIMARY> 17.64
<EPS-DILUTED> 17.64
</TABLE>
