<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 September 30, 1994
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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
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Commission File Number: 0-12946
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FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES IX
- - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2255857
- - ------------------------------- --------------------
(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 Agreement of Limited Partnership filed as Exhibit
A to the Partnership's Prospectus dated May 24, 1983, 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>
September 30,
1994 December 31,
(Unaudited) 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $19,832,100 $ 22,203,200
Buildings and improvements 73,072,000 107,274,500
- - -------------------------------------------------------------------------------
92,904,100 129,477,700
Accumulated depreciation and amortization (19,130,000) (27,239,500)
- - -------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 73,774,100 102,238,200
Cash and cash equivalents 20,342,400 19,160,900
Restricted cash 389,900 261,100
Restricted certificate of deposit 75,000
Rents receivable 742,700 876,600
Escrow deposits 94,300
Other assets (primarily loan acquisition costs net
of accumulated amortization of $254,300 and
$241,900, respectively) 350,700 632,200
- - -------------------------------------------------------------------------------
$95,599,800 $123,338,300
- - -------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable $23,171,200 $ 60,212,600
Accrued real estate taxes 983,900 845,900
Accounts payable and accrued expenses 704,400 585,900
Distributions payable 555,600
Due to Affiliates 92,400 205,500
Security deposits 506,400 440,300
Other liabilities 110,400 247,400
- - -------------------------------------------------------------------------------
26,124,300 62,537,600
Partners' (deficit) capital:
General Partner (41,300)
Limited Partners (100,000 Units authorized, issued
and outstanding) 69,475,500 60,842,000
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69,475,500 60,800,700
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$95,599,800 $123,338,300
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 30, 1994
and the year ended December 31, 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1993 $ (11,000) $63,837,800 $63,826,800
Net (loss) for the year ended
December 31, 1993 (30,300) (2,995,800) (3,026,100)
- - -----------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1993 (41,300) 60,842,000 60,800,700
Net income for the nine months ended
September 30, 1994 196,900 18,033,500 18,230,400
Distributions for the nine months ended
September 30, 1994 (155,600) (9,400,000) (9,555,600)
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Partners' capital, September 30, 1994 $ 0 $69,475,500 $69,475,500
- - -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $2,877,900 $4,462,000
Interest 233,300 138,500
- - ---------------------------------------------------------------------------
3,111,200 4,600,500
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Expenses:
Interest 418,700 1,031,200
Depreciation and amortization 652,800 830,400
Property operating 838,900 917,800
Real estate taxes and insurance 476,700 479,500
Repairs and maintenance 363,200 375,000
General and administrative 73,500 73,600
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2,823,800 3,707,500
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Income before expenses on sale of properties 287,400 893,000
Expenses on sale of properties (41,200)
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Net income $ 246,200 $ 893,000
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Net income allocated to General Partners $ 55,600 $ 8,900
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Net income allocated to Limited Partners $ 190,600 $ 884,100
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Net income allocated to Limited Partners per Unit
(100,000 Units authorized, issued and outstanding) $ 1.91 $ 8.84
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the nine months ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $10,414,600 $13,151,000
Interest 697,100 383,300
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11,111,700 13,534,300
- - -------------------------------------------------------------------------------
Expenses:
Interest 2,047,900 3,133,300
Depreciation and amortization 2,268,500 2,586,000
Property operating 2,524,500 2,604,800
Real estate taxes and insurance 1,526,600 1,528,600
Repairs and maintenance 1,117,900 1,117,000
General and administrative 231,800 259,300
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9,717,200 11,229,000
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Income before gain on sale of properties, provision
for value impairment and extraordinary (loss) on
early extinguishment of debt 1,394,500 2,305,300
Gain on sale of properties, net 17,987,500
Provision for value impairment (5,500,000)
- - -------------------------------------------------------------------------------
Income (loss) before extraordinary (loss) on early
extinguishment of debt 19,382,000 (3,194,700)
Extraordinary (loss) on early extinguishment of debt (1,151,600) (540,100)
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Net income (loss) $18,230,400 $(3,734,800)
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Net income (loss) allocated to General Partners $ 196,900 $ (37,300)
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Net income (loss) allocated to Limited Partners $18,033,500 $(3,697,500)
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Net income (loss) before extraordinary (loss) on
early extinguishment of debt allocated to Limited
Partners per Unit (100,000 Units authorized, issued
and outstanding) $ 191.72 $ (31.63)
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Net income (loss) allocated to Limited Partners per
Unit (100,000 Units authorized, issued and
outstanding) $ 180.34 $ (36.98)
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</TABLE>
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $18,230,400 $(3,734,800)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,268,500 2,586,000
Extraordinary loss on early extinguishment of debt 1,151,600 540,100
Gain on sale of properties (17,987,500)
Provision for value impairment 5,500,000
Changes in assets and liabilities:
Decrease in rents receivable 133,900 230,100
(Increase) in restricted cash (128,800) (2,700)
(Increase) decrease in other assets, net of
accumulated amortization (128,800) 422,300
Increase (decrease) in accrued real estate taxes 138,000 (20,500)
Increase in accounts payable and accrued expenses 118,500 714,600
(Decrease) increase in due to Affiliates (113,100) 49,200
(Decrease) in other liabilities (137,000) (36,800)
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Net cash provided by operating activities 3,545,700 6,247,500
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Cash flows from investing activities:
Proceeds from sale of properties 46,598,400
Payments for capital and tenant improvements (2,005,000) (1,340,200)
Decrease (increase) in escrow deposits 94,300 (280,800)
Purchase of commercial rental property (3,081,400)
Maturity of (investment in) restricted certificate
of deposit 75,000 (75,000)
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Net cash provided by (used for) investing
activities 44,762,700 (4,777,400)
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Cash flows from financing activities:
Principal payments on mortgage loans payable (37,041,400) (15,760,600)
Proceeds from issuance of mortgage loan 22,500,000
Refund of deposit on loan 225,000
Loan acquisition costs incurred (396,500)
Distributions paid to Partners (9,000,000)
Prepayment costs on mortgage loans payable (1,151,600) (540,100)
Increase in security deposits 66,100 66,500
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Net cash (used for) provided by financing
activities (47,126,900) 6,094,300
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Net increase in cash and cash equivalents 1,181,500 7,564,400
Cash and cash equivalents at the beginning of the
period 19,160,900 10,809,700
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Cash and cash equivalents at the end of the period $20,342,400 $18,374,100
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Supplemental information:
Interest paid during the period $ 1,866,000 $ 3,229,100
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Non cash financing activities:
Assumption of mortgage note $4,868,600
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</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 nine months ended September 30, 1994, are not necessarily
indicative of the operating results for the year ending December 31, 1994.
The financial statements include the Partnership's 50% interest in three joint
ventures, one of which was sold in April, 1994, and a 100% interest in one
joint venture. The joint ventures are operated under the control of the
Managing General Partner. Accordingly, the Partnership's pro rata share of the
ventures' revenues, expenses, assets and liabilities is included in the
financial statements.
Property sales are recorded when title transfers and sufficient consideration
has been received by the Partnership. Upon disposition, the related costs and
accumulated depreciation are removed from the respective accounts. Any gain or
loss is recognized in accordance with generally accepted accounting principles.
Cash equivalents are defined as all highly liquid investments purchased with a
maturity of three months or less.
Restricted cash represents tenant security deposits for the Partnership's New
York property that are required to be placed in interest-earning accounts.
Restricted certificate of deposit represented funds reserved from loan proceeds
received in connection with the refinancing of the El Paso Natural Gas Building
("El Paso"), which funds were placed in an interest-bearing investment. Under
the terms of the loan agreement this amount was available to be used for future
loan servicing costs. As a result of the sale of El Paso, these funds are no
longer restricted.
Reference is made to the Partnership's annual report for the year ended
December 31, 1993, 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.
Certain reclassifications have been made to the previously reported 1993
financial statements in order to provide comparability with the 1994 financial
statements. These reclassifications have not changed the 1993 results.
2. RELATED PARTY TRANSACTIONS:
Subsequent to October 31, 1983, the Termination of the Offering, the General
Partners are entitled to 10% of Cash Flow as a Partnership Management Fee. In
accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of a Partnership property) shall be
allocated 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. Net Losses from
the sale of a Partnership property shall be allocated: first, to the General
Partners to the extent of the aggregate balance in their capital accounts;
second, to the Unit Holders until the balance in their capital accounts shall
be reduced to zero; and third, the balance, if any, 99% to the Unit Holders 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
or disposition of a Partnership property. Net Losses (exclusive of Net Losses
from the sale of a Partnership property) shall be allocated 1% to the General
Partners and 99% to the Unit Holders. For the quarter and nine months ended
September 30, 1994, the General Partners were allocated distributable Cash Flow
and, accordingly, Net Profits from operations of approximately $55,600 and
$155,600, respectively. For the nine months ended September 30, 1994, the
General Partners were allocated Net Profits from the sale of a Partnership
property of approximately $221,400 (which is net of a loss on early
extinguishment of debt of approximately $11,200), Net Losses from the sale of a
Partnership property of $177,700 and Net Losses from early extinguishment of
debt of approximately $2,400.
Fees and reimbursement paid and payable by the Partnership to Affiliates during
the quarter and nine months ended September 30, 1994 were as follows:
<TABLE>
<CAPTION>
Paid
--------------------
Quarter Nine Months Payable
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $167,100 $599,900 $38,100
Reimbursement of property insurance premiums, at
cost 43,700 131,900 None
Real estate commissions (a) None None 48,500
Reimbursement of expenses, at cost:
(1) Accounting 8,500 21,900 4,200
(2) Investor communication 3,700 11,700 1,600
(3) Legal 134,500 188,900 None
- - ------------------------------------------------------------------------------
$357,500 $954,300 $92,400
- - ------------------------------------------------------------------------------
</TABLE>
(a) As of September 30, 1994, the Partnership owed $48,500 to the Managing
General Partner for a real estate commission earned in connection with the
sale of a Partnership property. This commissions have been accrued but not
paid. Under the terms of the Partnership Agreement, these fees will not be
paid until 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 which has
been distributed to the Unit Holders) of 6% simple interest per annum on
their Capital Investment from the initial date of investment.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Firstate Financial A Savings Bank, ("Firstate") an Affiliate of the Managing
General Partner, is obligated to the Partnership under a lease of office space
at the Citrus Center. The lease expires in February, 2002. For the quarter and
nine months ended September 30, 1994, Firstate paid approximately $55,000 and
$174,200 in total rents, respectively.
3. MORTGAGE LOANS PAYABLE:
The maturity date of the mortgage loan collateralized by the Glendale Center
Shopping Mall ("Glendale") had previously been extended with the existing
lender until October 3, 1994. On October 27, 1994, the joint venture which owns
Glendale made a $4,300,000 principal payment to this lender, of which the
Partnership's proportionate share was $2,150,000. This principal payment, along
with the payment of a $50,000 fee, further extended the loan's maturity until
November 30, 1994. The joint venture has received a verbal commitment from a
new lender for a $17,000,000 loan. The joint venture is entitled to exercise
one 2-month extension of the maturity date to January 31, 1995 with the
existing lender if the new loan does not close by November 30, 1994, provided
that the joint venture pays an additional principal payment of $3,700,000 and a
$50,000 fee.
The Managing General Partner had been engaged in discussions with the mortgage
holder regarding restructuring of the mortgage loan collateralized by the
Fashion Atrium Building ("Fashion Atrium"). The Managing General Partner was
unable to reach a mutual resolution regarding the restructuring of the loan and
as a result, in April 1994, the Partnership received a notice of default from
the mortgage holder. On August 25, 1994, FANY Seventh Avenue Associates
("FANY"), the joint venture which owns Fashion Atrium and in which the
Partnership has a 50% interest, executed a Cash Collateral Use Agreement ("the
Agreement") with the mortgage holder. Upon execution of the Agreement, FANY
transferred approximately $1,311,000, of which the Partnership's proportionate
share is approximately $655,000, of accumulated cash flow through July 31, 1994
to a safekeeping account under sole control of the mortgage holder. In
addition, the mortgage holder made a protective advance to FANY in the amount
of approximately $2,313,200, of which the Partnership's proportionate share is
approximately $1,156,600, for the payment of accrued real estate taxes plus
penalties and interest. FANY is currently assisting in the orderly conveyance
of title of the property to the mortgage holder within the context of a pre-
packaged Chapter 11 bankruptcy case filed on October 14, 1994 in the United
States Bankruptcy Court for the Southern District of New York. A confirmation
hearing on the pre-packaged plan is scheduled for November 22, 1994. It is
anticipated that conveyance of title of the property will occur pursuant to the
terms and conditions of the confirmed plan prior to 1995. At the point in time
in which the conveyance of title occurs, the Partnership would be relieved of
its obligation under the mortgage loan of approximately $13,269,100 less
amounts held in safekeeping. Upon consummation of the Bankruptcy, the assets
and liabilities of FANY will be conveyed to the mortgage holder.
On May 27, 1994 the Partnership repaid the mortgage loan collateralized by the
Citrus Center for a total amount of approximately $9,731,000, including a
prepayment penalty of approximately $237,300. The prepayment penalty was
recorded as an extraordinary loss on early extinguishment of debt.
The Partnership repaid the mortgage loan collateralized by Shoppes of West
Melbourne in the amount of $4,000,000 on June 6, 1994, its scheduled maturity
date.
4. PROPERTY SALES:
On April 6, 1994 First Capital Kayser Center, a joint venture in which the
Partnership and an Affiliated partnership each had a 50% interest (the "Joint
Venture"), sold its interest in the El Paso Natural Gas Building, located in El
Paso, Texas, for a sale price of $88,450,000. The outstanding indebtedness on
this property of approximately $42,757,000 was satisfied at closing. The Joint
Venture incurred selling expenses of approximately $3,743,100, of which
approximately $1,828,600 related to a prepayment penalty on the early
extinguishment of debt. The Joint Venture received net sale proceeds of
approximately $84,707,000, of which the Partnership's share was approximately
$42,353,500. The net gain reported by the Partnership for financial statement
purposes was approximately $18,015,400. For tax reporting purposes the
Partnership will report a gain of approximately $28,646,700. The above sale was
an all-cash sale, with no further involvement on the part of the Joint Venture.
On June 10, 1994 the Partnership sold the Triangle Building, located in
Atlanta, Georgia, for a sale price of $3,420,000. The Partnership incurred
selling expenses of approximately $89,400. The outstanding indebtedness on this
property of approximately $2,218,800 was assumed by the buyer at closing. The
Partnership received sale proceeds of approximately $3,330,600. The total loss
to the Partnership in connection with this sale was approximately $4,942,200 of
which $4,000,000 was recorded in 1993 as a provision for value impairment. For
tax reporting purposes the Partnership will report a loss of approximately
$2,700,000.
<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, 1993, for a discussion of the Partnership's business.
OPERATIONS
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 Limited Partners from Cash Flow generated by Partnership
operations. To the extent cash distributions exceed net income, such excess
distributions will be treated as a return of capital. The statements of cash
flows presented in the financial statements represent a reconciliation of the
changes in cash balances. Cash Flow, as defined in the Partnership Agreement,
is generally not equal to Partnership net income or cash flows as determined
under generally accepted accounting principles, since certain items are treated
differently under the Partnership Agreement than under generally accepted
accounting principles. Management believes that in order 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 generally accepted
accounting principles. The amount of Cash Flow and the return on Capital
Investment are not indicative of actual distributions and actual returns on
Capital Investment.
<TABLE>
<CAPTION>
Comparative Cash Flow Results
For the Quarters For the Nine Months
Ended Ended
9/30/94 9/30/93 9/30/94 9/30/93
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount of Cash Flow (as
defined in the Partnership
Agreement $ 940,200 $ 1,429,200 $ 3,303,900 $ 4,092,200
Average Capital Investment $92,000,000 $100,000,000 $96,444,400 $100,000,000
Annualized return on Capital
Investment (Annualized Cash
Flow/Average Capital
Investment) 4.09% 5.72% 4.57% 5.46%
- - -------------------------------------------------------------------------------
</TABLE>
As the Partnership enters the disposition phase of its life cycle, comparisons
of Cash Flow results between periods are complicated. Partnership Cash Flow is
generally expected to decrease as real property interests are sold since the
Partnership no longer receives Cash Flow generated from such real property
interests. Accordingly, rental income, interest expense, property operating
expenses, real estate taxes and insurance and repairs and maintenance expenses
are expected to decline as well, but will continue to comprise the significant
components of Cash Flow and operating results until the final property sale.
The sales of El Paso Natural Gas Building ("El Paso") in April 1994 and the
Triangle Building ("Triangle") in June 1994 account for the significant
decreases in Cash Flow and operating results for the quarter and nine months
ended September 30, 1994. The net effect of these transactions was a decrease
in Cash Flow of approximately $331,500 and $627,800, respectively. 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, mortgage debt repayments or
making improvements to the Partnership's remaining properties. Prior to being
utilized for such purposes these funds are invested in short-term money market
instruments. Sale and Refinancing Proceeds are excluded from the determination
of Cash Flow.
Aside from these transactions, Cash Flow results for the quarter and nine
months ended September 30, 1994 decreased when compared to the quarter and nine
months ended September 30, 1993 by approximately $157,500 and $160,400,
respectively. These decreases were due to: 1) decreased rental revenues at
Fashion Atrium Building ("Fashion Atrium"), Glendale Center Shopping Mall
("Glendale") and Shoppes of West Melbourne ("Shoppes"); 2) increased repairs
and maintenance expenses at Citrus Center of approximately $56,400; and 3)
increased property operating expenses at Glendale and Shoppes of approximately
$44,000 and $31,700, respectively. Partially offsetting the decrease in Cash
Flow results were: 1) decreased debt service payments of approximately $178,200
as a result of the payoff of the mortgage loan collateralized by the Citrus
Center on May 27, 1994 and the payoff of the mortgage loan collateralized by
Shoppes on June 6, 1994 and 2) an increase in interest income earned on short-
term investments due to an increase in funds available for such investments.
Rental revenues at Glendale for the nine months ended September 30, 1994 and
1993 were approximately $2,617,200 and $3,065,600, respectively, and for the
quarters ended September 30, 1994 and 1993 were approximately $880,100 and
$1,052,700, respectively. Rental revenues are less in 1994 primarily due to the
recognition in 1993 of billings made for the collection of additional tenant
reimbursements for real estate taxes paid in prior years.
Rental revenues at Fashion Atrium for the nine months ended September 30, 1994
and 1993 were approximately $1,405,700 and $1,903,500, respectively, and for
the quarters ended September 30, 1994 and 1993 were approximately $412,400 and
$616,100, respectively. The decrease in rental revenues for the periods under
comparison was due to a decrease in tenant expense reimbursements and a
decrease in the quarterly and nine-month average occupancy rates from 78% and
77%, respectively, in 1993 to 74% and 72%, respectively, in 1994.
Rental revenues at Citrus Center for the nine months ended September 30, 1994
and 1993 were approximately $3,170,900 and $2,998,100, respectively, and for
the quarters ended September 30, 1994 and 1993 were approximately $970,300 and
$1,048,300, respectively. The increase in the 1994 nine-month rental revenues
was primarily due to an increase in the base rental rates charged to new and
renewing tenants and an increase in the nine-month average occupancy rate from
82% in 1993 to 85% in 1994. Partially offsetting this increase was the recovery
of certain tenant receivables in 1993 which were previously deemed
uncollectible. Although the average quarterly occupancy rate increased from 81%
in 1993 to 86% in 1994, quarterly rental revenues decreased in 1994 due to a
third quarter 1994 reduction of tenant expense reimbursements recorded in the
first half of 1994.
Rental revenues at Shoppes for the nine months ended September 30, 1994 and
1993 were approximately $962,900 and $994,700, respectively, and for the
quarters ended September 30, 1994 were approximately $319,600 and $326,900,
respectively. The decrease in rental revenues was primarily due to a decrease
in the quarterly and nine-month average occupancy rates from 99% and 98% in
1993 to 92% and 93% in 1994. Partially offsetting the decrease in rental
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
revenues was an increase in tenant reimbursements in 1994 for 1993 real estate
taxes.
Rental revenues at Richmond Plaza Shopping Center for the nine months ended
September 30, 1994 and 1993 were approximately $886,900 and $780,700,
respectively, and for the quarters ended September 30, 1994 and 1993 were
approximately $296,400 and $280,800, respectively. This increase was primarily
due to an increase in the quarterly and nine-month average occupancy rates from
88% in 1993 to 92% in 1994.
Rental revenues at El Paso for the nine months ended September 30, 1994 and
1993 were approximately $1,003,400 and $2,747,400, respectively. This decrease
was due to the sale of the property on April 6, 1994.
Rental revenues at Triangle for the nine months ended September 30, 1994 and
1993 were approximately $367,700 and $661,000, respectively. This decrease was
due to the sale of the property on June 10, 1994.
To increase occupancy levels at the Partnership's remaining 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 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
The increase in the Partnership's cash position as of September 30, 1994 when
compared to December 31, 1993 resulted primarily from proceeds from the sales
of El Paso and Triangle and net cash provided by operating activities exceeding
the principal payoffs of the mortgage loans collateralized by El Paso, Citrus
Center and Shoppes, along with the related prepayment costs, the distributions
paid to Partners and payments made for capital and tenant improvements. The
liquid assets of the Partnership as of September 30, 1994, were comprised of
amounts held for working capital purposes.
Net cash provided by operating activities decreased from $6,247,500 for the
nine months ended September 30, 1993 to $3,545,700 for the nine months ended
September 30, 1994. This decrease was primarily due to the decrease in Cash
Flow as discussed above along with the timing of the collection of rental
revenues and the payment of certain Partnership expenses.
Net cash (used for) provided by investing activities changed from $(4,777,400)
for the nine months ended September 30, 1993 to $44,762,700 for the nine months
ended September 30, 1994. This change was due primarily to the receipt of
$46,598,400 of proceeds from the sales of El Paso and Triangle and the maturity
of the restricted certificate of deposit established in connection with the El
Paso refinancing completed in 1993, partially offset by an increase in payments
for capital and tenant improvements.
During the nine months ended September 30, 1994, the Partnership spent
approximately $2,005,000 for capital and tenant improvements and has budgeted
to spend approximately $900,000 during the remainder of 1994. Included in the
remaining budgeted amount is approximately $400,000, $200,000 and $200,000
relating to anticipated capital and tenant improvements at Glendale, the Citrus
Center and Shoppes, 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 April 6, 1994 First Capital Kayser Center, a joint venture in which the
Partnership and an Affiliated partnership each had a 50% interest, sold its
interest in El Paso, located in El Paso, Texas, for a sale price of
$88,450,000. The Partnership's share of sale proceeds was approximately
$20,975,000, net of selling expenses, including a mortgage prepayment penalty,
and the payoff of the mortgage loan collateralized by the property. The
Partnership distributed $8,000,000 of these proceeds to the Limited Partners in
May 1994 and the remainder was added to working capital. The Partnership used
approximately $9,731,000 of the amount added to working capital to repay the
mortgage loan collateralized by the Citrus Center including a prepayment
penalty of approximately $237,300, and $4,000,000 to repay the mortgage loan
collateralized by Shoppes, which matured in June 1994.
On June 10, 1994 the Partnership sold the Triangle Building, located in
Atlanta, Georgia, for a sale price of $3,420,000. The Partnership incurred
selling expenses of approximately $89,400. Proceeds received from the sale were
approximately $1,111,800, net of selling expenses and the assumption of a
mortgage loan collateralized by the property by the buyer. The proceeds from
this sale were added to the Partnership's working capital.
Net cash provided by (used for) financing activities changed from $6,094,300
for the nine months ended September 30, 1993 to $(47,126,900) for the nine
months ended September 30, 1994. This change was primarily due to the payoff of
mortgage loans collateralized by El Paso, Citrus Center and Shoppes, along with
related prepayment penalties and the distribution of Sale Proceeds to Partners
in 1994 exceeding the net proceeds and deposit refund received on the
refinancing of El Paso in 1993, reduced by loan acquisition costs and a
prepayment penalty relating to the previous El Paso loan.
On May 27, 1994 the Partnership repaid the balance of the mortgage loan
collaterized by the Citrus Center in the amount of approximately $9,731,000,
including a prepayment penalty of approximately $237,300.
On June 6, 1994 the Partnership repaid the mortgage loan collateralized by
Shoppes in the amount of $4,000,000.
The maturity date of the mortgage loan collateralized by Glendale had
previously been extended with the existing lender until October 3, 1994. On
October 27, 1994, the joint venture which owns Glendale made a $4,300,000
principal payment to this lender, of which the Partnership's proportionate
share was $2,150,000. This principal payment, along with the payment of a
$50,000 fee, further extended the loan's maturity to November 30, 1994. The
joint venture has received a verbal commitment from a new lender for a
$17,000,000 loan. The joint venture is entitled to exercise one 2-month
extension of the maturity date to January 31, 1995 with the existing lender if
the new loan does not close by November 30, 1994, provided that the joint
venture pays an additional principal payment of $3,700,000 and a $50,000 fee.
The Partnership's 50% share of the $4,300,000 principal payment was funded by
amounts previously added to working capital from the sale of El Paso.
The Managing General Partner had been engaged in discussions with the mortgage
holder regarding restructuring of
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the mortgage loan collateralized by Fashion Atrium. The Managing General
Partner was unable to reach a mutual resolution regarding the restructuring of
the loan and as a result, in April 1994, the Partnership received a notice of
default from the mortgage holder. On August 25, 1994, FANY Seventh Avenue
Associates ("FANY"), the joint venture which owns Fashion Atrium and in which
the Partnership has a 50% interest, executed a Cash Collateral Use Agreement
with the mortgage holder. Upon execution of the Agreement, FANY transferred
accumulated cash flow through July 31, 1994 to a safekeeping account under sole
control of the mortgage holder. In addition, the mortgage holder made a
protective advance to FANY for the payment of accrued real estate taxes plus
penalties and interest. FANY is currently assisting in the orderly conveyance
of title of the property to the mortgage holder within the context of a pre-
packaged Chapter 11 bankruptcy case filed on October 14, 1994 in the United
States Bankruptcy Court for the Southern District of New York. A confirmation
hearing on the pre-packaged plan is scheduled for November 22, 1994. It is
anticipated that conveyance of title of the property will occur pursuant to the
terms and conditions of the confirmed plan prior to 1995. At the point in time
in which the conveyance of title occurs, the Partnership will be relieved of
its obligation under the mortgage loan.
The Managing General Partner continues to take a very conservative approach to
projections of future rental income and to maintain a significant level of cash
reserves for the Partnership. The cash reserves are needed because of the
Partnership's cash requirements during the next several years, which may be
quite substantial due to the anticipated capital and tenant improvements
necessary to be made to the Partnership's properties. As a result of this, the
Partnership continues to reserve amounts from Cash Flow to supplement working
capital reserves and has retained a portion of the Sale and Refinancing
Proceeds discussed in previous paragraphs. For the quarter and nine months
ended September 30, 1994, Cash Flow retained to supplement working capital
reserves approximated $384,600 and $1,748,300, respectively. The Managing
General Partner believes that the Partnership's current cash position along
with any additional amounts retained from future Cash Flow will be sufficient
to cover budgeted expenditures as well as any other requirements which may
reasonably be foreseen.
Distributions to Limited Partners for the quarter ended September 30, 1994 were
declared in the amount of $5.00 per Unit. Cash distributions are made 60 days
after the quarter-end. The amount of Cash Flow available for distributions to
investors is ultimately dependent upon the performance of the Partnership's
investments as well as the amount of Cash Flow retained for future cash
requirements. Therefore, there can be no assurance of the amount of future Cash
Flow available for distribution to Partners.
<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 IX
BY: FIRST CAPITAL FINANCIAL CORPORATION
MANAGING GENERAL PARTNER
Date: November 11, 1994 By: /s/ DOUGLAS CROCKER II
----------------- -------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: November 11, 1994 By: /s/ NORMAN M. FIELD
----------------- -------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
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<PAGE>
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<NAME> FIRST CAPITAL INCOME PROPERTIES. LTD.--SERIES IX
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
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<RECEIVABLES> 742,700
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<PP&E> 92,904,100
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<OTHER-SE> 69,475,500
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