<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, 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 ____________________
Commission File Number: 0-12946
--------------------------------------------------
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>
PART I. FINANCIAL INFORMATION CENTER
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 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 72,119,600 107,274,500
- - -------------------------------------------------------------------------------
91,951,700 129,477,700
Accumulated depreciation and amortization (18,487,300) (27,239,500)
- - -------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 73,464,400 102,238,200
Cash and cash equivalents 20,990,600 19,160,900
Restricted cash 321,500 261,100
Restricted certificate of deposit 75,000
Rents receivable 656,900 876,600
Escrow deposits 94,300
Other assets (primarily loan acquisition costs net
of accumulated amortization of $244,100 and
$241,900, respectively) 236,500 632,200
- - -------------------------------------------------------------------------------
$ 95,669,900 $123,338,300
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable $ 22,762,500 $ 60,212,600
Accrued real estate taxes 1,547,500 845,900
Accounts payable and accrued expenses 396,500 585,900
Distributions payable 555,600
Due to Affiliates 122,100 205,500
Security deposits 435,300 440,300
Other liabilities 65,600 247,400
- - -------------------------------------------------------------------------------
25,885,100 62,537,600
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Partners' (deficit) capital:
General Partner (41,300)
Limited Partners (100,000 Units authorized, issued
and outstanding) 69,784,800 60,842,000
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69,784,900 60,800,700
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$95,669,900 $123,338,300
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 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
six months ended
June 30, 1994 141,300 17,842,800 17,984,100
Distributions for the
six months ended
June 30, 1994 (100,000) (8,900,000) (9,000,000)
- - -------------------------------------------------------------------------------
Partners' capital,
June 30, 1994 $ 0 $69,784,800 $69,784,800
- - -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $ 3,178,200 $ 4,371,300
Interest 405,700 126,900
- - -------------------------------------------------------------------------------
3,583,900 4,498,200
- - -------------------------------------------------------------------------------
Expenses:
Interest 611,000 1,035,100
Depreciation and amortization 717,500 863,000
Property operating 853,000 888,100
Real estate taxes and insurance 532,500 499,600
Repairs and maintenance 346,700 415,000
General and administrative 83,700 98,600
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3,144,400 3,799,400
- - -------------------------------------------------------------------------------
Income before gain on sale of properties, provision
for value impairment and extraordinary (loss) on
early extinguishments of debt 439,500 698,800
Gain on sale of properties, net 18,028,700
Provision for value impairment (5,500,000)
- - -------------------------------------------------------------------------------
Net income (loss) before extraordinary (loss) on
early extinguishments of debt 18,468,200 (4,801,200)
Extraordinary (loss) on early extinguishments of
debt (1,151,600)
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Net income (loss) $17,316,600 $(4,801,200)
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Net income (loss) allocated to General Partners $ 74,600 $ (48,000)
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Net income (loss) allocated to Limited Partners $17,242,000 $(4,753,200)
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Net income (loss) before extraordinary (loss) on
early extinguishments of debt allocated to Limited
Partners per Unit (100,000 Units authorized,
issued and outstanding) $ 183.58 $ (47.53)
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Net income (loss) allocated to Limited Partners per
Unit (100,000 Units authorized, issued and
outstanding) $ 172.20 $ (47.53)
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $ 7,536,700 $ 8,689,000
Interest 463,800 244,800
- - -------------------------------------------------------------------------------
8,000,500 8,933,800
- - -------------------------------------------------------------------------------
Expenses:
Interest 1,629,200 2,102,100
Depreciation and amortization 1,615,700 1,755,600
Property operating 1,685,600 1,687,000
Real estate taxes and insurance 1,049,900 1,049,100
Repairs and maintenance 754,700 742,000
General and administrative 158,300 185,700
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6,893,400 7,521,500
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Income before gain on sale of properties, provision
for value impairment and extraordinary (loss) on
early extinguishments of debt 1,107,100 1,412,300
Gain on sale of properties, net 18,028,700
Provision for value impairment (5,500,000)
- - -------------------------------------------------------------------------------
Net income (loss) before extraordinary (loss) on
early extinguishments of debt 19,135,800 (4,087,700)
Extraordinary (loss) on early extinguishments of
debt (1,151,600) (540,100)
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Net income (loss) $17,984,200 $(4,627,800)
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Net income (loss) allocated to General Partners $ 141,400 $ (46,300)
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Net income (loss) allocated to Limited Partners $17,842,800 $(4,581,500)
- - -------------------------------------------------------------------------------
Net income (loss) before extraordinary (loss) on
early extinguishments of debt allocated to Limited
Partners per Unit (100,000 Units authorized,
issued and outstanding) $ 189.91 $ (40.47)
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Net income (loss) allocated to Limited Partners per
Unit (100,000 Units authorized, issued and
outstanding) $ 178.43 $ (45.82)
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 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) $ 17,984,200 $ (4,627,800)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,615,700 1,755,600
Extraordinary loss on early extinguishments of
debt 1,151,600 540,100
Gain on sale of properties (18,028,700)
Provision for value impairment 5,500,000
Changes in assets and liabilities:
Decrease in rents receivable 219,700 392,500
(Increase) in restricted cash (60,400) (400)
(Increase) decrease in other assets, net of
accumulated amortization (4,400) 430,300
Increase in accrued real estate taxes 701,600 384,700
(Decrease) in accounts payable and accrued
expenses (189,400) (162,800)
(Decrease) increase in due to Affiliates (89,900) 18,600
(Decrease) in other liabilities (181,800) (35,900)
- - -----------------------------------------------------------------------------
Net cash provided by operating activities 3,118,200 4,194,900
- - -----------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of properties 46,646,000
Payments for capital and tenant improvements (1,052,600) (826,100)
Decrease (increase) in escrow deposits 94,300 (338,400)
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 45,762,700 (4,320,900)
- - -----------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on mortgage loans payable (37,450,100) (15,466,400)
Proceeds from issuance of mortgage loan 22,500,000
Refund of deposit on loan 225,000
Loan acquisition costs incurred (387,400)
Distributions paid to Partners (8,444,500)
Prepayment costs on mortgage loans (1,151,600) (540,100)
(Decrease) increase in security deposits (5,000) 65,200
- - -----------------------------------------------------------------------------
Net cash (used for) provided by financing
activities (47,051,200) 6,396,300
- - -----------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,829,700 6,270,300
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 $ 20,990,600 $ 17,080,000
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Supplemental information:
Interest paid during the period $ 1,706,100 $ 2,196,800
- - -----------------------------------------------------------------------------
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
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, 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.
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 six months ended June
30, 1994, the General Partners were allocated distributable Cash Flow and,
accordingly, Net Profits from operations of approximately $55,600 and $100,000,
respectively. For the quarter and six months ended June 30, 1994, the General
Partners were allocated Net Profits from the sale of a Partnership property of
approximately $221,800, 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
approximately $178,100 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 six months ended June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Paid
Quarter Six Months Payable
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $196,800 $432,800 $ 59,300
Reimbursement of property insurance premiums, at
cost 20,400 88,200 None
Real estate commissions (a) None None 48,500
Reimbursement of expenses, at cost:
(1) Accounting 9,400 13,400 4,200
(2) Investor communication 4,900 8,000 1,600
(3) Legal 37,200 54,400 8,500
- - ------------------------------------------------------------------------------
$268,700 $596,800 $122,100
- - ------------------------------------------------------------------------------
</TABLE>
(a) As of June 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.
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
six months ended June 30, 1994, Firstate paid approximately $62,600 and
$119,200 in total rents, respectively.
3. MORTGAGE LOANS PAYABLE:
The mortgage loan collateralized by the Glendale Center Shopping Mall has been
further extended until September 1, 1994. All other terms of the loan remained
the same.
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. The Managing General Partner intends to assist in the
orderly conveyance of title of the property to the mortgage holder and is
actively negotiating a Cash Collateral Use Agreement with the mortgage holder.
As of June 30, 1994, accrued real estate taxes plus penalties and interest
totalled approximately $1,615,000, of which the Partnership's proportionate
share is approximately $807,500. The scheduled monthly payments of interest due
on the loan were funded from Fashion Atrium's cash flow through June 1, 1994.
As of the date of this report, the interest payment due on July 1, 1994 has
been suspended. 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 $12,100,000 and any ownership in Fashion Atrium.
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.
On June 6, 1994 the Partnership repaid the mortgage loan collateralized by
Shoppes of West Melbourne in the amount of $4,000,000.
4. PROPERTY SALES:
On April 6, 1994 First Capital Kayser Center, a joint venture in which the
Partnership and an Affiliated partnership each have a 50% interest, 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 $3,673,300, 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 $84,776,700, of which the
Partnership's share was approximately $42,388,400. The net gain reported by the
Partnership for financial statement purposes was approximately $18,050,300. For
tax reporting purposes the Partnership will report a gain of approximately
$28,681,600. The above sale was an all-cash sale, with no further involvement
on the part of the Partnership.
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 $83,200, including $6,500 of accrued legal
fees. 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 $3,343,300. The total loss to the Partnership in connection with
this sale was approximately $4,935,900 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 Ended For the Six Months Ended
6/30/94 6/30/93 6/30/94 6/30/93
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount of Cash Flow (as
defined in the Partnership
Agreement $ 1,106,000 $ 1,280,800 $ 2,363,700 $ 2,663,000
Average Capital Investment $97,333,000 $100,000,000 $98,667,000 $100,000,000
Annualized return on Capital
Investment (Annualized Cash
Flow/Average Capital
Investment) 4.55% 5.12% 4.79% 5.33%
- - -------------------------------------------------------------------------------
</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 change as real property interests are sold since the
Partnership no longer receives Cash Flow generated from such real property
interests. Accordingly, rental income, property operating expenses, repairs and
maintenance and real estate taxes are expected to decline, but will continue to
comprise the significant components of Cash Flow and operating results until
the final property sale. 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.
The decrease in Cash Flow results for the quarter and six months ended June 30,
1994 is primarily due to a decrease in rental revenues, partially offset by a
decrease in debt service payments. Rental revenues decreased at the El Paso
Natural Gas Building ("El Paso") and Triangle Building ("Triangle") due to the
sales of these properties on April 6, 1994 and June 10, 1994, respectively. In
addition, rental revenues decreased at Fashion Atrium Building ("Fashion
Atrium"), Glendale Center Shopping Mall ("Glendale") and Shoppes of West
Melbourne ("Shoppes"). Debt service payments decreased as a result of the
payoff of the mortgage loan collateralized by El Paso at the time of sale of
this property, 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. Partially offsetting the decrease in Cash Flow results
was an increase in interest income earned on short-term investments due to an
increase in funds available for such investments.
Rental revenues at El Paso for the six months ended June 30, 1994 and 1993 were
approximately $1,003,400 and $1,806,700, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $62,700 and $910,800,
respectively. This decrease was due to the sale of the property on April 6,
1994.
Rental revenues at Triangle for the six months ended June 30, 1994 and 1993
were approximately $368,500 and $464,600, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $136,400 and $238,600,
respectively. This decrease was primarily due to the sale of the building on
June 10, 1994 and the write-off in 1994 of certain tenant receivables.
Rental revenues at Glendale for the six months ended June 30, 1994 and 1993
were approximately $1,737,100 and $2,012,900, respectively, and for the
quarters ended June 30, 1994 and 1993 were approximately $849,100 and
$1,145,700, respectively. Rental revenues decreased 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 six months ended June 30, 1994 and
1993 were approximately $993,300 and $1,287,300, respectively, and for the
quarters ended June 30, 1994 and 1993 were approximately $444,500 and $658,400,
respectively. The decrease in rental revenues for the periods under comparison
was due to decreased tenant expense reimbursements and a decrease in the
quarterly and six-month average occupancy rates from 76% and 75%, respectively,
in 1993 to 72% and 71%, respectively, in 1994.
Rental revenues at Shoppes for the six months ended June 30, 1994 and 1993 were
approximately $643,200 and $667,700, respectively, and for the quarters ended
June 30, 1994 were approximately $313,100 and $334,300, respectively. The
decrease in rental revenues was primarily due to a decrease in the quarterly
and six-month average occupancy rates from 98% in 1993 to 93% in 1994.
Partially offsetting the decrease in base rental revenues was an increase in
tenant reimbursements in 1994 for 1993 real estate taxes.
Rental revenues at Citrus Center for the six months ended June 30, 1994 and
1993 were approximately $2,200,600 and $1,949,800, respectively, and for the
quarters ended June 30, 1994 and 1993 were approximately $1,057,200 and
$833,900, respectively. This increase in rental revenues was primarily due to a
1993 adjustment of previously billed tenant expense reimbursements which had
been overestimated. In addition, rental income increased due to an increase in
the base rental rates charged to new and renewing tenants and an increase in the
quarterly and six-month average occupancy rates from 82% in 1993 to 84% in 1994.
Rental revenues at Richmond for the six months ended June 30, 1994 and 1993
were approximately $590,500 and $499,900, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $314,100 and $249,500,
respectively. This increase was primarily due to an increase in the quarterly
and six-month average occupancy rates from 88% in 1993 to 91% in 1994.
To increase occupancy levels at the Partnership's properties, the Managing
General Partner, through its Affiliated asset and property management groups,
continues to take the necessary actions deemed appropriate for the properties
discussed above. Some of these actions include: 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 June 30, 1994 when
compared to December 31, 1993 resulted primarily from proceeds from the sales
of El Paso and Triangle and the net cash provided by operating activities
exceeding the principal payoffs of the mortgage loans collateralized by El
Paso, Citrus Center and Shoppes along with prepayment costs, the distributions
paid to Partners and payments made for capital and tenant improvements. The
liquid assets of the Partnership as of June 30, 1994 were comprised of amounts
held for working capital purposes and undistributed Sale Proceeds.
Net cash provided by operating activities decreased from $4,194,900 for the six
months ended June 30, 1993 to $3,118,200 for the six months ended June 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 $(4,320,900)
for the six months ended June 30, 1993 to $45,762,700 for the six months ended
June 30, 1994. This change was due primarily to the collection of $46,646,000
of proceeds from the sales of El Paso and Triangle along with 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 six months ended June 30, 1994, the Partnership spent approximately
$1,052,600 for capital and tenant improvements and has budgeted to spend
approximately $3,570,000 during the remainder of 1994. Included in the
remaining budgeted amount is approximately $2,350,000 and $900,000 relating to
anticipated capital and tenant improvements at the Citrus Center and Glendale,
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
$21,009,900, net of selling expenses, including the mortgage prepayment
penalty, and the payoff of a mortgage loan collateralized by the property. The
Partnership distributed $8,000,000 of these proceeds to the Limited Partners in
late May 1994 and the remainder was added to working capital. The Partnership
used approximately $9,731,000 of working capital to repay the mortgage loan
collateralized by the Citrus Center including a prepayment penalty of
approximately $237,300 and used $4,000,000 of working capital 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 $83,200, including $6,500 of accrued legal
fees. Proceeds received from the sale were approximately $1,124,500, 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 $6,396,300
for the six months ended June 30, 1993 to ($47,051,200) for the six months
ended June 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 Refinancing 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 mortgage loan collateralized by Glendale has been further extended until
September 1, 1994. All other terms of the loan remained the same. The Managing
General Partner continues to discuss the possibility of receiving a longer-term
extension with the existing lender and to pursue permanent financing
opportunities with other potential lenders.
The Managing General Partner had been engaged in discussions with the mortgage
holder regarding restructuring of 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. The Managing
General Partner intends to assist in the orderly conveyance of title of the
property to the mortgage holder and is actively negotiating a Cash Collateral
Use Agreement with the mortgage holder. At the point in time in which the
conveyance of title occurs, the Partnership will be relieved of its obligation
under the mortgage loan of approximately $12,100,000 and any ownership in
Fashion Atrium.
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 and the potential
repayment of the loan collateralized by Glendale. As a result of these
concerns, the Partnership continues to reserve amounts from Cash Flow to
supplement working capital reserves and retained a portion of the Sale and
Refinancing Proceeds as discussed in previous paragraphs. For the quarter and
six months ended June 30, 1994, Cash Flow retained to supplement working
capital reserves approximated $550,400 and $1,363,700, respectively. The
Managing General Partner believes that the Partnership's current cash position
along with any additional amounts retained from future Cash Flow and Sale
Proceeds will be sufficient to cover budgeted expenditures as well as the
potential repayment of the loan collateralized by Glendale and any other
requirements which may reasonably be foreseen.
Distributions to Limited Partners for the quarter ended June 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>
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 6, 1994, was filed reporting the
sale of the El Paso Natural Gas Building, located in El Paso, Texas.
<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: August 12, 1994 By: /s/ DOUGLAS CROCKER II
--------------- --------------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 12, 1994 By: /s/ MICHAEL J. MCHUGH
--------------- ---------------------------------------------
MICHAEL J. MCHUGH
Senior Vice President and
Chief Financial Officer
