<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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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 Identification No.)
incorporation or organization)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
- ------------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 207-0020
----------------
Securities registered pursuant to Section 12(b) of the Act: NONE
----------------
Securities registered pursuant to Section 12(g)
of the Act: Limited Partnership Units
-------------------------
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated May 24, 1983, included in
the Registrant's Registration Statement on Form S-11 (Registration No. 2-82357),
is incorporated herein by reference in Part IV of this report.
<PAGE>
Documents incorporated by reference: (continued)
The Partnership's Report on Form 8-K dated April 6, 1994, reporting the sale of
the El Paso Natural Gas Building, located in El Paso, Texas, is incorporated
herein by reference in Part IV of this report.
The Partnership's Report on Form 8-K dated December 9, 1994, reporting the
disposition of the Fashion Atrium Building, located in New York, New York, is
incorporated herein by reference in Part IV of this report.
The Partnership's Report on Form 8-K dated January 15, 1993, reporting the
refinancing of the El Paso Natural Gas Building, located in El Paso, Texas, is
incorporated herein by reference in Part IV of this report.
The Partnership's Report on Form 8-K dated January 22, 1993, reporting the
purchase of an additional interest in South Orange Avenue Associates, is
incorporated herein by reference in Part IV of this report.
Exhibit Index - Page A-1
- ------------------------
2
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------
The registrant, First Capital Income Properties, Ltd. - Series IX (the
"Partnership") is a limited partnership organized in 1983 under the Florida
Uniform Limited Partnership Law. The Partnership sold $100,000,000 in Limited
Partnership Units (the "Units") to the public from June 1983 to October 1983,
pursuant to a Registration Statement on Form S-11 filed with the Securities and
Exchange Commission (Registration Statement No. 2-82357). Capitalized terms used
in this report have the same meaning as those terms have in the Partnership's
Registration Statement.
The business of the Partnership is to invest primarily in existing, improved,
commercial income-producing real estate, such as shopping centers, warehouses
and office buildings, and, to a lesser extent, in other types of commercial
income-producing real estate. From July 1984 to May 1986, the Partnership made
four real property investments and purchased 50% interests in four joint
ventures which were each formed with Affiliated partnerships for the purpose of
acquiring a 100% interest in certain real property. The Partnership's joint
ventures, prior to dissolution, are operated under the common control of First
Capital Financial Corporation (the "Managing General Partner"). In January 1993,
the Partnership purchased the remaining 50% interest in one of the four joint
ventures. As of December 31, 1995 the Partnership has sold two real property
investments and, with its Affiliate, dissolved two joint ventures as a result of
the sale and/or disposition of the real property investments (see Note 7 of
Notes to Financial Statements for additional information).
Property management services for the Partnership's real estate investments are
provided by Affiliates of the Managing General Partner for fees calculated as a
percentage of gross rents received from the properties.
The real estate business is highly competitive. The results of operations of the
Partnership will depend upon the availability of suitable tenants, real estate
market conditions and general economic conditions which may impact the success
of these tenants. Properties owned by the Partnership frequently compete for
tenants with similar properties owned by others.
As of March 1, 1996, there were 42 employees at the Partnership's properties for
on-site property maintenance and administration.
ITEM 2. PROPERTIES (a)(b)
- ------- -----------------
As of December 31, 1995, the Partnership owned directly or through a joint
venture, the following four properties, all of which were owned in fee simple
and, except for Glendale Center Shopping Mall ("Glendale"), were unencumbered by
a mortgage. For complete details of the material terms of the encumbrance, refer
to Note 4 in the Notes to Financial Statements.
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
- ------------------------- -------------------- ------------ -----------
<S> <C> <C> <C>
Shopping Centers:
- -----------------
Glendale Center Shopping Mall (d) Indianapolis, Indiana 652,727 59(2)
Richmond Plaza Shopping Center (e) Augusta, Georgia 164,129 22(2)
Shoppes of West Melbourne West Melbourne, Florida 146,991 14(3)
Office Building:
- ----------------
Citrus Center Orlando, Florida 258,321 43(2)
</TABLE>
3
<PAGE>
ITEM 2. PROPERTIES (a)(b) - Continued
- ------ -----------------------------
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's properties refer to
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.
(b) For Federal income tax purposes, the Partnership depreciates the portion
of the acquisition costs of its properties allocable to real property
(exclusive of land) improvements and all improvements thereafter, over
useful lives ranging from 18 years to 40 years, utilizing either the
Accelerated Cost Recovery System or straight-line method. The
Partnership's portion of real estate taxes for Glendale, Citrus Center,
the Shoppes of West Melbourne ("Shoppes") and the Richmond Plaza
Shopping Center ("Richmond"), was $422,100, $387,700, $89,900, and
$73,400, respectively, for the year ended December 31, 1995.
(c) Represents the total number of tenants as well as the number of tenants,
in parenthesis, that individually occupy more than 10% of the net
leasable square footage of the properties.
(d) The Partnership owns a 50% joint venture interest in this property.
(e) The net leasable square footage excludes an out-parcel of 26,770 square
feet which is under a ground lease. The tenant under this lease, owns
the improvements to this land.
The following table presents each of the Partnership properties' occupancy rates
as of December 31 for each of the last five years:
<TABLE>
<CAPTION>
Property Name 1995 1994 1993 1992 1991
- ------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Glendale 93% 93% 87% 92% 90%
Richmond 97% 94% 92% 87% 85%
Shoppes 97% 93% 94% 98% 97%
Citrus Center 99% 96% 81% 80% 84%
</TABLE>
The amounts in the following table represent each of the Partnership properties'
average annual rental rate per square foot for each of the last five years ended
December 31 and were computed by dividing each property's base rental revenues
by its average occupied square footage:
<TABLE>
<CAPTION>
Property Name 1995 1994 1993 1992 1991
- ------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Glendale $5.48 $5.55 $4.95 $5.47 $5.63
Richmond $7.49 $5.92 $6.63 $4.90 $4.91
Shoppes $8.15 $7.84 $7.94 $8.12 $8.13
Citrus Center $14.22 $13.81 $12.98 $11.60 $10.68
</TABLE>
4
<PAGE>
ITEM 2. PROPERTIES - Continued
- ------- ----------------------
The following table summarizes the principal provisions of the leases for the
tenants which occupy ten percent or more of the rentable square footage at each
of the Partnership's properties:
<TABLE>
<CAPTION>
Partnership's Share of per Percentage
Annum Base Rents (a) for of Net Renewal
-------------------------- Leasable Options
Final Twelve Expiration Square (Renewal
Months of Date of Footage Options /
1996 Lease Lease Occupied Years)
---------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Glendale
- --------
L. S. Ayres & Co.
(department store) $ 194,100 $ 194,100 1/31/01 36% 3 / 30
Lazarus
(department store) $ 128,700 $ 128,700 1/31/01 25% 1 / 18
Richmond
- --------
Kroger
(supermarket) $ 259,600 $ 200,800 12/31/04 25% 2 / 5
Service Merchandise
(department store) $ 255,000 $ 255,000 12/28/08 33% 6 / 5
Shoppes
- -------
Marshall's
(discount department
store) $ 140,600 $ 140,600 1/31/00 15% 2 / 5
Service Merchandise
(department store) $ 312,500 $ 312,500 2/28/05 34% 6 / 5
Books a Million
(book store) $ 281,800 $ 281,800 9/30/04 24% 6 / 5
Citrus Center
- -------------
Akerman, Senterfitt
& Eidson
(legal services) $ 787,800 $ 996,300 12/31/05 18% None
Citrus Club
(dining/health club) $ 230,500 $ 234,200 1/14/02 11% None
</TABLE>
(a) The Partnership's share of per annum base rents for each of the
tenants listed above for each of the years between 1996 and the final
twelve months for each of the above leases is no lesser or greater than
the amounts listed in the above table.
5
<PAGE>
ITEM 2. PROPERTIES - Continued
- ------- ----------------------
The amounts in the following table represent the Partnership's portion of leases
in the year of expiration (assuming no lease renewals) through the year ended
December 31, 2005:
<TABLE>
<CAPTION>
Number Base Rents
of in Year of % of Total
Year Tenants Square Feet Expiration (a) Base Rents (b)
--------- ------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
1996 26 51,021 $ 383,300 5.15%
1997 17 75,516 $ 482,100 6.88%
1998 18 39,143 $ 329,200 5.06%
1999 14 60,329 $ 613,500 10.18%
2000 18 93,142 $ 508,000 10.48%
2001 8 409,647 $ 127,500 3.17%
2002 7 69,312 $ 337,700 9.68%
2003 6 15,435 $ 94,000 3.04%
2004 11 106,325 $ 558,900 20.32%
2005 6 123,428 $1,189,700 67.69%
</TABLE>
(a) Represents the Partnership's portion of base rents to be collected
each year on expiring leases.
(b) Represents the Partnership's portion of base rents to be collected
each year on expiring leases as a percentage of the Partnership's
portion of the total base rents to be collected on leases existing
as of December 31, 1995.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
(a & b) The Partnership and its properties were not a party to, nor the subject
of, any material pending legal proceedings, nor were any such proceedings
terminated during the quarter ended December 31, 1995. Ordinary routine
litigation incidental to the business which is not deemed material was
maintained during the quarter ended December 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
(a, b, c & d) None.
6
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS
- ------- ----------------------------------------------------------------------
There has not been, nor is there expected to be, a public market for Units.
As of March 1, 1996, there were 10,885 Holders of Units.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 11,974,000 $24,235,100 $ 18,092,500 $ 17,927,500 $ 16,922,900
Net (loss) income $ (5,608,600) $19,429,400 $ (3,026,100) $ (244,500) $ 2,186,000
Net (loss) income
allocated to
Limited Partners $ (5,907,500) $19,160,300 $ (2,995,800) $ (287,200) $ 1,824,700
Net (loss) income
allocated to Limited
Partners per Unit
(100,000 Units issued
and outstanding)(a) $ (59.08) $ 191.60 $ (29.96) $ (2.87) $ 18.25
Total assets $ 70,894,100 $78,938,800 $123,388,300 $ 114,608,400 $ 117,712,300
Mortgage loan(s) payable $ 8,039,400 $ 6,650,000 $ 60,212,600 $ 48,981,600 $ 50,584,600
Distributions to Limited
Partners per Unit
(100,000 Units issued
and outstanding)(b) $ 35.00 $ 100.50 None $ 5.62 $ 32.52
Return of capital
to Limited Partners
per Unit (100,000 Units
issued and outstanding)(c) $ 35.00 None None $ 5.62 $ 14.27
Other data:
- -----------
Investment in
commercial rental
properties (net of
accumulated
depreciation and
amortization) $ 54,231,400 $62,932,400 $102,238,200 $ 101,280,100 $ 110,137,900
Number of real
property interests
owned at December 31 4 4 7 7 8
</TABLE>
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA - Continued
- ------- -----------------------------------
(a) Net income (loss) allocated to Limited Partners per Unit for 1994 and
1993 included extraordinary gain (loss) on early extinguishments of
debt.
(b) Distributions to Limited Partners per Unit for the year ended December
31, 1994 included Sale Proceeds of $80.00.
(c) For the purposes of this table, return of capital represents either: 1)
the amount by which distributions, if any, exceed net income for the
respective year or 2) total distributions, if any, when the Partnership
incurs a net loss for the respective year. Pursuant to the Partnership
Agreement, Capital Investment is only reduced by distributions of Sale
or Refinancing Proceeds. Accordingly, return of capital as used in the
above table does not impact Capital Investment.
The following table includes a reconciliation of Cash Flow (as defined in the
Partnership Agreement) to cash flow provided by operating activities as
determined by generally accepted accounting principles ("GAAP"):
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined
in the Partnership
Agreement) (a) $ 5,345,700 $ 4,869,100 $ 5,278,600 $ 4,803,200 $ 5,298,900
Items of reconciliation:
Principal payments on
mortgage loan(s) payable 460,600 359,200 1,176,200 326,900 282,200
Changes in current assets
and liabilities:
(Increase) decrease
in current assets (112,900) 496,500 750,200 (46,100) (361,500)
(Decrease) increase
in current liabilities (288,400) (399,200) 473,000 238,600 (237,100)
------------ ------------ ----------- ------------- -------------
Net cash provided by
operating activities $ 5,405,000 $ 5,325,600 $ 7,678,000 $ 5,322,600 $ 4,982,500
============ ============ =========== ============= =============
Net cash (used for)
provided by investing
activities $ (2,748,500) $ 40,655,900 $(5,028,200) $ 3,587,800 $ (997,100)
============ ============ =========== ============= =============
Net cash (used for)
financing activities $ (2,217,600) $(50,057,000) $(5,701,400) $ (3,458,100) $ (4,388,500)
============ ============ =========== ============= =============
</TABLE>
(a) Cash Flow is defined in the Partnership Agreement as Partnership
revenues earned from operations (excluding tenant deposits and proceeds
from the sale, disposition or financing of any Partnership properties or
the refinancing of any Partnership indebtedness), minus all expenses
incurred (including Operating Expenses, payments of principal (other
than balloon payments of principal out of Offering Proceeds) and
interest on any Partnership indebtedness, and any reserves of revenues
from operations deemed reasonably necessary by the Managing General
Partner), except depreciation and amortization expenses and capital
expenditures,
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA - Continued
- ------ -----------------------------------
lease acquisition expenditures made from Offering proceeds and the
General Partners' Partnership Management Fee.
The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing on pages A-1 through A-7
in this report and the supplemental schedule on pages A-8 and A-9.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The ordinary business of the Partnership is expected to pass through three
phases: (i) Offering of Units and investment in properties; (ii) operation of
properties and (iii) sale or other disposition of properties.
The Partnership commenced the Offering of Units in June 1983 and terminated the
Offering in October 1983 upon the sale of 100,000 Units. From July 1984 through
May 1986 the Partnership purchased eight property investments, three of which
are 50% joint venture interests and one of which was a 50% joint venture
interest until January 1993 when the Partnership purchased the remaining 50%
joint venture interest from an Affiliated partnership.
In 1992, the Partnership, in addition to being in the operation of properties
phase, entered the disposition phase of its life cycle. During the disposition
phase of the Partnership's life cycle, comparisons of operating results are
complicated due to the timing and effect of property sales. Partnership
operating results are generally expected to decline as real property interests
are sold since the Partnership no longer receives income generated from such
real property interests. As of December 31, 1995 the Partnership has sold two
real property investments and liquidated two joint venture investments.
The past year was disappointing for
most retailers throughout the
country. Gross margins and
consequently profits were negatively
impacted as retailers attempted to
turn inventories. The prospects for
expansion in 1996 are also minimal,
if nonexistent. The poor sales
performance of retailers has resulted
in less demand for store space,
further retailer consolidations and
an increased number of bankruptcies.
Factors utilized by prospective
property purchasers such as higher
capitalization and discount rates
resulted in lower prices than
previously seen in years. In
addition, downward pressure on rent,
upward pressure on tenant improvement
costs and larger reserves for capital
expenditures also negatively affected
the pricing of retail assets. Three
of the Partnership's remaining
investments are retail properties.
These properties accounted for
approximately 52% of the
Partnership's total rental revenues
for the year ended December 31, 1995.
Glendale Center Shopping Mall
("Glendale") also experienced other
issues which has affected its
estimated fair market value.
Competition from other malls and
community centers as well as other
department stores (including a
department store operated by one of
Glendale's anchor tenants) entering
the regional market has had a
negative impact on the sales of
Glendale's tenants and prospects for
lease renewals. For the year ended
December 31, 1995, the sales
performance of the two anchor tenants
(department stores) at Glendale
totaled $51,789,000, as compared to
$55,886,000 for the year ended
December 31, 1994, a 7.3% decrease.
Recent attempts to sell Glendale have
been unsuccessful.
The General Partner has historically reviewed significant factors regarding the
properties, such as those mentioned above, to determine that the properties are
carried at lower of cost or fair market value, and where appropriate has made
value impairment adjustments. These factors include, but are not limited to 1)
recent and/or budgeted operating performance; 2) research of market conditions;
3) economic trends affecting major tenants; 4) economic factors related to the
region where the properties are located and 5) when available, recent property
appraisals. As a result of the current year review, the Partnership has
recorded provisions for value impairment totaling $9,000,000 for the year ended
December 31, 1995. For more details related to these provisions see note (c) to
the Comparative Operating Results table below and Note 8 of Notes to Financial
Statements. The Managing General Partner will continue to evaluate real estate
market conditions affecting each of the Partnership's properties, in its
efforts to maximize the realization of proceeds on their eventual disposition.
The recording of the provisions for value impairment does not impact cash flows
as defined by generally accepted accounting principles ("GAAP") or 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 properties for the years ended December 31, 1995, 1994 and 1993.
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 Years Ended December 31,
---------------------------------
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
CITRUS CENTER
Rental revenues $4,774,700 $4,261,500 $4,085,300
- ------------------------------------------------------------------
Property net income (b) $1,250,200 $ 631,000 $ 65,900
- ------------------------------------------------------------------
Average occupancy 97% 86% 81%
- ------------------------------------------------------------------
GLENDALE CENTER SHOPPING MALL
Rental revenues $3,529,400 $3,532,000 $4,038,800
- ------------------------------------------------------------------
Property net income (c) $ 80,600 $ 245,100 $1,050,000
- ------------------------------------------------------------------
Average occupancy 92% 87% 88%
- ------------------------------------------------------------------
SHOPPES OF WEST MELBOURNE
Rental revenues $1,339,400 $1,287,900 $1,311,600
- ------------------------------------------------------------------
Property net income (c) $ 753,900 $ 566,700 $ 496,100
- ------------------------------------------------------------------
Average occupancy 96% 93% 98%
- ------------------------------------------------------------------
RICHMOND PLAZA SHOPPING CENTER
Rental revenues $1,370,600 $1,222,500 $1,082,900
- ------------------------------------------------------------------
Property net income $ 739,700 $ 637,500 $ 499,000
- ------------------------------------------------------------------
Average occupancy 94% 92% 89%
- ------------------------------------------------------------------
FASHION ATRIUM BUILDING (D)
Rental revenues 1,676,800 $2,476,300
- ------------------------------------------------------------------
Property net (loss) (1,124,400) $ (272,900)
- ------------------------------------------------------------------
Average occupancy 65% 77%
- ------------------------------------------------------------------
</TABLE>
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
Comparative Operating Results
(a)
For the Years Ended December
31,
--------------------------------
1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
EL PASO NATURAL GAS BUILDING (E)
Rental revenues 1,003,400 $3,688,100
- -------------------------------------------------------------------
Property net income 324,100 $1,105,600
- -------------------------------------------------------------------
Average occupancy 100% 100%
- -------------------------------------------------------------------
TRIANGLE BUILDING (F)
Rental revenues 367,600 $ 879,700
- -------------------------------------------------------------------
Property net (loss) (59,200) $ (22,700)
- -------------------------------------------------------------------
Average occupancy 87% 85%
- -------------------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items which are either not directly
related to individual property operating results such as interest income
and general and administrative expenses or are related to properties
previously owned by the Partnership.
(b) Property net income for the year ended December 31, 1994 excludes an
extraordinary (loss) on early extinguishment of debt of $(237,300) (for
additional information see Note 4 of Notes to Financial Statements).
(c) The property net income excludes a provision for value impairment of
$6,300,000 and $2,700,000 for Glendale and Shoppes, respectively, which
were recorded in the Statement of Income and Expenses for the year ended
December 31, 1995.
(d) On December 9, 1994, the Fashion Atrium Building ("Fashion Atrium") was
disposed of through the orderly conveyance of title to the mortgage holder.
Property net (loss) for the year ended December 31, 1993, excludes a
provision for value impairment of $5,500,000. Property net (loss) for the
year ended December 31, 1994 excludes (loss) on disposition of property of
$(7,944,800) and an extraordinary gain on early extinguishment of debt of
$8,808,600 (see Notes 7 and 8 of Notes to Financial Statements for
additional information).
(e) El Paso Natural Gas Building ("El Paso") was sold on April 6, 1994. The
property net income excludes the gain on sale of $18,929,600 and a
prepayment penalty of $(914,300) which was included as an extraordinary
(loss) on early extinguishment of debt in the Statement of Income and
Expenses for the year ended December 31, 1994 (for additional information
see Notes 4 (a) and 7 of Notes to Financial Statements). Property net
income for the year ended December 31, 1993 excludes a prepayment penalty
of $(540,100) which was reported as an extraordinary (loss) on early
extinguishment of debt in the 1993 Statement of Income and Expenses.
(f) Triangle Building ("Triangle") was sold on June 10, 1994. The property net
(loss) excludes a (loss) on sale of the property of $(1,017,600) which was
included in the Statement of Income and Expenses for the year ended
December 31, 1994.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
The disposition and sales of certain Partnership properties during 1994 and
provisions for value impairment recorded in 1995 had a significant impact on
the comparison of net income (loss) for the year ended December 31, 1995 when
compared to the year ended December 31, 1994. As described above, the
Partnership recorded provisions for value impairment of $9,000,000 for the year
ended December 31, 1995. During the year ended December 31, 1994, the
Partnership disposed of Fashion Atrium and sold El Paso and Triangle.
Properties disposed of and sold during 1994 accounted for net income (including
operating results, net gains on sale or disposition of properties and
extraordinary gain on early extinguishment of debt) of $17,002,000. The effects
of the disposition and sales of Partnership properties accounted for
significant decreases in rental income, interest expense, property operating
expenses, depreciation and amortization expense, real estate tax expense,
insurance expense and repairs and maintenance. For further information
regarding these transactions see notes (c) through (f) to the above table.
Excluding the effects on net income (loss) of disposed of and sold properties
and provisions for value impairment, net income increased $897,200 when
compared to the year ended December 31, 1994. The increase was primarily due
to: 1) improved operating results at Shoppes of West Melbourne ("Shoppes"),
Richmond Plaza Shopping Center ("Richmond") and Citrus Center totaling
$908,600; 2) increased interest income of $46,400 primarily due to an increase
in rates available on the Partnership's short-term investments and 3) the
absence of a prepayment penalty of $237,300 included in the Statement of Income
and Expenses for the year ended December 31, 1994. Partially offsetting the
increase in net income was: 1) decreased operating results at Glendale Center
Shopping Mall ("Glendale") of $164,500 and 2) increased general and
administrative expense of $134,500 primarily due to increases in taxes paid,
printing and mailing costs, salaries and legal fees, partially offset by
decreases in accounting and data processing fees.
The following comparative discussion includes only the operating results of the
Partnership's three remaining property investments and one joint venture
investment.
Rental revenues increased $710,200, or 6.9%, for the year ended December 31,
1995 when compared to the year ended December 31, 1994. The primary factors
which caused the increase in rental revenues was increases in the average
occupancy rate and base rental rate charged to new and renewing tenants at
Citrus Center, Richmond and Shoppes.
Interest expense decreased $247,200 for the comparable periods primarily due to
the 1994 payoffs of the mortgage loans collateralized by Citrus Center and
Shoppes, partially offset by an increase in interest expense at Glendale.
Although the average outstanding principal balance on the Glendale mortgage is
lower in 1995 when compared to 1994, the interest expense increased due to an
increase in the interest rate.
Insurance expense decreased $55,400 for the year ended December 31, 1995 when
compared to the year ended December 31, 1994. This decrease was primarily due
to lower group rates on the Partnership's combined insurance coverage as a
result of a minimal amount of claims made over the past several years.
Property operating expenses decreased by $53,900 for the years under
comparison. This decrease was primarily due to: 1) decreased professional fees
at Shoppes and Richmond; 2) decreased promotional and advertising expenses at
Richmond and Glendale and 3) decreased utilities at Glendale and Richmond.
Partially offsetting the decrease in property
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
operating expenses were increased utilities, salaries and professional fees at
Citrus Center resulting from the increase in occupancy.
Real estate tax expense decreased $17,600 for the year ended December 31, 1995
when compared to the year ended December 31, 1994 due to a decrease in real
estate tax expense at Shoppes and Citrus Center resulting from a decrease in
the assessed valuation of these properties.
Repairs and maintenance expense increased $20,000 for the comparable periods.
The primary factors which caused the increase were: 1) increased roof repairs
and supplies at Richmond and 2) increased repairs and maintenance salaries,
cleaning supplies and uniforms and repairs made to the HVAC system, partially
offset by decreased janitorial and plumbing services at Citrus Center.
Partially offsetting the increase in repairs and maintenance expense were: 1)
decreases in expenditures for snow removal and janitorial costs, partially
offset by an increase in signage expenses at Glendale and 2) decreased expenses
associated with patching, resurfacing and striping of the parking lot and
repairs and maintenance salaries at Shoppes.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1994 TO THE YEAR ENDED DECEMBER 31,
1993
The effects of the disposition and sales of certain Partnership properties in
1994, together with provisions for value impairment recorded in 1993, had a
significant impact on the comparison of net income for the year ended December
31, 1994 when compared to the year ended December 31, 1993. As described above,
net income for the year ended December 31, 1994 (including operating results,
net gain on sale or disposition of properties and extraordinary gain on early
extinguishment of debt) associated with properties sold or disposed of during
1994 amounted to $17,002,000. During the year ended December 31, 1993, the net
(loss) related to the sold properties was $(5,230,100), which included a
provision for value impairment of $5,500,000 on Fashion Atrium and a prepayment
penalty of $510,100 on El Paso.
Excluding the effect on net income of the properties disposed of and sold
during 1994, net income for the year ended December 31, 1994 increased by
$460,800 when compared to the year ended December 31, 1993. The increase was
due to the following: 1) improved operating results at Citrus Center, Richmond,
and Shoppes of $565,100, $138,500 and $70,600, respectively; 2) an increase in
interest income earned on short-term investments of $391,200 due to an increase
in funds available for investment, as a result of retaining a portion of the El
Paso sale proceeds, as well as to a trend in higher interest rates earned on
these types of investments and 3) a decrease in general and administrative
expenses of $47,700 due to a decrease in professional fees and printing and
mailing costs. Partially offsetting the increase was decreased operating
results of $804,900 at Glendale.
The following comparative discussion includes only the operating results of the
Partnership's three remaining property investments and one joint venture
investment.
Rental revenues for the Partnership decreased $214,900, or 2%, for the year
ended December 31, 1994 when compared to the year ended December 31, 1993. The
primary factor which caused the decrease in rental revenues was decreased
rental revenues at Glendale due to: 1) a decrease in real estate tax and
operating expense escalation income, as a result of a 1994 adjustment of
previously billed 1993 amounts which had been overestimated; 2) the receipt by
the Partnership in 1993 of $81,000 from a tenant relating to a lease settlement
and 3) a slight decrease in the average annual occupancy rate. Also affecting
the decrease in rental revenues was a decrease in rental revenues at Shoppes
due to the decrease in the average annual occupancy rate. Partially offsetting
the decrease in rental revenues was: 1) increased base rental rates charged to
new and renewing tenants, partially offset by a decrease in real estate tax
escalation income at Citrus Center and 2) an increase in the average annual
occupancy rate at Citrus Center and Richmond.
Interest expense for the Partnership decreased $557,900 for the year ended
December 31, 1994 when compared to the year ended December 31, 1993. This
decrease was primarily the result of the Partnership's repayment of the loans
collateralizing Citrus Center and Shoppes in May and June of 1994,
respectively. Partially offsetting this decrease was an increase in interest
expense at Glendale due to a slightly higher variable interest rate and loan
extension costs incurred during the year ended December 31, 1994.
Insurance expense decreased $7,900 for the year ended December 31, 1994, when
compared to the year ended December 31, 1993. This decrease was primarily due
to lower group rates on the Partnership's combined insurance coverage as a
result of a minimal amount of claims made over the past several years.
Repairs and maintenance expense increased $56,100 for the year ended December
31, 1994 when compared to the year ended December 31, 1993. The increase was
primarily due to the following: 1) increased parking garage expenditures for
equipment and supplies as well as plumbing repairs and repairs to the fire
protection and HVAC systems at Citrus Center and 2) increased expenses
associated with patching, resurfacing and striping of the parking lot at
Shoppes. Partially offsetting the increases in repairs and maintenance expense
was decreased janitorial payroll, partially offset by an increase in outside
janitorial services at Glendale.
Real estate tax expense for the Partnership increased $13,900 for the annual
comparable periods. The increase in real estate tax expense was due to the
following: 1) an increase at Glendale resulting from an increase in the tax
rate imposed by the taxing authority and 2) slight increases at Citrus Center
and Richmond. Partially offsetting these increases was a decrease at Shoppes
resulting from a decrease in the property's assessed value.
Property operating expenses increased $12,500 for the years under comparison.
The increase in property operating expenses was due to: 1) increased
promotional expenditures in order to attract new tenants at Glendale and 2)
increased professional fees at Shoppes. Partially offsetting these increases
were decreased security costs at Citrus Center.
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 tenant leases and addressing
any expansion needs these tenants may have; 3) promotion of local broker events
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
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.
The rate of inflation has remained relatively stable during the years under
comparison and has had a minimal impact on the operating results of the
Partnership. The nature of various tenant lease clauses protects the
Partnership to some extent from increases in the rate of inflation. Certain of
the lease clauses provide for: 1) rent increases based on the Consumer Price
Index or graduated rental increases; 2) percentage rentals for which the
Partnership receives as additional rent a percentage of a tenant's sales over
predetermined breakeven amounts and 3) total or partial tenant reimbursement of
property operating expenses (e.g., common area maintenance, real estate taxes,
etc.).
LIQUIDITY AND CAPITAL RESOURCES
A primary objective of the Partnership is to provide cash distributions to
Partners from Partnership operations. Cash Flow (as defined in the Partnership
Agreement) is generally not equal to Partnership net income or cash flow as
defined by GAAP, since certain items are treated differently under the
Partnership Agreement than under GAAP. The Managing General Partner 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 flow as defined
by GAAP. The table in Item 6. Selected Financial Data includes a reconciliation
of Cash Flow (as defined in the Partnership Agreement) to cash flow 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.
Cash Flow (as defined in the Partnership Agreement) for the year ended December
31, 1995 was $5,345,700, a $476,600 increase when compared to the year ended
December 31, 1994. This increase was primarily due to the increase in net
income (exclusive of depreciation and amortization, net gains on sale or
disposition of properties, provisions for value impairment and gain on early
extinguishment of debt), partially offset by an increase in scheduled principal
payments resulting from the terms of the refinanced mortgage loan
collateralized by Glendale.
The increase in the Partnership's cash position of $438,900 as of December 31,
1995 when compared to December 31, 1994 was primarily the result of net cash
provided by operating activities exceeding payments made for capital and tenant
improvements and leasing costs and distributions paid to Partners. Liquid
assets of the Partnership as of December 31, 1995 were comprised of
undistributed cash from operations retained for working capital purposes.
Net cash provided by operating activities continues to be the Partnership's
primary source of funds. Net cash provided by operating activities for the year
ended December 31, 1995 was $5,405,000, a $79,400 increase when compared to the
year ended December 31, 1994. This increase was primarily due to the increase
in the operating results of Citrus Center, Shoppes, Richmond and the absence of
the deficit operating results of Fashion Atrium, partially offset by the
absence of operating results generated by El Paso together with a 1995 decrease
in cash provided by operating activities from Glendale.
Net cash provided by (used for) investing activities changed from $40,655,900
for the year ended December 31, 1994 to $(2,748,500) for the year ended
December 31, 1995. This change was primarily due to proceeds received in 1994
of $44,379,100 from the sale of El Paso and a decrease in expenditures for
capital and tenant improvements and leasing costs for the Partnership's
properties, partially offset by an increase in escrow deposits. The Partnership
maintains working capital reserves to pay for these types of capital
expenditures. During the year ended December 31, 1995, the Partnership spent
$2,677,300 for building and tenant improvements and leasing costs and has
budgeted to spend approximately $700,000 during the year ending December 31,
1996. Included in the 1996 budgeted amount are capital and tenant improvements
and leasing costs of approximately $296,000, $241,000, $104,000 and $59,000 at
Glendale, Citrus Center, Shoppes and Richmond, respectively. The Managing
General Partner believes these expenditures are necessary to increase and/or
maintain occupancy levels in very competitive markets, maximize rental rates
charged to new and renewing tenants and prepare the properties for eventual
disposition.
The decrease in net cash used for financing activities of $47,839,400 for the
year ended December 31, 1995 when compared to the year ended December 31, 1994
was primarily due to: 1) the payoff in 1994 of the mortgage loans
collateralized by El Paso, Citrus Center and Shoppes, including prepayment
penalties; 2) the partial principal paydown in 1994 on the mortgage loan
collateralized by Glendale and 3) distribution of Sale Proceeds to Limited
Partners from the sale of El Paso. Partially offsetting the decrease was the
refinancing of the mortgage loan collateralized by Glendale in 1995.
On January 6, 1995, Indianapolis Mall Associates, the joint venture which owns
Glendale, obtained a new mortgage loan in the amount of $17,000,000 secured by
Glendale. The Partnership's share of the new loan amount was $8,500,000. The
existing loan was paid off in full with a portion of the proceeds from the new
loan. The net cash received by the Partnership in connection with this new loan
was $1,780,100, which was net of $69,900 in loan acquisition costs, and was
added to the Partnership's working capital.
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 and tenant improvements 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 year ended December 31, 1995, Cash Flow (as
defined in the Partnership Agreement) retained to supplement working capital
reserves was $1,456,800.
Distributions to Limited Partners for the quarter ended December 31, 1995 were
declared in the amount of $9.50 per Unit. Cash distributions are made 60 days
after the last day of each fiscal quarter. The amount of future distributions
to Limited 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,
there can be no assurance as to the amount and/or availability of cash for
future distributions to Partners.
13
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The response to this item is submitted as a separate section of this report. See
page A-1, "Index of Financial Statements, Schedule and Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
(a) DIRECTORS
---------
The Partnership has no directors. First Capital Financial Corporation
("FCFC") is the Managing General Partner. The directors of FCFC, as of March
29, 1996, are shown in the table below. Directors serve for one year or
until their successors are elected. The next annual meeting of FCFC will be
held in June 1996.
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
Samuel Zell . . . . . . . . . . . . . . . . . . Chairman of the Board
Douglas Crocker II. . . . . . . . . . . . . . . Director
Sheli Z. Rosenberg. . . . . . . . . . . . . . . Director
Sanford Shkolnik. . . . . . . . . . . . . . . . Director
</TABLE>
Samuel Zell, 54, has been a Director of the Managing General Partner since
1983 (Chairman of the Board since December 1985) and is Chairman of the
Board of Great American Management and Investment, Inc. ("Great American").
Mr. Zell is also Chairman of the Board of Equity Financial and Management
Company ("EFMC") and Equity Group Investments, Inc. ("EGI"), and is a
trustee and beneficiary of a general partner of Equity Holdings Limited, an
Illinois Limited Partnership, a privately owned investment partnership. He
is also Chairman of the Board of Directors of Anixter International Inc.,
Falcon Building Products, Inc. and American Classic Voyages Co. He is
Chairman of the Board of Trustees of Equity Residential Properties Trust. He
is a director of Quality Food Centers, Inc. and Sealy Corporation. He is
Chairman of the Board of Directors and Chief Executive Officer of Capsure
Holdings Corp. and Manufactured Home Communities, Inc. and Co-Chairman of
the Board of Revco D.S., Inc. Mr. Zell was President of Madison Management
Group, Inc. ("Madison") prior to October 4, 1991. Madison filed for
protection under the Federal bankruptcy laws on November 8, 1991.
Douglas Crocker II, 55, has been President and Chief Executive Officer since
December 1992 and a Director since January 1993 of the Managing General
Partner. Mr. Crocker has been an Executive Vice President of EFMC since
November 1992. Mr. Crocker has been President, Chief Executive Officer and
trustee of Equity Residential Properties Trust since March 31, 1993. He was
President of Republic Savings Bank, F.S.B. ("Republic") from 1989 to June
1992 at which time the Resolution Trust Company took control of Republic.
Mr. Crocker is a member of the Board of Directors of Horizon Group, Inc.
Sheli Z. Rosenberg, 54, was President and Chief Executive Officer of the
Managing General Partner from December 1990 to December 1992 and has been a
Director of the Managing General Partner since September 1983; was Executive
Vice President and General Counsel for EFMC from October 1980 to November
1994; has been President and Chief Executive Officer of EFMC and EGI since
November 1994; has been a Director of Great American since June 1984 and is
a director of various subsidiaries of Great American. She is also a director
of Anixter International Inc., Capsure Holdings Corp., American Classic
Voyages Co., Falcon Building Products, Inc., Jacor Communications, Inc.,
Revco D.S., Inc., Sealy Corporation and CFI Industries, Inc. She was
Chairman of the Board from January 1994 to September 1994; Co-Chairman of
the Board from September 1994 until March 1995 of CFI Industries, Inc. She
is also a trustee of Equity Residential Properties Trust. Ms. Rosenberg is a
Principal of Rosenberg & Liebentritt, P.C., counsel to the Partnership, the
Managing General Partner and certain of their Affiliates. Ms. Rosenberg was
Vice President of Madison prior to October 4, 1991. Madison filed for
protection under the Federal
15
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
- -------- --------------------------------------------------------------
(a) DIRECTORS (continued)
---------------------
bankruptcy laws on November 8, 1991. She has been Vice President of First
Capital Benefit Administrators, Inc. ("Benefit Administrators") since July
22, 1987. Benefit Administrators filed for protection under the Federal
Bankruptcy laws on January 3, 1995.
Sanford Shkolnik, 57, has been a Director of the Managing General Partner
since December 1985. Mr. Shkolnik has been Executive Vice President of EFMC
since 1976. He is Chairman of the Board and Chief Executive Officer of SC
Management, Inc., which is general partner of Equity Properties and
Development Limited Partnership, a nationally ranked shopping center
management company.
(b,c & e) EXECUTIVE OFFICERS
------------------
The Partnership does not have any executive officers. The executive officers
of the Managing General Partner as of March 29, 1996 are shown in the table.
All officers are elected to serve for one year or until their successors are
elected and qualified.
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
Douglas Crocker II.................. President and Chief Executive Officer
Arthur A. Greenberg................. Senior Vice President
Norman M. Field..................... Vice President - Finance and Treasurer
</TABLE>
PRESIDENT AND CEO - See Table of Directors above.
Arthur A. Greenberg, 55, has been Senior Vice President of the Managing
General Partner since August 1986. Mr. Greenberg was Executive Vice
President and Chief Financial Officer of Great American from December 1986
to March 1995. Mr. Greenberg also is an Executive Vice President of EFMC
since 1971, and President of Greenberg & Pociask, Ltd. He is Senior Vice
President since 1989 and Treasurer since 1990 of Capsure Holdings Corp. Mr.
Greenberg is a director of American Classic Voyages Co. and Chairman of the
Board of Firstate Financial A Savings Bank. Mr. Greenberg was Vice President
of Madison prior to October 4, 1991. Madison filed for protection under the
Federal bankruptcy laws on November 8, 1991.
Norman M. Field, 47, has been Vice President of Finance and Treasurer of the
Managing General Partner since February 1984, and also served as Vice
President and Treasurer of Great American from July 1983 until March 1995.
Mr. Field has been Treasurer of Benefit Administrators since July 22, 1987.
He also served as Vice President of Madison until October 4, 1991. He was
Chief Financial Officer of Equality Specialties, Inc. ("Equality"), a
subsidiary of Great American, from August 1994 to April 1995. Equality was
sold in April 1995.
(d) FAMILY RELATIONSHIPS
There are no family relationships among any of the foregoing directors and
officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
With the exception of the bankruptcy matters disclosed under Items 10 (a),
(b), (c) and (e), there are no involvements in certain legal proceedings
among any of the foregoing directors and officers.
16
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
(a,b,c & d) As stated in Item 10, the Partnership has no officers or directors.
Neither the Managing General Partner, nor any director or officer of the
Managing General Partner, received any direct remuneration from the Partnership
during the year ended December 31, 1995. However, the Managing General Partner
and Affiliates of the Managing General Partner do compensate the directors and
officers of the Managing General Partner. For additional information see Item 13
(a) Certain Relationships and Related Transactions.
(e) None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
(a) As of March 1, 1996, no person owned of record or was known by the
Partnership to own beneficially more than 5% of the Partnership's 100,000 Units
then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1, 1996
the executive officers and directors of First Capital Financial Corporation, the
Managing General Partner, did not own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
(a) Affiliates of the Managing General Partner, provided leasing, property
management and supervisory services to the Partnership. Compensation for these
property management services may not exceed the lesser of the compensation
customarily charged in arm's-length transactions by persons rendering similar
services or 6% of the gross receipts from the property being managed plus normal
out-of-pocket expenses where the Managing General Partner or Affiliate provides
leasing, re-leasing and/or leasing-related services, or 3% of gross receipts
where the Managing General Partner or Affiliate does not perform leasing, re-
leasing and/or leasing-related services for a particular property. In the event
the Partnership leases properties on a long-term net basis (10 years or more),
the maximum property management fee from such leases shall be 1% of the gross
revenues from such properties, except that the Partnership may also pay the
Managing General Partner or Affiliates a one time initial leasing fee of 3% of
the gross revenues on each lease payable over the first five full years of the
original term of the lease. For the year ended December 31, 1995, these
Affiliates were entitled to leasing, supervisory and property management fees of
$599,800. In addition, other Affiliates of the Managing General Partner was
entitled to receive $159,600 as reimbursements for insurance, personnel and
other miscellaneous services. Compensation for these services are on terms which
are fair, reasonable and no less favorable to the Partnership than reasonably
could be obtained from unaffiliated persons. Of these amounts, a total of
$67,900 was due from Affiliates and $36,300 was due to Affiliates as of December
31, 1995.
As of December 31, 1995, the Partnership owed $48,500 to the Managing General
Partner for a real estate commission earned in connection with the sale of one
Partnership property. This commission has been accrued but not paid. The total
of all real estate commissions incurred in connection with the sale of the
Partnership's properties shall not exceed the lesser of the compensation
customarily charged in arm's-length transactions or 6% of the sales price of the
property. Under the terms of the Partnership Agreement, this fee will not be
paid until such time as 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 Limited Partners) of 6% simple interest per annum on their
Capital Investment from the initial date of investment.
17
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Firstate Financial A Savings Bank ("Firstate"), an Affiliate of the Managing
General Partner, is obligated to the Partnership under a lease for office space
at Citrus Center. During the year ended December 31, 1995, Firstate paid
$240,500 in rent to the Partnership. The rent paid by Firstate is comparable to
that paid by other tenants at Citrus Center.
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 Limited Partners. Net Losses from the sale or disposition of a Partnership
property, including provisions for value impairment, shall be allocated: first,
to the General Partners to the extent of the aggregate balance in their capital
accounts; second, to the Limited Partners and among them (in the ratio which
their respective capital account balances bear to the aggregate of all capital
account balances of the Limited Partners) until the balance in their capital
accounts shall be reduced to zero; and third, the balance, if any, 99% to the
Limited Partners and 1% to the General Partners. Notwithstanding this, in all
events there shall be allocated to the General Partners not less than 1% of the
Net Losses from the sale, disposition or provisions for value impairment of a
Partnership property. For the year ended December 31, 1995, the General Partners
were entitled to a Partnership Management fee of $388,900 and allocated Net
Profits of $298,900, which included a (loss) from provisions for value
impairment of $(90,000).
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the Managing General Partner and certain of their Affiliates. Sheli
Z. Rosenberg, President and Chief Executive Officer of the Managing General
Partner from December 1990 to December 1992 and a Director of the Managing
General Partner since September 1983, is a Principal of Rosenberg. Compensation
for these services are on terms which are fair, reasonable and no less favorable
to the Partnership than reasonably could have been obtained from unaffiliated
persons. Rosenberg earned legal fees of $137,800 for the year ended December 31,
1995.
(c) No management person is indebted to the Partnership.
(d) None.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a,c & d) (1,2 & 3) See Index of Financial Statements, Schedule and Exhibits on
page A-1 of Form 10-K.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the quarter ended December 31, 1995.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: March 29, 1996 By: /s/ DOUGLAS CROCKER II
----------------- -----------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ SAMUEL ZELL March 29, 1996 Chairman of the Board
- ---------------------------- -------------- and Director of the
SAMUEL ZELL Managing General Partner
/s/ DOUGLAS CROCKER II March 29, 1996 President, Chief Executive
- ---------------------------- -------------- Officer and Director of the
DOUGLAS CROCKER II Managing General Partner
/s/ SHELI Z. ROSENBERG March 29, 1996 Director of the Managing
- ---------------------------- -------------- General Partner
SHELI Z. ROSENBERG
/s/ SANFORD SHKOLNIK March 29, 1996 Director of the Managing
- ---------------------------- -------------- General Partner
SANFORD SHKOLNIK
/s/ NORMAN M. FIELD March 29, 1996 Vice President - Finance
- ---------------------------- -------------- and Treasurer
NORMAN M. FIELD
20
<PAGE>
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Pages
-------------
Report of Independent Auditors A - 2
Balance Sheets at December 31, 1995 and 1994 A - 3
Statements of Partners' Capital for the Years
Ended December 31, 1995, 1994, and 1993 A - 3
Statements of Income and Expenses for the Years
Ended December 31, 1995, 1994, and 1993 A - 4
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993 A - 4
Notes to Financial Statements A - 5 to A - 7
SCHEDULE FILED AS PART OF THIS REPORT
III - Real Estate and Accumulated Depreciation
as of December 31, 1995 A - 8 and A - 9
All other schedules have been omitted as inapplicable, or for the reason that
the required information is shown in the financial statements or notes thereto.
EXHIBITS FILED AS PART OF THIS REPORT
EXHIBITS (3 & 4) First Amended and Restated Certificate and Agreement of
- ----------------
Limited Partnership as set forth on pages A-1 through A-30 of the Partnership's
definitive Prospectus dated May 24, 1983; Registration Statement No. 2-82357,
filed pursuant to Rule 424(b), is incorporated herein by reference.
EXHIBIT (10) Material Contracts
- ------------
(a) Lease agreement for a tenant at Citrus Center, one of the Partnership's
most significant properties whose revenues exceeded 10% of the Partnership's
1994 budgeted rental income, is incorporated herein by reference.
(b) Real Estate Sale Agreement for the sale of the Partnership's investment in
the El Paso Natural Gas Building filed as an exhibit to the Partnership's Report
on Form 8-K dated April 6, 1994 is incorporated herein by reference.
(c) Order Confirming Plan of Reorganization under Chapter 11 of the United
States Bankruptcy Code for FANY Seventh Avenue Associates, filed as an exhibit
to the Partnership's Report on Form 8-K dated December 9, 1994, is incorporated
herein by reference.
(d) Lease agreements for tenants that individually occupy more than 10% of the
net leasable square footage of the Partnership's significant properties, filed
as exhibits to the Partnership's Reports on Form 10-K dated December 31, 1993,
are incorporated herein by reference.
(e) Assignment Agreement for the purchase of an additional interest in South
Orange Avenue Associates filed as an exhibit to the Partnership's Report on
Form 8-K dated January 22, 1993 is incorporated herein by reference.
(f) Loan Agreement for the refinancing of the Partnership's investment in the
El Paso Natural Gas Building filed as an exhibit to the Partnership's Report on
Form 8-K dated January 15, 1993 is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
- ------------
The 1994 Annual Report to Limited Partners is being sent under separate cover,
not as a filed document and not via EDGAR, for the information of the
Commission.
EXHIBIT (27) Financial Data Schedule
- ------------
A - 1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
First Capital Income Properties, Ltd. - Series IX
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Income
Properties, Ltd. - Series IX as of December 31, 1995 and 1994, and the related
statements of income and expenses, partners' capital and cash flows for each of
the three years in the period ended December 31, 1995, and the schedule listed
in the accompanying index. These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Capital Income
Properties, Ltd. - Series IX at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
March 1, 1996
A-2
<PAGE>
BALANCE SHEETS
December 31, 1995 and 1994
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $12,472,900 $15,722,900
Buildings and improvements 58,832,000 61,904,700
- ------------------------------------------------------------------------------
71,304,900 77,627,600
Accumulated depreciation and amortization (17,073,500) (14,695,200)
- ------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 54,231,400 62,932,400
Cash and cash equivalents 15,524,300 15,085,400
Rents receivable 708,300 671,600
Escrow deposits 71,200
Other assets (primarily loan acquisition costs, net
of accumulated amortization of $115,000 and
$78,400, respectively) 358,900 249,400
- ------------------------------------------------------------------------------
$70,894,100 $78,938,800
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan payable $ 8,039,400 $ 6,650,000
Accounts payable and accrued expenses 1,034,800 1,213,300
Due to Affiliates 17,200 125,200
Security deposits 147,200 128,800
Distributions payable 1,055,600 722,200
Other liabilities 145,100 147,000
- ------------------------------------------------------------------------------
10,439,300 8,986,500
- ------------------------------------------------------------------------------
Partners' capital:
General Partners (deficit) (90,000)
Limited Partners (100,000 Units issued and
outstanding) 60,544,800 69,952,300
- ------------------------------------------------------------------------------
60,454,800 69,952,300
- ------------------------------------------------------------------------------
$70,894,100 $78,938,800
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1995, 1994 and 1993
(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 year ended December 31,
1994 269,100 19,160,300 19,429,400
Distributions for the year ended December
31, 1994 (227,800) (10,050,000) (10,277,800)
- -------------------------------------------------------------------------------
Partners' capital, December 31, 1994 0 69,952,300 69,952,300
Net income (loss) for the
year ended
December 31, 1995 298,900 (5,907,500) (5,608,600)
Distributions for the year ended December
31, 1995 (388,900) (3,500,000) (3,888,900)
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
1995 $(90,000) $60,544,800 $60,454,800
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-3
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the years ended December 31, 1995, 1994 and 1993
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $11,014,100 $13,351,700 $17,562,800
Interest 959,900 916,200 529,700
Net gain on sale or disposition of
properties 9,967,200
- ------------------------------------------------------------------------------
11,974,000 24,235,100 18,092,500
- ------------------------------------------------------------------------------
Expenses:
Interest 892,100 2,471,500 4,167,800
Depreciation and amortization 2,414,900 2,904,500 3,440,800
Property operating:
Affiliates 643,200 758,400 856,200
Nonaffiliates 1,958,100 2,590,100 2,735,300
Real estate taxes 945,500 1,780,900 1,795,800
Insurance--Affiliate 104,500 185,200 203,800
Repairs and maintenance 1,197,000 1,483,500 1,532,700
General and administrative:
Affiliates 75,600 96,300 42,600
Nonaffiliates 351,700 192,300 303,500
Provisions for value impairment 9,000,000 5,500,000
- ------------------------------------------------------------------------------
17,582,600 12,462,700 20,578,500
- ------------------------------------------------------------------------------
Net (loss) income before extraordinary
gain (loss) on early extinguishments
of debt (5,608,600) 11,772,400 (2,486,000)
Extraordinary gain (loss) on early
extinguishments of debt 7,657,000 (540,100)
- ------------------------------------------------------------------------------
Net (loss) income $(5,608,600) $19,429,400 $(3,026,100)
- ------------------------------------------------------------------------------
Net income (loss) allocated to General
Partners $ 298,900 $ 269,100 $ (30,300)
- ------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(5,907,500) $19,160,300 $(2,995,800)
- ------------------------------------------------------------------------------
Net (loss) income before extraordinary
gain (loss) on early extinguishments
of debt allocated to Limited Partners
per Unit (100,000 Units outstanding) $ (59.08) $ 117.72 $ (24.86)
- ------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (100,000 Units
outstanding) $ (59.08) $ 191.60 $ (29.96)
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(5,608,600) $19,429,400 $(3,026,100)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 2,414,900 2,904,500 3,440,800
(Gain) on sale or disposition of
properties (9,967,200)
Provisions for value impairment 9,000,000 5,500,000
Extraordinary (gain) loss on early
extinguishments of debt (7,657,000) 540,100
Changes in assets and liabilities:
Decrease in restricted cash 261,100 12,000
(Increase) decrease in rents
receivable (36,700) 205,000 333,700
(Increase) decrease in other assets (76,200) 30,400 404,500
(Decrease) increase in accounts
payable and accrued expenses (178,500) 300,100 214,600
(Decrease) increase in due to
Affiliates (108,000) (80,300) 104,500
(Decrease) increase in other
liabilities (1,900) (100,400) 153,900
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 5,405,000 5,325,600 7,678,000
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the sale of properties 44,379,100
Purchase of commercial rental
property (3,081,400)
Payments for capital and tenant
improvements (2,677,300) (3,892,500) (1,866,600)
Maturity of (investment in)
restricted certificate of deposit 75,000 (75,000)
(Increase) decrease in escrow
deposits (71,200) 94,300 (5,200)
- ------------------------------------------------------------------------------
Net cash (used for) provided by
investing activities (2,748,500) 40,655,900 (5,028,200)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Cash paid on disposition of property (49,500)
Proceeds from mortgage loan payable 8,500,000 22,500,000
Principal payments on mortgage loans
payable (7,110,600) (38,903,800) (16,137,600)
Prepayment costs on mortgage loans
payable (1,151,600) (540,100)
Payment of loan acquisition costs (69,900) (85,000) (397,900)
Refund of deposit on loan
refinancing 225,000
Increase (decrease) in security
deposits 18,400 (311,500) 52,000
Distributions paid to Partners (3,555,500) (9,555,600)
- ------------------------------------------------------------------------------
Net cash (used for) provided by
financing activities (2,217,600) (50,057,000) 5,701,400
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 438,900 (4,075,500) 8,351,200
Cash and cash equivalents at the
beginning of the year 15,085,400 19,160,900 10,809,700
- ------------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $15,524,300 $15,085,400 $19,160,900
- ------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year $ 942,100 $ 2,103,800 $ 4,323,800
- ------------------------------------------------------------------------------
Non-cash financing activities:
Assumption of mortgage loan $ 4,868,600
- ------------------------------------------------------------------------------
Mortgage loan assumed by the
purchaser $ 2,218,800
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms 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.
ORGANIZATION:
The Partnership was formed on February 2, 1983, by the filing of a Certificate
and Agreement of Limited Partnership with the Department of State of the State
of Florida, and commenced the Offering of Units on June 13, 1983. The
Certificate and Agreement, as amended and restated, authorized the sale to the
public of 75,000 Units (with the Managing General Partner's option to increase
the Offering to 100,000 Units) and not less than 1,400 Units pursuant to the
Prospectus. On June 28, 1983, the required minimum subscription level was
reached and the Partnership's operations commenced. The Managing General
Partner exercised its option to increase the Offering to 100,000 Units, which
amount was sold prior to the Termination of the Offering in October, 1983. The
Partnership was formed to invest primarily in existing, improved, income-
producing commercial real estate.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2014. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
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 preparation of the Partnership's financial statements in conformity with
generally accepted accounting principles 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 statements include the Partnership's 50% interest in three joint
ventures, one of which was sold in April 1994 and one of which was disposed of
in December 1994. The joint ventures are operated under the common control of
the Managing General Partner. Accordingly, the Partnership's pro rata share of
the ventures' revenues, expenses, assets, liabilities and capital is included
in the financial statements.
The Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership income or loss in their
individual tax returns; therefore, no provision for income taxes is made in the
financial statements of the Partnership. In addition, it is not practicable for
the Partnership to determine the aggregate tax bases of the Limited Partners;
therefore, the disclosure of the differences between the tax bases and the
reported assets and liabilities of the Partnership would not be meaningful.
Commercial rental properties are recorded at cost, net of any provisions for
value impairment, and depreciated (exclusive of amounts allocated to land) on
the straight-line method over their estimated useful lives. Lease acquisition
fees are recorded at cost and amortized over the life of the lease. Maintenance
and repair costs are expensed as incurred; expenditures for improvements are
capitalized and depreciated over the estimated life of the improvements.
The Managing General Partner periodically reviews significant factors regarding
the properties to determine that the properties are carried at lower of cost or
fair market value. These factors include, but are not limited to, the Managing
General Partner's experience in the real estate industry, an evaluation of
recent operating performance against expected results, economic trends or
factors affecting major tenants or the regions in which the properties are
located and, where available, information included in recent appraisals of
properties.
Based on this analysis, where it is anticipated that the carrying value of an
investment property will not be recovered, the Managing General Partner has
deemed it appropriate to reduce the basis of the properties for financial
reporting purposes to fair market value. Such fair market value is the Managing
General Partner's best estimate of the amounts expected to be realized were
such properties sold as of the Balance Sheet date, based upon current
information available. The ultimate realization may differ from these amounts.
Provisions where applicable, are reflected in the accompanying Statements of
Income and Expenses in the year such evaluations have been made. See Note 8 for
additional information.
Loan acquisition costs are amortized over the term of the note issued under
mortgage loans made in connection with the acquisitions or refinancings of
Partnership properties. When a property is disposed or refinanced, the related
loan acquisition costs and accumulated amortization are removed from the
respective accounts and any unamortized balance is expensed.
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 also
recognized in accordance with generally accepted accounting principles.
Cash equivalents are considered all highly liquid investments with a maturity
of three months or less when purchased.
The Partnership's financial statements include financial instruments, including
receivables, trade liabilities and mortgage debt. The Partnership considers the
disclosure of the fair value of its mortgage debt to be impracticable due to
the general illiquid nature of the real estate financing market and an
inability to obtain comparable financing on certain properties due to declines
in market value. The fair value of all other financial instruments, including
cash and cash equivalents, was not materially different from their carrying
value at December 31, 1995 and 1994.
Certain reclassifications have been made to the previously reported 1993 and
1994 statements in order to provide comparability with the 1995 statements.
These reclassifications have no effect on net income (loss) or Partners'
(deficit) capital.
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, subsequent to October 31, 1983,
the Termination of the Offering, the General Partners are entitled to 10% of
distributable Cash Flow (as defined by the Partnership Agreement), as a
Partnership Management Fee. In 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: (A) the General
Partners' Partnership Management Fee for such fiscal year; or (B) 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: (A) the Sale or Refinancing Proceeds
to be distributed to the General Partners with respect to the sale or
disposition of such property; or (B) 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 provisions for value
impairment of Partnership properties are allocated: first, to the General
Partners to the extent of the aggregate balance in their capital accounts;
second, to the Limited Partners and among them (in the ratio which their
respective capital account balances bear to the aggregate of all capital
account balances of the Limited Partners) until the balance 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 or disposition of a Partnership property. For the year
ended December 31, 1995, the General Partners were entitled to a Partnership
Management Fee of $388,900 and allocated Net Profits of $298,900, which
included a (loss) from provisions for value impairment of $(90,000). For the
year ended December 31, 1994, the General Partners were entitled to a
Partnership Management Fee of $227,800 and allocated Net Profits of $269,100,
which included an extraordinary (loss) on the early extinguishment of debt of
$(17,000) and a gain from the sale or disposition of Partnership property of
$58,300. For the year ended December 31, 1993, the General Partners were not
entitled to a
A-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Partnership Management Fee and were allocated Net (Loss) of $(30,300), which
included a (loss) from a provision for value impairment of $(55,000) and an
extraordinary (loss) on early extinguishment of debt of $(5,400).
Fees and reimbursements paid and payable by the Partnership to Affiliates are
as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------------------------------
1995 1994 1993
---------------------- ------------------- -------------------
Payable
Paid (Receivable) Paid Payable Paid Payable
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate commission
(a) None $48,500 None $ 48,500 None $ 48,500
Property management and
leasing fees $ 711,500 (40,800) $ 728,200 70,900 $ 637,500 144,200
Reimbursements of
property insurance
premiums, at cost 104,500 None 177,600 None 192,600 None
Reimbursements of
expenses, at cost:
--Accounting 28,200 7,000 28,100 4,200 30,500 4,200
--Investor
communication 23,500 2,200 15,400 1,600 10,400 1,600
--Legal 137,500 300 250,400 None 130,300 7,000
--Other None None None None 1,600 None
- ----------------------------------------------------------------------------------------
$1,005,200 $17,200 $1,199,700 $125,200 $1,002,900 $205,500
- ----------------------------------------------------------------------------------------
</TABLE>
(a) As of December 31, 1995, the Partnership owed $48,500 to the Managing
General Partner for a real estate commission earned in connection with the
1992 sale of one Partnership property. This commission has been accrued but
not paid. Under the terms of the Partnership Agreement, this fee will not
be paid until such time as 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 Limited Partners) 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 Citrus Center (f/k/a/ Firstate Tower). The lease agreement terminates on
February 28, 2002. For the years ended December 31, 1995, 1994 and 1993,
Firstate paid approximately $240,500, $232,600 and $224,200, respectively, in
total rents. In January 1993, the Partnership purchased an additional interest
in the Citrus Center from an Affiliated Partnership (see Note 6 for additional
information). The rent paid by Firstate is comparable to that paid by other
tenants at Citrus Center.
3. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1995 was as follows:
<TABLE>
<S> <C>
1996 $ 7,440,000
1997 7,009,100
1998 6,504,100
1999 6,024,800
2000 4,846,400
Thereafter 16,005,900
--------------
$47,830,300
--------------
</TABLE>
The Partnership is subject to the usual business risks associated with the
collection of the above-scheduled rentals. In addition to the amounts scheduled
above, the Partnership expects to receive rental revenue from operating expense
and real estate tax reimbursements and percentage rents. Percentage rents
earned for the years ended December 31, 1995, 1994 and 1993 were $385,500,
$252,500 and $506,600, respectively.
4. MORTGAGE LOAN PAYABLE:
Mortgage loan payable at December 31, 1995 and 1994 consisted of the following
non-recourse loan:
<TABLE>
<CAPTION>
Principal Principal Estimated
Property Pledged as Balance at Balance at Interest Maturity Periodic Balloon
Collateral 12/31/95 12/31/94 Rate Date Payment Payment
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glendale Center Shopping
Mall (a) $8,039,400 $6,650,000 10.51%(b) 1/1/99(c) (c) $6,171,200(c)
- --------------------------------------------------------------------------------------------
$8,039,400 $6,650,000
- --------------------------------------------------------------------------------------------
</TABLE>
(a) This property is owned through a joint venture. Amounts represent the
Partnership's share of the liability and are not the total amount by which
the property is encumbered.
(b) This interest rate represents the weighted average for the year ended
December 31, 1995. The interest rate is subject to change in accordance
with the provisions of the loan agreement. As of December 31, 1995, the
interest rate on the Glendale loan was 10.531%.
(c) On October 27, 1994, Indianapolis Mall Associates, the joint venture which
owns Glendale Center Shopping Mall ("Glendale") made a $4,300,000 principal
payment to this lender, of which the Partnership's share was $2,150,000. As
a result of this principal payment, the lender agreed to extend the loan's
maturity to November 30, 1994. On November 21, 1994, the joint venture made
an additional principal payment of $3,700,000, of which the Partnership's
share was $1,850,000, for which the lender further extended the maturity
date to January 31, 1995. A fee of $50,000 was paid by the joint venture
for each loan extension. On January 6, 1995, the joint venture which owns
Glendale, obtained a new mortgage loan in the amount of $17,000,000 secured
by this property. The Partnership's share of the new loan amount was
$8,500,000. The existing loan was paid off in full with a portion of the
proceeds from the new loan. The interest rate on the new loan is variable
at Libor plus 4.5% with interest payable monthly. Monthly payments of
principal are to be made based on an 11-year amortization with an interest
rate of 9.5%. The joint venture is required to pay annually additional
principal amortization equal to 50% of net cash flow (pursuant to the loan
agreement) from the property for each prior calendar year by March 31,
1996. Additionally, certain debt coverage requirements (pursuant to the
loan agreement) must be met each quarter and deficiencies in reaching
benchmarks will require additional principal amortization payments. The
additional principal amortization payment that the joint venture is
required to pay for the 1995 calendar year is $387,400, of which the
Partnership's share is $193,700.
On June 10, 1994 the Partnership sold the Triangle Building. The outstanding
indebtedness on this property of $2,218,800 was assumed, without recourse to
the Partnership, by the buyer at closing.
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.
On May 27, 1994, the Partnership repaid the mortgage loan collateralized by
Citrus Center for a total amount of $9,731,000, which included a prepayment
penalty of $237,300. The prepayment penalty was recorded as an extraordinary
(loss) on early extinguishment of debt in the Partnership's financial
statements.
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. The
outstanding indebtedness on this property of $42,757,000, of which the
Partnership's share was $21,378,500, was satisfied at closing. In addition,
a prepayment penalty on early extinguishment of debt of $1,828,600 was
incurred, of which the Partnership's share was $914,300. The prepayment
penalty was recorded as an extraordinary loss on early extinguishment of
debt in the Partnership's financial statements.
A-6
<PAGE>
The Managing General Partner was unable to reach a mutual resolution with
the mortgage holder regarding the restructuring of the mortgage loan for
Fashion Atrium 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 owned 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 $1,311,000, of which the Partnership's share was
$655,500, 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 $2,313,200, of
which the Partnership's proportionate share was $1,156,600, for the payment
of accrued real estate taxes plus penalties and interest. FANY assisted in
the orderly conveyance of title of the property to the mortgage holder
within the context of a pre-packaged Chapter 11 bankruptcy plan filed on
October 14, 1994 in the United States Bankruptcy Court for the Southern
District of New York. The conveyance of title to the property occurred
pursuant to the terms and conditions of a confirmed plan on December 9,
1994. At the time the conveyance of title occurred, FANY was relieved of its
obligation under the mortgage loan of $24,151,000 less amounts held in
safekeeping, of which the Partnership's share was $12,075,500 and any
interest in the assets and liabilities of FANY therein, with the exception
of the rights to real estate tax refunds that may be received for the fiscal
years 1992 and 1993.
Amortization of scheduled mortgage loan principal payments for the remaining
term of the Glendale loan:
<TABLE>
<S> <C>
1996 $ 700,000
1997 556,500
1998 611,700
1999 6,171,200
-------
$8,039,400
-------
</TABLE>
5. INCOME TAX:
The Partnership utilizes the accrual basis of accounting for both income tax
reporting and financial statement purposes. Financial statement results will
differ from tax results due to the use of differing depreciation lives and
methods, the recognition of rents received in advance as taxable income, the
Partnership's provisions for value impairment and other factors for financial
statement purposes. The net effect of these accounting differences for the year
ended December 31, 1995, was that the net results for financial statement
purposes was $8,798,300 less than the net results for tax reporting purposes.
The aggregate cost for federal income tax purposes at December 31, 1995 was
$76,370,000.
6. PROPERTY ACQUISITION:
On January 22, 1993, the Partnership purchased First Capital Income Properties,
Ltd.--Series XI's ("Series XI"), an Affiliated Partnership, 50% interest in the
joint venture which owned the Citrus Center. The purchase, effective January 1,
1993, was pursuant to the terms of an assignment agreement by and among the
Partnership, Series XI and a corporation wholly owned by the Partnership. The
amount paid to Series XI by the Partnership was $3,081,400, which was equal to
50% of the appraised value of the Citrus Center, as determined by an
independent appraiser, less 50% of the then outstanding principal balance under
the loan collateralized by the Citrus Center of $4,868,600.
7. PROPERTY SALES/DISPOSITIONS:
On April 6, 1994 First Capital Kayser Center, the joint venture ("Joint
Venture") which owned El Paso, sold the property for a sale price of
$88,450,000. The outstanding indebtedness on this property of $42,757,000 was
satisfied at closing. The Joint Venture incurred selling expenses of
$3,743,300, of which $1,828,600 related to a prepayment penalty on the early
extinguishment of debt. The Partnership's share of these amounts was $1,871,600
and $914,300, respectively. The Joint Venture received net sale proceeds, prior
to satisfaction of the mortgage on the property, of $84,706,700, of which the
Partnership's share was $42,353,400. The net gain, after recognition of the
prepayment penalty, reported by the Partnership for financial statement
purposes was $18,015,300. For income tax reporting purposes the Partnership
reported a net gain in 1994 of $28,646,700.
On June 10, 1994, the Partnership sold the Triangle Office Building, located in
Atlanta, Georgia, for a sale price of $3,420,000. The Partnership incurred
selling expenses of $89,800. The outstanding indebtedness on this property of
$2,218,800 was assumed, without recourse to the Partnership, by the buyer at
closing. The Partnership received net sale proceeds of $1,111,400. The total
(loss) to the Partnership for financial statement purposes in connection with
this sale was $(5,017,600) of which $(4,000,000) was recorded in 1992 as a
provision for value impairment. For income tax reporting purposes the
Partnership reported a (loss) of $(2,700,000).
On December 9, 1994, the joint venture which owned Fashion Atrium, in which the
Partnership had a 50% interest, transferred title to Fashion Atrium to the
mortgage holder through an orderly conveyance of title within the context of a
pre-packaged Chapter 11 bankruptcy plan filed on October 14, 1994 in the United
States Bankruptcy Court for the Southern District of New York. The disposition
of the Fashion Atrium relieved the Partnership of its share of the obligation
under the nonrecourse mortgage loan collateralized by the property as well as
any interest in the assets therein, with the exception of the rights to real
estate tax refunds that may be received for the fiscal years 1992 and 1993.
This extinguishment of debt was considered a noncash event for the purposes of
the Statement of Cash Flows, and was not included in the Partnership's
calculation of Cash Flow (as defined by the Partnership Agreement) for the year
ended December 31, 1994. The total (loss), for financial statement purposes, to
the Partnership in connection with the disposition of Fashion Atrium was
$(13,444,800) of which $(5,500,000) was recorded in 1993 as a provision for
value impairment. This (loss) represented the net book value of the property
(prior to any provision for value impairment) in excess of its estimated fair
market value. In addition, in 1994, the Partnership also recorded an
extraordinary gain on extinguishment of debt in connection with the disposition
of the Fashion Atrium of $8,808,600 for financial statement purposes. This
extraordinary gain on extinguishment of debt represented the excess property
indebtedness over the estimated fair market value of the property. For tax
purposes, the Partnership recorded a (loss) in 1994 of $(588,700) on this
disposition.
All of the above sales were all-cash transactions (with the exception of
Fashion Atrium), with no further involvement on the part of the Partnership.
8. PROVISIONS FOR VALUE IMPAIRMENT:
Due to the depressed economic environment in the retail industry, regional
factors affecting the Partnership's retail properties and other matters
relating specifically to certain of the Partnership's properties, there is
uncertainty as to the Partnership's ability to recover the net carrying value
of certain of its properties during the remaining estimated holding periods.
Accordingly, it was deemed appropriate to reduce the bases of such properties
in the Partnership's financial statements during the years ended December 31,
1995 and 1993. The provisions for value impairment were considered non-cash
events for the purposes of the Statements of Cash Flows and were not utilized
in the determination of Cash Flow (as defined in the Partnership Agreement).
The following is a summary of the provisions for value impairment reported by
the Partnership for the years ended December 31, 1995 and 1993:
<TABLE>
<S> <C> <C>
Property 1995 1993
--------------------------------------------
Glendale Center Shopping
Mall $6,300,000
Shoppes of West Melbourne 2,700,000
Fashion Atrium $5,500,000
--------------------------------------------
$9,000,000 $5,500,000
--------------------------------------------
</TABLE>
The provisions for value impairment are a material fourth quarter adjustment
pursuant to Accounting Principles Board Opinion No. 28, Interim Financial
Reporting. No other material adjustments were made in the fourth quarters.
Beginning on January 1, 1996, the Partnership will adopt 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 is effective for fiscal years
beginning after December 15, 1995. The Managing General Partner believes that
based on current circumstances, the adoption on January 1, 1996 of the Standard
will not materially affect the Partnership's financial position or results of
operations.
A-7
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES IX
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
Column A Column B Column C Column D
- ------------------------- ------------ ------------------------- -------------------------
Initial cost Costs capitalized
to Partnership (1) subsequent to acquisition
------------------------- -------------------------
Buildings
and
Improve- Improve- Carrying
Description Encumbrances Land ments ments Costs (2)
- ------------------------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Shopping Centers:
- -----------------
Richmond Plaza
Shopping Center
(Augusta, GA) (5) $ 2,152,300 $ 7,630,900 $ 1,081,800 $ 56,900
Glendale Center
Shopping Mall
(Indianapolis, IN)
(50% Interest) $ 8,039,400 4,932,600 18,556,900 2,068,900 67,600
Shoppes of West
Melbourne (West
Melbourne, FL) (11) 4,133,000 8,782,800 807,800 222,800
Office Buildings:
- -----------------
Citrus Center
(f/k/a Firstate Tower)
(Orlando, FL) (13) (14) 4,475,000 18,113,100 7,134,900 87,600
----------- ----------- ------------ ----------- ---------
$ 8,039,400 $15,692,900 $ 53,083,700 $11,093,400 $ 434,900
=========== =========== ============ =========== =========
</TABLE>
<TABLE>
<CAPTION>
Column E Column F Column G Column H Column I
--------------------------------------------- ------------ --------- ---------- ------------
Life on
Gross amount at which which
carried at close of period deprecia-
--------------------------------------------- tion in lat-
Buildings Accumu- est income
and lated Date of statements
Improve- Deprecia- construc- Date is com-
Description Land ments Total (3)(4) tion (3) tion Acquired puted
- ------------------------- ----------- ------------ ------------ ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers:
- -----------------
Richmond Plaza
Shopping Center 35 (6)
(Augusta, GA) $ 2,156,000 $ 8,765,900 $ 10,921,900 $ 2,505,800 1980 Sept. 1984 3 - 10 (7)
Glendale Center
Shopping Mall
(Indianapolis, IN) 35 (6)
(50% Interest) 2,887,600(8) 16,438,400 19,326,000(9) 5,860,400 1958(10) May 1985 3 - 13 (7)
Shoppes of West
Melbourne (West) 35 (6)
Melbourne, FL) 2,954,300 8,292,100 11,246,400(12) 2,465,100 1984 Nov. 1985 3 - 10 (7)
Office Buildings:
- -----------------
Citrus Center
(f/k/a Firstate Tower) 35 (6)
(Orlando, FL) (13) 4,475,000 25,335,600 29,810,600 6,242,200 1971 May 1986 2 - 10 (7)
----------- ------------ ------------ -----------
$12,472,900 $ 58,832,000 $ 71,304,900 $17,073,500
============ ============ ============ ===========
</TABLE>
See accompanying notes on the following page.
A - 8
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES IX
NOTES TO SCHEDULE III
Note 1. Amounts presented are net of rent guarantees.
Note 2. Consists of legal fees, appraisal fees, title costs and other related
professional fees.
Note 3. The following is a reconciliation of activity in Columns E and F:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994 December 31, 1993
---------------------------- ---------------------------- ----------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of the year $ 77,627,600 $ 14,695,200 $129,477,700 $ 27,239,500 $125,161,100 $ 23,881,000
Additions during the year:
Acquisition of commercial
rental property (11) 7,950,000
Improvements 2,677,300 3,892,500 1,866,600
Provisions for depreciation
and amortization 2,378,300 2,851,200 3,358,500
Deductions during the year:
Cost of real estate sold
or disposed (55,742,600)
Accumulated depreciation
on real estate sold or
disposed (15,395,500)
Provisions for value
impairment (9,000,000) (5,500,000)
------------ ------------ ------------ ------------ ------------ ------------
Balance at the end
of the year $ 71,304,900 $ 17,073,500 $ 77,627,600 $ 14,695,200 $129,477,700 $ 27,239,500
============ ============ ============ ============ ============ ============
</TABLE>
Note 4. The aggregate cost for Federal income tax purposes is $76,370,000.
Note 5. Mortgage balance repaid in January 1993.
Note 6. Estimated useful life for building.
Note 7. Estimated useful life for improvements.
Note 8. A parcel of land at Glendale Shopping Center was sold on October 9,
1992. The basis of the land was approximately $59,400.
Note 9. Includes a provision for value impairment of $6,300,000.
Note 10. Renovated in 1983 and 1984.
Note 11. Mortgage balance repaid in June 1994.
Note 12. Included a provision for value impairment of $2,700,000.
Note 13. In January 1993 the Partnership effectively purchased the remaining 50%
joint venture interest of this property from an Affiliated partnership.
Note 14. Mortgage balance repaid in May 1994.
A-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,524,300
<SECURITIES> 0
<RECEIVABLES> 708,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,303,800
<PP&E> 71,304,900
<DEPRECIATION> 17,073,500
<TOTAL-ASSETS> 70,894,100
<CURRENT-LIABILITIES> 2,206,300
<BONDS> 8,039,400
<COMMON> 0
0
0
<OTHER-SE> 60,454,800
<TOTAL-LIABILITY-AND-EQUITY> 71,304,900
<SALES> 0
<TOTAL-REVENUES> 11,974,000
<CGS> 0
<TOTAL-COSTS> 4,848,300
<OTHER-EXPENSES> 427,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 892,100
<INCOME-PRETAX> (5,608,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,608,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,608,600)
<EPS-PRIMARY> (59.08)
<EPS-DILUTED> (59.08)
</TABLE>
