<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission File Number 0-12946
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First Capital Income Properties, Ltd. - Series IX
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(Exact name of registrant as specified in its charter)
Florida 59-2255857
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 1000, Chicago, Illinois 60606-2607
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(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated May 24, 1983, included
in the Partnership's Registration Statement on Form S-11, is incorporated herein
by reference in Part I of this report.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CAPITAL INCOME PROPERTIES, LTD.--SERIES IX
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
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<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 2,887,600 $ 5,841,900
Buildings and improvements 13,994,400 22,451,500
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16,882,000 28,293,400
Accumulated depreciation and amortization (7,008,400) (9,587,600)
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Total investment properties, net of accumulated
depreciation and amortization 9,873,600 18,705,800
Cash and cash equivalents 10,422,000 22,387,300
Investments in debt securities 16,889,300 4,862,000
Rents receivable 392,200 499,000
Escrow deposits 139,500 100,400
Other assets (including loan acquisition costs, net
of accumulated amortization of $135,200 and
$115,400, respectively) 143,000 79,600
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$37,859,600 $46,634,100
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan payable $ 5,998,400 $ 6,559,700
Accounts payable and accrued expenses 588,500 598,500
Due to Affiliates, net 71,500 62,600
Distributions payable 10,994,500 10,905,600
Security deposits 5,500 21,200
Other liabilities 353,200 353,600
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18,011,600 18,501,200
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Partners' capital:
General Partners 106,600 86,700
Limited Partners (100,000 units issued and
outstanding) 19,741,400 28,046,200
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19,848,000 28,132,900
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$37,859,600 $46,634,100
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
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<S> <C> <C> <C>
Partners' (deficit) capital, January 1,
1997 $(117,000) $ 56,790,200 $ 56,673,200
Net income for the year ended December
31, 1997 548,100 12,206,000 12,754,100
Distributions for the year ended
December 31, 1997 (344,400) (40,950,000) (41,294,400)
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Partners' capital, December 31, 1997 86,700 28,046,200 28,132,900
Net income for the six months ended
June 30, 1998 119,900 3,145,200 3,265,100
Distributions for the six months ended
June 30, 1998 (100,000) (11,450,000) (11,550,000)
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Partners' capital, June 30, 1998 $ 106,600 $ 19,741,400 $ 19,848,000
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</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES IX
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Income:
Rental $ 812,100 $2,981,700
Interest 468,400 227,400
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1,280,500 3,209,100
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Expenses:
Interest 156,800 181,300
Depreciation and amortization 118,000 600,800
Property operating:
Affiliates 9,400 100,800
Nonaffiliates 209,900 485,300
Real estate taxes 88,100 200,200
Insurance--Affiliate 9,500 25,000
Repairs and maintenance 55,600 287,600
General and administrative:
Affiliates 7,900 5,700
Nonaffiliates 58,700 64,200
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713,900 1,950,000
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Net income $ 566,600 $1,258,200
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Net income allocated to General Partners $ 44,400 $ 116,600
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Net income allocated to Limited Partners $ 522,200 $1,141,600
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Net income allocated to Limited Partners per Unit
(100,000 Units outstanding) $ 5.22 $ 11.42
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Income:
Rental $1,942,200 $5,774,700
Interest 893,100 431,400
Gain on sale of property 1,990,300
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4,825,600 6,206,100
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Expenses:
Interest 318,200 363,400
Depreciation and amortization 267,500 1,208,900
Property operating:
Affiliates 28,700 213,500
Nonaffiliates 435,600 1,037,300
Real estate taxes 190,700 461,200
Insurance--Affiliate 25,900 56,700
Repairs and maintenance 116,800 584,000
General and administrative:
Affiliates 18,200 16,000
Nonaffiliates 158,900 128,000
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1,560,500 4,069,000
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Net income $3,265,100 $2,137,100
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Net income allocated to General Partners $ 119,900 $ 233,300
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Net income allocated to Limited Partners $3,145,200 $1,903,800
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Net income allocated to Limited Partners per Unit
(100,000 Units outstanding) $ 31.45 $ 19.04
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,265,100 $ 2,137,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of property (1,990,300)
Depreciation and amortization 267,500 1,208,900
Changes in assets and liabilities:
Decrease in rents receivable 106,800 58,100
(Increase) in other assets (83,100) (20,000)
(Decrease) increase in accounts payable and
accrued expenses (10,000) 288,900
Increase (decrease) in due to Affiliates 8,900 (39,600)
(Decrease) increase in other liabilities (400) 165,900
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Net cash provided by operating activities 1,564,500 3,799,300
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Cash flows from investing activities:
Payments for capital and tenant improvements (700) (95,300)
Proceeds from sale of property 10,575,400
(Increase) in investments in debt securities (12,027,300) (8,841,800)
(Increase) in escrow deposits (39,100) (34,000)
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Net cash (used for) investing activities (1,491,700) (8,971,100)
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Cash flows from financing activities:
Principal payments on mortgage loan payable (561,300) (351,000)
Distributions paid to Partners (11,461,100) (2,333,300)
(Decrease) in security deposits (15,700) (10,500)
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Net cash (used for) financing activities (12,038,100) (2,694,800)
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Net (decrease) in cash and cash equivalents (11,965,300) (7,866,600)
Cash and cash equivalents at the beginning of the
period 22,387,300 15,693,500
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Cash and cash equivalents at the end of the period $ 10,422,000 $ 7,826,900
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Supplemental information:
Interest paid during the period $ 318,200 $ 304,100
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD.--SERIES IX
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is included in the Registration Statement and
incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The financial information included in these financial statements is unaudited;
however, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter and six months ended June 30, 1998 are not necessarily indicative
of the operating results for the year ending December 31, 1998.
The financial statements include the Partnership's 50% interest in a joint
venture with an Affiliated partnership. This joint venture was formed for the
purpose of acquiring a 100% interest in certain real property and is operated
under the common control of the Managing General Partner. Accordingly, the
Partnership's pro rata share of the joint venture's revenues, expenses, assets,
liabilities and Partners' capital was included in the financial statements.
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 on the straight-line method over the
life of the respective lease. Maintenance and repair costs are expensed against
operations as incurred; expenditures for improvements are capitalized to the
appropriate property accounts and depreciated on the straight-line method over
the estimated life of such improvements.
The Partnership evaluates its rental properties for impairment when conditions
exist which may indicate that it is probable that the sum of expected future
cash flows (undiscounted) from a property is less than its estimated carrying
basis. Upon determination that an impairment has occurred, the basis in the
rental property is reduced to fair value. Management was not aware of any
indicator that would result in a significant impairment loss during the periods
reported.
Loan acquisition costs are amortized over the term of the mortgage loan made in
connection with the acquisition of Partnership properties or refinancing of
Partnership loans. When a property is disposed of or a loan is refinanced, the
related loan acquisition costs and accumulated amortization are removed from
the respective accounts and any unamortized balance is expensed.
Property sales 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 is recognized in accordance with GAAP.
Investments in debt securities are comprised of obligations of the United
States government and corporate debt securities and are classified as held-to-
maturity. These investments are carried at their amortized cost basis in the
financial statements, which approximated fair market value. All of these
securities had a maturity of less than one year when purchased.
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
Certain reclassifications have been made to the previously reported 1997
statements in order to provide comparability with the 1998 statements. These
reclassifications have no effect on net income or Partners' capital.
Reference is made to the Partnership's annual report for the year ended
December 31, 1997 for a description of other accounting policies and additional
details of the Partnership's financial condition, results of operations,
changes in Partners' capital and changes in cash balances for the year then
ended. The details provided in the notes thereto have not changed except as a
result of normal transactions in the interim or as otherwise disclosed herein.
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, subsequent to October 31, 1983,
the Termination of the Offering, the General Partners are entitled to 10% of
Cash Flow (as defined in the Partnership Agreement), as a Partnership
Management Fee. 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 for
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 provision
4
<PAGE>
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, disposition or provision for value impairment of a
Partnership property. For the quarter and six months ended June 30, 1998, the
General Partners were paid a Partnership Management Fee, and were allocated Net
Profits from operations, of $44,400 and $100,000, respectively. In addition,
during the six months ended June 30, 1998 the General Partners were allocated a
gain of $19,900 from the sale of a Partnership property. For the quarter and
six months June 30, 1997 the General Partners were paid a Partnership
Management Fee and were allocated Net Profits of $116,600 and $233,300,
respectively.
Fees and reimbursement paid and payable by the Partnership to Affiliates during
the quarter and six months ended June 30, 1998 were as follows:
<TABLE>
<CAPTION>
Paid
Quarter Six Months Payable
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Asset management fees $13,000 $23,600 $ 1,800
Reimbursement of property insurance premiums, at
cost 7,000 8,000 17,900
Real estate commission (a) None None 48,500
Legal 32,300 50,800 2,300
Reimbursement of expenses, at cost
--Accounting 9,100 9,100 700
--Investor communications 2,800 2,800 300
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$64,200 $94,300 $71,500
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</TABLE>
(a) As of June 30, 1998, the Partnership owed $48,500 to the Managing General
Partner for a real estate commission earned in connection with the sale of
a Partnership property. This commission has been accrued but not paid. In
accordance with the Partnership Agreement, the Partnership will not pay the
General Partners or any Affiliates a real estate commission from the sale
of a Partnership property until Limited Partners have received cumulative
distributions of Sale or Refinancing Proceeds equal to 100% of their
Original Capital Contribution, plus a cumulative return (including all Cash
Flow (as defined in the Partnership Agreement) which has been distributed
to the Limited Partners from the initial date of investment) of 6% simple
interest per annum on their Capital Investment from the initial date of
investment.
3. MORTGAGE LOAN PAYABLE:
Mortgage loan payable at June 30, 1998 and December 31, 1997 consisted of the
following non-recourse loan:
<TABLE>
<CAPTION>
Property Partnership's share of
Pledged as Principal Balance at Interest Maturity
Collateral 6/30/98 12/31/97 Rate Date
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<S> <C> <C> <C> <C>
Glendale Center
Shopping
Mall (50%) $5,998,400 $6,559,700 10.17%(a) 1/1/1999(b)
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</TABLE>
(a) This interest rate represents the weighted average for the six months ended
June 30, 1998. This interest rate is subject to change on a monthly basis
in accordance with the provisions of the loan agreement. As of June 30,
1998, the interest rate on this loan was 10.16%.
(b) Upon fulfilling certain covenants, the Partnership has two options to
extend the maturity date for one year each.
For additional information regarding the mortgage loan payable, see Notes to
the Financial Statements in the Partnership's annual report for the year ended
December 31, 1997.
4. PROPERTY SALE:
On February 27, 1998, the Partnership completed the sale of Shoppes of West
Melbourne, located in West Melbourne, Florida, for a sale price of $11,000,000.
Sale Proceeds, net of actual and estimated closing expenses was $10,575,400.
The Partnership recorded a gain of $1,990,300 for the six months ended June 30,
1998 and will distribute $10,550,000 or $105.50 per Unit on August 31, 1998 to
Limited Partners of record as of February 27, 1998.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's Annual Report for the year ended
December 31, 1997 for a discussion of the Partnership's business.
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price.
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. Components of the Partnership's operating results are generally expected
to decline as real property interests are sold since the Partnership no longer
receives income nor incurs expenses from such real property interests. Through
June 30, 1998, the Partnership has sold all of its real property investments
with the exception of its 50% interest in Glendale Center Shopping Mall
("Glendale").
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the quarters and six months ended June 30, 1998
and 1997. 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 For the
Quarters Ended Six Months Ended
6/30/98 6/30/97 6/30/98 6/30/97
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<S> <C> <C> <C> <C>
GLENDALE CENTER SHOPPING MALL (50%)
Rental revenues $817,300 $1,030,900 $1,712,000 $1,899,900
- ---------------------------------------------------------------
Property net income $167,000 $ 375,100 $ 412,100 $ 397,200
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Average Occupancy 88% 91% 88% 91%
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SOLD PROPERTIES (B)
Rental revenues $ (5,100) $1,950,800 $ 230,200 $3,874,800
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Property net income $ 1,800 $ 722,700 $ 149,300 $1,450,100
- ---------------------------------------------------------------
</TABLE>
(a) Excludes certain income and expense items, which are not directly related
to individual property operating results such as interest income and
general and administrative expenses.
(b) Sold Properties includes the results of Citrus Center (Sold August 1,
1997), Richmond Plaza Shopping Center ("Richmond") (sold December 31, 1997)
and Shoppes of West Melbourne ("Shoppes") (sold February 27, 1998).
Unless otherwise disclosed, discussions of fluctuations between 1998 and 1997
refer to both the quarters and six months ended June 30, 1998 and 1997.
Net income increased by $1,128,000 for the six months ended June 30, 1998 when
compared to the six months ended June 30, 1997. The increase was primarily due
to the gain recorded during 1998 on the sale of Shoppes. The increase was also
due to an increase in interest earned on the Partnership's short-term
investments due to an increase in cash available for investment. The increase
was partially offset by the absence of results in 1998 from Richmond and Citrus
Center due to their sales in 1997 and to a lesser extent from Shoppes due to
its February 27, 1998 sale.
Net income decreased by $691,600 for the quarter ended June 30, 1998 when
compared to the quarter ended June 30, 1997. The decrease was primarily due to
the absence of results in 1998 from the Sold Properties. The decrease was
partially offset by the increase in interest earned on the Partnership's short-
term investments.
Net income exclusive of Sold Properties increased by $34,800 and $439,500 for
the quarter and six months ended June 30, 1998 when compared to the six months
ended June 30, 1997, respectively. The increase was primarily due to the
increase in interest earned on the Partnership's short-term investments. The
increase was partially offset by the 1997 receipt of consideration from tenants
at Glendale for the early termination of their leases.
The following discussion includes only the results of Glendale.
Rental revenues decreased by $213,600 or 20.8% and $187,900 or 9.9% for the
quarter and six months ended June 30, 1998 when compared to the quarter and six
months ended June 30, 1997, respectively. The decreases were primarily due to
consideration received for the early termination of tenants' leases in 1997.
Also contributing to the decreases was a decrease in tenant reimbursements for
common area maintenance. The decreases were partially offset by increases in
percentage rental income, which was due to an increase in tenants' sales.
Real estate tax expense increased by $40,200 and $13,400 for the quarter and
six months ended June 30, 1998 when compared to the quarter and six months
ended June 30, 1997, respectively. The increases were primarily due to a
reduction in estimated expense for 1997 due to a successful appeal for a
reduction in the taxing authority's assessed value of Glendale.
Interest expense decreased by $24,600 and $45,200 for the quarter and six
months ended June 30, 1998 when compared to the quarter and six months ended
June 30, 1997, respectively. The decreases were primarily due to the effects of
principal payments made during the past 18 months on the Glendale mortgage
loan.
Property operating expenses decreased by $72,100 for the six months ended June
30, 1998 when compared to the six months ended June 30, 1997, respectively. The
decrease was primarily the result of decreases in security and advertising and
promotional costs. Property operating expenses remained relatively unchanged
for the quarterly periods under comparison.
Repairs and maintenance expenses decreased by $24,500 and $83,300 for the
quarter and six months ended June 30, 1998 when compared to the quarter and six
months ended June 30, 1997, respectively. The decrease was primarily due to a
decrease in snow removal for the six-month periods under comparison. In
addition, the decreases for the quarterly and six-month periods under
comparison were due to an overall general decline in repair and maintenance
expenses.
To increase and/or maintain occupancy levels at the Partnership's remaining
property, the Managing General Partner, through its Affiliated and unaffiliated
asset and property management groups, continues to take the following actions:
1) implementation of marketing programs, including hiring of third-party
leasing agents or providing on-site leasing personnel, advertising, direct mail
campaigns and development of building brochures; 2) early renewal of existing
tenants' leases and addressing any expansion needs these tenants may have; 3)
promotion of local broker events and networking with local brokers; 4)
networking with national level retailers; 5) cold-calling other businesses and
tenants in the market area and 6) providing rental concessions or competitively
pricing rental rates depending on market conditions.
LIQUIDITY AND CAPITAL RESOURCES
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its remaining
property. Notwithstanding the Partnership's intention relative to property
sales, another primary objective of the Partnership is to provide cash
distributions to Partners from Partnership operations. To the extent cumulative
cash
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
distributions exceed net income, such excess distributions will be treated as a
return of capital. Cash Flow (as defined in the Partnership Agreement) is
generally not equal to net income or cash flows as determined by generally
accepted accounting principles ("GAAP"), since certain items are treated
differently under the Partnership Agreement than under GAAP. Management
believes that to facilitate a clear understanding of the Partnership's
operations, an analysis of Cash Flow (as defined in the Partnership Agreement)
should be examined in conjunction with an analysis of net income or cash flows
as determined by GAAP. 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 GAAP and 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 Flow.
<TABLE>
<CAPTION>
Comparative
Cash Flow Results
For the Six Months Ended
6/30/98 6/30/97
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flow (as defined in the Partnership Agreement) $ 981,000 $ 2,995,000
Items of reconciliation:
Principal payments on mortgage loan 561,300 351,000
Decrease in current assets 23,700 38,100
(Decrease) increase in current liabilities (1,500) 415,200
- -------------------------------------------------------------------------------
Net cash provided by operating activities $ 1,564,500 $ 3,799,300
- -------------------------------------------------------------------------------
Net cash (used for) investing activities (1,491,700) $(8,971,100)
- -------------------------------------------------------------------------------
Net cash (used for) financing activities $(12,038,100) $(2,694,800)
- -------------------------------------------------------------------------------
</TABLE>
The decrease in Cash Flow (as defined in the Partnership Agreement) of
$2,014,000 for the six months ended June 30, 1998 when compared to six months
ended June 30, 1997 was primarily due to the absence of results from the
Partnership's Sold Properties. The decrease was partially offset by the
increased interest earned on the Partnership's short-term investments, as
previously discussed.
The decrease of $11,945,900 in the Partnership's cash position for the six
months ended June 30, 1998 was primarily the result of the increase in
investments in debt securities, principal payments on mortgage loan payable and
distributions paid to Partners exceeding the receipt of Sale Proceeds from
Shoppes and net cash provided by operating activities. Liquid assets (including
cash, cash equivalents and investments in debt securities) as of June 30, 1998
were comprised of amounts held for working capital purposes.
The decrease in net cash provided by operating activities of $2,234,800 for the
six months ended June 30, 1998 when compared to the six months ended June 30,
1997 was primarily due to the effects on the operating results from the 1997
sales of Citrus Center and Richmond and the 1998 sale of Shoppes.
Net cash used for investing activities decreased by $7,479,400 for the six
months ended June 30, 1998 when compared to the six months ended June 30, 1997.
This decrease was primarily due the 1998 receipt of proceeds from the sale of
Shoppes. Partially offsetting the decrease was an increase in investments in
debt securities. This increase was primarily due to the Partnership investing a
greater portion of its undistributed Sales Proceeds in investments with longer
terms to improve returns prior to distribution to Partners. These investments
are of investment grade and mature less than one year from their date of
purchase.
The Partnership maintains working capital reserves to pay for capital
expenditures and to potentially facilitate the refinancing of the mortgage loan
collateralized by Glendale. During the six months ended June 30, 1998, the
Partnership spent $700 for building and tenant improvements.
As more fully disclosed in the Partnership's Annual Report for the year ended
December 31, 1997, the future tenancy level at Glendale is uncertain. The
potential loss of one or both of its anchor tenants at their lease termination
dates (January 2001) would have a dramatic adverse impact on the operations of
the property. The Managing General Partner is exploring alternatives for
Glendale, which include, but are not limited to, pursuing other tenants and the
sale of the property.
On February 27, 1998, the Partnership consummated the sale of Shoppes for a
sale price of $11,000,000. Sale Proceeds, net of actual and estimated closing
expenses, amounted to $10,575,400. In connection with this sale, the
Partnership will distribute $10,550,000 or $105.50 per Unit on August 31, 1998
to Limited Partners of record as of February 27, 1998.
On May 31, 1998, the Partnership distributed $10,350,000 or $103.50 per Unit to
Limited Partners of record as of December 31, 1997. This distribution
represented the approximate net proceeds realized from the December 31, 1997
sale of Richmond.
Net cash used for financing activities increased by $9,343,300 for the six
months ended June 30, 1998 when compared to the six months ended June 30, 1997.
The increase was primarily due to the special distribution of Sale Proceeds
from the sale of Richmond. Exclusive of the Richmond distribution, there was a
decrease of $1,006,700 in net cash used for financing activities for the
comparable periods. This decrease was primarily due to a decrease in
distributions of Cash Flow (as defined in the Partnership Agreement) paid to
Partners in line with reduced operating results following the sale of several
Partnership properties. This decrease was partially offset by an increase in
principal payments on the mortgage loan collateralized by Glendale. The
mortgage loan collateralized by Glendale contains provisions that require that
a portion of the cash generated by Glendale be utilized to reduce the
outstanding mortgage balance. This mortgage loan matures in January 1999.
Subject to fulfilling covenants, the Partnership has two extension options of
one year each. Any potential extension or refinancing could result in the
Partnership having to further reduce the principal balance on the mortgage
loan.
The Managing General Partner, on behalf of the Partnership, has contracted for
substantially all of its business activities with certain principal entities
for which computer programs are utilized. Each of these companies is
financially responsible and have represented to management of the Managing
General Partner that they are taking appropriate steps for modifications needed
to their respective systems to accommodate processing date by Year 2000.
Accordingly, the Partnership anticipates incurring no material Year 2000 costs
and is currently not aware of any material contingencies related to this
matter.
The Managing General Partner continues to take a conservative approach to
projections of future rental income in its determination of adequate levels of
cash reserves due to the uncertainty surrounding Glendale. The Managing General
Partner believes that Cash Flow (as defined in the Partnership Agreement) is
one of the best and least expensive sources of cash. As a result, cash
continues to be retained to supplement working capital reserves. For the six
months ended June 30, 1998, the Partnership utilized $38,400 of previously
undistributed Cash Flow (as defined in the Partnership Agreement) in its
distribution to Partners.
Distributions to Limited Partners for the quarter ended June 30, 1998 were
declared in the amount of $400,000, or $4.00 per Unit. Cash distributions are
made 60 days after the last day of each fiscal quarter. Following the special
distribution of proceeds from the sale of Shoppes, it is expected that future
distributions of Cash Flow (as defined in the Partnership Agreement) will be
reduced in line with the Partnership's smaller asset base. Additionally, the
amount of future distributions to Partners will ultimately be dependent upon
the performance of Glendale 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.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES IX
By: FIRST CAPITAL FINANCIAL CORPORATION
MANAGING GENERAL PARTNER
Date: August 14, 1998 By: /s/ DOUGLAS CROCKER II
--------------- -------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1998 By: /s/ NORMAN M. FIELD
--------------- --------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter
ended June 30, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,422,000
<SECURITIES> 16,889,300
<RECEIVABLES> 392,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,703,500
<PP&E> 16,882,000
<DEPRECIATION> 7,008,400
<TOTAL-ASSETS> 27,859,600
<CURRENT-LIABILITIES> 6,615,400
<BONDS> 5,998,400
0
0
<COMMON> 0
<OTHER-SE> 37,859,600
<TOTAL-LIABILITY-AND-EQUITY> 37,859,600
<SALES> 0
<TOTAL-REVENUES> 4,825,600
<CGS> 0
<TOTAL-COSTS> 797,700
<OTHER-EXPENSES> 177,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,265,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,265,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,265,100
<EPS-PRIMARY> 31.45
<EPS-DILUTED> 31.45
</TABLE>
