<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
June 30, 1995
For the period ended ____________________________________________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
0-12945
Commission File Number: _________________________________________________
First Capital Institutional Real Estate, Ltd. - 2
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2313852
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(312) 207-0020
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Agreement of Limited Partnership filed as Exhibit
A to the Partnership's Prospectus dated October 19, 1983, included in the
Partnership's Registration Statement on Form S-11, is incorporated herein by
reference in Part I of this report.
<PAGE>
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 10,237,400 $ 10,237,400
Buildings and improvements 35,774,500 35,605,600
------------------------------------------------------------------------------
46,011,900 45,843,000
Accumulated depreciation and amortization (11,887,800) (11,222,700)
------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 34,124,100 34,620,300
Cash and cash equivalents 12,832,600 12,560,400
Marketable securities, at cost which approximates
market 25,000 25,000
Investment in joint venture 5,083,500 5,234,600
Rents receivable 115,200 100,400
Other assets (including amounts due from joint
venture of $780,900 and $725,500, respectively) 825,600 901,400
------------------------------------------------------------------------------
$53,006,000 $ 53,442,100
------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and
accrued expenses $ 372,200 $ 389,200
Due to Affiliates 121,500 92,800
Security deposits 125,600 116,400
Distributions payable 1,179,000 1,037,500
Other liabilities 78,000 77,900
------------------------------------------------------------------------------
1,876,300 1,713,800
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Partners' (deficit) capital:
General Partner (121,300) (121,300)
Limited Partners (84,886 Units authorized, issued
and outstanding) 51,251,000 51,849,600
------------------------------------------------------------------------------
51,129,700 51,728,300
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$53,006,000 $ 53,442,100
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1995
and the year ended December 31, 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1994 $ (93,500) $56,187,300 $56,093,800
Net income (loss) for the year ended
December 31, 1994 307,000 (1,324,200) (1,017,200)
Distributions for the year ended
December 31, 1994 (334,800) (3,013,500) (3,348,300)
----------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1994 (121,300) 51,849,600 51,728,300
Net income for the six months ended
June 30, 1995 231,100 1,481,100 1,712,200
Distributions for the six months ended
June 30, 1995 (231,100) (2,079,700) (2,310,800)
----------------------------------------------------------------------------
Partners' (deficit) capital,
June 30, 1995 $(121,300) $51,251,000 $51,129,700
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $1,518,300 $1,502,600
Interest 273,100 102,800
Income from participation in joint venture 121,500 63,900
-------------------------------------------------------------------------------
1,912,900 1,669,300
-------------------------------------------------------------------------------
Expenses:
Depreciation and amortization 326,900 350,100
Property operating:
Affiliates 82,000 100,800
Nonaffiliates 237,600 237,700
Real estate taxes 95,900 185,100
Insurance--Affiliate 10,900 23,300
Repairs and maintenance 173,800 194,000
General and administrative:
Affiliates 10,500 17,000
Nonaffiliates 73,500 54,200
Loss on sale of property 1,275,800
-------------------------------------------------------------------------------
1,011,100 2,438,000
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Net income (loss) $ 901,800 $ (768,700)
-------------------------------------------------------------------------------
Net income allocated to General Partners $ 117,900 $ 65,000
-------------------------------------------------------------------------------
Net income (loss) allocated to Limited Partners $ 783,900 $ (833,700)
-------------------------------------------------------------------------------
Net income (loss) allocated to Limited Partners per
Unit (84,886 Units authorized, issued and outstanding) $ 9.23 $ (9.82)
-------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $3,118,500 $3,164,200
Interest 478,800 201,200
Income from participation in joint venture 190,800 113,500
---------------------------------------------------------------------------
3,788,100 3,478,900
---------------------------------------------------------------------------
Expenses:
Depreciation and amortization 665,100 691,600
Property operating:
Affiliates 202,500 205,600
Nonaffiliates 421,500 474,500
Real estate taxes 254,400 366,600
Insurance--Affiliate 32,400 47,500
Repairs and maintenance 332,800 395,600
General and administrative:
Affiliates 22,300 28,800
Nonaffiliates 144,900 121,200
Loss on sale of property 1,275,800
---------------------------------------------------------------------------
2,075,900 3,607,200
---------------------------------------------------------------------------
Net income (loss) $1,712,200 $ (128,300)
---------------------------------------------------------------------------
Net income allocated to General Partners $ 231,100 $ 128,600
---------------------------------------------------------------------------
Net income (loss) allocated to Limited Partners $1,481,100 $ (256,900)
---------------------------------------------------------------------------
Net income (loss) allocated to Limited Partners per
Unit (84,886 Units authorized, issued and
outstanding) $ 17.45 $ (3.03)
---------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,712,200 $ (128,300)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 665,100 691,600
Loss on sale of property 1,275,800
Changes in assets and liabilities:
(Increase) decrease in rents receivable (14,800) 112,200
Decrease in other assets 132,100 121,500
(Decrease) in accounts payable and accrued
expenses (17,000) (54,700)
Increase (decrease) in due to Affiliates 28,700 (3,000)
Increase (decrease) in other liabilities 100 (5,100)
-----------------------------------------------------------------------------
Net cash provided by operating activities 2,506,400 2,010,000
-----------------------------------------------------------------------------
Cash flows from investing activities:
Net proceeds from sale of property 3,020,500
Payments for capital and tenant improvements (168,900) (685,600)
Distributions received from joint venture in
excess of income allocated 151,100 99,100
(Funding of) collection of loans to joint venture (56,300) 46,200
-----------------------------------------------------------------------------
Net cash (used for) provided by investing
activities (74,100) 2,480,200
-----------------------------------------------------------------------------
Cash flows from financing activities:
Distributions paid to Partners (2,169,300) (1,136,500)
Increase (decrease) in security deposits 9,200 (7,400)
-----------------------------------------------------------------------------
Net cash (used for) financing activities (2,160,100) (1,143,900)
-----------------------------------------------------------------------------
Net increase in cash and cash equivalents 272,200 3,346,300
Cash and cash equivalents at the beginning of the
period 12,560,400 9,502,400
-----------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $12,832,600 $12,848,700
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1995
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 incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles. Under this method of accounting, revenues are
recorded when earned and expenses are recorded when incurred.
The financial information included in these financial statements is unaudited.
However, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter and six months ended June 30, 1995 are not necessarily indicative
of the operating results for the year ending December 31, 1995.
The financial statements include the Partnership's interest in four joint
ventures with Affiliated partnerships. These joint ventures were formed for the
purpose of acquiring 100% interests in certain real properties and are operated
under the common control of the General Partner. Accordingly, the Partnership's
pro rata share of the ventures' revenues, expenses, assets, liabilities and
capital is included in the financial statements.
Investment in joint venture represents the recording of the Partnership's
interest, under the equity method of accounting, in a joint venture with an
Affiliated partnership. The joint venture acquired a preferred majority
interest in a joint venture with the seller of the Lansing, Michigan property.
Under the equity method of accounting, the Partnership records its initial
interest at cost and adjusts its investment account for its share of joint
venture income or loss and its distribution of cash flow.
Cash equivalents are considered all highly liquid investments purchased with a
maturity of three months or less.
Certain reclassifications have been made to the previously reported 1994
statements in order to provide comparability with the 1995 statements. These
reclassifications have no effect on net income, net (loss) or Partners'
capital.
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim or as otherwise
disclosed herein.
2. RELATED PARTY TRANSACTIONS:
Subsequent to October 19, 1984, the Termination of the Offering, the General
Partner is entitled to 10% of Cash Flow as its Partnership Management Fee. In
accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) are allocated
first to the General Partner in an amount equal to the greater of the General
Partner's Partnership Management Fee or 1% of such Net Profits. The balance of
Net Profits, if any, is allocated to the Limited Partners. Net Losses from the
sale or disposition of Partnership properties are allocated: first, prior to
giving effect to any distributions of Sale or Financing Proceeds, to the extent
that the balance in the General Partner's or Limited Partners' capital accounts
exceeds the amount of their Capital Investment (the "Excess Balances"), to the
General Partner and Limited Partners pro rata in proportion to such Excess
Balances until such Excess Balances are reduced to zero; second, to the General
Partner and Limited Partners (in a ratio which their respective positive
capital account balances bear to the aggregate of all positive capital account
balances) 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
Partner. In all events the General Partner will be allocated at least 1% of Net
Losses from the sale or disposition of a Partnership property. In addition,
provisions for value impairment are allocated 99% to the Limited Partners and
1% to the General Partner. For the quarter and six months ended June 30, 1995,
the General Partner was entitled to cash distributions and, accordingly, was
allocated Net Profits from operations of approximately $117,900 and $231,100,
respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
Paid
-------------------
Quarter Six Months Payable
------------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $ 97,200 $159,500 $ 74,100
Reimbursement of property insurance premiums, at
cost 32,400 32,400 None
Real estate commissions (a) None None 40,300
Reimbursement of expenses, at cost:
(1) Accounting 4,600 11,200 4,000
(2) Investor communication 3,300 9,500 3,100
(3) Legal 12,900 17,300 None
------------------------------------------------------------------------------
$150,400 $229,900 $121,500
------------------------------------------------------------------------------
</TABLE>
(a) As of June 30, 1995 the Partnership owed $40,300 to the General Partner for
real estate commissions earned in connection with the sales of Partnership
properties. These commissions have been accrued but not paid. Under the
terms of the Partnership Agreement, these commissions will not be paid
until the Limited Partners have received cumulative distributions of Sale
or Refinancing Proceeds equal to 100% of their Original Capital
Contribution plus a cumulative return (including all Cash Flow which has
been distributed to the Limited Partners from the initial date of
investment) of 6% simple interest per annum on their Capital Investment
from the initial date of investment.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a discussion of the Partnership's business.
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, 1995
and 1994. The discussion following the table should be read in conjunction with
the Financial Statements and Notes thereto appearing in this report.
<TABLE>
<CAPTION>
Comparative Operating Results (a)
For the Quarters For the Six
Ended Months Ended
6/30/95 6/30/94 6/30/95 6/30/94
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOXHALL SQUARE BUILDING
Rental revenues $411,300 $353,100 $836,700 $775,300
------------------------------------------------------------------------------
Property net income $116,100 $ 51,300 $241,200 $204,000
------------------------------------------------------------------------------
Average occupancy 85.7% 85.1% 85.4% 84.9%
------------------------------------------------------------------------------
LAKEWOOD SQUARE SHOPPING CENTER
Rental revenues $282,300 $279,900 $595,100 $589,700
------------------------------------------------------------------------------
Property net income $180,200 $116,300 $337,900 $262,100
------------------------------------------------------------------------------
Average occupancy 88.4% 82.9% 85.9% 82.1%
------------------------------------------------------------------------------
ELLIS BUILDING
Rental revenues $276,100 $258,100 $564,700 $535,100
------------------------------------------------------------------------------
Property net income $ 76,300 $ 52,300 $154,200 $133,600
------------------------------------------------------------------------------
Average occupancy 95.7% 93.8% 95.8% 90.7%
------------------------------------------------------------------------------
MARKET PLACE AT RIVERGATE SHOPPING CENTER
Rental revenues $244,000 $192,600 $484,100 $411,000
------------------------------------------------------------------------------
Property net income $111,800 $ 53,400 $237,400 $150,200
------------------------------------------------------------------------------
Average occupancy 92.3% 87.4% 91.8% 85.0%
------------------------------------------------------------------------------
BANANA RIVER SQUARE SHOPPING CENTER
Rental revenues $180,300 $175,200 $383,300 $342,300
------------------------------------------------------------------------------
Property net income $ 62,800 $ 58,900 $151,400 $101,100
------------------------------------------------------------------------------
Average occupancy 96.1% 94.0% 95.7% 94.0%
------------------------------------------------------------------------------
12621 FEATHERWOOD BUILDING
Rental revenues $124,300 $114,400 $254,600 $229,000
------------------------------------------------------------------------------
Property net income $ 38,700 $ 22,700 $ 82,800 $ 46,700
------------------------------------------------------------------------------
Average occupancy 100.0% 100.0% 100.0% 100.0%
------------------------------------------------------------------------------
NORWEST PLAZA (B)
Rental revenues $129,300 $281,800
------------------------------------------------------------------------------
Property net income $ 44,700 $ 85,000
------------------------------------------------------------------------------
Average occupancy 100.0% 100.0%
------------------------------------------------------------------------------
</TABLE>
(a) The above table excludes certain income and expense items which are either
not directly related to individual property operating results such as
interest income, general and administrative expenses and income from
participation in joint venture or are related to properties previously
owned by the Partnership.
(b) Norwest Plaza was sold on June 8, 1994. The property net income excludes
loss on sale of property of $1,275,800 which is included in the Statements
of Income and Expenses for the quarter and six months period ended June 30,
1994.
Net (loss) income for the Partnership changed from ($768,700) to $901,800 and
from ($128,300) to $1,712,200, respectively, for the quarter and six months
ended June 30, 1994 when compared to the quarter and six months
ended June 30, 1995. The primary reason for this change was due the to sale of
Norwest Plaza, formerly known as United Bank of Arizona ("Norwest") on June 8,
1994. The sale of this property accounted for the significant decreases in
rental income, property operating expenses, depreciation and amortization
expense, real estate tax expense, insurance expense and repairs and
maintenance. Accordingly, the comparison of operating results between periods
is complicated. For further information regarding the loss on sale refer to
note (b) to the above table.
Net income, exclusive of Norwest, increased $439,400 or 95% and $649,700 or
61.1% for the quarter and six month periods under comparison. The increases in
net income were primarily due to: 1) improved operating results at all of the
Partnership's properties totaling approximately $224,300 and $311,900,
respectively, for the quarter and six month ended June 30, 1995 when compared
to 1994; 2) increased interest income of approximately $170,300 or 165.7% and
$277,700 or 138.0%, respectively, for the periods under comparison due to an
increase in cash available for investment and an increase in rates available on
the Partnership's short-term investments and 3) an increase in income from the
Partnership's equity investment in the joint venture which owns Holiday North
and South Office Park ("Holiday") of approximately $57,600 and $77,300,
respectively, for the quarter and six month periods under comparison. Partially
offsetting the increase in net income was an increase in general and
administrative expenses of $14,300 or 20.1% and $51,100 or 34.1%, respectively,
for both periods under comparison due to an increase in professional fees and
printing and mailing costs.
For purposes of the following comparative discussion, the operating results of
Norwest have been excluded.
Rental revenues increased by approximately $145,000 or 10.6% and $236,100 or
8.2%, respectively, for the quarter and six months ended June 30, 1995 when
compared to the quarter and six months ended June 30, 1994. The primary factors
which caused an increase in rental revenues for the quarterly periods under
comparison were: 1) increased rental income at Market Place at Rivergate
("Rivergate") due to increases in base rents and in tenant expense
reimbursements for real estate tax escalations resulting from an increase in
occupancy; 2) increased parking lot income at Foxhall Square Building
("Foxhall"); 3) increased rental revenues at Ellis Building ("Ellis") and
Lakewood Square Shopping Center ("Lakewood") due to an increase in occupancy
and 4) increased base rental rates at 12621 Featherwood Building
("Featherwood"). The primary factors which caused an increase in rental
revenues for the six month periods under comparison were: 1) increased rental
income at Rivergate and Banana River Square ("Banana River") due to increases
in base rents and tenant expense reimbursements for real estate tax escalations
due to an increase in occupancy; 2) increased parking lot income and base rents
at Foxhall; 3) increased rental income at Ellis and Lakewood due to an increase
in occupancy and 4) increased base rental rates and tenant expense
reimbursements for real estate tax escalations at Featherwood.
The increase in parking income for the quarter and six month periods under
comparison is primarily the result of discharging the third party parking
management agent and taking the operations in-house. Parking income was
previously recorded net of the agent's fees. Currently the income and expenses
are included in parking income and property operating expenses, respectively.
Real estate tax expense decreased by approximately $70,600 or 42.4% and $76,900
or 23.2%, respectively, for the quarter and six months ended June 30, 1995 when
compared to the quarter and six months ended June 30, 1994. The decrease in
real estate tax expense for the quarterly periods under comparison was
primarily due to the receipt of refunds for 1993/1994 real estate tax for
Lakewood and a decrease at Foxhall resulting from a decrease in the assessed
valuation (real estate taxes were assessed for the fiscal period April 1994 to
March 1995). The primary reason for the decrease in real estate tax expense for
the six month periods under comparison was the receipt of refunds for 1993/1994
real estate taxes for Lakewood and Rivergate.
Repairs and maintenance expense decreased approximately $1,200 and $15,600,
respectively, for the quarter and six months ended June 30, 1995 when compared
to the quarter and six months ended June 30, 1994. The primary factors which
caused the decrease for the six month periods under comparison were: 1)
decreased HVAC repairs at Banana River; 2) decreased roof repairs at Rivergate
and 3) decreased HVAC, common area costs and exterior repairs and supplies at
Lakewood. Partially offsetting the
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
decrease in repairs and maintenance for the six months ended June 30, 1995 were
increases in janitorial costs due to increased cleanable square footage and
minor repairs to maintain the HVAC system at Featherwood.
Insurance expense decreased by approximately $10,800 or 49.8% and $11,000 or
25.3%, respectively, for the quarter and six months ended June 30, 1995, when
compared to the prior year periods. These decreases were 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, which provided a
good loss experience relative to Partnership's properties.
Property operating expenses increased by approximately $14,500 or 4.7% and
$14,200 or 2.3%, respectively, for the comparable periods. The primary factors
which caused the increases in property operating expenses for the quarter and
six months under comparison were: 1) increased personnel costs related to the
operations of the parking garage and increased management fees resulting from
an increase in rental revenues at Foxhall; 2) increased managements fees,
utilities, professional fees and personnel costs at Banana River and 3)
increased management fees, offset by a decrease in professional fees at Ellis.
Partially offsetting the increase was decreased professional fees associated
with space planning for new and renewing tenants at Lakewood and Rivergate and
decreased utilities at Featherwood.
To increase and or maintain occupancy levels at the Partnership's properties,
the General Partner, through its Affiliated asset and property management
groups, continues to take the necessary actions deemed appropriate for the
properties discussed above. Some of these actions include: 1) implementation of
marketing programs, including hiring of third-party leasing agents or providing
on-site leasing personnel, advertising, direct mail campaigns and development
of building brochures; 2) early renewal of existing tenants and addressing any
expansion needs these tenants may have; 3) promotion of local broker events and
networking with local brokers; 4) networking with national level retailers; 5)
cold-calling other businesses and tenants in the market area and 6) providing
rental concessions or competitively pricing rental rates depending on market
conditions.
LIQUIDITY AND CAPITAL RESOURCES
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 six remaining
properties and investment in joint venture. Notwithstanding, the Partnership's
intention relative to property sales, another primary objective of the
Partnership is to provide cash distributions to Limited Partners from
Partnership operations. To the extent cumulative cash 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
Partnership net income or cash flows as defined 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 by the Partnership Agreement) should be examined in
conjunction with an analysis of net income or cash flows as defined by GAAP.
The following table includes a reconciliation of Cash Flow (as defined by 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 neccessarily be considered as an alternative to the results
disclosed in the Statements of Income and Expense and Cash Flow.
<TABLE>
<CAPTION>
Comparative Cash Flow
Results
For the Six Months
Ended
6/30/95 6/30/94
-------------------------------------------------------------------------------
<S> <C> <C>
Amount of Cash Flow (as defined in the Partnership
Agreement) $ 2,356,500 $ 1,970,300
Items of reconciliation:
Income from participation in joint venture 190,800 113,500
Distribution from joint venture (170,000) (244,700)
Decrease in current assets 117,300 233,700
Increase (decrease) in current liabilities 11,700 (62,800)
-------------------------------------------------------------------------------
Net cash provided by operating activities $ 2,506,300 $ 2,010,000
-------------------------------------------------------------------------------
Net cash (used for) provided by investing activities $ (74,100) $ 2,480,200
-------------------------------------------------------------------------------
Net cash (used for) financing activities $(2,160,000) $(1,143,900)
-------------------------------------------------------------------------------
</TABLE>
The increase in Cash Flow (as defined by the Partnership Agreement) of
approximately $386,200 for the six months ended June 30, 1995 when compared to
six months ended June 30, 1994 was primarily due to the increase in net income,
as previously discussed, exclusive of depreciation and amortization.
The increase in the Partnership's cash position of approximately $272,200 as of
June 30, 1995 when compared to December 31, 1994 was primarily the result of
net cash provided by operating activities exceeding distributions paid to
Partners and expenditures for capital and tenant improvements. Liquid assets of
the Partnership as of June 30, 1995 were comprised of amount held for working
capital purposes.
The increase of approximately $496,300 in net cash provided by operating
activities for the six months ended June 30, 1995 when compared to the six
months ended June 30, 1994 was primarily due to the increase in net income,
previously discussed, partially offset by the timing of the collection of
tenant's rental payments.
Net cash provided by (used for) investing activities changed from $2,480,200 to
($74,100) for the six months ended June 30, 1994 when compared to the six
months ended June 30, 1995, respectively, primarily due to the net proceeds
received from the sale of Norwest on June 8, 1994. Partially offsetting this
change in net cash provided by (used for) investing activities was the decrease
in payments made for capital and tenant improvements to the Partnership's
properties.
During the six months ended June 30, 1995, the Partnership spent $168,900 for
capital and tenant improvements and has budgeted to spend an additional
$790,000 during the remainder of 1995. Of the remaining budgeted amount,
approximately $350,000, $195,000, $140,000, $55,000 and $50,000, relates to
anticipated capital and tenant improvements and leasing costs expected to be
incurred at Lakewood, Foxhall, Ellis, Rivergate and Banana River, respectively.
In addition, $500,000 is budgeted for capital and tenant improvements for the
Partnership's joint venture investment in Holiday. The General Partner believes
these expenditures are necessary to maintain occupancy levels in very
competitive markets and ready the remaining properties for disposition.
The increase of $1,016,100 in net cash (used for) financing activities for the
six months ended June 30, 1995 when compared to the six months ended June 30,
1994 was due primarily to an increase in distributions paid to Partners in
1995.
The 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 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. Cash Flow
(as defined by the Partnership Agreement) retained to supplement working
capital reserves approximated $45,700 for the six months ended June 30, 1995.
Distributions to Limited Partners for the quarter ended June 30, 1995 were
declared in the amount of $12.50 per Unit. Cash distributions are made 60 days
after quarter end. The amount of future distributions to Limited Partners will
ultimately be dependent upon the performance of the Partnership's investments,
as well as the amount of cash retained in the future to supplement working
capital reserves. Accordingly, there can be no assurance of the availability of
cash for distribution to Partners.
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
June 30, 1995.
<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 INSTITUTIONAL REAL ESTATE, LTD. - 2
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Date: August 14, 1995 By: /s/ DOUGLAS CROCKER II
--------------- ---------------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1995 By: /s/ NORMAN M. FIELD
--------------- ---------------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000727087
<NAME> FIRST CAPITAL INSTITUTIONAL REAL ESTATE - 2
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 12,832,600
<SECURITIES> 0
<RECEIVABLES> 115,200
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0
0
<OTHER-SE> 51,251,000
<TOTAL-LIABILITY-AND-EQUITY> 53,006,000
<SALES> 0
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