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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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 0-12945
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 700,
Chicago, Illinois 60606-2607
(Address of principal executive (Zip Code)
offices)
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. [X]
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated October 19, 1983,
included in the Registrant's Registration Statement on Form S-11 (Registration
No. 2-86361), is incorporated herein by reference in Part IV of this report.
Exhibit Index--Page A-1
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PART I
ITEM 1. BUSINESS
The registrant, First Capital Institutional Real Estate, Ltd.- 2 (the
"Partnership"), is a limited partnership organized in 1983 under the Florida
Uniform Limited Partnership Law. The Partnership sold 84,886 Limited
Partnership Units (the "Units") to the public from November 1983 to October
1984, pursuant to a Registration Statement on Form S-11 filed with the
Securities and Exchange Commission (Registration Statement No. 2-86361).
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 was to invest primarily in existing, improved,
income-producing real estate, such as shopping centers, warehouses and office
buildings, and, to a lesser extent, in other types of income-producing real
estate. From May 1984 to May 1986, the Partnership made seven real property
investments and purchased 50% interests in four joint ventures, which were each
formed with an Affiliated partnership for the purpose of acquiring a 100%
interest in certain real property. In addition, in January 1987 the Partnership
formed a joint venture with an Affiliated partnership (the "Joint Venture"), in
which they were each 50% partners. The Joint Venture was formed for the purpose
of entering into a limited partnership agreement with an unaffiliated third
party to which the Joint Venture contributed 75% of the total purchase price of
a property in order to obtain a preferred majority interest in the limited
partnership. All of the Partnership's joint ventures were operated under the
common control of First Capital Financial Corporation (the "General Partner").
During the year ended 1998, the Partnership sold all of its remaining real
property investments. The Partnership is currently addressing post sale
matters, including monitoring the remediation of an environmental matter at one
of the properties sold during 1997. Upon the successful remediation of the
environmental matter and the resolution of other post closing matters, the
Partnership will make a liquidating distribution and dissolve.
ITEM 2. PROPERTIES
During the year ended December 31, 1998, the Partnership sold its remaining
property investments.
ITEM 3. LEGAL PROCEEDINGS
(a & b) The Partnership was 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, 1999. Ordinary routine legal matters incidental to
the business which were not deemed material, were pursued during the quarter
ended December 31, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a,b,c & d) None.
2
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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, 2000, there were 12,283 Holders of Units.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Total revenues $ 405,400 $ 6,477,900 $ 6,849,100 $ 7,003,700 $ 7,054,400
Net income $ 291,800 $ 7,098,600 $ 4,044,900 $ 3,203,200 $ 1,797,300
Net income allocated to
Limited Partners $ 288,900 $ 6,883,800 $ 3,663,600 $ 2,778,800 $ 1,326,300
Net income allocated to
Limited Partners per
Unit (84,886 Units
outstanding) $ 3.40 $ 81.09 $ 43.16 $ 32.74 $ 15.62
Total assets $5,996,300 $19,116,600 $30,019,700 $44,166,200 $50,803,100
Distributions to Limited
Partners per Unit
(84,886 Units
outstanding) (a) None $ 262.36 $ 301.44 $ 104.00 $ 51.00
Return of capital to
Limited Partners per
Unit (84,886 Units
outstanding) (b) None $ 181.27 $ 258.28 $ 71.26 $ 35.38
Other data:
Investment in:
Commercial rental
properties (net of
accumulated
depreciation and
amortization) None None $10,111,300 $32,480,000 $32,902,700
Real estate joint
venture None None $ 5,311,400 $ 5,852,800 $ 5,424,600
Number of real property
interests owned at
December 31 None None 3 7 7
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</TABLE>
(a) Distributions to Limited Partners per Unit for the years ended December 31,
1998, 1997 and 1996 included Sales Proceeds of $247.36, $274.94 and $59.00,
respectively.
(b) 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 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,
------------------------------------------------------------------
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Cash Flow (as defined in
the Partnership
Agreement) (a) $ 291,800 $ 1,477,900 $ 3,847,700 $ 4,657,000 $ 4,742,800
Items of reconciliation:
(Cash Flow) from joint
venture (453,100) (719,500) (574,700) (490,900)
Changes in current
assets and
liabilities:
Decrease in current
assets 2,200 64,400 56,500 23,900 74,100
(Decrease) increase in
current liabilities (50,900) (133,200) (184,400) (164,600) 118,200
- ---------------------------------------------------------------------------------------------
Net cash provided by
operating activities $ 243,100 $ 956,000 $ 3,000,300 $ 3,941,600 $ 4,444,200
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Net cash (used for)
provided by investing
activities $ (2,943,000) $ 21,546,500 $ 24,877,900 $(1,960,700) $ (182,100)
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Net cash (used for)
financing activities $(13,361,200) $(17,868,500) $(18,007,000) $(9,675,500) $(4,554,500)
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</TABLE>
a) Cash Flow is defined in the Partnership Agreement as Partnership revenues
earned from operations (excluding tenant deposits and proceeds from the sale
or disposition of any Partnership properties), minus all expenses incurred
(including Operating Expenses and any reserves of revenues from operations
deemed reasonably necessary by the General Partner), except depreciation and
amortization expenses and capital expenditures, lease acquisition
expenditures and the General Partner's 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-8.
3
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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.
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.
The Partnership commenced the Offering of Units on November 10, 1983 and began
operations on December 5, 1983, after achieving the required minimum
subscription level. On October 15, 1984, the Offering was terminated upon the
sale of 84,886 Units. From May 1984 to May 1986, the Partnership made seven
real property investments and purchased 50% interests in four joint ventures,
which were each formed with an Affiliated partnership for the purpose of
acquiring a 100% interest in certain real property. In addition, in January
1987 the Partnership formed a joint venture with an Affiliated partnership (the
"Joint Venture"), in which they were each 50% partners. The Joint Venture was
formed for the purpose of entering into a partnership agreement with an
unaffiliated third party to which the Joint Venture contributed 75% of the
total purchase price of a property in order to obtain a preferred majority
interest in the limited partnership. All of the Partnership's joint ventures
were operated under the common control of First Capital Financial Corporation
(the "General Partner").
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
1991 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. During the years ended December 31, 1998 and 1997, the
Partnership sold its remaining seven real property investments.
Operations
Comparison of the year ended December 31, 1999 to the year ended December 31,
1998
Results of operations for the year ended December 31, 1999 were comprised of
interest income and post property sale activities.
Net income decreased by $6,806,800 for the year ended December 31, 1999 when
compared to the year ended December 31 ,1998. The decrease was primarily due to
the gains recorded in 1998 on the sales of three Partnership properties. The
decrease was also due to the absence of operating results in 1999 from the
three properties sold by the Partnership during 1998. In addition, the decrease
was due to a reduction in interest earned on the Partnership's short-term
investments resulting from a decrease in the average cash available for
investment.
Comparison of the year ended December 31, 1998 to the year ended December 31,
1997
Net income increased by $3,053,700 for the year ended December 31, 1998 when
compared to the year ended December 31, 1997. The increase was primarily due to
the 1998 gains recognized on the sales of Ellis Building ("Ellis"), Holiday
Office Park North and South ("Holiday") and Marketplace at Rivergate Shopping
Center ("Rivergate") exceeding the 1997 gains recorded on the sales of Foxhall
Square Office Building ("Foxhall"), Lakewood Square Shopping Center
("Lakewood") and Banana River Shopping Center ("Banana River"). The increase
was also due to an increase in interest earned on the Partnership's short-term
investments, which was due to an increase in cash available for investment
during 1998. The increase was partially offset by diminished operating results,
which was due to the sales of Partnership properties during 1998 and 1997.
Rental revenues decreased by $3,729,100 or 78.9% for the year ended December
31, 1998 when compared to the year ended December 31, 1997. The decrease was
primarily due to the effects of property sales in 1998 and 1997.
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 tenants' lease clauses protected the
Partnership, to some extent, from increases in the rate of inflation. Certain
of the lease clauses provided for the following: 1) annual rent increases based
on the Consumer Price Index or graduated rental increases, 2) percentage
rentals at shopping centers, under which the Partnership receives as additional
rent, a percentage of a tenant's sales over predetermined 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
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.
Notwithstanding the Partnership's intention relative to property sales, another
primary
4
<PAGE>
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 determined by
GAAP, since certain items are treated differently under the Partnership
Agreement than under GAAP. The 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 determined by GAAP. The second
table in Selected Financial Data includes a reconciliation of Cash Flow (as
defined in the Partnership Agreement) to cash flow provided by operating
activities as determined 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, 1999 was $291,800, a decrease of $1,186,100 when compared to the year ended
December 31, 1998. The decrease was primarily due to the absence of 1999
operating results from Ellis, Holiday and Rivergate due to their sales in 1998.
In addition, the decrease is also due to the decrease in interest earned on the
Partnership's short-term investments, as previously discussed.
The decrease in the Partnership's cash position of $16,061,100 for the year
ended December 31, 1999 was primarily the result of the Partnership's
distributions of cash to Partners exceeding cash provided by operating
activities. Liquid assets (including cash and cash equivalents) of the
Partnership as of December 31, 1999 were comprised of amounts reserved for the
Lakewood environmental matter (as hereafter discussed) and Partnership
liquidation expenses.
The decrease of $712,900 in net cash provided by operating activities for the
year ended December 31, 1999 when compared to the year ended December 31, 1998
was primarily the result of the absence of operating results from properties
sold during 1998, exclusive of depreciation and amortization, and reduced
interest income, as previously discussed.
Net cash provided by (used for) investing activities changed from $21,546,500
for the year ended December 31, 1998 to $(2,943,000) the year ended December
31, 1999. The change was primarily due to the proceeds received from the 1998
sales of three Partnership properties, which included the sale of Holiday
together with a 1999 increase in investments in debt securities.
Investments in debt securities are a result of the continued extension of the
maturities of certain of the Partnership's short-term investments in an effort
to maximize the Partnership's return on these investments, while they are held
as working capital reserves. These investments are of investment grade and
mature less than one year from their dates of purchase.
The Partnership has no financial instruments for which there are significant
market risks. Due to the timing of the maturities and the liquid nature of the
Partnership's investments in debt securities, the Partnership does not believe
that its has substantial market risk.
On February 28, 1999, in connection with the sale of Holiday, the Partnership
distributed $6,499,700 or $76.57 per Unit to Limited Partners of record as of
September 22, 1998.
On February 28, 1999, in connection with the sale Ellis, the Partnership
distributed $6,672,900 or $78.61 per Unit to Limited Partners of record as of
August 21, 1998.
The decrease of $4,507,300 in net cash used for financing activities for the
year ended December 31, 1999 when compared to the year ended December 31, 1998
was primarily due to the special distributions of Sales Proceeds during 1998
exceeding the special distributions of Sales Proceeds during 1999.
In prior years, the Partnership discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Partnership completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Partnership experienced no significant disruptions
in mission critical information technology and non-information technology
systems and believes those systems successfully responded to the Year 2000 date
change. The Partnership incurred minimal expenses in connection with
remediating its systems. The Partnership is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal
systems, or the products and services of third parties. The Partnership will
continue to monitor its mission critical computer applications and those of its
suppliers and vendors throughout the Year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
As described in Note 5 of Notes to Financial Statements, the Partnership is
awaiting resolution of an environmental matter at Lakewood. The General Partner
is continuing to monitor the documentation delivered by the purchaser of
Lakewood regarding the purchaser's activities to remedy the hazardous
substances at Lakewood. There can be no assurance as to the actual timeframe
for the remediation or that it will be completed without cost to the
Partnership.
5
<PAGE>
During 1998, the Partnership consummated the sale of its last remaining
property. The General Partner is in the process of winding up the affairs of
the Partnership. This process will include the resolution of all post closing
property sale matters. In addition, the environmental matter at Lakewood will
be closely monitored. While these matters are pending, the Partnership will
remain in existence. When the environmental matter is satisfactorily remediated
and the other post closing matters are resolved, the Partnership will pay the
Partners a liquidating distribution of the remaining assets held by the
Partnership, less amounts reserved for administrative expenses and any amounts
deemed necessary for contingencies and other post closing matters. In line with
reduced cash flow following the sale of its remaining properties, distributions
to Partners have been suspended until such time as a final liquidating
distribution is made.
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, Schedules and Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
6
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) & (e) DIRECTORS
The Partnership has no directors. First Capital Financial Corporation ("FCFC")
is the General Partner. The directors of FCFC, as of March 31, 2000, 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 2000.
<TABLE>
<CAPTION>
Name Office
---- --------
<S> <C>
Douglas Crocker II.............................................. Director
Sheli Z. Rosenberg.............................................. Director
</TABLE>
Douglas Crocker II, 59, has been President and Chief Executive Officer since
December 1992 and a Director since January 1993 of the General Partner. Mr.
Crocker has been President, Chief Executive Officer and trustee of Equity
Residential Properties Trust since March 31, 1993. Mr. Crocker is a member of
the Board of Directors of Wellsford Real Properties, Inc. and Ventas Inc. and
was a member of the Board of Directors of Horizon Group, Inc. from July 1996
to June 1998. Mr. Crocker was an Executive Vice President of Equity Financial
and Management Company ("EFMC") from November 1992 until March 31, 1997.
Sheli Z. Rosenberg, 58, was President and Chief Executive Officer of the
General Partner from December 1990 to December 1992 and has been a Director of
the General Partner since September 1983; was Executive Vice President and
General Counsel for EFMC from October 1980 to November 1994; has been vice
chairman of Equity Group Investments, LLC ("EGI") since January 2000. From
November 1994 until 1999 had been President and Chief Executive Officer of
EGI. Ms. Rosenberg has been a Director of Great American Management and
Investment Inc. ("Great American") since June 1984 and is a director of
various subsidiaries of Great American. She is also a director of Anixter
International Inc., Capital Trust Inc., CVS Corporation, Dynergy Inc., Danka
Business Systems PLC and Manufactured Home Communities, Inc. She is also a
trustee of Equity Residential Properties Trust and Equity Office Properties
Trust. Ms. Rosenberg was a Principal of Rosenberg & Liebentritt, P.C. ("R&L")
from 1980 until 1997. R&L served as counsel to the Partnership, the General
Partner and certain of their Affiliates until its dissolution in 1999.
(b) & (e) EXECUTIVE OFFICERS
The Partnership does not have any executive officers. The executive officers
of the General Partner as of March 31, 2000 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>
President and Chief Executive
Douglas Crocker II......................... Officer
Donald J. Liebentritt...................... Vice President
Vice President--Finance and
Norman M. Field............................ Treasurer
</TABLE>
PRESIDENT AND CEO--See Table of Directors above.
Donald J. Liebentritt, 49, has been Vice President of the General Partner
since July 1997 and is President of EGI, Vice President and Assistant
Secretary of Great American and was Principal and Chairman of R&L.
Norman M. Field, 51, has been Vice President of Finance and Treasurer of the
General Partner since February 1984, and also served as Vice President of
Great American from July 1983 until March 1995 and from July 1997 to the
present.
(d) FAMILY RELATIONSHIPS
There are no family relationships among any of the foregoing directors and
officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
There are no involvements in certain legal proceedings among any of the
foregoing directors and officers.
7
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ITEM 11. EXECUTIVE COMPENSATION
(a,b,c & d) As stated in Item 10, the Partnership has no officers or directors.
Neither the General Partner, nor any director or officer of the General
Partner, received any direct remuneration from the Partnership during the year
ended December 31, 1999. However, Affiliates of the General Partner do
compensate the directors and officers.
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, 2000, no person owned of record or was known by the
Partnership to own beneficially more than 5% of the Partnership's 84,886
Units then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1,
2000, the executive officers and directors of the General Partner, as a
group, did not own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Affiliates of the General Partner were entitled to compensation and
reimbursements of $25,400 from the Partnership for 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. As of December 31,
1999, total fees and reimbursements of $3,200 were due to Affiliates.
In accordance with the Partnership Agreement, subsequent to October 19,
1984, the Termination of the Offering, the General Partner is 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
Partner, in an amount equal to the greater of the General Partner's
Partnership Management Fee or 1% of such Net Profits; second, the balance,
if any, to the Limited Partners. Net Profits from the sale or disposition
of a Partnership property are allocated: first, prior to giving effect to
any distributions of Sale Proceeds from the transaction, to the General
Partner 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
Partner, in an amount necessary to make the balance in its capital account
equal to the amount of Sale Proceeds to be distributed to the General
Partner with respect to the sale or disposition of such property 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 Partner and 99% to
the Limited Partners. Net Losses from the sale, disposition or provision
for value impairment of Partnership properties are allocated: first, prior
to giving effect to any distributions of Sale Proceeds from the
transaction, to the extent that the balance in the General Partner's
capital account exceeds its Capital Investment or the balance in the
capital accounts of the Limited Partners exceeds the amount of their
Capital Investment (the "Excess Balances"), to the General Partner and the
Limited Partners pro rata in proportion to such Excess Balances until such
Excess Balances are reduced to zero; second, to the General Partner and the
Limited Partners and among them (in the ratio which 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.
Notwithstanding the foregoing, in all events there shall be allocated to
the General Partner 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 year ended December 31, 1999, the General Partner was not
paid a Partnership Management Fee, and was allocated Net Profits of $2,900.
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), served as legal counsel to the
Partnership, the General Partner and certain of their Affiliates. Donald J.
Liebentritt, Vice President of the General Partner was a Principal and the
Chairman of the Board of Rosenberg. Compensation for these services were on
terms which were fair, reasonable and no less favorable to the Partnership
than reasonably could have been obtained from unaffiliated persons. Total
legal fees, which Rosenberg was entitled to, for the year ended December
31, 1999 was $5,300.
(c) No management person is indebted to the Partnership.
(d) None.
8
<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 during the quarter ended December 31,
1999.
9
<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 INSTITUTIONAL REAL
ESTATE, LTD.-2
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 24, 2000 /s/ DOUGLAS CROCKER II
By: ____________________________________
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.
<TABLE>
<S> <C> <C>
/s/ DOUGLAS CROCKER II March 24, 2000 President, Chief Executive
______________________________________ Officer and Director of
DOUGLAS CROCKER II the General Partner
/s/ SHELI Z. ROSENBERG March 24, 2000 Director of the General
______________________________________ Partner
SHELI Z. ROSENBERG
/s/ DONALD J. LIEBENTRITT March 24, 2000 Vice President
______________________________________
DONALD J. LIEBENTRITT
/s/ NORMAN M. FIELD March 24, 2000 Vice President--Finance
______________________________________ and Treasurer
NORMAN M. FIELD
</TABLE>
10
<PAGE>
INDEX OF FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
<TABLE>
<CAPTION>
Pages
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<S> <C>
Report of Independent Auditors A-2
Balance Sheets as of December 31, 1999 and 1998 A-3
Statements of Partners' Capital for the Years Ended December 31,
1999, 1998 and 1997 A-3
Statements of Income and Expenses for the Years Ended December 31,
1999, 1998 and 1997 A-4
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 A-4
Notes to Financial Statements A-5 to A-8
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</TABLE>
SCHEDULES FILED AS PART OF THIS REPORT
All 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-31 of the Partnership's
definitive Prospectus dated October 19, 1983; Registration Statement No. 2-
86361, filed pursuant to Rule 424 (b), is incorporated herein by reference.
EXHIBIT (10) Material Contracts
Real Estate Sale Agreement and Closing Documents for the sale of Marketplace at
Rivergate Shopping Center filed as an exhibit to the Partnership's Report on
form 8-K filed on March 18, 1998 is incorporated herein by reference.
Real Estate Sale Agreement and Closing Documents for the sale of Ellis Building
filed as an exhibit to the Partnership's Report on form 8-K filed on September
8, 1998 is incorporated herein by reference.
Real Estate Sale Agreement and Closing Documents for the sale of Holiday Office
Park North and South filed as an exhibit to the Partnership's Report on form 8-
K filed on October 6, 1998 is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1998 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 Institutional Real Estate, Ltd.-2
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Institutional
Real Estate, Ltd.-2 as of December 31, 1999 and 1998, 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, 1999. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 Institutional
Real Estate, Ltd.-2 at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Ernst & Young LLP
Chicago, Illinois
February 15, 2000
A-2
<PAGE>
BALANCE SHEETS
December 31, 1999 and 1998
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,017,500 $19,078,600
Investments in debt securities 2,943,000
Rents receivable 27,800 27,800
Other assets 8,000 10,200
- ------------------------------------------------------------------------------
$5,996,300 $19,116,600
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 140,500 $ 115,500
State income taxes payable 75,300
Due to Affiliates 3,200 2,000
Security deposits
Distributions payable 13,361,200
Other liabilities 1,300 3,100
- ------------------------------------------------------------------------------
145,000 13,557,100
- ------------------------------------------------------------------------------
Partners' capital:
General Partner 76,200 73,300
Limited Partners (84,886 Units issued and outstanding) 5,775,100 5,486,200
- ------------------------------------------------------------------------------
5,851,300 5,559,500
- ------------------------------------------------------------------------------
$5,996,300 $19,116,600
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1999, 1998 and 1997
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital, January 1,
1997 $(131,300) $ 42,797,500 $ 42,666,200
Net income for the year ended December
31, 1997 381,300 3,663,600 4,044,900
Distributions for the year ended
December 31, 1997 (250,000) (25,588,000) (25,838,000)
- -------------------------------------------------------------------------------
Partners' capital, December 31, 1997 -- 20,873,100 20,873,100
Net income for the year ended December
31, 1998 214,800 6,883,800 7,098,600
Distributions for the year ended
December 31, 1998 (141,500) (22,270,700) (22,412,200)
- -------------------------------------------------------------------------------
Partners' capital, December 31, 1998 73,300 5,486,200 5,559,500
Net income for the year ended December
31, 1999 2,900 288,900 291,800
- -------------------------------------------------------------------------------
Partners' capital, December 31, 1999 $ 76,200 $ 5,775,100 $ 5,851,300
- -------------------------------------------------------------------------------
</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, 1999, 1998 and 1997
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $ 21,100 $ 995,500 $4,724,600
Interest 384,300 860,900 663,200
Net gain on sales of property 4,621,500 1,461,300
- -----------------------------------------------------------------------------
405,400 6,477,900 6,849,100
- -----------------------------------------------------------------------------
Expenses:
Depreciation and amortization 199,700 968,200
Property operating:
Affiliates 200 34,300 244,300
Nonaffiliates 5,300 200,400 793,600
Real estate taxes (1,300) 48,800 415,700
Insurance--Affiliate 7,600 47,600
Repairs and maintenance 1,700 161,900 514,500
General and administrative:
Affiliates 30,700 39,000 37,100
Nonaffiliates 76,400 168,400 205,800
- -----------------------------------------------------------------------------
113,000 860,100 3,226,800
- -----------------------------------------------------------------------------
Net income before income from participation
in joint venture and state income tax
expense 292,400 5,617,800 3,622,300
Income from participation in joint venture:
Operations 295,200 428,400
Gain on sale of property 1,439,100
- -----------------------------------------------------------------------------
Income before state income tax expense 292,400 7,352,100 4,050,700
State income tax expense 600 253,500 5,800
- -----------------------------------------------------------------------------
Net income $291,800 $7,098,600 $4,044,900
- -----------------------------------------------------------------------------
Net income allocated to General Partner $ 2,900 $ 214,800 $ 381,300
- -----------------------------------------------------------------------------
Net income allocated to Limited Partners $288,900 $6,883,800 $3,663,600
- -----------------------------------------------------------------------------
Net income allocated to Limited Partners per
Unit (84,886 Units outstanding) $ 3.40 $ 81.09 $ 43.16
- -----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998 and 1997
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 291,800 $ 7,098,600 $ 4,044,900
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 199,700 968,200
Net gain on sales of property (4,621,500) (1,461,300)
(Income) from participation in
joint venture (1,652,000) (423,600)
Changes in assets and liabilities:
Decrease in rents receivable 39,500 32,500
Decrease in other assets 2,200 24,900 24,000
Increase (decrease) in accounts
payable and accrued expenses 25,000 (104,600) (102,800)
(Decrease) increase in state income
tax payable (75,300) 75,300
Increase (decrease) in due to
Affiliates 1,200 (50,100) (24,100)
(Decrease) in other liabilities (1,800) (53,800) (57,500)
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 243,100 956,000 3,000,300
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Net proceeds from sales of property 14,537,200 23,383,400
Payments for capital and tenant
improvements (4,100) (521,600)
(Increase) decrease in investments
in debt securities (2,943,000) 1,051,100
Decrease in restricted cash 50,000
Net distributions received from
joint venture 6,963,400 965,000
- --------------------------------------------------------------------------------
Net cash (used for) provided by
investing activities (2,943,000) 21,546,500 24,877,900
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Distributions paid to Partners (13,361,200) (17,819,000) (17,918,900)
(Decrease) in security deposits (49,500) (88,100)
- --------------------------------------------------------------------------------
Net cash (used for) financing
activities (13,361,200) (17,868,500) (18,007,000)
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (16,061,100) 4,634,000 9,871,200
Cash and cash equivalents at the
beginning of the year 19,078,600 14,444,600 4,573,400
- --------------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 3,017,500 $ 19,078,600 $ 14,444,600
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 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.
Organization:
The Partnership was formed on August 22, 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 November 10, 1983. The
Certificate and Agreement, as amended and restated, authorized the sale to the
public of up to 85,000 Units and not less than 1,400 Units pursuant to the
Prospectus. On December 5, 1983, the required minimum subscription level was
reached and Partnership operations commenced. A total of 84,886 Units were sold
prior to Termination of the Offering in October, 1984. The Partnership was
formed to invest primarily in existing, income-producing commercial real
estate.
The Partnership has disposed of its real estate properties. Upon resolution of
the environmental matter disclosed in Note 5 and other post closing matters
related to the sales of the Partnership's properties, the Partnership will make
a liquidating distribution and dissolve.
In 1998, the Company adopted Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The Partnership has one reportable segment
as the Partnership is in the disposition phase of its life cycle, wherein it is
seeking to resolve post-closing matters relating to properties sold by the
Partnership. The adoption of Statement 131 did not affect the results of
operations or financial position.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 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 accounting
principles generally accepted in the United States ("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 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 until its
sale in August 1998, was operated under the common control of the General
Partner. Accordingly, the Partnership's pro rata share of the venture's
revenues, expenses, assets, liabilities and Partners' capital is included in
the financial statements.
Investment in joint venture, represented 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 limited partnership with the sellers of the Lansing, Michigan
property ("Holiday"). Under the equity method of accounting, the Partnership
recorded its initial investment at cost and adjusted its investment account for
its share of Holiday's income or loss and its distributions of cash flow (as
defined in the limited partnership agreement). During 1998, Holiday was sold
and the remaining assets and liabilities of the limited partnership were
distributed to the Partnership. In December 1998, the limited partnership was
dissolved.
The Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership's income or loss on
their income tax returns; therefore, no provision for Federal income taxes is
made in the financial statements of the Partnership. It is not practicable for
the Partnership to determine the aggregate tax bases of the
A-5
<PAGE>
Limited Partners; therefore, the disclosure of the difference between the tax
bases and the reported assets and liabilities of the Partnership would not be
meaningful.
Property sales are recorded when title transfers and sufficient consideration
has been received by the Partnership. Upon disposition, the related costs and
accumulated depreciation are removed from the respective accounts. Any gain or
loss on sale is recognized in accordance with GAAP.
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
Investments in debt securities are comprised of obligations of the United
States government 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.
Certain reclassifications have been made to the previously reported 1998 and
1997 statements in order to provide comparability with the 1999 statements.
These reclassifications have no effect on net income or Partners' capital.
The Partnership's financial statements include financial instruments, including
receivables and trade liabilities. The fair value of financial instruments,
including cash and cash equivalents, was not materially different from their
carrying values at December 31, 1999 and 1998.
2. Related party transactions:
In accordance with the Partnership Agreement, subsequent to October 19, 1984,
the Termination of the Offering, the General Partner is 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 Partner, in an
amount equal to the greater of the General Partner's Partnership Management Fee
or 1% of such Net Profits; second, the balance, if any, to the Limited
Partners. Net Profits from the sale or disposition of a Partnership property
are allocated: first, prior to giving effect to any distributions of Sale
Proceeds from the transaction, to the General Partner 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 Partner, in an amount necessary to make the
balance in its capital account equal to the amount of Sale Proceeds to be
distributed to the General Partner with respect to the sale or disposition of
such property 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
Partner and 99% to the Limited Partners. Net Losses from the sale, disposition
or provision for value impairment of Partnership properties are allocated:
first, prior to giving effect to any distributions of Sale Proceeds from the
transaction, to the extent that the balance in the General Partner's capital
account exceeds its Capital Investment or the balance in the capital accounts
of the Limited Partners exceeds the amount of their Capital Investment (the
"Excess Balances"), to the General Partner and the Limited Partners pro rata in
proportion to such Excess Balances until such Excess Balances are reduced to
zero; second, to the General Partner and the Limited Partners and among them
(in the ratio which 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. Notwithstanding the foregoing, in all events there
shall be allocated to the General Partner 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, 1999 the General Partner was not paid a Partnership
Management Fee and was allocated Net Profits of $2,900. For the year ended
December 31, 1998, the General Partner was paid a Partnership Management Fee of
$141,500 and was allocated Net Profits of $214,800, which includes $73,300 from
the sales of Partnership properties. For the year ended December 31, 1997, the
General Partner was paid a Partnership Management Fee of $250,000 and was
allocated Net Profits of $381,300, which includes $131,300 from the sales of
Partnership properties.
A-6
<PAGE>
Fees and reimbursements paid and payable by the Partnership to Affiliates for
the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ---------------- ----------------
Paid Payable Paid Payable Paid Payable
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property management and
leasing fees $ 700 $ None $ 41,000 $(3,300) $230,300 $ 3,100
Reimbursement of property
insurance premiums None None 7,700 None 47,600 None
Real estate commissions
(a) None None None None None 40,300
Legal 5,300 None 59,200 None 104,100 7,500
Reimbursement of expenses,
at cost
--Accounting 11,800 2,000 17,100 3,300 21,300 900
--Investor communication 15,000 1,200 12,700 2,000 12,000 300
--Other None None None None 2,300 None
- ------------------------------------------------------------------------------
$32,800 $3,200 $137,700 $ 2,000 $417,600 $52,100
- ------------------------------------------------------------------------------
</TABLE>
The variance between the amounts listed in the table and the Statement of
Income and Expense is due to capitalizable legal costs.
(a) As of December 31, 1997, 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.
In accordance with the Partnership Agreement, no Affiliate of the General
Partner may receive payment of a real estate commission upon the sale of a
Partnership property until Limited Partners have received cumulative
distributions of Sale or Financing 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) of 6% simple interest per annum on
their Capital Investment. During the year ended December 31, 1998,
following the sale of the Partnership's last property, it was determined
that the requirement would not be fulfilled and, accordingly, the
liability was written off and reported as a gain on the sale of property.
3.Income tax:
The Partnership utilizes the accrual method 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 prepaid rents as taxable income and differing tax
cost basis in properties sold.
4.Property sales:
On September 22, 1998, the joint venture in which the Partnership owned a 50%
interest, treated under the equity method, consummated the sale of its
property, Holiday Office Park North and South, located in Lansing, Michigan for
a sale price of $13,500,000. The Partnership's share of proceeds from this
transaction was $6,526,900, which was net of closing expenses. The Partnership
reported a net gain of $1,439,100 for the year ended December 31, 1998 in
connection with this sale and distributed $6,499,700 or $76.57 per Unit on
February 28, 1999 to Limited Partners of record as of September 22, 1998. For
tax reporting purposes, the Partnership reported a (loss) of $(367,300) for the
year ended December 31, 1998 in connection with this sale.
On August 21, 1998, a joint venture in which the Partnership owned a 50%
interest, consummated the sale of the Ellis Building, located in Sarasota,
Florida, for a sale price of $13,875,000. The Partnership's share of proceeds
from this transaction was $6,673,800, which was net of closing expenses. The
Partnership reported a net of gain of $2,942,000 for the year ended December
31, 1998 in connection with this sale and distributed $6,672,900 or $78.61 per
Unit on February 28, 1999 to Limited Partners of record as of August 21, 1998.
For tax reporting purposes, the Partnership reported a gain of $1,525,100 for
the year ended December 31, 1998 in connection with this sale.
On March 4, 1998, the Partnership sold Marketplace at Rivergate Shopping
Center, located in Nashville, Tennessee, for a sale price of $8,128,000.
Proceeds from this transaction were $7,823,100, which was net of closing
expenses. The Partnership reported a gain for financial reporting purposes of
$1,639,300 for the year ended December 31, 1998 from this sale and distributed
$7,824,800 or $92.18 per Unit on August 31, 1998 to Limited Partners of record
as of March 4, 1998. For tax reporting purposes, the Partnership reported a
gain of $1,013,500 for the year ended December 31, 1998 in connection with this
sale.
On November 10, 1997, a joint venture in which the Partnership owned a 50%
interest, consummated the sale of Foxhall Square Office Building, located in
Washington D.C., for a sale price of $17,125,000. The Partnership's share of
proceeds from this transaction was $8,283,100, which was net of closing
expenses. The Partnership reported a gain for financial reporting purposes of
$1,079,000 for the year ended December 31, 1997 in connection with this sale
and distributed
A-7
<PAGE>
$8,249,200 or $97.18 per Unit on February 28, 1998 to Limited Partners of
record as of November 10, 1997. For tax reporting purposes, the Partnership
reported a gain of $2,316,600 for the year ended December 31, 1997 in
connection with this sale.
On July 24, 1997, the Partnership sold Banana River Square Shopping Center,
located in Cocoa Beach, Florida, for a sale price of $5,185,000. Proceeds from
this transaction were $4,948,400, which was net of closing expenses. The
Partnership reported a gain for financial reporting purposes of $269,400 for
the year ended December 31, 1997 from this sale and distributed $4,935,300 or
$58.14 per Unit on November 30, 1997 to Limited Partners of record as of July
24, 1997. For tax reporting purposes, the Partnership reported a gain of
$2,377,800 for the year ended December 31, 1997 in connection with this sale.
On June 27, 1997, a joint venture in which the Partnership owned a 50%
interest, consummated the sale of 12621 Featherwood Office Building, located in
Houston, Texas, for a sale price of $3,146,700. The Partnership's share of
proceeds from this transaction was $1,491,900, which was net of closing
expenses. The Partnership reported a net loss of $53,700 for the year ended
December 31, 1997 in connection with this sale and distributed $1,495,700 or
$17.62 per Unit on November 30 ,1997 to Limited Partners of record as of June
27, 1997. For tax reporting purposes, the Partnership reported a (loss) of
$(848,000) for the year ended December 31, 1997 in connection with this sale.
On May 16, 1997, a joint venture in which the Partnership owned a 50% interest,
consummated the sale of Lakewood Square Shopping Center ("Lakewood"), located
in Lakewood, California, for a sale price of $17,750,000. The Partnership's
share of proceeds from this transaction was $8,660,000, which was net of
closing expenses. The Partnership reported a net gain of $166,600 for the year
ended December 31, 1997 in connection with this sale and distributed $8,658,400
or $102.00 per Unit on August 31,1997 to Limited Partners of record as May 16,
1997. For tax reporting purposes, the Partnership reported a gain of $3,238,700
for the year ended December 31, 1997 in connection with this sale.
5.Environmental matter:
In December 1996, the General Partner became aware of the existence of
hazardous substances in the soil and groundwater under Lakewood. In connection
with the 1997 sale of Lakewood, the purchaser assumed the obligation to remedy
the hazardous substances in the manner required by law, which includes, but is
not limited to, payment of all costs in connection with the remediation work.
In addition, the purchaser provided the Partnership with certain
indemnification protection in relation to clean-up costs and related expenses
arising from the presence of these hazardous substances. At the present time,
the General Partner is unaware of any claims or other matters referred to the
above-described matter, or any other environmental matter against the
Partnership. During 1998, the purchaser submitted its corrective action plan to
the California Regional Water Quality Control Board ("Water Board"). The Water
Board subsequently approved this plan subject to its review of purchaser's
pilot study (the "Pilot Study"). The Plan provided for the recommended method
of cleanup and the obtaining of regulatory approval upon completion. In
February 2000, purchaser reported that the results of the Pilot Study indicated
that the plan may not adequately address some of the contamination in the soil
below Lakewood. In response, in February 2000, purchaser (presented an outline
of its alternative plan (the "Alternative Plan") to the Water Board. Purchaser
is awaiting final approval from the Water Board to begin implementation of the
Alternative Plan. The timing of the completion of the remediation process is
contingent upon, among other things the Water Board's issuance of this
approval. Accordingly, there can be no assurance as to the timing of the
completion of the remediation process. The General Partner continues to monitor
the documentation delivered by the purchaser regarding the purchaser's
activities to remedy the hazardous substances at Lakewood.
6.State income tax expense:
State income tax expense is comprised substantially of taxes based on taxable
income imposed by the District of Columbia and the states of Michigan and
Florida.
A-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,017,500
<SECURITIES> 2,943,000
<RECEIVABLES> 27,800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,988,300
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,966,300
<CURRENT-LIABILITIES> 143,700
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,851,300
<TOTAL-LIABILITY-AND-EQUITY> 5,966,300
<SALES> 0
<TOTAL-REVENUES> 405,400
<CGS> 0
<TOTAL-COSTS> 5,900
<OTHER-EXPENSES> 107,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 292,400
<INCOME-TAX> 600
<INCOME-CONTINUING> 291,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291,800
<EPS-BASIC> 3.40
<EPS-DILUTED> 3.40
</TABLE>
