<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended September 30, 1994
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission File Number: 0-12538
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FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 1
- - --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2197264
- - ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
- - ------------------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
- - -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated October 25, 1982, included
in the Registrant's Registration Statement on Form S-11 (Registration No.
2-79092), is incorporated herein by reference in Part I of this report.
<PAGE>
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
September 30,
1994 December 31,
(Unaudited) 1993
- - -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 5,501,700 $ 5,501,700
Buildings and improvements 30,641,900 30,120,900
- - -----------------------------------------------------------------------------
36,143,600 35,622,600
Accumulated depreciation and amortization (10,477,200) (9,632,500)
- - -----------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 25,666,400 25,990,100
Cash and cash equivalents 4,523,200 4,245,900
Rents receivable 104,200 246,600
Other assets 19,000 42,300
- - -----------------------------------------------------------------------------
$30,312,800 $30,524,900
- - -----------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 293,600 $ 321,500
Due to Affiliates 425,600 431,700
Security deposits 135,900 116,500
Distributions payable 349,800 199,800
Other liabilities 70,300 66,600
- - -----------------------------------------------------------------------------
1,275,200 1,136,100
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Partners' (deficit) capital:
General Partners (226,900) (157,900)
Limited Partners (60,000 Units authorized, issued
and outstanding) 29,264,500 29,546,700
- - -----------------------------------------------------------------------------
29,037,600 29,388,800
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$30,312,800 $30,524,900
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 30, 1994
and the year ended December 31, 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1993 $ (63,500) $29,083,700 $29,020,200
Net (loss) income for the year ended
December 31, 1993 (94,400) 1,262,200 1,167,800
Distributions for the year ended December
31, 1993 (799,200) (799,200)
- - -------------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1993 (157,900) 29,546,700 29,388,800
Net (loss) income for the
nine months ended
September 30, 1994 (69,000) 767,200 698,200
Distributions for the nine months ended
September 30, 1994 (1,049,400) (1,049,400)
- - -------------------------------------------------------------------------------
Partners' (deficit) capital,
September 30, 1994 $(226,900) $29,264,500 $29,037,600
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</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $1,091,800 $1,152,000
Interest 47,700 30,000
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1,139,500 1,182,000
- - ---------------------------------------------------------------------------
Expenses:
Depreciation and amortization 289,300 297,000
Property operating 286,000 266,000
Real estate taxes and insurance 88,400 125,700
Repairs and maintenance 143,500 73,900
General and administrative 56,500 48,600
- - ---------------------------------------------------------------------------
863,700 811,200
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Net income $ 275,800 $ 370,800
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Net (loss) allocated to General Partners $ (23,200) $ (23,000)
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Net income allocated to Limited Partners $ 299,000 $ 393,800
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Net income allocated to Limited Partners per Unit
(60,000 Units authorized, issued and outstanding) $ 4.98 $ 6.56
- - ---------------------------------------------------------------------------
</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the nine months ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Income:
Rental $3,284,500 $3,575,400
Interest 121,500 86,400
- - ---------------------------------------------------------------------------
3,406,000 3,661,800
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Expenses:
Depreciation and amortization 844,700 887,200
Property operating 847,300 814,100
Real estate taxes and insurance 365,300 384,600
Repairs and maintenance 487,200 375,300
General and administrative 163,300 170,400
- - ---------------------------------------------------------------------------
2,707,800 2,631,600
- - ---------------------------------------------------------------------------
Net income $ 698,200 $1,030,200
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Net (loss) allocated to General Partners $ (69,000) $ (69,500)
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Net income allocated to Limited Partners $ 767,200 $1,099,700
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Net income allocated to Limited Partners per Unit
(60,000 Units authorized, issued and outstanding) $ 12.79 $ 18.33
- - ---------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 698,200 $1,030,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 844,700 887,200
Changes in assets and liabilities:
Decrease (increase) in rents receivable 142,400 (13,000)
Decrease (increase) in other assets 23,300 (4,700)
(Decrease) increase in accounts payable and accrued
expenses (27,900) 72,500
(Decrease) in due to Affiliates (6,100) (20,500)
Increase (decrease) in other liabilities 3,700 (43,500)
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Net cash provided by operating activities 1,678,300 1,908,200
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Cash flows from investing activities:
Payments for capital and tenant improvements (521,000) (592,900)
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Net cash (used for) investing activities (521,000) (592,900)
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Cash flows from financing activities:
Distributions paid to Partners (899,400) (881,400)
Increase (decrease) in security deposits 19,400 (100)
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Net cash (used for) financing activities (880,000) (881,500)
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Net increase in cash and cash equivalents 277,300 433,800
Cash and cash equivalents at the beginning of the
period 4,245,900 3,716,800
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Cash and cash equivalents at the end of the period $4,523,200 $4,150,600
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</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 1994
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 nine months ended September 30, 1994 are not necessarily
indicative of the operating results for the year ending December 31, 1994.
Certain reclassifications have been made to the previously reported 1993
financial statements in order to provide comparability with the 1994 financial
statements. These reclassifications have not changed the 1993 results.
The financial statements include the Partnership's 50% interest in three joint
ventures. These joint ventures were formed for the purpose of acquiring
interests in certain real properties and are operated under the control of the
Managing General Partner. Accordingly, the Partnership's pro rata share of the
ventures' revenues, expenses, assets, liabilities and capital is included in
the financial statements.
Cash equivalents are considered all highly liquid investments purchased with a
maturity of three months or less.
Reference is made to the Partnership's annual report for the year ended
December 31, 1993, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim or as disclosed
herein.
2. RELATED PARTY TRANSACTIONS:
Subsequent to March 31, 1983, the Termination of the Offering, the General
Partners are entitled to 10% of Cash Flow as their Partnership Management Fee,
provided that the Limited Partners first receive specified cumulative annual
returns on their Original Capital Contributions. In accordance with the
Partnership Agreement, Net Profits (exclusive of depreciation and Net Profits
from the sale or disposition of Partnership properties) are allocated first to
the General Partners in an amount equal to the greater of the General Partners'
Partnership Management Fee or 1% of such Net Profits. The balance of Net
Profits, if any, is allocated to the Limited Partners. Net Losses (exclusive of
depreciation and Net Losses from the sale or disposition of Partnership
properties) are allocated 1% to the General Partners and 99% to the Limited
Partners. All depreciation shall be allocated 10% to the General Partners and
90% to the Limited Partners. The General Partners were not entitled to cash
distributions for the quarter and nine months ended September 30, 1994. During
the quarter and nine months ended September 30, 1994, the General Partners were
allocated Net Losses of $23,200 and $69,000, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and nine months ended September 30, 1994 were as follows:
<TABLE>
<CAPTION>
Paid
----------------
Nine
Quarter Months Payable
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Property management and leasing fees $44,800 $153,600 $ 19,300
Reimbursement of property insurance premiums, at
cost 16,000 45,700 None
Real estate commissions (a) None None 403,000
Reimbursement of expenses, at cost:
(1) Accounting 5,800 16,400 1,500
(2) Investor communication 3,200 11,300 1,800
(3) Legal 7,000 25,200 None
- - ---------------------------------------------------------------------------
$76,800 $252,200 $425,600
- - ---------------------------------------------------------------------------
</TABLE>
(a) As of September 30, 1994, the Partnership owed $403,000 to the Managing
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's annual report for the year ended
December 31, 1993, for a discussion of the Partnership's business.
OPERATIONS
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its four
remaining properties. Notwithstanding the Partnership's intention relative to
property sales, another primary objective of the Partnership is to provide cash
distributions to Limited Partners from Cash Flow generated by Partnership
operations. To the extent 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 determined by generally accepted accounting principles,
since certain items are treated differently under the Partnership Agreement
than under generally accepted accounting principles. 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 generally accepted accounting principles. The amount of Cash Flow and the
return on Capital Investment are not indicative of actual distributions and
actual returns on Capital Investment.
<TABLE>
<CAPTION>
Comparative Cash Flow Results
For the Nine Months
For the Quarters Ended Ended
9/30/94 9/30/93 9/30/94 9/30/93
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount of Cash Flow
(as defined in the
Partnership Agreement) $ 565,100 $ 667,800 $ 1,542,900 $ 1,917,400
Capital Investment $44,010,000 $44,010,000 $44,010,000 $44,010,000
Annualized return on Capital
Investment (Annualized Cash
Flow/ Capital Investment) 5.14% 6.07% 4.67% 5.81%
- - -----------------------------------------------------------------------------
</TABLE>
The decrease in Cash Flow of approximately $102,700 and $374,500 for the
quarter and nine months ended September 30, 1994, respectively, when compared
to the quarter and nine months ended September 30, 1993 was primarily due to
decreases in rental revenues at all of the Partnership's properties and
increases in property operating and repairs and maintenance expenses, partially
offset by a decrease in real estate taxes and insurance.
Rental revenues at Peachtree for the nine months ended September 30, 1994 and
1993 were approximately $913,700 and $1,113,800, respectively, and for the
quarters ended September 30, 1994 and 1993 were approximately $314,900 and
$355,000, respectively. Rental revenues decreased for both periods primarily
due to decreases in the quarterly and nine-month average occupancy rates from
85% for the quarter and nine months ended September 30, 1993 to 79% and 78%,
respectively, for the quarter and nine months ended September 30, 1994.
Rental revenues at Foxhall for the nine months ended September 30, 1994 and
1993 were approximately $1,169,900 and $1,239,700, respectively, and for the
quarters ended September 30, 1994 and 1993 were approximately $394,600 and
$401,400, respectively. The decreases for both periods were primarily due to
lower tenant expense reimbursements in 1994, partially offset by an increase in
base rents. The quarterly and nine-month average occupancy rates at Foxhall
increased slightly to 85% in 1994 from 83% in 1993.
Rental revenues at Lakewood for the nine months ended September 30, 1994 and
1993 were approximately $869,000 and $883,300, respectively, and for the
quarters ended September 30, 1994 and 1993 were approximately $279,400 and
$281,500, respectively. The decrease for the nine months ended September 30,
1994 was primarily due to a decrease in insurance escalation income, as well as
granting refunds to tenants in 1994 for an overestimate of 1993 insurance
escalation billings. The quarterly and nine-month average occupancy rates were
84% and 83%, respectively, in 1994 and 82% and 85%, respectively, in 1993.
Rental revenues at the 12621 Featherwood Building ("Featherwood") for the nine
months ended September 30, 1994 and 1993 were approximately $331,900 and
$340,700, respectively, and for the quarters ended September 30, 1994 and 1993
were approximately $102,900 and $113,600, respectively. The property remained
100% occupied during 1993 and 1994. On July 18, 1994, the Partnership purchased
a parcel of land adjacent to the Featherwood building for approximately $8,100
to be used for an expanded parking facility as required under the sole tenant's
lease.
Property operating and repairs and maintenance expenses increased primarily due
to an increase of the Partnership's share of these expenses at Featherwood
resulting from the expiration of the prior tenant's lease which was on a net
basis, as more fully discussed in the Partnership's Annual Report. The
Partnership's share of total operating expenses, including real estate taxes,
at Featherwood increased approximately $229,300 for the nine months ended
September 30, 1994 when compared to the nine months ended September 30, 1993
due to the assumption of these obligations by the Partnership. In addition,
repairs and maintenance expenses increased at Foxhall and Peachtree by
approximately $13,000 and $45,000, respectively. Contributing to the increase
in repairs and maintenance expenses at Peachtree were repairs made to the HVAC
system.
Partially offsetting the decreases in Cash Flow results mentioned above were:
1) a decrease in real estate taxes at Foxhall of approximately $75,600
primarily due to the receipt of a real estate tax refund in 1994 relating to
the 1992/1993 tax year and 2) a decrease in property operating expenses at
Peachtree of approximately $38,000 due to a decrease in salaries and at Foxhall
of approximately $21,200 due to a decrease in promotional expenditures.
To increase occupancy levels at the Partnership's properties, the Managing
General Partner, through its Affiliated asset and property management groups,
continues to take the necessary actions deemed appropriate for the properties
discussed above. Some of these actions include: 1) implementation of marketing
programs, including hiring of third-party leasing agents or providing on-site
leasing personnel, advertising, direct mail campaigns and development of
building brochures; 2) early renewal of existing tenants and addressing any
expansion needs these tenants may have; 3) promotion of local broker events and
networking with local brokers; 4) networking with national level retailers; 5)
cold-calling other businesses and tenants in the market area and 6) providing
rental concessions or competitively pricing rental rates depending on market
conditions.
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Partnership's cash position as of September 30, 1994 when
compared to December 31, 1993 was primarily the result of net cash provided by
operating activities exceeding payments made for capital and tenant
improvements and distributions paid to Limited Partners. The liquid assets of
the Partnership as of September 30, 1994 represent working capital reserves
comprised of undistributed Sale Proceeds and undistributed Cash Flow.
Net cash provided by operating activities decreased by $229,900 during the nine
months ended September 30, 1994 when compared to the nine months ended
September 30, 1993. This decrease was primarily due to the decrease in Cash
Flow results as discussed above and the timing in 1994 of the payment of
certain Partnership expenses, partially offset by the significant collection of
past due receivables.
Net cash used for investing activities decreased by $71,900 for the nine months
ended September 30, 1994 when compared to the nine months ended September 30,
1993. This decrease was due to a decrease in expenditures for capital and
tenant improvements to the Partnership's properties. During the nine months
ended September 30, 1994, the Partnership spent approximately $521,000 for
building and tenant improvements and has budgeted to spend an additional
$300,000 during the remainder of 1994. Of the remaining budgeted amount,
approximately $150,000 and $120,000 relates to anticipated capital and tenant
improvements and leasing costs expected to be incurred at Foxhall and
Peachtree, respectively. The Managing General Partner believes these
expenditures are necessary to maintain occupancy levels in very competitive
markets.
Net cash used for financing activities decreased by $1,500 for the nine months
ended September 30, 1994 when compared to the nine months ended September 30,
1993. This decrease was due primarily to an increase in the net collections of
tenant security deposits, partially offset by an increase in distributions paid
to Limited Partners in 1994 as compared to 1993.
The Managing General Partner continues to take a conservative approach to
projections of future rental income and to maintain higher levels of cash
reserves due to the anticipated capital and tenant improvements necessary to be
made at the Partnership's properties during the next several years prior to
their disposition. As a result of this, the Partnership continues to reserve
amounts from Cash Flow to supplement working capital reserves. Cash Flow
retained to supplement working capital reserves approximated $215,300 and
$493,500 for the quarter and nine months ended September 30, 1994,
respectively.
Distributions to Limited Partners for the quarter ended September 30, 1994 were
declared at an annualized rate of 3.18% of Capital Investment. 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
Flow retained for future cash requirements. Therefore, there can be no
assurance of the availability or the amount of Cash Flow for distribution to
Partners.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
September 30, 1994.
<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. - 1
BY: FIRST CAPITAL FINANCIAL CORPORATION
MANAGING GENERAL PARTNER
Date: November 11, 1994 By: /s/ DOUGLAS CROCKER II
---------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: November 11, 1994 By: /s/ NORMAN M. FIELD
---------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000730212
<NAME> FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.-1
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 4,523,200
<SECURITIES> 0
<RECEIVABLES> 104,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,627,400
<PP&E> 36,143,600
<DEPRECIATION> 10,477,200
<TOTAL-ASSETS> 30,312,800
<CURRENT-LIABILITIES> 643,400
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 29,037,600
<TOTAL-LIABILITY-AND-EQUITY> 30,312,800
<SALES> 0
<TOTAL-REVENUES> 3,406,000
<CGS> 0
<TOTAL-COSTS> 1,699,800
<OTHER-EXPENSES> 163,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 698,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 698,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 698,200
<EPS-PRIMARY> 12.79
<EPS-DILUTED> 12.79
</TABLE>
