<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 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
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(Exact name of registrant as specified in its charter)
Florida 59-2197264
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
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(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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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>
PART I. FINANCIAL INFORMATION
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1994 December 31,
(Unaudited) 1993
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<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 5,501,700 $ 5,501,700
Buildings and improvements 30,446,900 30,120,900
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35,948,600 35,622,600
Accumulated depreciation and amortization (10,187,900) (9,632,500)
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Total investment properties, net of accumulated
depreciation and amortization 25,760,700 25,990,100
Cash and cash equivalents 4,518,100 4,245,900
Rents receivable 113,700 246,600
Other assets 9,500 42,300
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$30,402,000 $30,524,900
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 276,900 $ 321,500
Due to Affiliates 433,200 431,700
Security deposits 110,900 116,500
Distributions payable 349,800 199,800
Other liabilities 119,600 66,600
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1,290,400 1,136,100
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Partners' (deficit) capital:
General Partners (203,700) (157,900)
Limited Partners (60,000 Units authorized, issued
and outstanding) 29,315,300 29,546,700
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29,111,600 29,388,800
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$30,402,000 $30,524,900
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1994
and the year ended December 31, 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
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<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 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)
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Partners' (deficit) capital,
December 31, 1993 (157,900) 29,546,700 29,388,800
Net (loss) income for the six months
ended
June 30, 1994 (45,800) 468,200 422,400
Distributions for the
six months ended
June 30, 1994 (699,600) (699,600)
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Partners' (deficit) capital,
June 30, 1994 $(203,700) $29,315,300 $29,111,600
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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 June 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Income:
Rental $1,035,600 $1,129,100
Interest 40,900 28,000
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1,076,500 1,157,100
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Expenses:
Depreciation and amortization 281,100 293,700
Property operating 291,200 264,100
Real estate taxes and insurance 141,500 146,000
Repairs and maintenance 181,300 137,200
General and administrative 52,700 67,800
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947,800 908,800
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Net income $ 128,700 $ 248,300
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Net (loss) allocated to General Partners $ (24,000) $ (23,900)
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Net income allocated to Limited Partners $ 152,700 $ 272,200
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Net income allocated to Limited Partners per Unit
(60,000 Units authorized, issued and outstanding) $ 2.55 $ 4.54
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Income:
Rental $2,192,700 $2,423,400
Interest 73,800 56,400
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2,266,500 2,479,800
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Expenses:
Depreciation and amortization 555,400 590,200
Property operating 561,300 548,100
Real estate taxes and insurance 276,900 310,700
Repairs and maintenance 343,700 249,600
General and administrative 106,800 121,800
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1,844,100 1,820,400
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Net income $ 422,400 $ 659,400
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Net (loss) allocated to General Partners $ (45,800) $ (46,500)
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Net income allocated to Limited Partners $ 468,200 $ 705,900
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Net income allocated to Limited Partners per Unit
(60,000 Units authorized, issued and outstanding) $ 7.80 $ 11.77
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 422,400 $ 659,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 555,400 590,200
Changes in assets and liabilities:
Decrease in rents receivable 132,900 2,100
Decrease in other assets 32,800 16,900
(Decrease) increase in accounts payable and accrued
expenses (44,600) 53,400
Increase (decrease) in due to Affiliates 1,500 (2,500)
Increase (decrease) in other liabilities 53,000 (29,000)
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Net cash provided by operating activities 1,153,400 1,290,500
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Cash flows from investing activities:
Payments for capital and tenant improvements (326,000) (384,500)
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Net cash (used for) investing activities (326,000) (384,500)
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Cash flows from financing activities:
Distributions paid to Partners (549,600) (681,600)
(Decrease) increase in security deposits (5,600) 600
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Net cash (used for) financing activities (555,200) (681,000)
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Net increase in cash and cash equivalents 272,200 225,000
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 $4,518,100 $3,941,800
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</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 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 six months ended June 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
statements in order to provide comparability with the 1994 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 six months ended June 30, 1994. During the
quarter and six months ended June 30, 1994, the General Partners were allocated
Net Losses of $24,000 and $45,800, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Paid
Six
Quarter Months Payable
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<S> <C> <C> <C>
Property management and leasing fees $61,000 $108,800 $ 25,800
Reimbursement of property insurance premiums, at
cost 14,900 29,700 None
Real estate commissions (a) None None 403,000
Reimbursement of expenses, at cost:
(1) Accounting 6,900 10,600 2,800
(2) Investor communication 4,300 8,100 1,600
(3) Legal 7,700 18,200 None
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$94,800 $175,400 $433,200
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</TABLE>
(a) As of June 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 Six Months
For the Quarters Ended Ended
6/30/94 6/30/93 6/30/94 6/30/93
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<S> <C> <C> <C> <C>
Amount of Cash Flow (as
defined in the Partnership
Agreement) $ 409,800 $ 542,000 $ 977,800 $ 1,249,600
Capital Investment $44,010,000 $44,010,000 $44,010,000 $44,010,000
Annualized return on Capital
Investment (Annualized Cash
Flow/Capital Investment) 3.72% 4.93% 4.44% 5.68%
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</TABLE>
The decrease in Cash Flow of approximately $132,200 and $271,800 for the
quarter and six months ended June 30, 1994, respectively, when compared to the
quarter and six months ended June 30, 1993 was primarily due to a decrease in
rental revenues and increases in property operating expenses and repairs and
maintenance expenses, partially offset by a decrease in real estate taxes and
general and administrative expenses.
Rental revenues decreased at the Foxhall Square Building ("Foxhall") and
Peachtree Palisades East Office Building ("Peachtree") by approximately
$62,900 and $160,100, respectively, for the six months ended June 30, 1994
when compared to the six months ended June 30, 1993. Partially offsetting
these decreases were increased rental revenues at Lakewood Square Shopping
Center ("Lakewood") and the 12621 Featherwood Building ("Featherwood").
Rental revenues at Foxhall for the six months ended June 30, 1994 and 1993
were approximately $775,400 and $838,300, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $353,100 and $375,300,
respectively. This decrease was primarily due to lower tenant expense
reimbursements in 1994. The quarterly and six-month average occupancy rates at
Foxhall have remained relatively stable at 85% during 1994 and 82% during
1993.
Rental revenues at Peachtree for the six months ended June 30, 1994 and 1993
were approximately $598,700 and $758,800, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $288,200 and $363,000,
respectively. The decrease for the six months ended June 30, 1994 was
primarily due to a decrease in the quarterly and six-month average occupancy
rates from 85% for the quarter and six months ended June 30, 1993 to 77% for
the comparable 1994 periods.
Rental revenues at Lakewood for the six months ended June 30, 1994 and 1993
were approximately $589,600 and $601,800, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $279,900 and $274,700,
respectively. The decrease for the six months ended June 30, 1994 was
primarily due to a decrease in the six-month average occupancy rate from 85%
in 1993 to 83% in 1994. The quarterly occupancy rate remained relatively
stable at 82% during 1994 and 83% during 1993.
Rental revenues at Featherwood for the six months ended June 30, 1994 and 1993
were approximately $229,000 and $227,100, respectively, and for the quarters
ended June 30, 1994 and 1993 were approximately $114,400 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 with the sole tenant's lease.
Property operating expenses and repairs and maintenance expenses increased due
primarily 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 $152,100 for the six
months ended June 30, 1994 when compared to the six months ended June 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 $15,000 and $45,000, respectively.
Partially offsetting the decreases in Cash Flow results mentioned above were:
1) a decrease in real estate taxes at Foxhall of approximately $44,600 due to
a decrease in the assessed value of the property; 2) a decrease in real estate
taxes at Peachtree of approximately $26,800 due to an overaccrual of taxes for
the six months ended June 30, 1993 and 3) a decrease in property operating
expenses at Peachtree of approximately $29,000.
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 June 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 June 30, 1994 represent working capital reserves
comprised of undistributed Sale Proceeds and undistributed Cash Flow.
Net cash provided by operating activities decreased approximately $137,100
during the six months ended June 30, 1994 when compared to the six months
ended June 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 collection of past due
receivables.
Net cash used for investing activities decreased approximately $58,500 for the
six months ended June 30, 1994 when compared to the six months ended June 30,
1993. This decrease was due to a decrease in expenditures for capital and
tenant improvements to the Partnership's properties. During the six months
ended June 30, 1994, the Partnership spent approximately $326,000 for building
and tenant improvements and has budgeted to spend an additional $625,000
during the remainder of 1994. Of the remaining budgeted amount, approximately
$320,000 and $250,000 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 and ready
the remaining properties for ultimate disposition.
Net cash used for financing activities decreased approximately $125,800 for
the six months ended June 30, 1994 when compared to the six months ended June
30, 1993. This decrease was due primarily to a decrease in distributions paid
to Limited Partners in 1994 when 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 $60,000 and
$278,200 for the quarter and six months ended June 30, 1994, respectively.
Distributions to Limited Partners for the quarter ended June 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 future Cash Flow for
distribution to Partners.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended June
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: August 12, 1994 By: /s/ DOUGLAS CROCKER II
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DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 12, 1994 By: /s/ MICHAEL J. MCHUGH
--------------- -------------------------------------
MICHAEL J. MCHUGH
Senior Vice President and
Chief Financial Officer
