<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
------------------------------------
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
----------------
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 Identification No.)
incorporation or organization)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 207-0020
-------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
-------------------
Limited Partnership
Securities registered pursuant to Section 12(g) of the Act: 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. [_]
<PAGE>
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,
is incorporated herein by reference in Part IV of this report.
Exhibit Index - Page A-1
------------------------
2
<PAGE>
PART I
ITEM 1. BUSINESS
------- --------
First Capital Institutional Real Estate, Ltd.- 1 (the "Partnership") is a
limited partnership organized in 1982 under the Florida Uniform Limited
Partnership Act. The Partnership sold $60,000,000 in Limited Partnership Units
(the "Units") to the public from November 1982 through March 1983, pursuant to a
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission (Registration Statement No. 2-79092). Capitalized terms used in this
report have the same meaning as those terms have in this Registration Statement.
The business of the Partnership is to invest primarily in existing, income-
producing commercial real estate such as shopping centers and office buildings,
and to a lesser extent, in other types of real estate. From May 1983 through
September 1983, the Partnership made three real property investments. As of
December 31, 1994, the Partnership has sold two of these real property
investments. In addition, from May 1984 through January 1985, the partnership
purchased a 50% interest in three joint ventures with an Affiliated partnership,
each of which own one real property investment.
Property management services for certain of the Partnership's real estate
investments are provided by Affiliates of the Managing General Partner for fees
calculated as a percentage of gross rents received from the properties.
The real estate business is highly competitive. The results of operations of the
Partnership will depend upon the availability of suitable tenants, real estate
market conditions and general economic conditions which may impact the success
of those tenants. Properties owned by the Partnership frequently compete for
tenants with similar properties owned by others.
The Partnership employs directly or through joint ventures 9 people for on-site
property maintenance and administration.
ITEM 2. PROPERTIES(a)(b)
------- ----------
As of December 31, 1994, the Partnership owns, directly or through a joint
venture, the following four property interests, all of which are owned in fee
simple, except as noted below:
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
------------------------ -------------------- ------------ -----------
<S> <C> <C> <C>
Shopping Center:
------------------------
Lakewood Square
Shopping Center (d) Lakewood, California 147,544 25(1)
Office Buildings:
------------------------
Peachtree Palisades East
Office Building (e) Atlanta, Georgia 128,276 34(2)
Foxhall Square
Office Building (d) Washington, D.C. 141,902 68
</TABLE>
3
<PAGE>
ITEM 2. PROPERTIES - Continued
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<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
---------------------------- -------------- ------------ -----------
<S> <C> <C> <C>
12621 Featherwood Building
f/k/a Houston Lighting and
Power Building (d) Houston, Texas 88,811 1
</TABLE>
Notes:
------
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's properties refer to Item 7 on
pages 9 through 12.
(b) For Federal income tax purposes, the Partnership depreciates the portion of
the acquisition costs of its properties allocable to real property, and all
improvements thereafter, over useful lives ranging from 18 years utilizing
Accelerated Cost Recovery System ("ACRS") to 31.5 years Modified ACRS
utilizing the straight-line method. The Partnership's portion of real estate
taxes for Lakewood Square Shopping Center ("Lakewood"), Peachtree Palisades
East Office Building ("Peachtree") and Foxhall Square Building ("Foxhall"),
the Partnership's most significant properties, were approximately $138,300,
$70,500 and $152,800, respectively, for the year ended December 31, 1994. In
the opinion of the Managing General Partner, the Partnership's properties
are adequately insured and serviced by all necessary utilities.
(c) Represents the total number of tenants as well as the number of tenants, in
parenthesis, that individually occupy more than 10% of the net leasable
square footage of the property.
(d) The Partnership owns a 50% joint venture interest in this property.
(e) The Partnership leases the land on which this property is situated.
The following table presents the Partnership's significant properties' occupancy
rates as of December 31 for each of the last five years:
<TABLE>
<CAPTION>
Property Name 1994 1993 1992 1991 1990
------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Lakewood Square
Shopping Center 84% 86% 94% 94% 93%
Peachtree Palisades East
Office Building 81% 77% 85% 86% 81%
Foxhall Square
Building 88% 85% 82% 81% 85%
</TABLE>
4
<PAGE>
ITEM 2. PROPERTIES - Continued
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The amounts in the following table represent the Partnership's significant
properties' average annual rentals per square foot for each of the last five
years ended December 31 which are computed by dividing each property's base
rental revenues by its average occupied square footage.
<TABLE>
<CAPTION>
Property Name 1994 1993 1992 1991 1990
------------------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Lakewood Square
Shopping Center $14.56 $14.17 $15.15 $15.22 $14.98
Peachtree Palisades East
Office Building $11.62 $11.95 $12.41 $12.18 $12.36
Foxhall Square
Building $22.64 $21.94 $21.94 $26.01 $24.39
</TABLE>
The following table summarizes the principal provisions of the lease for the
tenants who occupy more than ten percent of the rentable square footage at
Lakewood and Peachtree Palisades, two of the Partnership's most significant
properties. No individual tenant at Foxhall, the Partnership's other significant
property, occupies ten percent or more of the rentable square footage of this
building.
<TABLE>
<CAPTION>
Percentage
of Net
Partnership's Leasable
Share of Expiration Square
Rent Date of Footage Renewal Options
for 1995 Lease Occupied (Renewal Options/Years)
------------- ---------- ---------- -----------------------
<S> <C> <C> <C> <C>
Lakewood Square
Shopping Center
-----------------
Cost Plus $121,400 10/28/07 14% 2/10
(specialty store sales)
Peachtree Palisades East
Office Building
-----------------
Railcar Management, Inc. $179,200 4/30/98 12% NONE
(railway management)
JACOR Communications, Inc. $270,800 8/31/06 15% NONE
(radio broadcasting) (a)
</TABLE>
(a) Represents twelve months of rent. This amount may be reduced depending on
the actual commencement date of the lease which has not yet been determined.
5
<PAGE>
ITEM 2. PROPERTIES -- Continued
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The following table sets forth the Partnership's portion of lease
expirations (assuming no lease renewals) for Lakewood, Peachtree and
Foxhall, the Partnership's most significant properties, through the year
ended December 31, 2004:
Number Base Rents % of Total
of in Year of Base Rents
Year Tenants Square Feet Expiration (a) Collected (b)
------ ------- ----------- -------------- -------------
1995 31 54,837 $473,800 13.04%
1996 20 43,194 $249,200 8.33%
1997 14 19,060 $144,700 5.36%
1998 24 106,197 $507,500 22.67%
1999 13 21,573 $228,900 16.21%
2000 5 14,539 $101,600 8.83%
2001 3 9,584 $ 38,600 3.98%
2002 3 8,004 $ 65,500 7.32%
2003 8 15,015 $120,100 15.41%
2004 1 2,913 $ 43,600 6.00%
(a) Represents Partnership's portion of rents to be received, through
the date of expiration, on expiring leases for each year.
(b) Represents the rents to be received on expiring leases as a
percentage of the total rents expected to be collected for each
year.
ITEM 3. LEGAL PROCEEDINGS
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(a & b) The Partnership and its properties are 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, 1994. Ordinary
routine litigation incidental to the business which is not deemed material
was maintained during the quarter ended December 31, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------- ---------------------------------------------------
(a, b, c & d) None.
6
<PAGE>
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 the Units.
As of March 1, 1995, there were 8,970 Holders of the Units.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 4,604,600 $ 4,682,700 $ 5,581,000 $ 6,133,500 $ 6,488,400
Net income (loss) $ 434,400 $ 1,167,800 $ (194,800) $ 1,966,100 $ 5,513,000
Net income (loss)
allocated to Limited
Partners $ 532,200 $ 1,262,200 $ (199,800) $ 2,066,700 $ 5,069,300
Net income (loss)
allocated to Limited
Partners per Unit
(60,000 Units issued
and outstanding) $ 8.87 $ 21.04 $ (3.33) $ 34.45 $ 84.49
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $25,324,600 $25,990,100 $26,455,500 $34,554,400 $35,394,800
Number of real property
interests owned at
December 31 4 4 4 5 5
Total assets $29,792,600 $30,524,900 $30,432,200 $36,630,300 $37,087,200
Cash Flow (as defined in
the Partnership
Agreement) (a) $ 2,069,000 $ 2,346,700 $ 2,953,900 $ 3,302,300 $ 3,625,100
Distributions to Limited
Partners per Unit
(60,000 Units issued
and outstanding) (b) $ 23.32 $ 13.32 $ 102.12 $ 32.12 $ 250.39
Return of Capital to
Limited Partners per
Unit (60,000 Units
issued and outstanding)
(c) $ 14.45 N/A $ 102.12 N/A $ 165.90
--------------------------------------------------------------------------------------
</TABLE>
Reconciliation of Cash Flow (as defined in the Partnership Agreement) to net
cash provided by operating activities:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined in
the Partnership
Agreement) (a) $2,069,000 $2,346,700 $2,953,900 $3,302,300 $3,625,100
Items of reconciliation:
Changes in assets and
liabilities:
Decrease (increase) in
current assets 59,500 (29,000) (21,100) 184,700 83,100
Increase (decrease) in
current liabilities 61,000 7,600 69,000 (110,600) 15,500
-----------------------------------------------------------------------------------
Net cash provided by
operating activities $2,189,500 $2,325,300 $3,001,800 $3,376,400 $3,723,700
-----------------------------------------------------------------------------------
</TABLE>
(a) Cash Flow is defined in the Partnership Agreement as all revenues from
operations (excluding tenant deposits, net proceeds from the sale,
disposition or financing of any Partnership properties or the refinancing
of any Partnership indebtedness), minus all expenses (including Operating
Expenses, payments of principal and interest on any Partnership
indebtedness, and any reserves of revenues from operations deemed
reasonably necessary by the Managing General Partner), except depreciation
and amortization expenses, capital expenditures and the General Partners'
Partnership Management Fee.
(b) Distributions to Limited Partners per Unit included Sale Proceeds of
approximately $70.00 and $186.50 for the years ended December 31, 1992 and
1990, respectively.
(c) To the extent cash distributions exceed net income, such excess
distributions are treated as a return of capital.
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-6
in this report and the supplemental schedule on pages A-7 and A-8.
8
<PAGE>
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.
The Partnership commenced the Offering of Units on November 16, 1982 and began
operations on January 3, 1983 after reaching the required minimum subscription
level. In March, 1983, the Offering was terminated upon the sale of 60,000
Units. During the period of 1983 to 1985 the Partnership purchased a total of
six properties, including three 50% joint venture interests. In 1990 the
Partnership, in addition to being in the operation of properties phase, entered
the disposition phase. As of December 31, 1994, the Partnership has sold two of
its real property interests.
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 cash distributions exceed net income, such excess
distributions will be treated as a return of capital. The Statements of Cash
Flows presented in the financial statements represent a reconciliation of the
changes in cash balances. 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.
As the Partnership progresses through the disposition phase, the Managing
General Partner continues to analyze, and if necessary adjust for, the
differences between the market values and the carrying bases of the
Partnership's properties. As a result of the current year analysis, the
Partnership has recorded a provision for value impairment for the 12621
Featherwood Building ("Featherwood") in the amount of $500,000 for the year
ended December 31, 1994. The Managing General Partner will continue to evaluate
real estate market conditions affecting each of the Partnership's properties,
in its efforts to maximize the realization of proceeds on their eventual
disposition. The recording of the provisions for value impairment does not
impact cash flows as defined by generally accepted accounting principles or
Cash Flow as defined by the Partnership Agreement (see Note 8 of Notes to
Financial Statements for additional information).
<TABLE>
<CAPTION>
Comparative Cash Flow Results
For the Years Ended
-----------------------------------
12/31/94 12/31/93 12/31/92
----------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of Cash Flow (as defined by the
Partnership Agreement) $ 2,069,000 $ 2,346,700 $ 2,953,900
Average Capital Investment $44,010,000 $44,010,000 $47,860,000
Return on average Capital Investment
(Cash Flow/average Capital Investment) 4.70% 5.33% 6.17%
----------------------------------------------------------------------------
</TABLE>
During the Partnership's final phase of its life cycle, comparisons of Cash
Flow results between the years presented in the table is complicated due to the
timing and effect of property sales. Partnership Cash Flow is generally
expected to decline as real property interests are sold since the Partnership
no longer receives Cash Flow generated from such real property interests.
Accordingly, rental income, property operating expenses, repairs and
maintenance and real estate taxes are expected to decline as well, but will
continue to comprise the significant components of Cash Flow until the sale of
the final property. Also, during the final phase, cash and cash equivalents
increase as sale proceeds are received and decrease as the Partnership utilizes
such proceeds for the purposes of distributions to Limited Partners or making
improvements to the Partnership's remaining properties. Prior to being
utilized, these funds are invested in short-term interest bearing instruments.
Sale proceeds are excluded from the determination of Cash Flow.
Cash Flow results for the Partnership decreased by $277,700 for the year ended
December 31, 1994 when compared to the year ended December 31, 1993. The two
most significant factors affecting the decrease were lower Cash Flow results at
Peachtree and Featherwood of $212,500 and $223,500, respectively. Partially
offsetting the decrease in Cash Flow was: 1) an increase in Cash Flow results
at Lakewood and Foxhall of $19,100 and $40,200, respectively; 2) an increase in
interest income of $57,800 due to a trend in higher rates earned on short-term
investments; 3) a decrease in printing and mailing costs of $41,200 and 4) the
absence of operating expenses associated with a property sold in 1992.
The decrease in Cash Flow results of $607,200 for the year ended December 31,
1993 when compared to the year ended December 31, 1992 was primarily due to the
sale on September 2, 1992 of Northridge Shopping Center ("Northridge") and
therefore the absence of Cash Flow generated from this property. Exclusive of
this sale, Cash Flow decreased for the year ended December 31, 1993 by
approximately $331,900 when compared to the year ended December 31, 1992.
Factors which contributed to the decrease in Cash Flow results from 1992 to
1993 were: 1) decreased rental revenues at Lakewood, Peachtree and Foxhall of
$187,900, $108,900 and $37,000, respectively; 2) an increase in property
operating expenses at Foxhall of approximately $22,000; 3) an increase in
repairs and maintenance expenses at Peachtree of approximately $21,000 and 4) a
decrease in interest income earned on short-term investments of approximately
$14,800 due to the trend in lower interest rates earned on these types of
investments. Partially offsetting the decrease in Cash Flow results for the
year ended December 31, 1993 when compared to the year ended December 31, 1992
was 1) a decrease in real estate taxes at Foxhall of approximately $51,000 due
primarily to the receipt of a refund in 1993 for 1992 taxes; and 2) a decrease
in real estate taxes and property operating expenses at Peachtree of
approximately $45,300 and $57,100, respectively.
Rental revenues at Foxhall for the years ended December 31, 1994, 1993 and 1992
were approximately $1,554,700, $1,619,000 and $1,656,000, respectively. The
decrease in rental revenue in 1994 when compared to 1993 was primarily due to
lower escalation income in 1994 resulting from overpayments from tenants in
prior years as well as changes in tenants' base years caused by lease
rollovers. This decrease was offset by an increase in base rents. Offsetting
the decrease in rental revenues for this property from 1993 to 1994 was: 1) a
decrease in real estate tax expense of $71,100 due to the receipt of a refund
in 1994 relating to the 1992/1993 tax year and 2) a decrease in property
operating expenses of $33,400, resulting primarily from reduced utility
expenses. Rental revenues decreased slightly from 1992 to 1993 as a result of a
1993
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
adjustment of previously billed 1992 tenant expense reimbursements which had
been overestimated. The average annual occupancy rate at Foxhall has remained
relatively stable at 85%, 82% and 83% for 1994, 1993 and 1992, respectively.
Rental revenues at Peachtree for the years ended December 31, 1994, 1993 and
1992 were approximately $1,249,300, $1,408,600 and $1,517,500, respectively.
Rental revenues decreased from 1993 to 1994 primarily due to a decrease in the
average annual occupancy rate. Also affecting the decrease in Cash Flow results
for this property caused by the decrease in rental revenues was an increase in
repairs and maintenance of $52,700 primarily due to repairs made to the HVAC
and fire protection systems and minor tenant improvements. Rental revenues
decreased from 1992 to 1993 due to a decrease in the average annual occupancy
rate and a current year adjustment of previously billed 1992 tenant expense
reimbursements which had been overestimated. The average annual occupancy rate
at Peachtree for 1994, 1993 and 1992 was 79%, 83% and 87%, respectively.
Rental revenues at Lakewood for the years ended December 31, 1994, 1993 and
1992 were approximately $1,168,900, $1,121,700 and $1,309,600, respectively.
Rental revenues were higher in 1994 primarily due to the write-off in 1993 of
approximately $51,000 in uncollectible tenant receivables. Partially offsetting
the increase in Cash Flow results for this property for the year ended December
31, 1994 when compared to December 31, 1993 was an increase in repairs and
maintenance and operating expenses of $12,000 and $16,200, respectively. Rental
revenues decreased from 1992 to 1993 due to decreases in occupancy and base
rents charged to new and renewing tenants. The average annual occupancy rate
for 1994, 1993 and 1992 was 84%, 85% and 96%, respectively. The average annual
occupancy rate declined significantly in 1993 as compared to 1992 due to a loss
of a bankrupt tenant.
Rental revenues at Featherwood for the years ended December 31, 1994, 1993 and
1992 were $456,600, $418,000 and $453,000, respectively. The Partnership's
share of total operating expenses, including real estate taxes, and repairs and
maintenance, increased approximately $262,200 for the year ended December 31,
1994 when compared to the year ended December 31, 1993 due to the assumption of
these obligations by the Partnership. Property operating and repairs and
maintenance expenses at Featherwood increased significantly due to an increase
in the Partnership's share of these expenses resulting from the expiration of
the prior tenant's lease, which was on a net basis.
The Featherwood building remained 100% occupied during 1992 and 1993. On
December 14, 1993, the sole tenant's (the "Tenant") lease expired. Since April
1, 1992, two subtenants occupied approximately 84% of the building and the
Tenant occupied the remaining 16% of the building. On December 14, 1993, the
Partnership and First Capital Institutional Real Estate, Ltd.--2, an Affiliated
partnership, (collectively "FCIRE 1 & 2") entered into a three-year lease
agreement with one of the former subtenants, Parsons S.I.P., Inc. ("Parsons"),
an engineering firm, to occupy the entire building. The terms of the new lease
provide for minimum rents to be earned by FCIRE 1 & 2 of approximately $992,900
per annum throughout the term of the lease, of which the Partnership has a 50%
interest. Included in the lease terms is the ability of Parsons to cancel the
lease after two years provided that FCIRE 1 & 2 are notified nine months prior
to cancellation. In addition, Parsons took the space "as is" with only a small
capital improvement allowance for an expanded parking facility on a parcel of
land adjacent to the Featherwood building which FCIRE 1 & 2 purchased on July
18, 1994, for approximately $7,500 plus $600 of closing costs.
Rental revenues at Northridge for the year ended December 31, 1992 were
$512,600.
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 protects the
Partnership, to some extent, from increases in the rate of inflation. Certain
of the lease clauses provide for the following: 1) annual rent increases based
on the Consumer Price Index or graduated rental increases; 2) percentage
rentals at shopping centers, for which the Partnership receives as additional
rent a percentage of a tenant's sales over predetermined breakeven 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
The liquid assets of the Partnership as of December 31, 1994 represented
working capital reserves and undistributed Cash Flow. Net cash provided by
operating activities continues to be the Partnership's primary source of funds.
Net cash provided by operating activities decreased by $135,800 for the year
ended December 31, 1994 when compared to the year ended December 31, 1993. This
decrease was primarily due to the decrease in Cash Flow results, as discussed
above, partially offset by the timing of the payment of certain Partnership
expenses and the significant collection of past due receivables.
Net cash used for investing activities increased approximately $255,700 for the
year ended December 31, 1994 when compared to the year ended December 31, 1993.
The increase was due to an increase in expenditures for capital and tenant
improvements to the Partnership's properties. The Partnership has budgeted to
spend approximately $1,630,800 for building and tenant improvements in 1995.
Included in the 1995 budget are building and tenant improvements for Peachtree,
Lakewood, and Foxhall of approximately $956,000, $415,000 and $238,000,
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 increased by $144,900 for the year ended
December 31, 1994 when compared to the year ended December 31, 1993. This
increase was due to an increase in distributions paid to Limited Partners in
1994 as compared to 1993 partially offset by a net increase in net collections
of tenant security deposits.
The Managing General Partner continues to take a conservative approach to
projections of future rental income and maintain high levels of cash reserves
due to the anticipated capital and tenant improvements necessary to be made at
the Partnership's properties in the next several years prior to their ultimate
sales. As a result of this, the Partnership continues to reserve amounts from
Cash Flow to supplement working capital reserves. For the year ended December
31, 1994, Cash Flow withheld to supplement working capital reserves
approximated $669,800. The amount of future Cash Flow available for
distribution to Limited Partners will ultimately be dependent upon the
performance of the Partnership's investments as well as the amount of Cash Flow
withheld for future cash requirements. Therefore, there can be no assurance of
the availability or the amount of Cash Flow for distribution to investors.
Distributions to Limited Partners for 1994 were made at an annualized rate of
3.18% on total Capital Investment. Cash distributions are made 60 days after
the quarter-end.
10
<PAGE>
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, Schedule and
Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
(a) DIRECTORS
---------
The Partnership has no directors. First Capital Financial Corporation
("FCFC") is the Managing General Partner. The directors of FCFC, as of
March 30, 1995, 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 May, 1995.
Name Office
---- ------
Samuel Zell.......................................... Chairman of the Board
Douglas Crocker II................................... Director
Sheli Z. Rosenberg................................... Director
Sanford Shkolnik..................................... Director
Samuel Zell, 53, has been a Director of the Managing General Partner since
1983 (Chairman of the Board since December 1985); and is Chairman of the
Board of Great American Management and Investment, Inc. ("Great American").
Mr. Zell is also Chairman of the Board of Equity Financial and Management
Company ("EFMC") and Equity Group Investments, Inc., and is a trustee and
beneficiary of a general partner of Equity Holding Limited, an Illinois
Limited Partnership, a privately owned investment partnership. He is also
Chairman of the Board of Directors of Itel Corporation, Broadway Stores,
Inc., Falcon Building Products, Inc. and American Classic Voyages Co. He is
Chairman of the Board of Trustees of Equity Residential Properties Trust. He
is a director of Jacor Communications, Inc., Sealy Corporation and The
Vigoro Corporation, Chairman of the Board of Directors and Chief Executive
Officer of Capsure Holdings Corp. and Manufactured Home Communities, Inc.
and Co-Chairman of the Board of Revco D.S., Inc. Mr. Zell was President of
Madison Management Group, Inc. ("Madison") prior to October 4, 1991.
Madison filed for a petition under the Federal bankruptcy laws on
November 8, 1991.
Douglas Crocker II, 54 has been President and Chief Executive Officer since
December, 1992 and a Director since January, 1993 of the Managing General
Partner. Mr. Crocker has been an Executive Vice President of EFMC since
November, 1992. Mr. Crocker has been President and Chief Executive Officer
of Equity Residential Properties Trust since March 31, 1993. He was
President of Republic Savings Bank, F.S.B. ("Republic") from 1989 to June,
1992 at which time the Resolution Trust Company took control of Republic.
Sheli Z. Rosenberg, 53, was President and Chief Executive Officer of
the Managing General Partner from December, 1990 to December, 1992 and has
been a Director of the Managing General Partner since September, 1983; was
Executive Vice President and General Counsel for EFMC from October, 1980 to
November, 1994; has been President and Chief Executive Officer of EFMC and
Equity Group Investments, Inc. since November, 1994; has been a director of
Great American since June, 1984 and is a director of various subsidiaries of
Great American. She is also a Director of Itel Corporation, Capsure Holdings
Corp., American Classic Voyages Co., Falcon Building Products, Inc., Jacor
Communications, Inc., Revco D.S., Inc. and The Vigoro Corporation. She was
Chairman of the Board from January, 1994 to September, 1994; and has been
Co-Chairman of the Board since September, 1994 of CFI Industries, Inc., She
is also a trustee of Equity Residential Properties Trust. Ms. Rosenberg is
Chairman of the Board of Rosenberg & Liebentritt, P.C., counsel to the
Partnership, the Managing General Partner and certain of their
12
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -- CONTINUED
(a) DIRECTORS (continued)
---------
Affiliates. Ms. Rosenberg was Vice President of Madison prior to October 4,
1991. Madison filed for a petition under the Federal bankruptcy laws on
November 8, 1991. She has been Vice President of First Capital Benefit
Administrators, Inc. ("Benefit Administrators") since July 22, 1987.
Benefit Administrators filed for a petition under the Federal Bankruptcy
laws on January 3, 1995.
Sanford Shkolnik, 56, has been a Director of the Managing General Partner
since December, 1985. Mr. Shkolnik has been Executive Vice President of
EFMC since 1976. He is Chairman of the Board and Chief Executive Officer
of SC Management, Inc., which is General Partner of Equity Properties and
Development Limited Partnership, a nationally ranked shopping center
company. He is also a director of Broadway Stores, Inc.
(b, c & e) EXECUTIVE OFFICERS
------------------
The Partnership does not have any executive officers. The executive
officers of the Managing General Partner as of March 30, 1995 are shown in
the table. All officers are elected to serve for one year or until their
successors are elected and qualified.
Name Office
---- ------
Douglas Crocker II...................President and Chief Executive Officer
Arthur A. Greenberg..................Senior Vice President
Norman M. Field......................Vice President - Finance and Treasurer
PRESIDENT AND CEO -- See Table of Directors above.
Arthur A. Greenberg, 53, has been Senior Vice President of the Managing
General Partner since August, 1986. Mr. Greenberg was Executive Vice
President and Chief Financial Officer of Great American from December, 1986
to March, 1995. Mr. Greenberg also is a Director and Executive Vice
President/Treasurer of EFMC since 1971, and President of Greenberg &
Pociask, Ltd. He is Senior Vice President since 1989 and Treasurer since
1990 of Capsure Holdings Corp. Mr. Greenberg is a director of American
Classic Voyages Co., The Vigoro Corporation, and Chairman of the Board of
Firstate Financial A Savings Bank. Mr. Greenberg was Vice President of
Madison prior to October 4, 1991. Madison filed for a petition under the
Federal bankruptcy laws on November 8, 1991.
Norman M. Field, 46, has been Vice President and Treasurer of the Managing
General Partner since February, 1984, and also served as Vice President and
Treasurer of Great American from July, 1983 until March, 1995. Mr. Field
has been treasurer of Benefit Administrators since July 22, 1987. Benefit
Administrators filed for a petition under the Federal Bankruptcy laws on
January 3, 1995. He has also been Chief Financial Officer of Equality
Specialties, Inc., a subsidiary of Great American, since August, 1994.
(d) FAMILY RELATIONSHIPS
--------------------
There are no family relationships among any of the foregoing officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
There are no involvements in certain legal proceedings among any of the
foregoing officers.
13
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
-------- ----------------------
(a,b,c & d) As stated in Item 10, the Partnership has no officers or directors.
Neither the Managing General Partner, nor any director or officer of the
Managing General Partner, received any direct remuneration from the Partnership
during the year ended December 31, 1994. However, Affiliates of the Managing
General Partner do compensate the directors and officers of the Managing General
Partner.
(e) None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
(a) As of March 1, 1995 no person owned of record or was known by the
Partnership to own beneficially more than 5% of the Partnership's 60,000 Units
then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1, 1995,
the executive officers and directors of the Managing General Partner, as a
group, did not own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
(a) On September 25, 1992, the entity formerly named First Capital Financial
Corporation and certain subsidiaries which may be or may have been entitled to
receive certain compensation, fees or reimbursements from the Partnership were
merged or liquidated into First Capital Properties Corporation. On February 23,
1993, First Capital Properties Corporation changed its name to First Capital
Financial Corporation.
Certain Affiliates of the Managing General Partner, provide leasing, property
management and supervisory services to the Partnership. Compensation for these
property management services may not exceed 6% of the gross receipts from the
property being managed where the Managing General Partner or Affiliates provide
leasing, re-leasing, and leasing related services, or 3% of gross receipts where
the Managing General Partner or Affiliates do not perform leasing, re-leasing
and leasing related services. For the year ended December 31, 1994, these
Affiliates were entitled to supervisory and property management and leasing fees
of approximately $199,900. In addition, other Affiliates of the General Partner
were entitled to compensation and reimbursements of approximately $97,600 from
the Partnership for insurance, personnel, and other miscellaneous services.
Services of Affiliates shall be 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, 1994, total fees and reimbursements of $44,700 were
due to Affiliates.
The Partnership executed a lease agreement in December, 1994 with JACOR
Communications, Inc. ("JACOR"), a radio broadcasting company, which is 65%
owned by Zell Chilmark Fund L.P., an affiliate of the Managing General Partner.
The lease is for 19,500 square feet and provides for monthly base rent of
$22,344, with an annual increase of 3% on September 1 of each year through the
lease expiration date. The lease expiration date is twelve years from the date
of commencement. The commencement date has not yet been determined. The lease
also provides for JACOR to pay the Partnership for its pro rata share of
operating expenses.
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 annual returns on
their Original Capital Contributions. In addition, whenever there is a sale or
disposition of a Partnership property, the General Partners are entitled to
distributions of Sale Proceeds, provided that the Limited Partners first receive
additional specified annual returns on their Original Capital Contributions. In
accordance with the Partnership Agreement, Net Profits (exclusive
14
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Continued
-------- ----------------------------------------------------------
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 Profits from the sale or disposition of a Partnership property are
allocated: first, to the General Partners in an amount equal to the aggregate
amount of depreciation previously allocated to them for such property; second,
to the General and Limited Partners with negative balances in their capital
accounts pro rata in proportion to the total of such respective negative
balances; third, to the General Partners, in an amount necessary to make the
aggregate amount of their capital accounts equal to the greater of the Sale or
Financing Proceeds distributed to the General Partners or 1% of such Net
Profits; and fourth, the balance, if any, to the Limited Partners. All
depreciation shall be allocated 10% to the General Partners and 90% to the
Limited Partners. Net Losses from the sale or disposition of Partnership
properties are allocated: first, to the extent that the balance in either the
General Partners' or Limited Partners' capital accounts exceeds the amount of
their Capital Investment (the "Excess Balances"), to the General Partners and
the Limited Partners pro rata in proportion to such Excess Balances until such
Excess Balances are reduced to zero; second, to the General Partners and the
Limited Partners (in the ratio which their respective capital account balances
bear to the aggregate of all capital account balances) until the balance in
their capital accounts shall be reduced to zero; third, the balance, if any, 99%
to the Limited Partners and 1% to the General Partners. In all events the
General Partners will be allocated at least 1% of Net Profits and Net Losses
from the sale or disposition of a Partnership property. In addition, provisions
for value impairment are allocated 99% to the Limited Partners and 1% to the
General Partners. The General Partners were not entitled to cash distributions
but were allocated a Net Loss from operations of $92,800 and a Net Loss from
provision for value impairment of $5,000 for the year ened December 31, 1994.
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the Managing General Partner and certain of their Affiliates. Sheli
Z. Rosenberg, President and Chief Executive Officer of the Managing General
Partner from December, 1990 to December, 1992 and a director of the Managing
General Partner since September, 1983, is a principal of this firm. Compensation
for these services are on terms which are fair, reasonable and no less favorable
to the Partnership than reasonably could have been obtained from unaffiliated
persons.
(c) No management person is indebted to the Partnership.
(d) None.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------- ---------------------------------------------------------------
(a,c & d) (1,2 & 3) See Index to the 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 for the quarter ended December 31, 1994.
16
<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. -- 1
BY: FIRST CAPITAL FINANCIAL CORPORATION
MANAGING GENERAL PARTNER
Dated: March 30, 1995 By: /s/ DOUGLAS CROCKER II
------------------ -------------------------------------
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.
/s/ SAMUEL ZELL March 30, 1995 Chairman of the Board and
----------------------- -------------- Director of the Managing
SAMUEL ZELL General Partner
/s/ DOUGLAS CROCKER II March 30, 1995 President, Chief Executive
----------------------- -------------- Officer and Director of the
DOUGLAS CROCKER II Managing General Partner
/s/ SHELI Z. ROSENBERG March 30, 1995 Director of the Managing General
----------------------- -------------- Partner
SHELI Z. ROSENBERG
/s/ SANFORD SHKOLNIK March 30, 1995 Director of the Managing General
----------------------- -------------- Partner
SANFORD SHKOLNIK
/s/ NORMAN M. FIELD March 30, 1995 Vice President -- Finance and
----------------------- -------------- Treasurer
NORMAN M. FIELD
<PAGE>
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Pages
-----
Independent Auditors' Report A-2
Balance Sheets at December 31, 1994 and 1993 A-3
Statements of Partners' Capital for the Years
Ended December 31, 1994, 1993, and 1992 A-3
Statements of Income and Expenses for the Years
Ended December 31, 1994, 1993, and 1992 A-4
Statements of Cash Flows for the Years Ended
December 31, 1994, 1993, and 1992 A-4
Notes to Financial Statements A-5 to A-6
SCHEDULE FILED AS PART OF THIS REPORT
III - Real Estate and Accumulated Depreciation as of A-7 and A-8
December 31, 1994
All other schedules have been omitted as inapplicable, or for the reason that
the required information is shown in the financial statements or notes thereto,
or in other schedules.
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-29 of the Partnership's
definitive Prospectus dated October 25, 1982; Registration Statement
No. 2-79092, filed pursuant to Rule 424 (b), incorporated herein by reference.
The Partnership agreement as filed has subsequently been amended to reflect the
admission, withdrawal and substitution of Limited Partners, the reduction of
Limited Partners' Capital Contributions, and the withdrawal of an individual
General Partner.
EXHIBIT (10) Material Contracts
(a) Lease agreements for tenants that individually occupy more than 10% of the
net leasable square footage of the Partnership's most significant properties,
filed as an exhibit to the Partnership's Report on Form 10-K dated December 31,
1992, incorporated herein by reference.
(b) Contract for the disposition of the Northridge Shopping Center filed as an
exhibit under Item 7(c) of the Partnership's Report on Form 8-K dated
September 2, 1992, incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1993 Annual Report to holders of Units is being sent under separate cover,
not via EDGAR, for the information of the Commission.
EXHIBIT (27) Financial Data Schedule
A-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
First Capital Institutional Real Estate, Ltd. - 1
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital
Institutional Real Estate, Ltd. - 1 as of December 31, 1994 and 1993, and
the related statements of income and expenses, Partners' Capital and cash
flows for the years ended December 31, 1994, 1993 and 1992 and the schedule
listed in the accompanying index. These financial statements and schedule
are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. - 1 as of December 31, 1994 and 1993, and
the results of its operations and its cash flows for the years ended
December 31, 1994, 1993 and 1992 in conformity with generally accepted
accounting principles. Further, it is our opinion that the schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
Kenneth Leventhal & Company
Chicago, Illinois
February 17, 1995
A-2
<PAGE>
BALANCE SHEETS
December 31, 1994 and 1993
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 5,501,700 $ 5,501,700
Buildings and improvements 30,590,100 30,120,900
----------------------------------------------------------------------------
36,091,800 35,622,600
Accumulated depreciation and amortization (10,767,200) (9,632,500)
----------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 25,324,600 25,990,100
Cash and cash equivalents 4,238,600 4,245,900
Rents receivable 67,300 246,600
Other assets 162,100 42,300
----------------------------------------------------------------------------
$29,792,600 $30,524,900
----------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 363,000 $ 321,500
Due to Affiliates 44,700 28,700
Real estate commissions due to Affiliate 403,000 403,000
Security deposits 138,000 116,500
Distributions payable 349,800 199,800
Other liabilities 70,100 66,600
----------------------------------------------------------------------------
1,368,600 1,136,100
----------------------------------------------------------------------------
Partners' (deficit) capital:
General Partners (255,700) (157,900)
Limited Partners (60,000 Units authorized, issued
and outstanding) 28,679,700 29,546,700
----------------------------------------------------------------------------
28,424,000 29,388,800
----------------------------------------------------------------------------
$29,792,600 $30,524,900
----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1994, 1993 and 1992
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital, January 1,
1992 $ (68,500) $35,410,700 $35,342,200
Net income (loss) for the year ended
December 31, 1992 5,000 (199,800) (194,800)
Distributions for the year ended December
31, 1992 (6,127,200) (6,127,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
1992 (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 year ended
December 31, 1994 (97,800) 532,200 434,400
Distributions for the year ended December
31, 1994 (1,399,200) (1,399,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
1994 $(255,700) $28,679,700 $28,424,000
-------------------------------------------------------------------------------
</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, 1994, 1993 and 1992
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $4,429,300 $4,565,200 $ 5,448,700
Interest 175,300 117,500 132,300
----------------------------------------------------------------------------
4,604,600 4,682,700 5,581,000
----------------------------------------------------------------------------
Expenses:
Depreciation and amortization 1,134,600 1,178,900 1,309,800
Property operating 1,130,900 1,064,800 1,089,500
Real estate taxes and insurance 496,700 497,800 642,800
Repairs and maintenance 694,400 549,600 634,000
General and administrative 213,600 223,800 260,800
----------------------------------------------------------------------------
3,670,200 3,514,900 3,936,900
----------------------------------------------------------------------------
Income before gain on sale of property
and provision for value impairment 934,400 1,167,800 1,644,100
Gain on sale of property 161,100
Provision for value impairment (500,000) (2,000,000)
----------------------------------------------------------------------------
Net income (loss) $ 434,400 $1,167,800 $ (194,800)
----------------------------------------------------------------------------
Net (loss) income allocated to General
Partners $ (97,800) $ (94,400) $ 5,000
----------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners $ 532,200 $1,262,200 $ (199,800)
----------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners per Unit (60,000 Units
authorized, issued and outstanding) $ 8.87 $ 21.04 $ (3.33)
----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 434,400 $ 1,167,800 $ (194,800)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 1,134,600 1,178,900 1,309,800
(Gain) on sale of property (161,100)
Provision for value impairment 500,000 2,000,000
Changes in assets and liabilities:
Decrease (increase) in rents
receivable 179,300 (85,000) 29,400
(Increase) decrease in other assets (119,800) 56,000 (50,500)
Increase in accounts payable and
accrued expenses 41,500 62,300 37,900
Increase (decrease) in due to
Affiliates 16,000 (9,400) (8,400)
Increase (decrease) in other
liabilities 3,500 (45,300) 39,500
-----------------------------------------------------------------------------
Net cash provided by operating
activities 2,189,500 2,325,300 3,001,800
-----------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the sale of property 5,538,700
Payments for capital and tenant
improvements (969,200) (713,500) (513,700)
-----------------------------------------------------------------------------
Net cash (used for) provided by
investing activities (969,200) (713,500) 5,025,000
-----------------------------------------------------------------------------
Cash flows from financing activities:
Distributions paid to Partners (1,249,100) (1,081,200) (6,127,200)
Increase (decrease) in security
deposits 21,500 (1,500) (19,900)
-----------------------------------------------------------------------------
Net cash (used for) financing
activities (1,227,600) (1,082,700) (6,147,100)
-----------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (7,300) 529,100 1,879,700
Cash and cash equivalents at the
beginning of the year 4,245,900 3,716,800 1,837,100
-----------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 4,238,600 $ 4,245,900 $ 3,716,800
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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.
ORGANIZATION:
The Partnership was formed on June 6, 1982, 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 16, 1982. The
Certificate and Agreement, as amended and restated, authorized the sale to the
public of up to 50,000 Units (with the Managing General Partner's option to
increase to 60,000 Units) and not less than 1,300 Units. On January 3, 1983,
the required minimum subscription level was reached and the Partnership
operations commenced. The Managing General Partner exercised its option to
increase the Offering to 60,000 Units, which amount was sold prior to the
Termination of the Offering in March, 1983. The Partnership was formed to
invest primarily in existing, improved, income-producing commercial real
estate.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2013. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
ACCOUNTING POLICIES:
The financial statements include the Partnership's 50% interest in three joint
ventures. The joint ventures 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.
The Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership income or loss on their
individual tax returns; therefore, no provision for 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 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.
Commercial rental properties are recorded at cost, net of any provision for
value impairment, and depreciated (exclusive of amounts allocated to land) on
the straight-line method over their estimated useful lives. Lease acquisition
fees are recorded at cost and amortized over the life of the lease. Maintenance
and repair costs are expensed against operations as incurred; expenditures for
improvements are capitalized and depreciated over the estimated life of the
improvements.
Property sales or dispositions 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 disposition is recognized in accordance with
generally accepted accounting principles.
Cash equivalents are considered all highly liquid investments purchased with an
original maturity of three months or less.
Certain reclassifications have been made to the previously reported 1993 and
1992 statements in order to provide comparability with the 1994 statements.
These reclassifications have no effect on net income, net (loss) or Partners'
capital.
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 annual returns on
their Original Capital Contributions. In addition, whenever there is a sale or
disposition of a Partnership property, the General Partners are entitled to
distributions of Sale Proceeds, provided that the Limited Partners first
receive additional specified annual returns on their Original Capital
Contribution. 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 Profits from the sale or disposition of a Partnership
property are allocated: first, to the General Partners in an amount equal to
the aggregate amount of depreciation previously allocated to them for such
property; second, to the General and Limited Partners with negative balances in
their capital accounts pro rata in proportion to the total of such respective
negative balances; third, to the General Partners, in an amount necessary to
make the aggregate amount of their capital accounts equal to the greater of the
Sale or Financing Proceeds distributed to the General Partners or 1% of such
Net Profits; and fourth, the balance, if any, to the Limited Partners. All
depreciation shall be allocated 10% to the General Partners and 90% to the
Limited Partners. Net Losses from the sale or disposition of Partnership
properties are allocated: first, to the extent that the balance in either the
General Partners' or Limited Partners' capital accounts exceeds the amount of
their Capital Investment (the "Excess Balances"), to the General Partners and
the Limited Partners pro rata in proportion to such Excess Balances until such
Excess Balances are reduced to zero; second, to the General Partners and the
Limited Partners (in the ratio which their respective capital account balances
bear to the aggregate of all capital account balances) until the balance in
their capital accounts shall be reduced to zero; third, the balance, if any,
99% to the Limited Partners and 1% to the General Partners. In all events the
General Partners will be allocated at least 1% of Net Profits and Net Losses
from the sale or disposition of a Partnership property. In addition, provisions
for value impairment are allocated 99% to the Limited Partners and 1% to the
General Partners. The General Partners were not entitled to cash distributions
for the years ended December 31, 1994, 1993 and 1992. During the year ended
December 31, 1994, the General Partners were allocated Net Losses from
operations of $92,800 and Net Losses from provision for value impairment of
$5,000. During the year ended December 31, 1993, the General Partners were
allocated Net Losses from operations of $94,400. During the year ended December
31, 1992, the General Partners were allocated Net Losses from operations of
$101,400, Net Profits from the sale of Northridge Shopping Center of $126,400
and Net Losses from provision for value impairment of $20,000. The amount of
Net Profits from the sale of Partnership properties in 1992 represented
recapture of depreciation allocated to the General Partners in previous years.
Affiliates of the General Partners provide property management services to the
Partnership. They receive management fees ranging from 1% to 6% of rents
collected plus reimbursement of specified costs.
Fees and reimbursements paid and payable by the Partnership to Affiliates for
the years ended December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992(a)
---------------- ---------------- ----------------
Paid Payable Paid Payable Paid Payable
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property management and
leasing fees $179,200 $40,300 $247,400 $19,600 $287,300 $33,200
Reimbursement of property
insurance premiums, at
cost 61,700 58,300 None 87,900 None
Reimbursement of expenses,
at cost:
(1) Accounting 19,800 2,000 17,600 2,100 19,700 3,000
(2) Investor communication 14,900 2,400 11,300 1,100 10,800 1,900
(3) Legal 38,400 31,300 5,900 54,600 None
------------------------------------------------------------------------------
$314,000 $44,700 $365,900 $28,700 $460,300 $38,100
------------------------------------------------------------------------------
</TABLE>
A-5
<PAGE>
(a) Property management reimbursements previously reported in 1992 have been
excluded from the above table and amounts previously included in 1992 in due to
affiliates have been reclassified to accounts payable and accrued expenses in
order to provide comparability to the fees presented for 1993 and 1994.
As of December 31, 1994, the Partnership has recorded a liability in the total
amount of $403,000 payable to the Managing General Partner for real estate
commissions earned in connection with the sale of Partnership properties in
prior years. Under the terms of the Partnership Agreement, these commissions
will not be paid until such time as 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.
The Partnership executed a lease agreement in December of 1994, with JACOR
Communications, Inc. ("JACOR"), a radio broadcasting company, of which is 65%
owned by Zell Chilmark Fund L.P., an affiliate of the Managing General Partner.
The lease is for 19,500 square feet and provides for monthly base rent of
$22,344, with an annual increase of 3% on September 1 of each year through the
lease expiration date of August 31, 2006. The lease also provides for JACOR to
pay the Partnership for its pro rata share of operating expenses.
3. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rentals due on noncancelable
operating leases as of December 31, 1994 were as follows:
<TABLE>
<S> <C>
1995 $ 4,122,700
1996 3,479,800
1997 2,691,200
1998 1,970,500
1999 1,402,500
Thereafter 5,512,700
--------------
$19,179,400
--------------
</TABLE>
The Partnership is subject to the usual business risks associated with the
collection of the above scheduled rentals. In addition to the amounts scheduled
above, the Partnership expects to receive rental revenue from (i) operating
expense and real estate tax reimbursements and (ii) percentage rents.
4. NET LEASE AGREEMENT:
The Partnership acquired Featherwood, formerly known as Houston Lighting and
Power Building, under a net lease agreement with a single tenant (the
"Tenant"). The Tenant was responsible for the maintenance and operating
expenses of the property and the payment of real estate taxes and insurance
costs. On December 14, 1993, the Tenant's lease expired. The Partnership
received a final payment for amounts due under the net lease agreement in
January 1994. On December 14, 1993, the Partnership executed a three year gross
lease with a former subtenant (the "Lessee"). Amounts due under this lease for
1995 are included in Note 3.
5. INCOME TAX:
The Partnership utilizes an accrual basis method of accounting for both 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 rents received in advance as taxable income, the
use of differing methods in computing the gain on sale of property and the
Partnership's provision for value impairment. The net effect of these
accounting differences for the year ended December 31, 1994 was that net income
for tax reporting purposes was less than the net income for financial statement
purposes by approximately $129,000.
6. PROPERTY SALE:
On September 2, 1992, the Partnership sold the Northridge Shopping Center
located in Atlanta, Georgia. The sales price of the property was $5,650,000.
The Partnership incurred selling expenses of approximately $186,100, including
$74,800 of accrued expenses. Proceeds received by the Partnership from this
sale were approximately $5,538,700, excluding such accrued expenses. The
taxable gain on this sale was approximately $2,174,900 and the gain for
financial statement purposes was approximately $161,100.
7. MANAGEMENT AGREEMENT:
On-site management for the Lakewood Square Shopping Center is provided by an
independent real estate management company for fees calculated as a percentage
of gross rents received from the property. An Affiliate of the Managing General
Partner provides supervisory management for this property for fees calculated
as a percentage of gross rents received from this property.
8. PROVISION FOR VALUE IMPAIRMENT:
In 1995, the Financial Accounting Standards Board agreed to issue a new
standard entitled "Accounting for the Impairment of Long-Lived Assets" (the
"Standard"). This Standard establishes guidance for determining if defined
assets are impaired, and if so, how impairment losses should be measured and
reported in the financial statements of companies. The carrying amounts of
impaired assets will be required to be reduced to fair value. The Standard is
effective for fiscal years beginning after December 15, 1995. The Managing
General Partner believes that implementation will not materially affect the
Partnership's financial position or results of operations once the Standard
becomes effective.
The Partnership recorded provisions for value impairment for Featherwood in the
amounts of $500,000 and $2,000,000 as of December 31, 1994 and December 31,
1992, respectively. Due to the uncertainty of the Partnership's ability to
recover the net carrying value of its investment in these properties (prior to
the provisions for value impairment) during the expected remaining holding
periods, it was deemed appropriate to reduce the bases of the properties for
financial statement purposes. These transactions were considered noncash events
for purposes of the Statement of Cash Flows, and were not included in the
Partnership's calculation of Cash Flow (as defined by the Partnership
Agreement) for the years ended December 31, 1994 or 1992.
Copies of the Partnership's Form 10-K are
available upon written request to the
General Partner at no charge.
A-6
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. -- 1
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Column A Column C Column D Column E Column F
------------------ ------------------------ ------------------------- --------------------------------------- ------------
Initial cost to Costs capitalized Gross amount at which
Partnership subsequent to acquisition carried at close of period
------------------------ ------------------------- ---------------------------------------
Buildings Buildings
and and Accumulated
Improve- Improve- Carrying Improve- Depreciation
Description Land ments ments Costs(1) Land ments Total(2)(3) (2)
------------------ ---------- ---------- --------- -------- ---------- ---------- ----------- ------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center:
Lakewood Square
Shopping Center
(Lakewood, CA)
(50% interest) $2,652,800 $7,988,700 $ 247,300 $40,200 $2,652,800 $8,276,200 $10,929,000 $ 2,425,600
Office Buildings:
Foxhall Square
Building
(Washington, D.C.)
(50% interest) 2,351,100 5,893,400 1,807,700 188,500 2,351,100 7,889,700 10,240,800 2,672,000
Peachtree Palisades
Office Building
(Atlanta, GA) (6) 8,273,500 3,425,600 46,400 (6) 11,745,400 11,745,400 4,432,000
12621 Featherwood
Building
(Houston, TX)
(50% interest) 497,800 5,037,700 83,600 57,400 497,800 2,678,800(7) 3,176,600 1,237,600
---------- ----------- ---------- -------- ---------- ----------- ----------- -----------
$5,501,700 $27,193,300 $5,564,200 $332,500 $5,501,700 $30,590,100 $36,091,800 $10,767,200
========== =========== ========== ======== ========== =========== =========== ===========
Column B - Not Applicable.
Column G Column H Column I
------------ ------------ ------------
Life on
which
depreciation
in latest
income
Date of Date statements is
construction Acquired computed
------------ ------------ ------------
<C> <C> <C>
Shopping Center:
Lakewood Square
Shopping Center
(Lakewood, CA) 35(4)
(50% interest) 1982 5/84 2-10(5)
Office Buildings:
Foxhall Square
Building
(Washington, D.C.) 35(4)
(50% interest) 1972 6/84 1-10(5)
Peachtree Palisades
Office Building 35(4)
(Atlanta, GA) 1965 9/83 1-10(5)
12621 Featherwood
Building
(Houston, TX)
(50% interest) 1983 1/85 35(4)
</TABLE>
See accompanying notes on following page.
A-7
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. -- 1
NOTES TO SCHEDULE III
Note 1. Consists of legal fees, appraisal fees, title costs and other related
professional fees.
Note 2. The following is a reconciliation of activity in columns E and F.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993 December 31, 1992
-------------------------- ------------------------ -------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
----------- ------------ ----------- ------------ ----------- ------------
<C> <C> <C> <C> <C> <C>
Balance at
beginning of $35,622,600 $ 9,632,500 $34,909,100 $8,453,600 $42,946,700 $8,392,300
Additions during
year:
Improvements 969,200 713,500 513,700
Provision for
depreciation
and amortization 1,134,700 1,178,900 1,309,800
Deductions
during year:
Provision for value
impairment (500,000) (2,000,000)
Cost of real
estate sold (6,551,300)
Accumulated
depreciation of
real estate sold (1,248,500)
----------- ----------- ----------- ---------- ----------- ----------
Balance at
end of year $36,091,800 $10,767,200 $35,622,600 $9,632,500 $34,909,100 $8,453,600
=========== =========== =========== ========== =========== ==========
</TABLE>
Note 3. The aggregate cost for Federal income tax purposes as of December 31,
1994 was $38,591,800.
Note 4. Estimated useful life for building.
Note 5. Ranges of estimated useful life for improvements.
Note 6. The Partnership leases the land on which this property is situated.
The lease expires on December 31, 2021.
Note 7. Includes provisions for value impairment of $500,000 and $2,000,000
from 1994 and 1992, respectively.
A-8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000730212
<NAME> FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.-1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,238,600
<SECURITIES> 0
<RECEIVABLES> 67,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,305,900
<PP&E> 36,091,800
<DEPRECIATION> 10,767,200
<TOTAL-ASSETS> 29,792,600
<CURRENT-LIABILITIES> 712,800
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,424,000
<TOTAL-LIABILITY-AND-EQUITY> 29,792,600
<SALES> 0
<TOTAL-REVENUES> 4,604,600
<CGS> 0
<TOTAL-COSTS> 2,322,000
<OTHER-EXPENSES> 213,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 434,400
<INCOME-TAX> 0
<INCOME-CONTINUING> 434,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 434,400
<EPS-PRIMARY> 8.87
<EPS-DILUTED> 8.87
</TABLE>
