<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, 1996
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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
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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)
Not applicable
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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
----- -----
DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated October 25, 1982, included
in the Registrant's Registration Statement on Form S-11 (Registration No. 2-
79092), is incorporated herein by reference in Part I of this report.
<PAGE>
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
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<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 5,501,700 $ 5,501,700
Buildings and improvements 31,123,700 30,584,800
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36,625,400 36,086,500
Accumulated depreciation and amortization (12,499,600) (11,937,500)
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Total investment properties, net of accumulated
depreciation and amortization 24,125,800 24,149,000
Cash and cash equivalents 882,400 4,254,900
Investments in debt securities 3,196,100
Rents receivable 53,000 149,800
Other assets 14,300 200
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$28,271,600 $28,553,900
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 355,800 $ 432,500
Due to Affiliates 26,200 21,900
Real estate commissions due to Managing General
Partner 403,000 403,000
Distributions payable 420,000 385,200
Security deposits 150,400 145,800
Other liabilities 65,600 109,000
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1,421,000 1,497,400
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Partners' capital:
General Partners (deficit) (403,500) (359,300)
Limited Partners (60,000 Units issued and
outstanding) 27,254,100 27,415,800
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26,850,600 27,056,500
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$28,271,600 $28,553,900
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1996 (Unaudited)
and the year ended December 31, 1995
(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, 1995 $(255,700) $28,679,700 $28,424,000
Net (loss) income for the year ended
December 31, 1995 (103,600) 276,900 173,300
Distributions for the year ended
December 31, 1995 (1,540,800) (1,540,800)
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Partners' (deficit) capital,
December 31, 1995 (359,300) 27,415,800 27,056,500
Net (loss) income for the six months
ended June 30, 1996 (44,200) 678,300 634,100
Distributions for the six months ended
June 30, 1996 (840,000) (840,000)
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Partners' (deficit) capital,
June 30, 1996 $(403,500) $27,254,100 $26,850,600
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</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Income:
Rental $1,170,800 $1,093,200
Interest 56,300 60,000
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1,227,100 1,153,200
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Expenses:
Depreciation and amortization 281,700 285,600
Property operating:
Affiliates 39,800 66,700
Nonaffiliates 260,900 207,900
Real estate taxes 96,500 64,300
Insurance--Affiliate 15,100 7,500
Repairs and maintenance 165,200 157,800
General and administrative:
Affiliates 10,500 2,700
Nonaffiliates 42,200 58,300
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911,900 850,800
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Net income $ 315,200 $ 302,400
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Net (loss) allocated to General Partners $ (22,200) $ (22,700)
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Net income allocated to Limited Partners $ 337,400 $ 325,100
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Net income allocated to Limited Partners per Unit
(60,000 Units outstanding) $ 5.62 $ 5.42
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Income:
Rental $2,387,800 $2,360,200
Interest 107,800 116,500
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2,495,600 2,476,700
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Expenses:
Depreciation and amortization 562,100 581,000
Property operating:
Affiliates 113,100 136,600
Nonaffiliates 510,600 482,700
Real estate taxes 189,000 196,500
Insurance--Affiliate 30,200 23,200
Repairs and maintenance 338,400 312,900
General and administrative:
Affiliates 21,500 16,100
Nonaffiliates 96,600 103,700
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1,861,500 1,852,700
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Net income $ 634,100 $ 624,000
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Net (loss) allocated to General Partners $ (44,200) $ (46,100)
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Net income allocated to Limited Partners $ 678,300 $ 670,100
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Net income allocated to Limited Partners per Unit
(60,000 Units outstanding) $ 11.31 $ 11.17
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 634,100 $ 624,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 562,100 581,000
Changes in assets and liabilities:
Decrease in rents receivable 96,800 6,600
(Increase) decrease in other assets (14,100) 131,500
(Decrease) in accounts payable and accrued expenses (76,700) (72,000)
Increase in due to Affiliates 4,300 10,800
(Decrease) in other liabilities (43,400) (700)
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Net cash provided by operating activities 1,163,100 1,281,200
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Cash flows from investing activities:
Payments for capital and tenant improvements (538,900) (501,200)
(Increase) in investments in debt securities (3,196,100)
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Net cash (used for) investing activities (3,735,000) (501,200)
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Cash flows from financing activities:
Distributions paid to Partners (805,200) (735,000)
Increase in security deposits 4,600 10,200
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Net cash (used for) financing activities (800,600) (724,800)
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Net (decrease) increase in cash and cash equivalents (3,372,500) 55,200
Cash and cash equivalents at the beginning of the
period 4,254,900 4,238,600
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Cash and cash equivalents at the end of the period $ 882,400 $4,293,800
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Under this method of accounting,
revenues are recorded when earned and expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The financial 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, 1996 are not necessarily indicative
of the operating results for the year ending December 31, 1996.
The financial statements include the Partnership's 50% interest in three joint
ventures with Affiliated partnerships. These joint ventures were formed for the
purpose of each acquiring a 100% interest in certain real properties and are
operated under the common control of the Managing General Partner. Accordingly,
the Partnership's pro rata share of the ventures' revenues, expenses, assets,
liabilities and partners' capital is included in the financial statements.
Commercial rental properties held for investment are recorded at cost, net of
any provisions for value impairment, and depreciated (exclusive of amounts, if
any, allocated to land and value impairments) on the straight-line method over
their estimated useful lives. Upon classifying a commercial rental property as
held for disposition, no depreciation or amortization of such property is
provided for in the financial statements. 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 to the appropriate property accounts and depreciated over the
estimated life of the improvements.
During the first quarter of 1996, the Partnership adopted Financial Accounting
Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of" (the "Standard"). The Standard established guidance
for determining if the value of defined assets impaired, and if so, how
impairment losses should be measured and reported in the financial statements.
The Standard also addressed the accounting for long-lived assets that are
expected to be disposed of. The adoption of the Standard did not have a
material effect on the Partnership's financial statements.
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
Investments in debt securities are comprised of corporate debt securities and
are classified as held-to-maturity. These investments are carried at their
amortized cost basis in the financial statements. As of June 30, 1996, these
securities had a fair market value of $3,192,400 and unrealized losses of
$3,700. Substantially all of these securities had maturities of less than one
year when purchased.
Certain reclassifications have been made to the previously reported 1995
statements in order to provide comparability with the 1996 statements. These
reclassifications have no effect on the net income (loss) or Partners'
(deficit) capital.
Reference is made to the Partnership's annual report for the year ended
December 31, 1995, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim or as otherwise
disclosed herein.
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, subsequent to March 31, 1983, the
Termination of the Offering, the General Partners are entitled to 10% of
distributable Cash Flow (as defined in the Partnership Agreement) as their
Subordinated Partnership Management Fee, provided that Limited Partners first
receive specified non-cumulative annual rates of return on their Capital
Investment.
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' Subordinated Partnership Management Fee
or 1% of such Net Profits; second, the balance, if any, to the Limited
Partners. Net Profits from the sale or disposition of a Partnership property
are allocated: first, to the General Partners, in an amount equal to the
aggregate amount of depreciation previously allocated to them; second, to the
General Partners and the Limited Partners with negative balances in their
capital accounts pro rata in proportion to such respective negative balances,
to the extent of the total of such negative balances; 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 Proceeds to be distributed to the
General Partners with respect to the sale or disposition of such property or 1%
of such Net Profits; and fourth, the balance, if any, to the Limited Partners.
Net Losses (exclusive of depreciation and Net Losses from the sale, disposition
or provision for value impairment of Partnership properties) are allocated 1%
to the General Partners and 99% to the Limited Partners. All depreciation is
allocated 10% to the General Partners and 90% to the Limited Partners. Net
Losses from the sale, disposition or provision for value impairment of
Partnership properties are allocated: first, to the extent that the balance in
the General Partners' capital accounts exceeds their Capital Investment or the
balance in the capital accounts of the Limited Partners exceeds the amount of
their Capital Investment (the "Excess Balances"), to the General 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 and among them (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 there shall be allocated to the General Partners not less than 1% of
Net Profits and Net Losses from the sale, disposition or provision for value
impairment of a Partnership property. The General Partners were not entitled to
cash distributions for the quarter and six months ended June 30, 1996. During
the quarter and six months ended June 30, 1996, the General Partners were
allocated Net (Losses) of $(22,200) and $(44,200), respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Paid
------------------
Quarter Six Months Payable
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<S> <C> <C> <C>
Property management and leasing fees $46,100 $ 90,900 $20,400
Reimbursement of property insurance premiums, at
cost 30,100 30,100
Reimbursement of expenses, at costs
--Accounting 6,000 14,400 4,200
--Investor communications 4,100 9,200 1,600
--Legal 9,300 14,400
--Other 100 900
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$95,700 $159,900 $26,200
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</TABLE>
As of June 30, 1996, 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.
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 property
Except as disclosed above, an Affiliate of the Managing General Partner
provides property and supervisory management as well as leasing services for
the Partnership's properties for fees ranging from 3% to 6% of gross rents
received from the properties.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's annual report for the year ended
December 31, 1995 for a discussion of the Partnership's business.
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the quarters and six months ended June 30, 1996
and 1995. The discussion following the table should be read in conjunction with
the financial statements and notes thereto appearing in this report.
<TABLE>
<CAPTION>
Comparative Operating Results (a)
For the Quarters For the Six
Ended Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
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<S> <C> <C> <C> <C>
FOXHALL SQUARE BUILDING (50%)
Rental revenues $ 371,600 $411,300 $785,600 $836,700
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Property net income $ 106,700 $116,100 $251,500 $241,200
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Average occupancy 83% 86% 83% 85%
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PEACHTREE PALISADES OFFICE BUILDING
Rental revenues $ 329,200 $275,300 $678,300 $673,800
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Property net (loss) $(16,100) $(30,900) $(30,400) $(33,700)
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Average occupancy 91% 78% 92% 78%
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LAKEWOOD SQUARE SHOPPING CENTER (50%)
Rental revenues $ 327,800 $282,300 $654,400 $595,100
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Property net income $ 155,400 $180,200 $309,400 $337,900
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Average occupancy 96% 88% 96% 86%
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12621 FEATHERWOOD BUILDING (50%)
Rental revenues $ 142,200 $124,300 $269,500 $254,600
- ------------------------------------------------------------
Property net income $ 64,300 $ 38,700 $113,000 $ 82,800
- ------------------------------------------------------------
Average occupancy 100% 100% 100% 100%
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</TABLE>
(a) The above table excludes certain income and expense items which are either
not directly related to individual property operating results such as
interest income and general and administrative expenses or are related to
properties previously owned by the Partnership.
Unless otherwise disclosed, discussions of fluctuations between 1996 and 1995
refer to both the quarters and six months ended June 30, 1996 and 1995.
Net income increased $12,800 for the quarter ended June 30, 1996 when compared
to the quarter ended June 30, 1995. The increase in net income for the quarter
was primarily due to improved operating results at Peachtree Palisades Office
Building ("Peachtree") and 12621 Featherwood Building ("Featherwood") totaling
$40,400 and
decreased general and administrative expenses of $8,300 due to a decrease in
data processing fees. Partially offsetting the increase in net income for the
quarters under comparison was diminished operating results at Lakewood Square
Shopping Center ("Lakewood") and Foxhall Square Building ("Foxhall") totaling
$34,200 and a decrease in interest income of $3,700 due to a decrease in cash
available for short-term investments.
Net income increased $10,100, for the six months ended June 30, 1996 when
compared to the six months ended June 30, 1995. The increase in net income for
the comparable six-month periods was primarily due to improved operating
results at Peachtree, Featherwood and Foxhall totaling $43,800 and decreased
general and administrative expenses of $1,700 primarily due to the reason
stated above. Partially offsetting the increase in net income for the six
months was diminished operating results at Lakewood of $28,500 and a decrease
in interest income of $8,700 due to the reason previously stated.
Total rental revenues increased by $77,600 or 7.1% and $27,600 or 1.2%,
respectively, for the quarter and six months ended June 30, 1996, when compared
to the quarter and six months ended June 30, 1995. The primary factors which
caused the increase in rental revenues for the comparable periods were: 1) an
increase in base rents at Peachtree as a result of an increase in occupancy and
an increase in rental revenues generated by the parking facility, partially
offset by a decrease in real estate tax escalations; 2) an increase in base
rents and tenant expense reimbursements for common area maintenance at Lakewood
primarily due to an increase in occupancy and 3) an increase in real estate tax
escalation income at Featherwood. Partially offsetting the increase in rental
revenues for the periods under comparison was a decrease in rental revenues at
Foxhall due to: 1) decreased base rents as a result of a decrease in occupancy
and 2) a decrease in rental revenues generated by the parking facility.
Partially offsetting the decrease in rental revenues at Foxhall was an increase
in tenant expense reimbursements for real estate taxes.
Total real estate tax expense was $32,200 higher for the quarter ended June 30,
1996 as compared to the quarter ended June 30, 1995 due to the receipt of a
refund in 1995 of $57,100 for 1993/1994 real estate taxes at Lakewood.
Excluding the refund, real estate tax expense decreased for the quarter as a
result of a decrease in the assessed valuations of Foxhall and Featherwood.
Total real estate tax expense decreased $7,500 for the six months under
comparison due to the following: 1) a decrease in real estate tax expense at
Foxhall resulting from a reduction in the property's assessed valuation; 2) a
decrease at Featherwood due to the receipt of a refund in 1996 for 1994 taxes
and 3) a slight decrease at Peachtree due to a decrease in tax rate. Partially
offsetting these decreases was an increase in real estate taxes at Lakewood due
to the reason previously stated.
Total repairs and maintenance expense increased $7,400 and $25,500,
respectively, for the comparable periods due to: 1) increased janitorial
services at Peachtree and 2) increased architectural costs at Lakewood.
Partially offsetting the increases were decreased repairs and maintenance
expense at Featherwood as a result of a decrease in repairs to the HVAC system.
Total property operating expenses increased by $26,100 and $4,400,
respectively, for the quarter and six months ended June 30, 1996 when compared
to the quarter and six months ended June 30, 1995. The primary factors which
caused the increase for both periods under comparison were: 1)
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
increased security expense at Featherwood and Lakewood and 2) increased
utilities at Featherwood. For the quarter ended June 30, 1996 when compared to
the quarter ended June 30, 1995, property operating expense increased at
Peachtree primarily due to an increase in utilities. For the six-month
comparable periods, property operating expense decreased at Peachtree primarily
due to a decrease in salaries paid to a full-time on-site property manager.
To increase and/or maintain occupancy levels at the Partnership's properties,
the Managing General Partner, through its Affiliated asset and property
management groups, continues to take the following actions: 1) implementation
of marketing programs, including hiring of third-party leasing agents or
providing on-site leasing personnel, advertising, direct mail campaigns and
development of building brochures; 2) early renewal of existing tenants and
addressing any expansion needs these tenants may have; 3) promotion of local
broker events and networking with local brokers; 4) networking with national
level retailers; 5) cold-calling other businesses and tenants in the market
area; and 6) providing rental concessions or competitively pricing rental rates
depending on market conditions.
LIQUIDITY AND CAPITAL RESOURCES
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its 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 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 net income or cash flows as defined by
generally accepted accounting principles ("GAAP"), since certain items are
treated differently under the Partnership Agreement than under GAAP. Management
believes that to facilitate a clear understanding of the Partnership's
operations, an analysis of Cash Flow (as defined in the Partnership Agreement)
should be examined in conjunction with an analysis of net income or cash flows
(as defined by GAAP). The following table includes a reconciliation of Cash
Flow (as defined in the Partnership Agreement) to cash flow provided by
operating activities as determined by GAAP. Such amounts are not indicative of
actual distributions to Partners and should not necessarily be considered as an
alternative to the results disclosed in the Statements of Income and Expenses
and Statements of Cash Flows.
<TABLE>
<CAPTION>
Comparative Cash Flow
Results For the Six
Months Ended
6/30/96 6/30/95
- -----------------------------------------------------------------------------
<S> <C> <C>
Cash Flow (as defined in the Partnership Agreement) $ 1,196,200 $1,205,000
Items of reconciliation:
Decrease in current assets 82,700 138,100
(Decrease) in current liabilities (115,800) (61,900)
- -----------------------------------------------------------------------------
Net cash provided by operating activities $ 1,163,100 $1,281,200
- -----------------------------------------------------------------------------
Net cash (used for) investing activities $(3,735,000) $ (501,200)
- -----------------------------------------------------------------------------
Net cash (used for) financing activities $ (800,600) $ (724,800)
- -----------------------------------------------------------------------------
</TABLE>
The decrease in Cash Flow (as defined in the Partnership Agreement) of $8,800
for the six months ended June 30, 1996 when compared to six months ended June
30, 1995 was primarily due to diminished operating results, exclusive of
depreciation and amortization, at Lakewood and Foxhall and decreased interest
income generated by the Partnership's short-term investments, partially offset
by increased operating results, exclusive of depreciation and amortization, at
Peachtree and Featherwood and decreased general and administrative expenses.
The decrease in the Partnership's cash position of $3,372,500 as of June 30,
1996 when compared to December 31, 1995 was primarily the result of the
investments in debt securities, payments made for capital, tenant improvement
and leasing costs and distributions paid to Partners exceeding net cash
provided by operating activities. Liquid assets; including cash, cash
equivalents and investments in debt securities as of June 30, 1996 were
comprised of amounts held for working capital purposes.
Net cash provided by operating activities continues to be the Partnership's
primary source of funds. Net cash provided by operating activities decreased by
$118,100 for the six months ended June 30, 1996 when compared to the six months
ended June 30, 1995. This decrease was primarily due to the 1995 receipt of a
rebate at Foxhall.
The increase in net cash used for investing activities of $3,233,800 for the
six months ended June 30, 1996 when compared to the six months ended June 30,
1995 was due to the increase in investment in debt securities and an increase
in expenditures for capital, tenant improvement and leasing costs at the
Partnership's properties. The increase in investments in debt securities is a
result of the extension of the maturities of certain of the Partnership's
short-term investments in an effort to maximize the return on these amounts as
they are held for working capital purposes. These investments are of
investment-grade and generally mature less than one year from their date of
purchase. The Partnership maintains working capital reserves to pay for capital
expenditures. During the six months ended June 30, 1996, the Partnership spent
$538,900 for capital, tenant improvement and leasing costs and has projected to
spend approximately $440,000 during the remainder of 1996. Of the projected
amount, approximately $220,000, $150,000 and $70,000 relates to anticipated
capital, tenant improvement and leasing costs expected to be incurred at
Foxhall, Lakewood and Peachtree, respectively. Actual amounts expended in 1996
may vary depending on a number
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
of factors including actual leasing activity, results of operations and other
market conditions over the course of the year. The Managing General Partner
believes these expenditures are necessary to increase and/or maintain occupancy
levels in very competitive markets, maximize rental rates charged to new and
renewing tenants and prepare the remaining properties for eventual disposition.
The increase in net cash used for financing activities of $75,800 for the six
months ended June 30, 1996 when compared to the six months ended June 30, 1995
was due primarily to an increase in distributions paid to Limited Partners
together with a decrease in the net collection of tenant security deposits.
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, tenant improvement and leasing costs
necessary to be made at the Partnership's properties during the next several
years. As a result of this, cash continues to be retained to supplement working
capital reserves. For the six months ended June 30, 1996, Cash Flow (as defined
in the Partnership Agreement) retained to supplement working capital reserves
approximated $356,200.
Distributions to Limited Partners for the quarter ended June 30, 1996 were
declared in the amount of $420,000, or $7.00 per Unit. Cash distributions are
made 60 days after the last day of each fiscal quarter. The amount of future
distributions to Limited Partners will ultimately be dependent upon the
performance of the Partnership's investments as well as the Managing General
Partner's determination of the amount of cash necessary to supplement working
capital reserves to meet future liquidity requirements of the Partnership.
Accordingly, there can be no assurance as to the amounts and/or availability of
cash for future distributions to Limited Partners.
7
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
June 30, 1996.
<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 14, 1996 By: /s/ DOUGLAS CROCKER II
--------------- -----------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1996 By: /s/ NORMAN M. FIELD
--------------- --------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 882,400
<SECURITIES> 3,196,100
<RECEIVABLES> 53,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,131,500
<PP&E> 36,625,400
<DEPRECIATION> 12,499,600
<TOTAL-ASSETS> 28,271,600
<CURRENT-LIABILITIES> 952,400
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 26,850,600
<TOTAL-LIABILITY-AND-EQUITY> 28,271,600
<SALES> 0
<TOTAL-REVENUES> 2,495,600
<CGS> 0
<TOTAL-COSTS> 1,181,300
<OTHER-EXPENSES> 118,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 634,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 634,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 634,100
<EPS-PRIMARY> 11.32
<EPS-DILUTED> 11.32
</TABLE>
