<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
EXCHANGE ACT OF 1934
For the period ended June 30, 1998
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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 1000, 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
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Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated October 25, 1982, included
in the Registrant's Registration Statement on Form S-11 (Registration No. 2-
79092), is incorporated herein by reference in Part I of this report.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.-1
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
June 30,
1998 December 31,
(Unaudited) 1997
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<S> <C> <C>
ASSETS
Cash and cash equivalents $3,480,000 $12,249,600
Investments in debt
securities 302,000
Rents receivable 23,700 25,400
Other assets 8,300 3,900
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$3,814,000 $12,278,900
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LIABILITIES AND PARTNERS'
CAPITAL
Liabilities:
Accounts payable and
accrued expenses $ 68,600 $ 60,100
Due to Affiliates 600 8,200
Distributions payable 8,460,000
Other liabilities 7,600 10,000
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76,800 8,538,300
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Partners' capital:
General Partners
(deficit) 611,400 611,500
Limited Partners (60,000
Units issued and
outstanding) 3,125,800 3,129,100
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3,737,200 3,740,600
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$3,814,000 $12,278,900
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 1998 (Unaudited)
and the year ended December 31, 1997
(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,
1997 $ (448,400) $27,214,700 $26,766,300
Net income for the year ended December
31, 1997 1,059,900 2,790,200 3,850,100
Distributions for the year ended
December 31, 1997 (26,875,800) (26,875,800)
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Partners' capital, December 31, 1997 611,500 3,129,100 3,740,600
Net (loss) for the six months ended June
30, 1998 (100) (3,300) (3,400)
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Partners' capital, June 30, 1998 $ 611,400 $ 3,125,800 $ 3,737,200
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</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--1
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Income:
Rental $ 300 $ 773,400
Interest 52,100 182,200
Gain on sale of property 1,230,200
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52,400 2,185,800
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Expenses:
Depreciation and amortization 160,700
Property operating:
Affiliates (59,400) 37,300
Nonaffiliates (13,900) 156,700
Real estate taxes 71,900
Insurance--Affiliate 4,400
Repairs and maintenance (300) 132,100
General and administrative:
Affiliates 3,500 5,600
Nonaffiliates 28,200 42,000
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(41,900) 610,700
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Net income $ 94,300 $1,575,100
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Net income allocated to General Partners $ 900 $ 731,900
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Net income allocated to Limited Partners $ 93,400 $ 843,200
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Net income allocated to Limited Partners per Unit
(60,000 Units outstanding) $ 1.56 $ 14.05
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</TABLE>
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Income:
Rental $ 9,700 $2,005,500
Interest 178,600 240,800
Gain on sale of property 1,230,200
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188,300 3,476,500
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Expenses:
Depreciation and amortization 453,300
Property operating:
Affiliates (59,400) 93,700
Nonaffiliates 6,100 418,700
Real estate taxes 177,000
Insurance--Affiliate 15,500
Repairs and maintenance 2,200 277,500
General and administrative:
Affiliates 8,400 11,700
Nonaffiliates 66,200 84,200
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23,500 1,531,600
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Income before state income tax expense 164,800 1,944,900
State income tax expense 168,200 1,000
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Net (loss) income $ (3,400) $1,943,900
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Net (loss) income allocated to General Partners $ (100) $ 709,200
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Net (loss) income allocated to Limited Partners $ (3,300) $1,234,700
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Net (loss) income allocated to Limited Partners per Unit
(60,000 Units outstanding) $ (0.06) $ 20.58
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</TABLE>
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998 and 1997
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (3,400) $ 1,943,900
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 453,300
Gain on sale of property (1,230,200)
Changes in assets and liabilities:
Decrease in rents receivable 1,700 50,000
(Increase) in other assets (4,400) (12,800)
Increase (decrease) in accounts payable and
accrued expenses 8,500 (116,800)
(Decrease) in due to Affiliates (7,600) (20,500)
(Decrease) in other liabilities (2,400) (109,800)
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Net cash (used for) provided by operating
activities (7,600) 957,100
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Cash flows from investing activities:
Payments for capital and tenant improvements (163,000)
Proceeds from sale of property 17,612,500
(Increase) in investments in debt securities (302,000) (6,156,300)
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Net cash (used for) provided by investing
activities (302,000) 11,293,200
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Cash flows from financing activities:
Distributions paid to Partners (8,460,000) (840,000)
(Decrease) in security deposits (103,000)
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Net cash (used for) financing activities (8,460,000) (943,000)
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Net (decrease) increase in cash and cash
equivalents (8,769,600) 11,307,300
Cash and cash equivalents at the beginning of the
period 12,249,600 3,926,100
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Cash and cash equivalents at the end of the period $ 3,480,000 $15,233,400
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.--1
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
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"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The financial 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, 1998 are not necessarily indicative
of the operating results for the year ending December 31, 1998.
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 which approximated fair value.
All of these securities had maturities of less than one year when purchased.
Reference is made to the Partnership's annual report for the year ended
December 31, 1997, 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 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; and 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 (collectively, 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, 1998. For the quarter and six months ended June 30,
1998 the General Partners were allocated Net income (loss) of $900 and $(100),
respectively.
Fees and reimbursements paid/(refunded) and payable by the Partnership to
Affiliates during the quarter and six months ended June 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Paid/(Refunded)
Quarter Six Months Payable
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<S> <C> <C> <C>
Refund of property management fees $(59,400) $(59,400) None
Legal 2,100 6,300 None
Refund of property insurance premiums (1,400) None
Reimbursement of expenses, at costs
--Accounting 4,400 4,400 $200
--Investor communications 3,500 3,500 400
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$(49,400) $(46,600) $600
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</TABLE>
4
<PAGE>
3. ENVIRONMENTAL MATTER:
In December 1996, the Managing General Partner became aware of the existence of
hazardous substances in the soil and groundwater of the Lakewood Square
Shopping Center ("Lakewood"). In connection with the 1997 sale of Lakewood, the
purchaser assumed the obligation to remedy the hazardous substances in the
manner required by law, which includes, but is not limited to, payment of all
costs in connection with the remediation work. In addition, the purchaser
provided the Partnership with certain indemnification protection in relation to
clean-up costs and related expenses arising from the presence of these
hazardous substances. At the present time, the Managing General Partner is
unaware of any claims or other matters referred to above against the
Partnership. In March 1998, the purchaser's plan to evaluate the site
contamination was approved by the Los Angeles Regional Water Quality Control
Board ("Water Board"), subject to certain monitoring and reporting activities
recommended by the Water Board. During the second half of 1998, the purchaser
anticipates that it will complete its site evaluation, and will submit a
corrective action plan for the site to the Water Board. The Managing General
Partner is continuing to monitor the documentation delivered by the purchaser
regarding the purchaser's activities to remedy the hazardous substances at
Lakewood.
4. STATE INCOME TAX EXPENSE:
State income tax expense is comprised substantially of a tax imposed by the
District of Columbia, based on taxable income.
5
<PAGE>
ITEM 2. 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, 1997 for a discussion of the Partnership's business.
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.
The Partnership has substantially completed the disposition phase of its life
cycle. During 1997, the Partnership sold its remaining property investments.
OPERATIONS
Net income (loss) changed from $1,943,900 for the six months ended June 30,
1997 to $(3,400) for the six months ended June 30, 1998. Net income decreased
by $1,480,800 for the quarter ended June 30, 1998 when compared to the quarter
ended June 30, 1997. These changes in net results were primarily due to the
effects of the 1997 sales of the Partnership's remaining properties. The change
for the six months periods under comparison, exclusive of the results of
properties sold in 1997 is primarily due to the Partnership's 1998 payment of
its share of taxes to the District of Columbia. Substantially all of this tax
was incurred in connection with the 1997 sale of Foxhall. In addition, the
Partnership realized less interest during the quarterly and six-month periods
under comparison resulting from a reduction in the amount of a cash available
for investment during 1998.
LIQUIDITY AND CAPITAL RESOURCES
The decrease in the Partnership's cash position of $8,769,600 during the six
months ended June 30, 1998 was primarily the result of the distribution of the
Proceeds from the 1997 sale of Foxhall and investments in debt securities.
Liquid assets, including cash, cash equivalents and investments in debt
securities, as of June 30, 1998 were comprised of amounts reserved for the
Lakewood environmental contingency (as hereafter discussed) and Partnership
liquidation expenses.
Net cash provided by (used for) operating activities changed from $957,100 for
the six months ended June 30, 1997 to $(7,600) for the six months ended June
30, 1998. The decrease was primarily the result of the effects of the sale of
all four of the Partnership's remaining property investments during 1997.
Net cash provided by (used for) investing activities changed from $11,293,200
for the six months ended June 30, 1997 to $(302,000) for the six months ended
June 30, 1998. The change was primarily due to the receipt of proceeds from the
sales of three Partnership properties during the six months ended June 30,
1997. The amount of investments in debt securities also significantly decreased
due to a reduction in the amount of cash available for investment. The
investments in debt securities is a result of the continued extension of the
maturities of certain of the Partnership's short-term investments in an effort
to maximize the return on these amounts while they are held as working capital
reserves. These investments are of investment-grade and mature less than one
year from their dates of purchase.
The increase in net cash used for financing activities of $7,517,000 for the
six months ended June 30, 1998 when compared to the six months ended June 30,
1997 was due to the distribution of Sale Proceeds on February 28, 1998. The
increase was partially offset by a reduction in distributions of Cash Flow to
Limited Partners.
As described in Note 3 of Notes to Financial Statements, there is uncertainty
surrounding an environmental matter at Lakewood. The Managing General Partner
is continuing to monitor the documentation delivered by the purchaser of
Lakewood regarding the purchaser's activities to remedy the hazardous
substances at Lakewood. There can be no assurance as to the actual timeframe
for the remediation or that it will be completed without cost to the
Partnership. As a result of this, together with other potential post closing
matters related to the Partnership properties, it will be necessary for the
Partnership to remain open. When the environmental matter at Lakewood is
satisfactorily remediated, Limited Partners will receive a final liquidating
distribution of the remaining cash held by the Partnership, less amounts
reserved for administrative expenses and any amounts deemed necessary to
resolve, or provide for, any post closing matters.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
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(a) Exhibits: None
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the quarter ended June 30,
1998.
<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, 1998 By: /s/ DOUGLAS CROCKER II
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DOUGLAS CROCKER II
President and Chief Executive Officer
Date: August 14, 1998 By: /s/ NORMAN M. FIELD
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NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,480,000
<SECURITIES> 302,000
<RECEIVABLES> 23,700
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,805,700
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,814,000
<CURRENT-LIABILITIES> 69,200
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,737,200
<TOTAL-LIABILITY-AND-EQUITY> 3,814,000
<SALES> 0
<TOTAL-REVENUES> 188,300
<CGS> 0
<TOTAL-COSTS> (51,100)
<OTHER-EXPENSES> 74,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 164,800
<INCOME-TAX> 168,200
<INCOME-CONTINUING> (3,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,400)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
