<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, 1995
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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 0-14121
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FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES X
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2417973
- ------------------------------- ------------------------------------
(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
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Securities registered pursuant to Section 12(g)
of the Act: Limited Partnership 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. [ ]
DOCUMENTS INCORPORATED BY REFERENCE:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated September 25, 1984,
included in the Registrant's Registration Statement on Form S-11 (Registration
Statement No. 2-92364), is incorporated herein by reference in Part IV of this
report.
<PAGE>
The Partnership's Report on Form 8-K dated December 9, 1994, reporting the
disposition of the Fashion Atrium Building, located in New York, New York, is
incorporated herein by reference in Part IV of this report.
EXHIBIT INDEX - PAGE A-1
- ------------------------
2
<PAGE>
PART I
ITEM 1. BUSINESS
- ------- --------
The registrant, First Capital Income Properties, Ltd. - Series X (the
"Partnership"), is a limited partnership organized in 1984 under the Florida
Uniform Limited Partnership Law. The Partnership sold $43,861,000 in Limited
Partnership Units (the "Units") to the public from September 1984 to September
1985, pursuant to a Registration Statement on Form S-11 filed with the
Securities and Exchange Commission (Registration Statement No. 2-92364).
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement.
The business of the Partnership is to invest primarily in existing or to-be-
developed real estate, such as shopping centers, warehouses, office buildings,
and, to a lesser extent, in other types of income-producing commercial real
estate. From December 1984 to February 1988, the Partnership made one real
property investment, purchased 50% interests in two joint ventures and a 25%
interest in one joint venture each with Affiliated partnerships. These joint
ventures were each formed for the purpose of acquiring a 100% interest in
certain real property and, prior to dissolution are operated under the common
control of First Capital Financial Corporation (the "General Partner"). By
December 31, 1995 the Partnership sold its real property investment and, with an
Affiliated partnership, dissolved one joint venture as a result of the
disposition of the real property interest.
Property management services for the Partnership's real estate investments are
provided by an Affiliate of the 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 these tenants. Properties owned by the Partnership frequently compete for
tenants with similar properties owned by others.
As of March 1, 1996, there were 37 employees at the Partnership's properties for
on-site property maintenance and administration.
ITEM 2. PROPERTIES (a)(b)
- ------- -----------------
As of December 31, 1995, the Partnership owned, through joint venture interests,
the following two properties, which were each owned in fee simple and were
encumbered by mortgages. For complete details of the material terms of the
encumbrances, refer to Note 4 of the Notes to Financial Statements.
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
- --------------------------------- --------------------- ------------ -----------
SHOPPING CENTERS:
<S> <C> <C> <C>
Glendale Center Shopping Mall (d) Indianapolis, Indiana 652,727 59 (2)
Regency Park Shopping Center (e) Jacksonville, Florida 329,858 21 (3)
</TABLE>
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's properties refer to Item 7 -
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(b) For Federal income tax purposes, the Partnership depreciates the
portion of the acquisition costs of its properties allocable to real
property (exclusive of land) and all improvements thereafter over
useful lives ranging from 18 years to 40 years, utilizing either the
Accelerated Cost Recovery System ("ACRS") or straight-line method.
Other depreciable assets were
3
<PAGE>
ITEM 2. PROPERTIES (a)(b) - CONTINUED
- ------- -----------------------------
depreciated over their applicable recovery periods. The Partnership's
portion of real estate taxes for the Glendale Center Shopping Mall
("Glendale") and Regency Park Shopping Center ("Regency") was $422,100
and $65,300, respectively, for the year ended December 31, 1995. In the
opinion of the 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 owns a 25% joint venture interest in this property.
The following table presents each of the Partnership properties' occupancy rates
as of December 31 for each of the last five years:
<TABLE>
<CAPTION>
Property Name 1995 1994 1993 1992 1991
- ------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Glendale 93% 93% 87% 92% 90%
Regency 87% 89% 78% 78% 84%
</TABLE>
The amounts in the following table represent each of the Partnership's
properties' average annual rental rate per square foot for each of the last five
years ended December 31 and were computed by dividing each property's base
rental revenues by its average occupied square footage:
<TABLE>
<CAPTION>
Property Name 1995 1994 1993 1992 1991
- ------------- ----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Glendale $5.48 $5.55 $4.95 $5.47 $5.63
Regency $6.47 $6.34 $6.85 $6.97 $6.50
</TABLE>
The following table summarizes the principal provisions of the leases for the
tenants which occupy ten percent or more of the rentable square footage at each
of the Partnership's properties:
<TABLE>
<CAPTION>
Partnership's Share of Percentage
per Annum Base Rents (a) for of Net Renewal
---------------------------- Leasable Options
Final Twelve Expiration Square (Renewal
Months of Date of Footage Options/
1996 Lease Lease Occupied Years)
-------- ------------ ---------- ---------- ---------
Glendale
- --------
L. S. Ayres & Co.
<S> <C> <C> <C> <C> <C>
(department store) $194,100 $194,100 1/31/01 36% 3/30
Lazarus
(department store) $128,700 $128,700 1/31/01 25% 1/18
Regency
- -------
Publix (b)
(grocery store) $ 71,700 $ 71,700 1/15/05 26% 3/5
</TABLE>
4
<PAGE>
ITEM 2. PROPERTIES-Continued
- ------- -------------------
<TABLE>
<CAPTION>
Partnership's Share of Percentage
per Annum Base Rents (a) for of Net Renewal
---------------------------- Leasable Options
Final Twelve Expiration Square (Renewal
Months of Date of Footage Options/
1996 Lease Lease Occupied Years)
-------- ------------ ---------- ---------- ---------
Regency
- -------
<S> <C> <C> <C> <C> <C>
Service Merchandise
(department store) $ 87,500 $ 87,500 2/28/09 14% 10/5
Baby Superstore
(wholesale baby
furnishings) $ 61,500 $ 75,300 9/30/04 12% 3/5
</TABLE>
(a) The Partnership's share of per annum base rents for each of the tenants
listed above for the years between 1996 and the final twelve months for
each of the above leases is no lesser or greater than the amounts
listed in the above table.
(b) This tenant does not physically occupy any space at this property but
continues to pay rent under the terms of its lease.
The amounts in the following table represent the Partnership's portion of leases
in the year of expiration (assuming no lease renewals) through the year ended
December 31, 2005:
<TABLE>
<CAPTION>
Number Base Rents
of in Year of % of Total
Year Tenants Square Feet Expiration (a) Base Rents (b)
- ---- ------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
1996 12 42,951 $ 72,214 3.31%
1997 10 61,751 $ 89,735 4.34%
1998 10 16,678 $127,606 6.36%
1999 7 24,138 $ 89,448 4.75%
2000 6 13,794 $ 68,823 3.98%
2001 9 444,215 $124,267 9.68%
2002 2 16,763 $ 98,569 8.74%
2003 6 15,435 $ 94,020 9.93%
2004 11 159,681 $229,416 37.77%
2005 2 12,578 $ 42,329 12.92%
</TABLE>
(a) Represents the Partnership's portion of base rents to be collected each
year on expiring leases.
(b) Represents the Partnership's portion of base rents to be collected each
year on expiring leases as a percentage of the Partnership's portion of
the total base rents to be collected on leases existing as of December
31, 1995.
5
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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(a & b) The Partnership and its properties were 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, 1995. Ordinary routine
litigation incidental to the business which is not deemed material was
maintained during the quarter ended December 31, 1995.
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 Units.
As of March 1, 1996, there were 3,610 Holders of Units.
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues $ 4,288,100 $ 5,913,000 $ 7,177,200 $ 8,129,500 $10,201,300
Net (loss) $(7,271,600) $ (949,100) $(6,532,500) $ (149,100) $(5,581,700)
Net (loss) allocated
to Limited Partners $(7,198,900) $(1,192,200) $(6,467,200) $ (155,300) $(5,525,900)
Net (loss) allocated
to Limited Partners
per Unit (43,861
Units issued and
outstanding) (a) $ (164.13) $ (27.18) $ (147.45) $ (3.54) $ (125.99)
Total assets $20,522,900 $26,495,200 $44,395,800 $50,612,200 $60,010,500
Mortgage loans payable $11,998,000 $10,648,600 $26,794,900 $26,831,200 $35,649,300
Distributions to Limited
Partners per Unit
(43,861 Units issued
and outstanding) None None None None None
Return of capital
to Limited Partners
per Unit (43,861 Units
issued and outstanding) None None None None None
Other data:
- -----------
Investment in
commercial rental
properties (net of
accumulated
depreciation and
amortization) $17,381,000 $24,728,800 $38,273,500 $46,067,100 $55,116,000
Number of real
property interests
owned at December 31 2 2 3 3 4
</TABLE>
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA - CONTINUED
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Notes:
- ------
(a) Net (loss) per Unit allocated to Limited Partners for 1994 included an
extraordinary gain on extinguishment of debt.
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 generally accepted accounting principles ("GAAP").
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined
in the Partnership
Agreement) (a) $ 288,600 $ 651,400 $1,732,300 $ 1,555,200 $ 1,800,900
Items of reconciliation:
Principal payments on
mortgage loans payable 500,600 33,800 36,300 30,600 25,700
Changes in current assets
and liabilities:
Decrease (increase)
in current assets 26,600 334,700 792,900 731,300 (1,024,700)
(Decrease) increase
in current liabilities (55,300) (542,900) 356,900 (89,400) (289,600)
---------- ----------- ---------- ----------- -----------
Net cash provided by
operating activities $ 760,500 $ 477,000 $2,918,400 $ 2,227,700 $ 512,300
========== =========== ========== =========== ===========
Net cash (used for)
provided by investing
activities $ (743,300) $ (418,300) $ (502,400) $ 7,372,100 $ (492,200)
========== =========== ========== =========== ===========
Net cash provided by
(used for) financing
activities $1,354,600 $(4,018,100) $ (40,800) $(9,175,100) $ (92,400)
========== =========== ========== =========== ===========
</TABLE>
(a) Cash Flow is defined in the Partnership Agreement as Partnership
revenues earned from operations (excluding tenant deposits and proceeds
from the sale, disposition or financing of any Partnership properties
or the refinancing of any Partnership indebtedness), minus all expenses
incurred (including Operating Expenses, payments of principal (other
than balloon payments of principal out of Offering Proceeds) and
interest on any Partnership indebtedness, and any reserves of revenues
from operations deemed reasonably necessary by the General Partner),
except depreciation and amortization expenses and capital expenditures,
lease acquisition expenditures and the General Partner's Partnership
Management Fee.
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-7
in this report and the supplemental schedule on pages A-8 and A-9.
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 September 25, 1984
(inception), and terminated the Offering on September 24, 1985, upon the sale
of 43,861 Units. From December 1985 to February 1988 the Partnership acquired
four real property interests, including two 50% joint venture interests and one
25% joint venture interest.
In 1992, the Partnership, in addition to being in the operation of properties
phase, entered the disposition phase of its life cycle. During the disposition
phase of the Partnership's life cycle, comparisons of operating results are
complicated due to the timing and effect of property sales. Partnership
operating results are generally expected to decline as real property interests
are sold since the Partnership no longer receives income generated from such
real property interests. As of December 31, 1995, the Partnership has sold one
real property investment and liquidated one joint venture investment.
The past year was disappointing for most retailers throughout the country.
Gross margins and consequently profits were negatively impacted as retailers
attempted to turn inventories. The prospects for expansion in 1996 are also
minimal, if nonexistent. The poor sales performance of retailers has resulted
in less demand for store space, further retailer consolidations and an
increased number of bankruptcies. Factors utilized by prospective property
purchasers such as higher capitalization and discount rates resulted in lower
prices than previously seen in years. In addition, downward pressure on rent,
upward pressure on tenant improvement costs and larger reserves for capital
expenditures also negatively affected the pricing of retail assets. Glendale
Center Shopping Mall ("Glendale") and Regency Park Shopping Center ("Regency")
also experienced other issues which have affected their estimated fair market
values. Competition from other malls and community centers as well as other
department stores (including a department store operated by one of Glendale's
anchor tenants) entering the regional market has had a negative impact on the
sales of Glendale's tenants and prospects for lease renewals. For the year
ended December 31, 1995, the sales performance of the two anchor tenants
(department stores) at Glendale totaled $51,789,000 as compared to $55,886,000
for the year ended December 31, 1994, a 7.3% decrease. Recent attempts to sell
Glendale have been unsuccessful. With respect to Regency, the vacancy of an
anchor tenant's space for a significant period of time has had a negative
impact on the property's appeal to existing and prospective tenants. While the
tenant has continued to pay rent pursuant to its lease, the Partnership has
experienced difficulty leasing the specialty retail space which surrounds this
area of the property. The General Partner has been negotiating with two
merchants to each sublet a portion of the vacant space and currently
anticipates that each of these stores will be open for business by the third
quarter of 1996. While there can be no assurances that either of these two
merchants will sublease space at Regency, if negotiations are completed and
they do take occupancy, then the lease-up of the vacant specialty space may
improve.
The General Partner has historically reviewed significant factors regarding the
properties, such as those mentioned above, to determine that the properties are
carried at lower of cost or fair market value, and where appropriate has made
value impairment adjustments. These factors include, but are not limited to 1)
recent and/or budgeted operating performance; 2) research of market conditions;
3) economic trends affecting major tenants; 4) economic factors related to the
region where the properties are located and 5) when available, recent property
appraisals. As a result of the current year review, the Partnership has
recorded provisions, for value impairment totaling $7,300,000 for the year
ended December 31, 1995. For more details related to these provisions see the
notes (b) and (c) to the Comparative Operating Results table below and Note 8
of Notes to Financial Statements. The 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 in the Partnership Agreement).
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the years ended December 31, 1995, 1994 and 1993.
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 Years Ended December 31,
-----------------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
GLENDALE
Rental revenues $3,529,300 $ 3,532,000 $4,038,800
- -------------------------------------------------------------
Property net income (b) $ 80,600 $ 245,100 $1,050,000
- -------------------------------------------------------------
Average occupancy 92% 87% 88%
- -------------------------------------------------------------
REGENCY
Rental revenues $ 587,500 $ 523,200 $ 542,200
- -------------------------------------------------------------
Property net (loss) (c) $ (70,200) $ (163,100) $ (172,300)
- -------------------------------------------------------------
Average occupancy 88% 79% 78%
- -------------------------------------------------------------
FASHION ATRIUM (D)
Rental revenues $ 1,676,800 $2,476,300
- -------------------------------------------------------------
Property net (loss) (d) $(1,170,100) $ (272,900)
- -------------------------------------------------------------
Average occupancy (d) 77%
- -------------------------------------------------------------
</TABLE>
(a) 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.
(b) The property net income excludes a provision for value impairment of
$6,300,000, for the year ended December 31, 1995 (see Note 8 of Notes to
Financial Statements for additional information).
(c) The property net (loss) excludes a (loss) from provisions for value
impairment of $(1,000,000), $(750,000) and $(1,500,000), respectively for
the years ended December 31, 1995, 1994 and 1993 and a (loss) on the sale
of a land parcel of $(20,800) reported in the 1993 Statement of Income and
Expenses (see Notes 7
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
and 8 of Notes to Financial Statements for additional information).
(d) On December 9, 1994, the Fashion Atrium Building was disposed of through
the orderly conveyance of title to the mortgage holder. Property net (loss)
for the year ended December 31, 1993 excludes a (loss) from provision for
value impairment of $(5,500,000). Property net (loss) for the year ended
December 31, 1994, excludes (loss) on disposition of property of
$(7,946,000) and an extraordinary gain on extinguishment of debt of
$8,808,600 (see Notes 7 and 8 of Notes to Financial Statements for
additional information).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
Partnership net (loss) increased by $6,322,500 for the year ended December 31,
1995 when compared to the year ended December 31, 1994. The comparison of
operating results between the periods is complicated by the effects of the
disposition of the Fashion Atrium Building ("Fashion Atrium") on December 9,
1994. In addition to the loss on disposition and extraordinary gain on
extinguishment of debt, as described above, the disposition of Fashion Atrium
accounted for significant decreases in rental income, interest expense,
property operating expenses, depreciation and amortization expense, real estate
tax expense, insurance expense and repairs and maintenance. The (loss) from
provisions for value impairment recorded for the years ended December 31, 1995
and December 31, 1994 of $(7,300,000) and $(750,000), respectively, also had
significant impact on the comparison of net (loss). For additional information
see Note 8 of Notes to Financial Statements.
Partnership net income (exclusive of the effects of Fashion Atrium and
provisions for value impairment) decreased $102,200 for the year ended December
31, 1995 when compared to the year ended December 31, 1994. The decrease was
due to: 1) decreased operating results at Glendale of $164,500 due to an
increase in interest expense, partially offset by decreased property operating
expenses and 2) a decrease in interest income of $33,400 due to a decrease in
cash available for investment resulting from payments in late 1994 on the
mortgage loan collateralized by Glendale. Partially offsetting the decrease in
net income was: 1) improved operating results at Regency of $92,900 resulting
from increased rental revenues and 2) a slight reduction in general and
administrative expenses due to a decrease in state and local taxes and data
processing costs, partially offset by an increase in printing and mailing costs
and legal fees.
For purposes of the following discussion, the comparative operating results of
Fashion Atrium have been excluded.
Rental revenues increased $61,600, or 1.5%, for the year ended December 31,
1995 when compared to the year ended December 31, 1994. The increase was
primarily due to an increase in Regency's average occupancy.
Interest expense increased $222,400 for the comparable periods. Although the
average outstanding principal balance on the Glendale mortgage was
significantly lower during 1995 than in 1994, the interest expense increased
due to the increase in the interest rate pursuant to the terms of the new loan
agreement (see Note 5 of Notes to Financial Statement for additional
information).
Total property operating expenses decreased $75,500 for the annual comparable
periods. The primary factors which contributed to the decrease in property
operating expenses were: 1) decreased utilities at Glendale and 2) decreased
advertising and promotional expenditures at Glendale and Regency.
Insurance expense decreased $23,500 for the year ended December 31, 1995 when
compared to the year ended December 31, 1994. This decrease was primarily due
to lower group rates on the Partnership's combined insurance coverage as a
result of a minimal amount of claims made over the past several years.
Repairs and maintenance expense decreased $13,100 for the year ended December
31, 1995 when compared to the year ended December 31, 1994. The primary factors
which caused the decrease were decreased expenditures for snow removal and
janitorial services, partially offset by an increase in signage expenses and
maintenance salaries at Glendale and decreased expenses associated with
patching, resurfacing and striping of the parking lot at Regency.
Real estate tax expense remained relatively flat for the comparable periods.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1994 TO THE YEAR ENDED DECEMBER 31,
1993
Partnership net (loss) decreased by $5,583,400 for the year ended December 31,
1994 when compared to the year ended December 31, 1993. The comparison of
results is complicated by the sale of Fashion Atrium. As described above, the
Partnership reported a (loss) of $(5,500,000) for the year ended December 31,
1993 as a provision for value impairment of Fashion Atrium. Upon the
liquidation of Fashion Atrium in 1994, the Partnership reported a (loss) on
disposition of $(7,946,000) and a gain on extinguishment of debt of $8,808,600.
In addition, Fashion Atrium's property operating results diminished $897,200
for the year ended December 31, 1994 when compared to the year ended December
31, 1993.
The primary reasons for the decline in the operating results of Fashion Atrium
was decreased rental revenues resulting from lower average effective annual
rental rates charged on new tenant leases and on tenant renewals resulting from
increased competition from other properties. Fashion Atrium's tenant base had
experienced significant changes as a result of the economic downturn in New
York City, particularly within the fashion garment industry. Partially
offsetting the decrease in operating results was decreased real estate taxes,
repairs and maintenance and property operating expenses primarily due to the
decrease in occupancy.
Partnership net income (exclusive of the effects of Fashion Atrium and
provisions for value impairment) decreased $698,400 for the year ended December
31, 1994 when compared to the year ended December 31, 1993. The decrease was
due to diminished operating results at Glendale of $804,900. Partially
offsetting the decrease in net income for the years under comparison was
improved operating results at Regency of $9,200, increased interest income of
$61,100 due to a trend in higher interest rates earned on short-term
investments and a slight decrease in general and administrative expenses.
For purposes of the following discussion the operating results of Fashion
Atrium have been excluded.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
Rental revenues decreased $525,800, or 11.5%, for the year ended December 31,
1994 when compared to the year ended December 31, 1993. The decrease in rental
revenues was due to decreases at Glendale resulting from: 1) a decrease in real
estate tax and operating expense escalation income of $409,700 as a result of a
1994 adjustment of previously billed 1993 amounts which had been overestimated;
2) the receipt by the Partnership in 1993 of $81,000 from a tenant relating to
a lease settlement and 3) a slight decrease in the average annual occupancy
rate. In addition, rental revenues decreased slightly at Regency due to a
decrease in the average base rental rate charged to new and renewing tenants
which was partially offset by an increase in percentage rents.
Total interest expense increased $160,200 for the comparable periods due to an
increase at Glendale due to a slightly higher variable interest rate and loan
extension costs incurred during the year ended December 31, 1994.
Total property operating expenses increased $52,300 for the year ended December
31, 1994 when compared to the year ended December 31, 1993 due to: 1) increased
promotional expenditures in order to attract new tenants at Glendale and
Regency and 2) a slight increase in utilities at Regency.
Total real estate tax expense increased $27,900 for the periods under
comparison primarily due to an increase at Glendale resulting from an increase
in the tax rate imposed by the local taxing authority.
Total repairs and maintenance and insurance expense remained relatively stable
for the years ended December 31, 1994 and 1993.
The rate of inflation has remained relatively stable and has had a minimal
impact on the operating results of the Partnership. The nature of various
tenant lease clauses protects the Partnership, to some extent, from increases
in the rate of inflation. Certain of the lease clauses provide for: 1) annual
rent increases based on the Consumer Price Index or graduated rental increases;
2) percentage rentals, for which the Partnership receives as additional rent as
a percentage of a tenant's sales over predetermined breakeven amounts and 3)
total or partial tenant reimbursement of property operating expenses and real
estate taxes.
To increase and/or maintain occupancy levels at the Partnership's properties,
the 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) promotion of local broker events and networking with
local brokers; 3) networking with national level retailers; 4) cold-calling
other businesses and tenants in the market area and 5) providing rental
concessions or competitively pricing rental rates, depending on market
conditions.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow (as defined in the Partnership Agreement) is generally not equal to
Partnership net income or cash flow as defined by GAAP, since certain items are
treated differently under the Partnership Agreement than under GAAP. The
General Partner 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 flow as defined by GAAP. The table in Item 6. Selected
Financial Data includes a reconciliation of Cash Flow (as defined in the
Partnership Agreement) to cash flow provided by operating activities as defined
by GAAP. Such amounts are not indicative of actual distributions to Partners
and should not neccessarily be considered as an alternative to the results
disclosed in the Statements of Income and Expenses and Statements of Cash
Flows.
Cash Flow (as defined in the Partnership Agreement) for the year ended December
31, 1995 was $288,600, a decrease of $362,800 when compared to the year ended
December 31, 1994. This decrease was primarily due to an increase in scheduled
debt service payments resulting from the refinancing of Glendale on January 6,
1995 and diminished operating results at Glendale as discussed above, partially
offset by the absence of the deficit operating results of Fashion Atrium in
1994.
The increase in the Partnership's cash position of $1,371,800 as of December
31, 1995 when compared to December 31, 1994 was primarily the result of the net
proceeds received in conjunction with the refinancing of the mortgage loan
collateralized by Glendale and the net cash provided by operating activities
exceeding expenditures made for capital and tenant improvements for the
Partnership's properties. Liquid assets of the Partnership as of December 31,
1995 are 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 for the year
ended December 31, 1995 was $760,500, an increase of $283,500 when compared to
the year ended December 31, 1994. This increase was primarily the result of the
decrease in the net loss due to the absence of Fashion Atrium, partially offset
by diminished operating results at Glendale, as previously discussed, and the
timing of the payment of certain Partnership expenses.
The increase in net cash (used for) investing activities of $325,000 for the
year ended December 31, 1995 when compared to the year ended December 31, 1994
was due to an increase in expenditures for capital and tenant improvements and
leasing costs at the Partnership's properties and to a lesser extent payments
of escrow deposits. The Partnership maintains working capital reserves to pay
for capital expenditures such as building and tenant improvements and leasing
costs. During the year ended December 31, 1995, the Partnership spent $672,100
for building and tenant improvements and leasing costs and has budgeted to
spend approximately $408,000 during 1996. Of the 1996 budgeted amount,
approximately $396,000 relates to anticipated capital and tenant improvements
and leasing costs expected to be incurred at Glendale. The General Partner
believes these expenditures are necessary in order to increase and/or maintain
occupancy levels and to maximize rental rates charged to new and renewing
tenants.
Net cash (used for) provided by financing activities changed from $(4,018,100)
for the year ended December 31, 1994 to $1,354,600 for the year ended December
31, 1995. This change was primarily due to the net proceeds received in 1995
from the refinancing of the mortgage loan collateralized by Glendale and the
absence of the principal paydowns which occurred in 1994.
As disclosed in Note 5 of Notes to Financial Statements, on January 6, 1995,
Indianapolis Mall Associates, the joint venture which owns Glendale, obtained a
new mortgage loan in the amount of $17,000,000 collateralized by this property.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
The Partnership's share of the new loan amount was $8,500,000. The existing
loan was paid off in full with a portion of the proceeds from the new loan. The
net cash received by the Partnership in connection with this refinancing of
$1,780,100, net of $69,900 in loan acquisition costs, was added to the
Partnership's working capital. Among other terms, the new loan provides for
monthly principal and interest payments as well as annual principal payments
based on Glendale's cash flow.
The joint venture which owns Regency, in which the Partnership has a 25%
interest with Affiliated partnerships, is in default under the terms of the
mortgage loan which matured on January 1, 1996. The General Partner is
negotiating with the mortgage lender to extend the maturity of the mortgage
loan. If consummated, the agreement for such extension of the loan may include
a change in interest rate, modified payment terms and other provisions that do
not exist in the matured loan. Since January 1, 1996, the Partnership has
continued to make payments to the lender, based on the terms of the matured
loan. There can be no assurance that the Partnership and mortgage lender will
consummate an extension of this loan. In addition, the Partnership has
initiated efforts to market Regency for sale.
As a result of the mortgage loan issues discussed above, combined with expected
cash required to fund anticipated capital, tenant improvement and leasing costs
to be made at the Partnership's properties, the General Partner believes that
it is in the best interest of the Partnership to retain all cash available.
Accordingly, distributions to Limited Partners continue to be suspended. The
amount of future distributions to Partners will ultimately be dependent upon
the performance of the Partnership's investments as well as the General
Partner's determination of the amount of cash necessary to supplement working
capital reserves to meet future liquidity requirements of the Partnership.
There can be no assurance as to the amount and/or availability of cash for
distribution to Partners.
Based upon the current estimated value of its assets, net of its outstanding
liabilities, together with its expected operating results and capital
expenditure requirements, the General Partner believes that the Partnership's
cumulative distributions to its Limited Partners from inception through the
termination of the Partnership will be substantially less than such Limited
Partner's original Capital Investment.
12
<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.
13
<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 General Partner. The directors of FCFC, as of March 29,
1996, 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 June 1996.
Name Office
---- ------
Samuel Zell........................................ Chairman of the Board
Douglas Crocker II................................. Director
Sheli Z. Rosenberg................................. Director
Sanford Shkolnik................................... Director
Samuel Zell, 54, has been a Director of the 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., ("EGI") and is a trustee and
beneficiary of a general partner of Equity Holdings Limited, an Illinois
Limited Partnership, a privately owned investment partnership. He is also
Chairman of the Board of Directors of Anixter International 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 Quality Food Centers, Inc. and Sealy Corporation. He is
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
protection under the Federal bankruptcy laws on November 8, 1991.
Douglas Crocker II, 55, has been President and Chief Executive Officer
since December 1992 and a Director since January 1993 of the General
Partner. Mr. Crocker has been an Executive Vice President of EFMC since
November 1992. Mr. Crocker has been President, Chief Executive Officer and
trustee 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.
Mr. Crocker is a member of the Board of Directors of Horizon Group, Inc.
Sheli Z. Rosenberg, 54, was President and Chief Executive Officer of the
General Partner from December 1990 to December 1992 and has been a Director
of the 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 EGI 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 Anixter
International Inc., Capsure Holdings Corp., American Classic Voyages Co.,
Falcon Building Products, Inc., Jacor Communications, Inc., Revco D.S.,
Inc., Sealy Corporation and CFI Industries, Inc. She was Chairman of the
Board from January 1994 to September 1994; Co-Chairman of the Board from
September 1994 until March 1995 of CFI Industries, Inc. She is also a
trustee of Equity Residential Properties Trust. Ms. Rosenberg is a
Principal of Rosenberg & Liebentritt, P.C., counsel to the Partnership, the
General Partner and certain of their Affiliates. Ms. Rosenberg was Vice
President of Madison prior to October 4, 1991. Madison filed for protection
under the
14
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
- -------- --------------------------------------------------
(a) DIRECTORS (continued)
---------------------
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 protection under the
Federal Bankruptcy laws on January 3, 1995.
Sanford Shkolnik, 57, has been a Director of the 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
management company.
(b,c & e) EXECUTIVE OFFICERS
------------------
The Partnership does not have any executive officers. The executive
officers of the General Partner as of March 29, 1996 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, 54, has been Senior Vice President of the 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 an Executive Vice President 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. 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 protection under the Federal bankruptcy laws on November
8, 1991.
Norman M. Field, 47, has been Vice President of Finance and Treasurer of the
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. He also served as Vice
President of Madison until October 4, 1991. He was Chief Financial Officer of
Equality Specialties, Inc. ("Equality"), a subsidiary of Great American, from
August 1994 to April 1995. Equality was sold in April 1995.
(d) FAMILY RELATIONSHIPS
--------------------
There are no family relationships among any of the foregoing directors and
officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
With the exception of the bankruptcy matters disclosed under Items 10 (a),
(b), (c) and (e), there are no involvements in certain legal proceedings
among any of the foregoing directors and officers.
15
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
(a,b,c & d) As stated in Item 10, the Partnership has no officers or directors.
Neither the General Partner, nor any director or officer of the General Partner,
received any direct remuneration from the Partnership during the year ended
December 31, 1995. However, the General Partner and Affiliates do compensate the
directors and officers of the General Partner. For additional information see
Item 13 (a) Certain Relationships and Related Transactions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
(a) As of March 1, 1996, no person owned of record or was known by the
Partnership to own beneficially more than 5% of the Partnership's 43,861 Units
outstanding.
(b) The Partnership has no directors or executive officers. As of March 1,
1996, the executive officers and directors of First Capital Financial
Corporation, the General Partner did not own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
(a) Affiliates of the General Partner provide leasing, property management and
supervisory services to the Partnership. Compensation for these property
management services may not exceed the lesser of the compensation customarily
charged in arm's-length transactions by persons rendering similar services or 6%
of the gross receipts from the property being managed plus normal out-of-pocket
expenses where the General Partner or Affiliate provides leasing, re-leasing
and/or leasing-related services, or 3% of gross receipts where the General
Partner or Affiliate does not perform leasing, re-leasing and/or leasing-related
services for a particular property. For the year ended December 31, 1995, these
Affiliates were entitled to leasing, supervisory and property management fees
and reimbursements of $299,000. In addition, other Affiliates of the General
Partner were entitled to fees, compensation and reimbursements of $77,400 for
insurance, personnel, and other miscellaneous services for 1995. Compensation
for these services are on terms which are fair, reasonable and no less favorable
to the Partnership than reasonably could be obtained from unaffiliated persons.
Of these amounts, a total of $30,500 was due to Affiliates as of December 31,
1995.
As of December 31, 1995, $10,000 was due to the General Partner for a real
estate commission earned in connection with the sale of one Partnership
property. This commission has been accrued but not paid. Under the terms of the
Partnership Agreement, this fee 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) of
6% simple interest per annum on their Capital Investment from the initial date
of investment.
In accordance with the Partnership Agreement, subsequent to September 24, 1985,
the Termination of the Offering, the General Partner is entitled to 10% of
distributable Cash Flow (as defined by the Partnership Agreement), as a
Partnership Management Fee. For the year ended December 31, 1995, the General
Partner was not paid a Partnership Management Fee.
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties and inclusive of
extinguishment of debt) are allocated to the General Partner in an amount equal
to the greater of 1% of such Net Profits or the Partnership Management Fee paid
by the Partnership to the General Partner during such year, and the balance, if
any, to the Limited Partners. Net Losses (exclusive of Net Losses from the sale
or disposition and
16
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - CONTINUED
- -------- ----------------------------------------------------------
provisions for value impairment of Partnership properties) are allocated 1% to
the General Partner and 99% to the Limited Partners. Net Profits from the sale
or disposition of a Partnership property are allocated: first, prior to giving
effect to any distribution of Sale or Refinancing Proceeds from the transaction,
to all 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; second, to the General Partner in an amount necessary to
make the positive balance in its Capital Account equal to the amount of Sale or
Refinancing Proceeds to be distributed to the General Partner with respect to
the sale or disposition of such property; and third, the balance, if any, to the
Limited Partners. Net Losses from the sale or disposition and provisions for
value impairment of Partnership properties are allocated: first, after giving
effect to any distribution of Sale or Refinancing Proceeds from the transaction,
to all Partners with positive balances in their Capital Accounts, pro rata in
proportion to such respective positive balances, to the extent of the total
amount of such positive balances; and second, the balance, if any, 1% to the
General Partner and 99% to the Limited Partners. Notwithstanding anything to the
contrary, there shall be allocated to the General Partner not less than 1% of
all items of Partnership income, gain, loss, deduction and credit during the
existence of the Partnership. For the year ended December 31, 1995, the General
Partner was allocated a Net (Loss) of $(72,700) which included a (loss) from
provisions for value impairment of $(73,000).
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the General Partner and certain of their Affiliates. Sheli Z.
Rosenberg, President and Chief Executive Officer of the General Partner from
December, 1990 to December, 1992 and a director of the General Partner since
September, 1983, is a Principal of Rosenberg. Compensation for these services
are on terms which are fair, reasonable and no less favorable to the Partnership
than reasonably could be obtained from unaffiliated persons. Total legal fees
paid to Rosenberg for the year ended December 31, 1995 were $78,500.
(c) No management person is indebted to the Partnership.
(d) None.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- -------- ----------------------------------------------------------------
(a,c & d) (1,2 & 3) See Index of 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, 1995.
18
<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 INCOME PROPERTIES, LTD. - SERIES X
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 29, 1996 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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ SAMUEL ZELL March 29, 1996 Chairman of the Board and
- ----------------------------- -------------- Director of the General Partner
SAMUEL ZELL
/s/ DOUGLAS CROCKER II March 29, 1996 President, Chief Executive Officer and
- ----------------------------- -------------- Director of the General Partner
DOUGLAS CROCKER II
/s/ SHELI Z. ROSENBERG March 29, 1996 Director of the General Partner
- ----------------------------- --------------
SHELI Z. ROSENBERG
/s/ SANFORD SHKOLNIK March 29, 1996 Director of the General Partner
- ----------------------------- --------------
SANFORD SHKOLNIK
/s/ NORMAN M. FIELD March 29, 1996 Vice President - Finance and Treasurer
- ----------------------------- --------------
NORMAN M. FIELD
</TABLE>
19
<PAGE>
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
<TABLE>
<CAPTION>
Pages
----------
<S> <C>
Report of Independent Auditors A-2
Balance Sheets at December 31, 1995 and 1994 A-3
Statements of Partners' Capital for the Years
Ended December 31, 1995, 1994, and 1993 A-3
Statements of Income and Expenses for the Years
Ended December 31, 1995, 1994, and 1993 A-4
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993 A-4
Notes to Financial Statements A-5 to A-7
SCHEDULE FILED AS PART OF THIS REPORT
III - Real Estate and Accumulated Depreciation as of
December 31, 1995 A-8 and A-9
</TABLE>
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.
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-9 of the Partnership's
definitive Prospectus dated September 25, 1984; Registration Statement No.
2-92364, filed pursuant to Rule 424(b), is incorporated herein by reference.
EXHIBIT (10) Material Contracts
(a) Order Confirming Plan of Reorganization under Chapter 11 of the United
States Bankruptcy Code for FANY Seventh Avenue Associates, filed as an exhibit
to the Partnership's Report on Form 8-K dated December 9, 1994, is incorporated
herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1994 Annual Report to Limited Partners is being sent under separate cover,
not as a filed document and not via EDGAR, for the information of the
Commission.
EXHIBIT (27) Financial Data Schedule
A-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Partners
First Capital Income Properties, Ltd. - Series X
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Income
Properties, Ltd. - Series X as of December 31, 1995 and 1994, and the related
statements of income and expenses, partners' capital and cash flows for each of
the three years in the period ended December 31, 1995, 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 Income
Properties, Ltd. - Series X at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
March 1, 1996
A-2
<PAGE>
BALANCE SHEETS
December 31, 1995 and 1994
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 3,928,400 $ 6,928,400
Buildings and improvements 20,551,600 24,179,500
- ------------------------------------------------------------------------------
24,480,000 31,107,900
Accumulated depreciation and amortization (7,099,000) (6,379,100)
- ------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 17,381,000 24,728,800
Cash and cash equivalents 2,464,100 1,092,300
Restricted cash 37,500
Rents receivable 444,500 493,800
Escrow deposits 111,000 39,800
Prepaid expenses 12,500
Other assets (primarily loan acquisition costs, net
of accumulated amortization of $179,000 and
$138,100, respectively) 122,300 90,500
- ------------------------------------------------------------------------------
$20,522,900 $26,495,200
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable $11,998,000 $10,648,600
Accounts payable and accrued expenses 549,200 612,300
Due to Affiliates 30,500 39,300
Security deposits 18,500 13,300
Other liabilities 68,100 51,500
- ------------------------------------------------------------------------------
12,664,300 11,365,000
- ------------------------------------------------------------------------------
Partners' (deficit) capital:
General Partner (deficit) (72,700)
Limited Partners (43,861 units issued and
outstanding) 7,931,300 15,130,200
- ------------------------------------------------------------------------------
7,858,600 15,130,200
- ------------------------------------------------------------------------------
$20,522,900 $26,495,200
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1995, 1994 and 1993
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1993 $(177,800) 22,789,600 $22,611,800
Net (loss)
for the
year ended
December 31, 1993 (65,300) (6,467,200) (6,532,500)
- --------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1993 (243,100) 16,322,400 16,079,300
Net income (loss) for the
year ended
December 31, 1994 243,100 (1,192,200) (949,100)
- --------------------------------------------------------------------------
Partners' capital, December 31, 1994 0 15,130,200 15,130,200
Net (loss)
for the
year ended
December 31, 1995 (72,700) (7,198,900) (7,271,600)
- --------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1995 $ (72,700) $ 7,931,300 $ 7,858,600
- --------------------------------------------------------------------------
</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, 1995, 1994 and 1993
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $ 4,140,500 $ 5,732,000 $ 7,057,300
Interest 147,600 181,000 119,900
- -------------------------------------------------------------------------------
4,288,100 5,913,000 7,177,200
- -------------------------------------------------------------------------------
Expenses:
Interest 1,250,100 1,818,100 1,413,400
Depreciation and amortization 760,800 1,228,300 1,280,300
Property operating:
Affiliates 342,100 347,900 369,300
Nonaffiliates 823,800 1,413,900 1,385,400
Real estate taxes 487,400 1,269,700 1,313,300
Insurance--Affiliate 49,100 90,700 98,800
Repairs and maintenance 397,200 644,500 665,800
General and administrative:
Affiliates 37,500 25,800 31,200
Nonaffiliates 111,700 135,800 131,400
Loss on sale or disposition of property 7,946,000 20,800
Provisions for value impairment 7,300,000 750,000 7,000,000
- -------------------------------------------------------------------------------
11,559,700 15,670,700 13,709,700
- -------------------------------------------------------------------------------
Net (loss) before extraordinary gain on
extinguishment of debt (7,271,600) (9,757,700) (6,532,500)
Extraordinary gain on extinguishment of
debt 8,808,600
- -------------------------------------------------------------------------------
Net (loss) $(7,271,600) $ (949,100) $(6,532,500)
- -------------------------------------------------------------------------------
Net (loss) income allocated to General
Partner $ (72,700) $ 243,100 $ (65,300)
- -------------------------------------------------------------------------------
Net (loss) allocated to Limited
Partners $(7,198,900) $(1,192,200) $(6,467,200)
- -------------------------------------------------------------------------------
Net (loss) before extraordinary gain on
extinguishment of debt allocated to
Limited Partners per Unit (43,861
Units outstanding) $ (164.13) $ (220.24) $ (147.45)
- -------------------------------------------------------------------------------
Net (loss) allocated to Limited
Partners per Unit (43,861 Units
outstanding) $ (164.13) $ (27.18) $ (147.45)
- -------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(7,271,600) $ (949,100) $(6,532,500)
Adjustments to reconcile net (loss) to
net cash provided by operating
activities:
Depreciation and amortization 760,800 1,228,300 1,280,300
Loss on sale or disposition of property 7,946,000 20,800
Provisions for value impairment 7,300,000 750,000 7,000,000
Extraordinary gain on extinguishment of
debt (8,808,600)
Changes in assets and liabilities:
Decrease in restricted cash 37,500 223,600 12,000
Decrease in rents receivable 49,300 197,900 317,000
Decrease (increase) in prepaid expenses 12,500 (6,500) 445,400
(Increase) decrease in other assets (72,700) (80,300) 18,500
(Decrease) increase in accounts payable
and accrued expenses (63,100) (200) 338,800
(Decrease) increase in due to
Affiliates (8,800) (12,900) 10,300
Increase (decrease) in other
liabilities 16,600 (11,200) 7,800
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 760,500 477,000 2,918,400
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for capital expenditures (672,100) (418,300) (539,300)
(Increase) in escrow deposits (71,200) (39,800)
Proceeds from the sale of land parcel 76,700
- --------------------------------------------------------------------------------
Net cash (used for) investing
activities (743,300) (418,300) (502,400)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of mortgage loans
payable 8,500,000
Advance on mortgage loans payable 1,182,700
Principal payments on mortgage loans
payable (7,150,600) (4,889,000) (36,300)
Cash paid on disposition of property (49,500)
Increase (decrease) in security deposits 5,200 (262,300) (4,500)
- --------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 1,354,600 (4,018,100) (40,800)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 1,371,800 (3,959,400) 2,375,200
Cash and cash equivalents at the
beginning of the year 1,092,300 5,051,700 2,676,500
- --------------------------------------------------------------------------------
Cash and cash equivalents at the end of
the year $ 2,464,100 $1,092,300 $ 5,051,700
- --------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year $ 1,300,400 $1,343,700 $ 1,414,600
- --------------------------------------------------------------------------------
</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 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 May 31, 1984, 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 September 25, 1984. The
Certificate and Agreement, as amended and restated, authorized the sale to the
public of 50,000 Units and not less than 1,400 Units. On October 23, 1984, the
required minimum subscription level was reached and the Partnership's
operations commenced. In September, 1985, the Offering was Terminated upon the
sale of 43,861 Units. 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, 2014. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles. Under this method of accounting, revenues are
recorded when earned and expenses are recorded when incurred.
The preparation of the Partnership's financial statements in conformity with
generally accepted accounting principles 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 statements include the Partnership's 50% interest in two joint
ventures and a 25% interest in one joint venture. The joint ventures are
operated under the common control of the 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 in their
individual tax returns; therefore, no provision for income taxes is made in the
financial statements of the Partnership. In addition, it is not practicable for
the Partnership to determine the aggregate tax bases of the Limited Partners;
therefore, the disclosure of the differences 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 provisions 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 as incurred; expenditures for improvements are
capitalized and depreciated over the estimated life of the improvements.
The General Partner periodically reviews significant factors regarding the
properties to determine that the properties are carried at lower of cost or
fair market value. These factors include, but are not limited to, the General
Partner's experience in the real estate industry and an evaluation of recent
operating performance against expected results, economic trends or factors
affecting major tenants or the regions in which the properties are located and,
where available, information included in recent appraisals of properties.
Based on this analysis, where it is anticipated that the carrying value of an
investment property will not be recovered, the General Partner has deemed it
appropriate to reduce the basis of the properties for financial reporting
purposes to fair market value. Such fair market value is the General Partner's
best estimate of the amounts expected to be realized were such properties sold
as of the Balance Sheet date, based upon current information available. The
ultimate realization may differ from these amounts. Provisions, where
applicable, are reflected in the accompanying Statements of Income and Expenses
in the year such evaluations have been made. See Note 8 for additional
information.
Loan acquisition costs are amortized over the term of the note issued under the
mortgage loans made in connection with the acquisition or refinancing of
Partnership properties. When a property is disposed or refinanced, the related
loan acquisition costs and accumulated amortization are removed from the
respective accounts and any unamortized balance is expensed.
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 and amortization are removed from
the respective accounts. Any gain or loss on sale or disposition is also
recognized in accordance with generally accepted accounting principles.
Cash equivalents are considered all highly liquid investments with a maturity
of three months or less when purchased.
The Partnership's financial statements include financial instruments, including
receivables, trade liabilities and mortgage debt. The Partnership considers the
disclosure of the fair value of its mortgage debt to be impracticable due to
the general illiquid nature of the real estate financing market and an
inability to obtain comparable financing on certain properties due to declines
in market value. The fair value of all other financial instruments, including
cash and cash equivalents, was not materially different from their carrying
value at December 31, 1995 and 1994.
Certain reclassifications have been made to the previously reported 1994 and
1993 statements in order to provide comparability with the 1995 statements.
These reclassifications have no effect on net (loss) or Partners' (deficit)
capital.
2. RELATED PARTY TRANSACTIONS:
In accordance with the Partnership Agreement, subsequent to September 24, 1985,
the Termination of the Offering, the General Partner is entitled to 10% of
distributable Cash Flow (as defined in the Partnership Agreement), as a
Partnership Management Fee. For the years ended December 31, 1995, 1994 and
1993 in conjunction with the suspension of distributions of Cash Flow (as
defined in the Partnership Agreement) to Limited Partners, the General Partner
was not paid a Partnership Management Fee.
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties and inclusive of
extraordinary gain on extinguishment of debt) are allocated to the General
Partner in an amount equal to the greater of 1% of such Net Profits or the
Partnership Management Fee paid by the Partnership to the General Partner
during such year, and the balance, if any, to the Limited Partners. Net Losses
(exclusive of Net Losses from the sale or disposition and provisions for value
impairment of Partnership properties) are allocated 1% to the General Partner
and 99% to the Limited Partners. Net Profits from the sale or disposition of a
Partnership property are allocated: first, prior to giving effect to any
distribution of Sale or Refinancing Proceeds from the transaction, to all
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; second, to the General Partner in an amount necessary
to make the positive balance in its Capital Account equal to the amount of Sale
or Refinancing Proceeds to be distributed to the General Partner with respect
to the sale or disposition of such property; and third, the balance, if any, to
the Limited Partners. Net Losses from the sale or disposition of Partnership
properties (including provisions for value impairments) are allocated: first,
after giving effect to any distribution of Sale or Refinancing Proceeds from
the transaction, to all Partners with positive balances in their Capital
Accounts, pro rata in proportion to such respective positive balances, to the
extent of the total amount of such positive balances; and second, the balance,
if any, 1% to the General Partner and 99% to the Limited Partners.
Notwithstanding anything to the contrary, there shall be allocated to the
General Partner not less than 1% of all items of Partnership income, gain,
loss, deduction and credit during the existence of the Partnership. For the
year ended December 31, 1995, the General Partner was allocated a Net (Loss) of
$(72,700), which included a (loss) from provisions for value impairment of
A-5
<PAGE>
$(73,000). For the year ended December 31, 1994, the General Partner was
allocated Net Profits of $243,100, which included a (loss) from the disposition
of Partnership property of $(79,500), an extraordinary gain on extinguishment
of debt of $340,700 and a (loss) from a provision for value impairment of
$(7,500). For the year ended December 31, 1993 the General Partner was
allocated a Net (Loss) of $(65,300) which included a (loss) from the sale of a
land parcel of $(200) and a (loss) from provisions for value impairment of
$(70,000).
Commission, fees and reimbursements paid and payable by the Partnership to
Affiliates are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------
1995 1994 1993
---------------- ---------------- ----------------
Paid Payable Paid Payable Paid Payable
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate commission (a) None $10,000 None $10,000 None $10,000
Property management and
leasing fees $310,100 15,400 $319,500 24,900 $318,100 37,200
Reimbursements of property
insurance premiums, at
cost 49,100 None 87,000 None 91,500 None
Reimbursements of
expenses, at cost:
--Accounting 17,600 4,200 18,600 3,300 22,300 3,300
--Investor communication 8,400 900 6,800 1,100 7,600 1,100
--Legal 78,500 None 59,700 None 53,000 600
- ------------------------------------------------------------------------------
$463,700 $30,500 $491,600 $39,300 $492,500 $52,200
- ------------------------------------------------------------------------------
</TABLE>
(a) As of December 31, 1995, 1994 and 1993, the Partnership owed $10,000 to the
General Partner for a real estate commission earned in connection with the
sale of one Partnership property. This commission has been accrued but not
paid. Under the terms of the Partnership Agreement, this fee will not be
paid until such time as 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) of 6% simple
interest per annum on their Capital Investment from the initial date of
investment.
3. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1995 was as follows:
<TABLE>
<S> <C>
1996 $ 2,181,400
1997 2,068,700
1998 2,006,300
1999 1,884,200
2000 1,731,300
Thereafter 4,800,400
--------------
$14,672,300
--------------
</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 operating expense
and real estate tax reimbursements and percentage rents. Percentage rents
earned for the years ended December 31, 1995, 1994 and 1993 were $249,300,
$107,400 and $382,800, respectively.
4. ESCROW DEPOSITS AND RESTRICTED CERTIFICATE OF DEPOSIT:
On June 24, 1994, the joint venture which owns Regency Park Shopping Center
("Regency"), in which the Partnership has a 25% interest, invested $150,000 in
a restricted certificate of deposit which collateralized a letter of credit for
a construction allowance to a major new tenant which occupies 40,150 leasable
square feet at Regency. This amount, of which the Partnership's share was
$37,500, was paid to the new tenant upon compliance with the lease section
pertaining to this construction allowance. The letter of credit was cancelled
and the certificate of deposit was released to the Partnership in May 1995.
Restricted escrow deposits at December 31, 1995 and 1994 included $159,400 of
which the Partnership's share was 25%, being held by the mortgage holder of
Regency in a non-interest bearing escrow account as collateral for the mortgage
loan that matured January 1, 1996 but was not paid (see Note 5 for additional
information).
Escrow deposits in the amount of $71,200 as of December 31, 1995 represented an
amount being held by the mortgage holder of the Glendale Center Shopping Mall
as working capital reserves to pay for capital expenditures such as building
and tenant improvement and leasing costs.
5. MORTGAGE LOANS PAYABLE:
Mortgage loans payable at December 31, 1995 and 1994 consisted of the following
non-recourse loans:
<TABLE>
<CAPTION>
Principal Principal Monthly Estimated
Property Pledged Balance at Balance at Interest Maturity Periodic Balloon
as Collateral (a) 12/31/95 12/31/94 Rate Date Payment Payment (b)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glendale Center Shopping
Mall (c) $ 8,039,400 $ 6,650,000 10.51%(d) 1/1/99 (c) $6,171,200
Regency Park Shopping
Center (e) 3,958,600 3,998,600 (e) (e) (e) (e)
Fashion Atrium Building
(f) None None (f) (f) (f) (f)
- -----------------------------------------------------------------------------------------
$11,998,000 $10,648,600
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Each property is owned through a joint venture. Amounts represent the
Partnership's share of the liability and not the total amount by which the
property is encumbered.
(b) The repayment will require either sale or refinancing of the respective
property.
(c) On October 27, 1994, Indianapolis Mall Associates, the joint venture which
owns Glendale Center Shopping Mall ("Glendale") made a $4,300,000 principal
payment to this lender, of which the Partnership's share was $2,150,000. As
a result of this principal payment, the lender agreed to extend the loan's
maturity to November 30, 1994. On November 21, 1994, the joint venture made
an additional principal payment of $3,700,000, of which the Partnership's
share was $1,850,000, for which the lender further extended the maturity
date to January 31, 1995. A fee of $50,000 was paid by the joint venture
for each loan extension. On January 6, 1995, the joint venture which owns
Glendale, obtained a new mortgage loan in the amount of $17,000,000 secured
by this property. The Partnership's share of the new loan amount was
$8,500,000. The existing loan was paid off in full with a portion of the
proceeds from the new loan. The interest rate on the new loan is variable
at Libor plus 4.5% with interest payable monthly. Monthly payments of
principal are to be made based on an 11-year amortization with an interest
rate of 9.5%. The joint venture is required to pay annually additional
principal amortization equal to 50% of net cash flow (pursuant to the loan
agreement) from the property for each prior calendar year by March 31,
1996. Additionally, certain debt coverage requirements (pursuant to the
loan agreement) must be met each quarter and deficiencies in reaching
benchmarks will
A-6
<PAGE>
require additional principal amortization payments. The additional principal
amortization payment that the joint venture is required to pay for the 1995
calendar year is $387,400 of which the Partnership's share is $193,700.
(d) This represents the weighted average interest rate for the year ended
December 31, 1995. The interest rate is subject to change in accordance
with the provisions within the loan agreement. As of December 31, 1995, the
interest rate on the Glendale loan was 10.531%.
(e) The joint venture which owns Regency, in which the Partnership has a 25%
interest with Affiliated partnerships, is in default under the terms of the
mortgage loan which matured on January 1, 1996. The General Partner is
negotiating with the mortgage lender to extend the maturity of the mortgage
loan. If consummated, the agreement for such extension of the loan may
include a change in interest rate, modified payment terms and other
provisions that do not exist in the matured loan. Since January 1, 1996,
the Partnership has continued to make payments to the lender, based on the
terms of the matured loan. There can be no assurance that the Partnership
and mortgage lender will consummate an extension of this loan.
(f) The General Partner was unable to reach a mutual resolution with the
mortgage holder regarding the restructuring of the loan for Fashion Atrium
and as a result, in April 1994, the Partnership received a notice of
default from the mortgage holder. On August 25, 1994, FANY Seventh Avenue
Associates ("FANY"), the joint venture which owned Fashion Atrium and in
which the Partnership had a 50% interest, executed a Cash Collateral Use
Agreement (the "Agreement") with the mortgage holder. Upon execution of the
Agreement, FANY transferred $1,311,000, of which the Partnership's share
was $655,500, of accumulated cash flow through July 31, 1994 to a
safekeeping account under sole control of the mortgage holder. In addition,
the mortgage holder made a protective advance to FANY in the amount of
$2,313,200, of which the Partnership's share was $1,156,600, for the
payment of accrued real estate taxes plus penalties and interest. FANY
assisted in the orderly conveyance of title of the property to the mortgage
holder within the context of a pre-packaged Chapter 11 bankruptcy plan
filed on October 14, 1994 in the United States Bankruptcy Court for the
Southern District of New York. A confirmation hearing on the pre-packaged
plan occurred on November 22, 1994. The conveyance of title to the property
occurred pursuant to the terms and conditions of a confirmed plan on
December 9, 1994. At the time the conveyance of title occurred, FANY was
relieved of its obligation under the mortgage loan of $24,151,000, less
amounts held in safekeeping, of which the Partnership's share was
$12,075,500 and any interest in the assets and liabilities of FANY therein,
with the exception of the rights to real estate tax refunds that may be
received for the fiscal years 1992 and 1993.
Principal amortization of mortgage loans payable for each of the next four
years as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
1996 $ 4,658,600
1997 556,500
1998 611,700
1999 6,171,200
--------
$11,998,000
--------
</TABLE>
6. INCOME TAX:
The Partnership utilizes the accrual basis 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 Partnership's
provisions for value impairment and other factors for financial statement
purposes. The net effect of these accounting differences for the year ended
December 31, 1995, was that the net (loss) for financial statement purposes was
$6,841,200 greater than the net (loss) for tax reporting purposes. The
aggregate cost of commercial rental properties for federal income tax purposes
at December 31, 1995 was $34,030,000.
7. PROPERTY SALES:
On December 9, 1994, the joint venture which owned Fashion Atrium, in which the
Partnership had a 50% interest, transferred title to Fashion Atrium to the
mortgage holder through an orderly conveyance of title of the property within
the context of a pre-packaged Chapter 11 bankruptcy plan filed on October 14,
1994 in the United States Bankruptcy Court for the Southern District of New
York. The disposition of Fashion Atrium relieved the Partnership of its share
of the obligation under the nonrecourse mortgage loan collateralized by the
property as well as any interest in the assets therein, with the exception of
the rights to real estate tax refunds that may be received for the fiscal years
1992 and 1993. This extinguishment of debt was considered a noncash event for
the purposes of the Statement of Cash Flows, and was not included in the
Partnership's calculation of Cash Flow (as defined by the Partnership
Agreement) for the year ended December 31, 1994. The Partnership recorded a
(loss) on the disposition of the Fashion Atrium of ($13,446,000) of which
($5,500,000) was recorded as a provision for value impairment for financial
statement purposes for the year ended December 31, 1993. In addition, in 1994,
the Partnership also recorded for financial statement purposes an extraordinary
gain on extinguishment of debt in connection with the disposition of Fashion
Atrium of $8,808,600 for financial statement purposes. This extraordinary gain
on extinguishment of debt represented the excess property indebtedness over the
estimated fair market value of the property. For tax purposes, the Partnership
recorded a (loss) in 1994 of ($588,700) on this disposition, which was
allocated to the General Partner in accordance with the Partnership Agreement.
On March 1, 1993, a joint venture in which the Partnership holds a 25%
interest, sold a parcel of land at the Regency, located in Jacksonville,
Florida. The Partnership's portion of the sale price was $78,800 and selling
expenses of $2,100 were incurred. The Partnership received net proceeds from
this sale of $76,700, of which $39,800 was deposited in a non-interest bearing
escrow held by the mortgage holder of the loan collateralized by Regency. For
financial statement and income tax reporting purposes the Partnership recorded
a (loss) of $(20,800) as a result of this transaction. This sale was all-cash
with no further involvement on the part of the Partnership.
8. PROVISIONS FOR VALUE IMPAIRMENT:
Due to the depressed economic environment in the retail industry, regional
factors affecting the Partnership's properties and other matters relating
specifically to certain of the Partnership's properties, there is uncertainty
as to the Partnership's ability to recover the net carrying value of certain of
its properties during the remaining estimated holding periods. Accordingly, it
was deemed appropriate to reduce the bases of such properties in the
Partnership's financial statements during the years ended December 31, 1995,
1994 and 1993. The provisions for value impairment were considered non-cash
events for the purposes of the Statements of Cash Flows and were not utilized
in the determination of Cash Flow (as defined in the Partnership Agreement).
The following is a summary of the provisions for value impairment reported by
the Partnership for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Property 1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Glendale Center
Shopping Mall $6,300,000
Regency Park Shopping
Center 1,000,000 $750,000 $1,500,000
Fashion Atrium 5,500,000
------------------------------------------------
$7,300,000 $750,000 $7,000,000
------------------------------------------------
</TABLE>
The provisions for value impairment were material fourth quarter adjustments
pursuant to Accounting Principles Board Opinion No. 28, "Interim Financial
Reporting". No other material adjustments were made in the fourth quarters.
Beginning on January 1, 1996, the Partnership will adopt Financial Accounting
Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The
Standard established guidance for determining if the value of defined assets
are impaired, and if so, how impairment losses should be measured and reported
in the financial statements. The Standard is effective for fiscal years
beginning after December 15, 1995. The General Partner believes that based on
current circumstances, the adoption on January 1, 1996 of the Standard will not
materially affect the Partnership's financial position or results of
operations.
A-7
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES X
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------- ----------- ------------------------ --------------------- --------------------------------------------
Costs capitalized
Initial cost subsequent Gross amount at which
to Partnership to acquisition carried at close of period
------------------------ --------------------- --------------------------------------------
Buildings Buildings
and and
Encum- Improve- Improve- Carrying Improve-
Description brances Land ments ments Costs(1) Land ments Total(2)(3)
- -------------------- ----------- ---------- ----------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers:
- -----------------
Glendale Center
Shopping Mall
(Indianapolis, IN)
(50% Interest) $ 8,039,400 $4,932,600 $18,556,900 $2,094,100 $ 67,600 $2,887,600(5) $16,463,600(5) $19,351,200
Regency Park
Shopping Center
(Jacksonville, FL)
(25% Interest) (9) 3,958,600 2,062,600 6,158,200 68,400 89,600 1,040,800 4,088,000(10) 5,128,800
----------- ---------- ----------- ---------- -------- ---------- ----------- -----------
$11,998,000 $6,995,200 $24,715,100 $2,162,500 $157,200 $3,928,400 $20,551,600 $24,480,000
=========== ========== =========== ========== ======== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
- -------------------- ---------- --------- -------- ------------
Life on
which
deprecia-
tion in lat-
Accumu- est income
lated Date of statements
Deprecia- construc- Date is com-
Description tion (2) tion Acquired puted
- -------------------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C>
Shopping Centers:
- -----------------
Glendale Center
Shopping Mall
(Indianapolis, IN) 35(7)
(50% Interest)(4) $5,885,600 1958(6) 5/85 3-13(8)
Regency Park
Shopping Center
(Jacksonville, FL) 35(7)
(25% Interest)# 1,213,400 1985 2/88 1-5(8)
----------
$7,099,000
==========
</TABLE>
See accompanying notes on the following page.
A-8
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES X
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, 1995 December 31, 1994 December 31, 1993
-------------------------- ---------------------------- ---------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
----------- ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of the year $31,107,900 $6,379,100 $ 48,541,500 $10,268,000 $55,099,700 $ 9,032,600
Additions during the year:
Improvements 672,100 418,300 539,300
Provisions for depreciation 719,900 1,185,800 1,235,400
Deductions during the year:
Cost of real estate sold or disposed (17,101,900) (97,500)
Accumulated depreciation on real
estate sold or disposed (5,074,700)
Provisions for value impairments (7,300,000) (750,000) (7,000,000)
----------- ---------- ------------ ----------- ----------- -----------
Balance at end of the year $24,480,000 $7,099,000 $ 31,107,900 $ 6,379,100 $48,541,500 $10,268,000
=========== ========== ============ =========== =========== ===========
</TABLE>
Note 3. The aggregate cost for Federal income tax purposes was $34,030,000.
Note 4. A parcel of land at Glendale Center Shopping Mall was sold on October
9, 1992. The basis of the land was approximately $59,400.
Note 5. Includes a provision for value impairment of $6,300,000.
Note 6. Renovated in 1983 and 1984.
Note 7. Estimated useful life of building.
Note 8. Estimated useful life of improvements.
Note 9. A parcel of land at Regency Park Shopping Center was sold on March 1,
1993. The basis of the land was approximately $97,500.
Note 10. Includes provisions for value impairment of $3,250,000.
A-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,464,100
<SECURITIES> 0
<RECEIVABLES> 444,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,019,600
<PP&E> 24,480,000
<DEPRECIATION> 7,099,000
<TOTAL-ASSETS> 20,522,900
<CURRENT-LIABILITIES> 588,200
<BONDS> 11,998,000
<COMMON> 0
0
0
<OTHER-SE> 7,858,600
<TOTAL-LIABILITY-AND-EQUITY> 20,522,900
<SALES> 0
<TOTAL-REVENUES> 4,288,100
<CGS> 0
<TOTAL-COSTS> 2,099,600
<OTHER-EXPENSES> 149,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,250,100
<INCOME-PRETAX> (7,271,600)
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<CHANGES> 0
<NET-INCOME> (7,271,600)
<EPS-PRIMARY> (164.13)
<EPS-DILUTED> (164.13)
</TABLE>
