<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, 1997
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------
Commission File Number 0-14121
--------------------
First Capital Income Properties, Ltd. - Series X
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Florida 59-2417973
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 1000, 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
- -------------------------------------------------- ---------------------------
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units
- ----------------------------------------------------------- ---------------------------
</TABLE>
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. [ x ]
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
No. 2-92364), is incorporated herein by reference in Part IV of this report.
Exhibit Index - Page A-1
- ------------------------
<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 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. Unless otherwise defined herein, 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"). Through
December 31, 1997, the Partnership sold its real property investment and, with
Affiliated partnerships, dissolved two of the joint ventures as a result of the
disposition or sale of the real property interests.
Property management services for the Partnership's real estate investments are
provided by a third party 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. The property owned by the Partnership frequently competes for
tenants with similar properties owned by others.
As of March 1, 1998, there were 27 employees at the Partnership's property for
on-site property maintenance and administration.
ITEM 2. PROPERTIES (a)(b)
As of December 31, 1997, the Partnership owned, through a joint venture
interest, the following property, which was owned in fee simple and was
encumbered by a mortgage. For details of the material terms of the mortgage,
refer to Note 5 of Notes to Financial Statements.
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
- ----------------------------------------- --------------------------- --------------------- -----------------
Shopping Center:
- ----------------
<S> <C> <C> <C>
Glendale Center Shopping Mall (50%) Indianapolis, Indiana 654,763 55 (2)
</TABLE>
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's property 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 property allocable to real property (exclusive
of land) and all improvements thereafter over useful lives ranging from 18
years to 40 years, utilizing either the
2
<PAGE>
ITEM 2. PROPERTIES (a)(b) (Continued)
Accelerated Cost Recovery System ("ACRS") or straight-line method. Other
depreciable assets were depreciated over their applicable recovery periods.
For the year ended December 31, 1997, the Partnership's portion of real
estate taxes for the Glendale Center Shopping Mall ("Glendale") was
$248,200, which was net of refunds related to previous years received, a
portion of which was remitted to tenants. In the opinion of the General
Partner, Glendale is 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 at Glendale.
The following table presents Glendale's occupancy rates as of December 31 for
each of the last five years:
<TABLE>
<CAPTION>
Property Name 1997 1996 1995 1994 1993
- ---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Glendale 89% 91% 93% 93% 87%
</TABLE>
The amounts in the following table represent Glendale's average annual rental
rate per square foot for each of the last five years ended December 31 and were
computed by dividing Glendale's base rental revenues by its average occupied
square footage:
<TABLE>
<CAPTION>
Property Name 1997 1996 1995 1994 1993
- ---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Glendale $5.65 $5.66 $5.48 $5.55 $4.95
</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
Glendale:
<TABLE>
<CAPTION>
Partnership's Share of per Percentage of Renewal
annum Base Rents (a) for Net Leasable Options
-------------------------- Square (Renewal
Final Twelve Expiration Footage Options /
1998 Months of Lease Date of Lease Occupied Years)
-------- --------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Glendale
- --------------------
L.S. Ayres & Co. 1 / 18
(department store) $194,100 $194,100 1/31/2001 36% 3 / 30
Lazarus 1 / 18
(department store) $128,700 $128,700 1/31/2001 25% 3 / 30
</TABLE>
(a) The Partnership's share of per annum base rents for each of the tenants
listed above for the years between 1998 and the final twelve months for
each of the above leases is no lesser or greater than the amounts listed in
the above table.
3
<PAGE>
ITEM 2. PROPERTIES (Continued)
The amounts in the following table represent the Partnership's portion of base
rental income at Glendale from leases in the year of expiration (assuming no
lease renewals) through the year ended December 31, 2007:
<TABLE>
<CAPTION>
Number Base Rents in Year of % of Total Base
Year of Tenants Square Feet Expiration (a) Rents (b)
------ ---------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C>
1998 15 49,270 $138,700 8.71%
1999 3 5,378 $ 27,900 1.91%
2000 8 16,631 $105,300 7.67%
2001 6 409,195 $ 78,900 8.33%
2002 4 18,927 $118,200 14.35%
2003 5 14,500 $111,300 16.79%
2004 4 15,316 $ 40,900 8.90%
2005 1 4,718 $ 37,700 8.90%
2006 6 26,153 $ 38,500 19.95%
2007 2 6,934 $ 64,600 43.22%
</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 in effect as of December 31,
1997.
ITEM 3. LEGAL PROCEEDINGS
(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, 1997. Ordinary routine legal
matters incidental to the business which are not deemed material were pursued
during the quarter ended December 31, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a,b,c & d) None.
4
<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, 1998, there were 3,088 Holders of Units.
5
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 4,731,800 $ 4,299,700 $ 4,288,100 $ 5,913,000 $ 7,177,200
Net income (loss) $ 1,560,000 $(2,332,100) $(7,271,600) $ (949,100) $(6,532,500)
Net income (loss)
allocated to Limited
Partners $ 1,544,400 $(2,308,800) $(7,198,900) $(1,192,200) $(6,467,200)
Net income (loss)
allocated to Limited
Partners per Unit
(43,861 Units
outstanding) (a) $ 35.21 $ (52.64) $ (164.13) $ (27.18) $ (147.45)
Total assets $14,350,700 $17,384,800 $20,522,900 $26,495,200 $44,395,800
Mortgage loans payable $ 6,559,700 $11,194,100 $11,998,000 $10,648,600 $26,794,900
Distributions to Limited
Partners per Unit
(43,861 Units
outstanding) None None None None None
OTHER DATA:
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $10,089,200 $14,416,200 $17,381,000 $24,728,800 $38,273,500
Number of real property
interests owned at
December 31 1 2 2 2 3
- -----------------------------------------------------------------------------------------
</TABLE>
(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,
------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined in
the Partnership
Agreement) (a) $ 436,700 $ 191,900 $ 288,600 $ 651,400 $1,732,300
Items of reconciliation:
Principal payments on
mortgage loans payable 814,600 803,900 500,600 33,800 36,300
Changes in current
assets and
liabilities:
Decrease in current
assets 138,100 13,900 26,600 334,700 792,900
Increase (decrease) in
current liabilities 55,400 (6,100) (55,300) (542,900) 356,900
- ---------------------------------------------------------------------------------------
Net cash provided by
operating activities $ 1,444,800 $1,003,600 $ 760,500 $ 477,000 $2,918,400
- ---------------------------------------------------------------------------------------
Net cash provided by
(used for) investing
activities $ 4,121,100 $ (725,200) $ (743,300) $ (418,300) $ (502,400)
- ---------------------------------------------------------------------------------------
Net cash (used for)
provided by financing
activities $(4,649,500) $ (816,800) $1,354,600 $(4,018,100) $ (40,800)
- ---------------------------------------------------------------------------------------
</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.
6
<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. Through December 31, 1997, the Partnership has sold
one real property investment and liquidated two joint venture investments.
OPERATIONS
The table below is a recap of certain operating results of each of the
Partnership's properties for the years ended December 31, 1997, 1996 and 1995.
The discussion following the table should be read in conjunction with the
Financial Statements and Notes thereto appearing in this report.
<TABLE>
<CAPTION>
Comparative Operating Results
(a)
For the Years Ended December 31,
--------------------------------
1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
GLENDALE CENTER SHOPPING MALL (50%)
Rental revenues $3,470,000 $3,572,300 $3,529,300
- -----------------------------------------------------------------
Property net income (b) $ 657,100 $ 331,500 $ 80,600
- -----------------------------------------------------------------
Average occupancy 90% 91% 92%
- -----------------------------------------------------------------
REGENCY PARK SHOPPING CENTER (25%)
Rental revenues $ 285,000 $ 599,300 $ 587,500
- -----------------------------------------------------------------
Property net income (loss) (c) $ 17,800 $ 10,500 $ (70,200)
- -----------------------------------------------------------------
Average occupancy 90% 88%
- -----------------------------------------------------------------
</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) Property net income excludes a loss from provision for value impairment of
$2,700,000 and $6,300,000, for the years ended December 31, 1996 and 1995,
respectively (see Note 8 of Notes to Financial Statements for additional
information).
(c) This property was sold in June 1997. Property net income excludes a gain
recorded on the sale (see Note 7 of Notes to Financial Statements for
additional information). Property net (loss) excludes a loss from provision
for value impairment of $1,000,000 for the year ended December 31, 1995
(see Note 8 of Notes to Financial Statements for additional information).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
Net (loss) income changed from $(2,332,100) for the year ended December 31,
1996 to $1,560,000 for the year ended December 31, 1997. The change was
primarily due to the $2,700,000 provision for value impairment recorded in 1996
for Glendale Center Shopping Mall ("Glendale") and the $799,400 gain on sale
recorded in 1997 for Regency Park Shopping Center ("Regency").
Net income exclusive of provisions for value impairment and the gain on sale
and operating results of Regency increased by $385,400 for the year ended
December 31, 1997 when compared to the year ended December 31, 1996. The
increase was primarily due to improved operating results at Glendale and an
increase in interest income earned on the Partnership's short-term investments.
The increase in interest income was primarily due to an increase in the average
amount of cash available for investment in 1997.
The following comparative discussion excludes the operating results of Regency.
Rental revenues decreased by $102,300 or 2.9% for the year ended December 31,
1997 when compared to the year ended December 31, 1996. The decrease was
primarily due to a decrease in the amount of percentage rental income collected
from the tenants due to declining sales at Glendale. Also causing the decrease
was lower base rental income resulting from a slow but steady reduction in
Glendale's occupancy. Partially offsetting the decrease was an increase in
consideration received for the early termination of tenants' leases.
Real estate taxes decreased by $214,300 for the year ended December 31, 1997
when compared to the year ended December 31, 1996. The decrease was primarily
due to a successful appeal of the taxing authority's assessed value of
Glendale. As a result of a decreased assessed value, the Partnership paid lower
taxes during 1997 for tax year 1996 than estimated.
Property operating expenses decreased by $112,900 for the year ended December
31, 1997 when compared to the year ended December 31, 1996. The decrease was
primarily due to a decrease in personnel, professional, security and utility
costs, partially offset by an increase in advertising and promotional costs, at
Glendale.
Interest expense decreased by $60,000 for the year ended December 31,1997 when
compared to the year ended December 31, 1996. The decrease was primarily due to
the effects of principal payments made during the past 24 months on the
Glendale mortgage loan.
Depreciation and amortization expense decreased by $29,200 for the year ended
December 31,1997 when compared to the year ended December 31, 1996. The
decrease was primarily due to the provision for value impairment recorded in
1996 which reduced the depreciable basis of Glendale's assets.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net results improved by $4,939,500 for the year ended December 31, 1996 when
compared to the year ended December 31, 1995. The improvement was primarily the
result of the differences in the amounts of provisions for value impairment
recognized during the years under comparison. The 1995 results included
provisions totaling $7,300,000, while 1996 included a provision of $2,700,000.
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
Exclusive of the provisions for value impairment, net income improved $339,500
for the year ended December 31, 1996 when compared to the year ended December
31, 1995. The improvement was primarily due to improved operating results at
Glendale and to a lesser extent at Regency. The improvement was also due to a
decrease in general and administrative expenses which was primarily the result
of decreased legal, data processing, printing and mailing costs.
Rental revenues remained relatively unchanged for the year ended December 31,
1996 when compared to the year ended December 31, 1995.
Interest expense decreased by $181,400 for the periods under comparison. The
decrease was primarily due to a reduction in the variable interest rate on the
Glendale loan and a reduction in the fixed interest rate on the Regency loan as
well as the effects of principal payments made during the past 24 months on the
Partnership's mortgage loans.
Depreciation and amortization decreased by $132,900 for the year ended December
31, 1996 when compared to the year ended December 31, 1995. The decrease was
primarily the result of the effects of provisions for value impairment taken on
the Partnership's properties.
Real estate tax expense increased by $42,500 for the year ended December 31,
1996 when compared to the year ended December 31, 1995. The increase was
primarily the result of increased 1996 taxes at Glendale in comparison with
those payable in 1995.
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 amounts and 3) total or
partial tenant reimbursement of property operating expenses including real
estate taxes.
To increase and/or maintain the occupancy level at the Partnership's remaining
property, the General Partner, through its Affiliated asset and third party
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
One of the Partnership's objectives is to dispose of its properties when market
conditions allow for the achievement of the maximum possible sales price. In
the interim, the Partnership continues to manage and maintain its remaining
property. Cash Flow (as defined in the Partnership Agreement) is generally not
equal to net income or cash flows as determined by generally accepted
accounting principles ("GAAP"), since certain items are treated differently
under the Partnership Agreement than under GAAP. Management believes that to
facilitate a clear understanding of the Partnership's operations, an analysis
of Cash Flow (as defined in the Partnership Agreement) should be examined in
conjunction with an analysis of net income or cash flows as determined by GAAP.
The second table in Selected Financial Data includes a reconciliation of Cash
Flow (as defined in the Partnership Agreement) to cash flow provided by
operating activities as determined by GAAP. Such amounts are not indicative of
actual distributions to Partners and should not necessarily be considered as an
alternative to the results disclosed in the Statements of Income and Expenses
and Statements of Cash Flow.
The increase in Cash Flow (as defined in the Partnership Agreement) of $244,800
for the year ended December 31, 1997 when compared to the year ended December
31, 1996 was primarily due to the improved operating results at Glendale,
exclusive of depreciation, amortization and provisions for value impairment, as
previously discussed.
The increase in the Partnership's cash position of $916,400 during the year
ended December 31, 1997 was primarily the result of Sale Proceeds and net cash
provided by operating activities exceeding principal payments on mortgage
loans, cash used for capital and tenant improvements and leasing costs and
investments in debt securities. Liquid assets of the Partnership as of December
31, 1997 were comprised of amounts held for working capital purposes.
The increase in net cash provided by operating activities of $441,200 for the
year ended December 31, 1997 when compared to the year ended December 31, 1996,
was primarily the result of improved operating results at Glendale, exclusive
of depreciation and amortization, as previously discussed.
Net cash (used for) provided by investing activities changed from $(725,200)
for the year ended December 31, 1996 to $4,121,100 for the year ended December
31, 1997. The change was due primarily to the proceeds received from the sale
of Regency and the decrease in expenditures for capital and tenant improvements
and leasing costs at the Partnership's properties. The Partnership maintains
working capital reserves to pay for capital expenditures such as building and
tenant improvements and leasing costs and to potentially facilitate the
refinancing of the mortgage loan collateralized by Glendale.
On June 16, 1997, the joint venture in which the Partnership owns a 25%
interest, completed the sale of Regency. The Partnership's share of the net
proceeds, after the repayment of the mortgage loan, received from this
transaction amounted to $867,800. Uncertainty surrounding Glendale, as
discussed below, made it necessary for the Partnership to retain all proceeds
received from the sale of Regency.
Net cash used for financing activities increased by $3,832,700 for the year
ended December 31, 1997 when compared to the year ended December 31, 1996. The
increase was due primarily to the repayment of the mortgage loan collateralized
by Regency in connection with its sale.
The General Partner, on behalf of the Partnership, has contracted for
substantially all of its business activities with certain principal entities
for which computer programs are utilized. Each of these companies is
financially responsible and have represented to management of the General
Partner that they are taking appropriate steps for modifications needed to
their respective systems to accommodate processing data by Year 2000.
Accordingly, the Partnership anticipates incurring no material Year 2000 costs
and is
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
currently not aware of any material contingencies related to this matter.
The mortgage loan collateralized by Glendale contains provisions that require
that a portion of the cash generated by Glendale be utilized to reduce the
outstanding mortgage balance. In March 1998 the Partnership's share of the
payment for calendar year 1997 was $262,700.
As discussed in the Partnership's 1996 annual report to Partners, the
Partnership continues to face uncertainty as to the future performance of
Glendale, despite the improved operating results. Increased competition in the
regional area has resulted in a continued reduction in the sales for the two
anchor tenants as well as the specialty tenants at Glendale. The leases of the
two anchor tenants at Glendale expire in January 2001. It is still currently
uncertain whether one or both of the anchor tenants will vacate at their lease
expiration dates. The loss of the anchor tenants without suitable replacements
could result in the loss of many of the specialty tenants pursuant to
contingency provisions within their respective leases. The General Partner is
continuing to pursue alternative tenants as well as exploring other possible
options for Glendale. In addition to the issue related to the future tenancy
levels at Glendale, the mortgage loan secured by Glendale matures on January 1,
1999, subject to extension options. The Partnership is currently evaluating
alternatives including extending or refinancing the existing mortgage loan or
pursuing the sale of the property. Any potential extension or refinancing could
result in the Partnership having to further reduce the principal balance of the
mortgage.
As a result of the future tenancy matters at Glendale together with the cash
requirements of its mortgage loan, the General Partner believes that it is in
the best interest of the Partnership to retain all cash available. Accordingly,
distributions continue to be suspended. The General Partner believes that Cash
Flow (as defined by the Partnership Agreement) is one of the best and least
expensive sources of cash available to the Partnership. For the year ended
December 31,1997, Cash Flow (as defined by the Partnership Agreement) of
$436,700 was retained to supplement working capital reserves. The amount of
future distributions to Partners will ultimately be dependent upon the
performance of Glendale as well as the General Partner's determination of the
amount of cash necessary to supplement working capital reserves to meet future
liquidity requirements. There can be no assurance as to the amount and/or
availability of cash for future distributions 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
Partners' original Capital Investment.
9
<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.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) & (e) DIRECTORS
The Partnership has no directors. First Capital Financial Corporation
("FCFC") is the General Partner. The directors of FCFC, as of March 31,
1998, 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 1998.
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
Douglas Crocker II.................................. Director
Sheli Z. Rosenberg.................................. Director
</TABLE>
Douglas Crocker II, 57, has been President and Chief Executive Officer
since December 1992 and a Director since January 1993 of the General
Partner. Mr. Crocker has been President, Chief Executive Officer and
trustee of Equity Residential Properties Trust since March 31, 1993. Mr.
Crocker is a member of the Board of Directors of Horizon Group, Inc. and
Wellsford Real Properties, Inc. Mr. Crocker was an Executive Vice President
of Equity Financial and Management Company ("EFMC") from November 1992
until March 1997.
Sheli Z. Rosenberg, 56, 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 Equity Group Investments, Inc.
("EGI") since November 1994; has been a Director of Great American
Management and Investment Inc. ("Great American") since June 1984 and is a
director of various subsidiaries of Great American. She is also a director
of Anixter International Inc., American Classic Voyages Co., CVS
Corporation, Illinova Corporation, Illinois Power Co., Jacor
Communications, Inc. and Manufactured Home Communities, Inc. She is also a
trustee of Equity Residential Properties Trust, Equity Office Properties
Trust and Capital Trust. Ms. Rosenberg was a Principal of Rosenberg &
Liebentritt, P.C., counsel to the Partnership, the General Partner and
certain of their Affiliates from 1980 to September 1997. She had been Vice
President of First Capital Benefit Administrators, Inc. ("Benefit
Administrators") since July 22, 1987 until its liquidation in November
1995. Benefit Administrators filed for protection under the Federal
Bankruptcy laws on January 3, 1995.
11
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(b) & (e) EXECUTIVE OFFICERS
The Partnership does not have any executive officers. The executive
officers of the General Partner as of March 31, 1998 are shown in the
table. All officers are elected to serve for one year or until their
successors are elected and qualified.
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
Douglas Crocker II.......................................President and Chief Executive Officer
Donald J. Liebentritt....................................Vice President
Norman M. Field..........................................Vice President - Finance and Treasurer
</TABLE>
PRESIDENT AND CEO- See Table of Directors above.
Donald J. Liebentritt, 47, has been Vice President of the General Partner
since July 1997 and is Executive Vice President and General Counsel of EGI,
Vice President and Assistant Secretary of Great American and Principal and
Chairman of the Board of Rosenberg & Liebentritt, P.C.
Norman M. Field, 49, 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
had been Treasurer of Benefit Administrators since July 22, 1987 until its
liquidation in November 1995. Benefit Administrators filed for protection
under the Federal Bankruptcy laws on January 3, 1995. 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 matter disclosed under Items 10 (a),
(b) and (e), there are no involvements in certain legal proceedings among
any of the foregoing directors and officers.
12
<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, 1997. However, the General Partner and Affiliates do compensate
certain 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, 1998, 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,
1998, 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) An Affiliate of the General Partner provides supervisory and asset
management services to the Partnership. For the year ended December 31,
1997, this Affiliate was entitled to supervisory and asset management fees
and reimbursements of $31,600. In addition, other Affiliates of the General
Partner were entitled to fees, compensation and reimbursements of $62,300
for insurance, personnel, and other miscellaneous services for 1997.
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 the foregoing amounts, a total of $500 was due to
Affiliates as of December 31, 1997 and $2,400 was due to the Partnership
from Affiliates.
As of December 31, 1997, $10,000 was due to the General Partner for a real
estate commission earned in connection with the sale of a 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.
In accordance with the Partnership Agreement, subsequent to September 24,
1985, the Termination of the Offering, the General Partner is entitled to
10% of Cash Flow (as defined in the Partnership Agreement), as a
Partnership Management Fee. For the year ended December 31, 1997, 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) 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,
disposition and provision 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
13
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
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, disposition or
provision 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, 1997, the General
Partner was allocated a Net Profits of $15,600.
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the General Partner and certain of their Affiliates. Donald J.
Liebentritt, Vice President of the General Partner, is a Principal and
Chairman of the Board 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, 1997 were $35,200.
(c) No management person is indebted to the Partnership.
(d) None.
14
<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,
1997.
15
<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. - X
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 31, 1998 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>
<S> <C> <C>
/s/ DOUGLAS CROCKER II March 31, 1998 President, Chief Executive Officer and
- -------------------------- -------------- Director of the General Partner
DOUGLAS CROCKER II
/s/ SHELI Z. ROSENBERG March 31, 1998 Director of the General Partner
- -------------------------- --------------
SHELI Z. ROSENBERG
/s/ DONALD J. LIEBENTRITT March 31, 1998 Vice President
- -------------------------- --------------
DONALD J. LIEBENTRITT
/s/ NORMAN M. FIELD March 31, 1998 Vice President - Finance and
- -------------------------- -------------- Treasurer
NORMAN M. FIELD
</TABLE>
16
<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 as of December 31, 1997 and 1996 A-3
Statements of Partners' Capital for the Years Ended December 31, 1997,
1996 and 1995 A-3
Statements of Income and Expenses for the Years Ended December 31, 1997,
1996 and 1995 A-4
Statements of Cash Flows for the Years Ended December 31, 1997, 1996
and 1995 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, 1997 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-32 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
Real Estate Sale Agreement and Closing Documents for the sale of Regency Park
Shopping Center filed as an exhibit to the Partnership's Report on Form 8-K
filed on June 26, 1997 is incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1996 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, 1997 and 1996, 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, 1997, and the financial
statement 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, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, 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 9, 1998
A-2
<PAGE>
BALANCE SHEETS
December 31, 1997 and 1996
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 2,887,600 $ 3,928,400
Buildings and improvements 14,018,900 18,171,900
- ------------------------------------------------------------------------------
16,906,500 22,100,300
Accumulated depreciation and amortization (6,817,300) (7,684,100)
- ------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 10,089,200 14,416,200
Cash and cash equivalents 2,842,100 1,925,700
Investments in debt securities 982,000 496,300
Rents receivable 297,400 436,000
Escrow deposits 100,400 19,600
Other assets (primarily loan acquisition costs, net
of accumulated amortization of $242,900 and
$221,900, respectively) 39,600 91,000
- ------------------------------------------------------------------------------
$14,350,700 $17,384,800
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loans payable $ 6,559,700 $11,194,100
Accounts payable and accrued expenses 438,200 569,800
Due to Affiliates, net 8,100 33,200
Security deposits 7,400 22,500
Other liabilities 250,800 38,700
- ------------------------------------------------------------------------------
7,264,200 11,858,300
- ------------------------------------------------------------------------------
Partners' capital:
General Partner (deficit) (80,400) (96,000)
Limited Partners
(43,861 units issued and outstanding) 7,166,900 5,622,500
- ------------------------------------------------------------------------------
7,086,500 5,526,500
- ------------------------------------------------------------------------------
$14,350,700 $17,384,800
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1997, 1996 and 1995
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital, January 1, 1995 $ 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
Net (loss) for the year ended December 31,
1996 (23,300) (2,308,800) (2,332,100)
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
1996 (96,000) 5,622,500 5,526,500
Net income for the year ended December 31,
1997 15,600 1,544,400 1,560,000
- -------------------------------------------------------------------------------
Partners' (deficit) capital, December 31,
1997 $(80,400) $ 7,166,900 $ 7,086,500
- -------------------------------------------------------------------------------
</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, 1997, 1996 AND 1995
(ALL DOLLARS ROUNDED TO NEAREST 00S EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $3,754,900 $ 4,171,600 $ 4,140,500
Interest 177,500 128,100 147,600
Gain on sale of property 799,400
- ----------------------------------------------------------------------------
4,731,800 4,299,700 4,288,100
- ----------------------------------------------------------------------------
Expenses:
Interest 888,100 1,068,700 1,250,100
Depreciation and amortization 490,700 627,900 760,800
Property operating:
Affiliates 60,500 339,400 342,100
Nonaffiliates 978,000 845,700 823,800
Real estate taxes 278,900 529,900 487,400
Insurance--Affiliate 51,100 55,400 49,100
Repairs and maintenance 329,900 362,900 397,200
General and administrative:
Affiliates 12,300 25,500 37,500
Nonaffiliates 82,300 76,400 111,700
Provisions for value impairment 2,700,000 7,300,000
- ----------------------------------------------------------------------------
3,171,800 6,631,800 11,559,700
- ----------------------------------------------------------------------------
Net income (loss) $1,560,000 $(2,332,100) $(7,271,600)
- ----------------------------------------------------------------------------
Net income (loss) allocated to General
Partner $ 15,600 $ (23,300) $ (72,700)
- ----------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners $1,544,400 $(2,308,800) $(7,198,900)
- ----------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners per Unit (43,861 Units
outstanding) $ 35.21 $ (52.64) $ (164.13)
- ----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(ALL DOLLARS ROUNDED TO NEAREST 00S)
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,560,000 $(2,332,100) $(7,271,600)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 490,700 627,900 760,800
Gain on sale of property (799,400)
Provisions for value impairment 2,700,000 7,300,000
Changes in assets and liabilities:
Decrease in rents receivable 138,600 8,500 49,300
(Increase) decrease in other assets (500) 5,400 (60,200)
Decrease in restricted cash 37,500
(Decrease) increase in accounts
payable and accrued expenses (131,600) 20,600 (63,100)
(Decrease) increase in due to
Affiliates (25,100) 2,700 (8,800)
Increase (decrease) in other
liabilities 212,100 (29,400) 16,600
- -------------------------------------------------------------------------------
Net cash provided by operating
activities 1,444,800 1,003,600 760,500
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for capital expenditures (320,300) (672,100)
Proceeds from sale of property 4,687,600
(Increase) in investments in debt
securities (485,700) (496,300)
(Increase) decrease in escrow deposits (80,800) 91,400 (71,200)
- -------------------------------------------------------------------------------
Net cash provided by (used for)
investing activities 4,121,100 (725,200) (743,300)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of mortgage
loan payable 8,500,000
Repayment of mortgage loan payable (3,819,800) (6,650,000)
Principal payments on mortgage loans
payable (814,600) (803,900) (500,600)
Payment of loan extension costs (16,900)
(Decrease) increase in security
deposits (15,100) 4,000 5,200
- -------------------------------------------------------------------------------
Net cash (used for) provided by
financing activities (4,649,500) (816,800) 1,354,600
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 916,400 (538,400) 1,371,800
Cash and cash equivalents at the
beginning of the year 1,925,700 2,464,100 1,092,300
- -------------------------------------------------------------------------------
Cash and cash equivalents at the end of
the year $ 2,842,100 $ 1,925,700 $ 2,464,100
- -------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year $ 912,200 $ 1,074,300 $ 1,300,400
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement, filed with the Securities and
Exchange Commission on Form S-11. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is incorporated herein by reference.
ORGANIZATION:
The Partnership was formed on 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 ("GAAP"). The Partnership utilizes the accrual
method of accounting. Under this method, revenues are recorded when earned and
expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The financial statements include the Partnership's 50% interest in one joint
venture and its 25% interest in another joint venture with Affiliated
partnerships. These joint ventures were formed for the purpose of each
acquiring a 100% interest in certain real property and are operated under the
common control of the General Partner. Accordingly, the Partnership's pro rata
share of the venture's revenues, expenses, assets, liabilities and Partners'
capital was 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 property is 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 on straight-line method over the life of
each respective lease. Repair and maintenance costs are expensed as incurred;
expenditures for improvements are capitalized and depreciated on the straight-
line method over the estimated life of such improvements.
The Partnership evaluates it rental property for impairment when conditions
exist which may indicate that it is probable that the sum of expected future
cash flows (undiscounted) from such property is less than its carrying basis.
Upon determination that a permanent impairment has occurred, the rental
property is reduced to estimated fair value. Except as disclosed in Note 8, the
General Partner was not aware of any indicator that would result in a
significant impairment loss during the periods reported.
Loan acquisition costs are amortized over the term of the note issued under the
mortgage loan made in connection with the acquisition of Partnership properties
or refinancing of Partnership loans. When a property is disposed of or a loan
is refinanced, the related loan acquisition costs and accumulated amortization
are removed from the respective accounts and any unamortized balance is
expensed.
Property sales 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 is recognized in accordance with GAAP.
Cash equivalents are considered all highly liquid investments with a maturity
of three months or less when purchased.
Investments in debt securities at December 31, 1997 are comprised of corporate
debt securities and are classified as held-to-maturity. These investments are
carried at their amortized cost basis in the financial statements which
approximates fair market value. All of these securities had a maturity of less
than one year when purchased.
The Partnership's financial statements include financial instruments, including
receivables, escrow deposits, mortgage debt and trade liabilities. 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 its
property due to a decline in market value. The fair value of all other
financial instruments including cash and cash equivalents, included in the
financial statements, was not materially different from their carrying value at
December 31, 1997 and 1996.
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 Cash
Flow (as defined in the Partnership Agreement), as a Partnership
A-5
<PAGE>
Management Fee. For the year ended December 31, 1997, 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) 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, disposition and
provision 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,
disposition of Partnership properties or provisions for value impairment 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, 1997, the General Partner was
allocated Net Profits of $15,600, including $8,000 of the Net Profit from the
sale of Regency. For the year ended December 31, 1996, the General Partner was
allocated a Net (Loss) of $(23,300) which included a (loss) from a provision
for value impairment of $(27,000). 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).
Fees and reimbursements paid and payable by the Partnership to Affiliates were
as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------
1997 1996 1995
----------------- ---------------- ----------------
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 $ 55,500 (2,400) $302,800 21,500 $310,100 15,400
Reimbursements of
property insurance
premiums, at cost 51,100 None 55,400 None 49,100 None
Legal 35,200 None 41,700 None 78,500 None
Reimbursements of
expenses, at cost:
--Accounting 9,000 400 19,800 1,500 17,600 4,200
--Investor communication 3,400 100 5,100 200 8,400 900
- ------------------------------------------------------------------------------
$ 154,200 $ 8,100 $424,800 $33,200 $463,700 $30,500
- ------------------------------------------------------------------------------
</TABLE>
(a) As of December 31, 1997, the Partnership owed $10,000 to the General
Partner for a real estate commission earned in connection with the sale of
a Partnership property. This commission has been accrued but not paid. In
accordance with the Partnership Agreement, the Partnership shall not pay
the General Partner or any Affiliate a real estate commission from the sale
of a Partnership property until 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 (as defined in the Partnership Agreement) which has been distributed
to the Limited Partners from the initial investment date) of 6% simple
interest per annum on their Capital Investment.
3. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
1998 $ 1,592,200
1999 1,456,900
2000 1,373,100
2001 947,900
2002 823,600
Thereafter 1,931,200
--------------
$ 8,124,900
--------------
</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, 1997, 1996 and 1995 were $102,300,
$192,900 and $249,300, respectively. To provide comparability in the financial
statements, the Partnership netted the effects of real estate tax refunds from
prior periods received in 1997 with any such amounts due to tenants and related
rental revenues.
4. ESCROW DEPOSITS:
Escrow deposits in the amount of $100,400 as of December 31, 1997 represented
the Partnership's share of an amount being held by the mortgage holder of the
Glendale Center Shopping Mall as reserves to pay for capital expenditures such
as building and tenant improvement and leasing costs.
A-6
<PAGE>
5. MORTGAGE LOANS PAYABLE:
Mortgage loans payable at December 31, 1997 and 1996 consisted of the following
non-recourse loans:
<TABLE>
<CAPTION>
Principal Balance at
----------------------
Average Monthly Estimated
Property Pledged as Interest Maturity Periodic Balloon
Collateral (a) 12/31/97 12/31/96 Rate Date Payment Payment (b)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glendale Center Shopping
Mall (c) $6,559,700 $ 7,339,500 10.15% (d) 1/1/99 (c) $5,783,200
Regency Park Shopping
Center (e) (e) 3,854,600 (e) (e) (e) (e)
- -------------------------------------------------------------------------------------------
$6,559,700 $11,194,100
- -------------------------------------------------------------------------------------------
</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 property.
(c) The interest rate on this loan is variable at LIBOR plus 4.5%, with
interest payable monthly. Monthly payments of principal are based on an 11-
year amortization with an interest rate of 9.5%. The joint venture is
required to pay annually additional principal equal to 50% of net cash flow
(pursuant to the loan agreement) from the property for each prior calendar
year by March 31 of the following year. Additionally, certain debt coverage
requirements (pursuant to the loan agreement) must be met each quarter and
deficiencies in reaching benchmarks will require additional principal
payments. The additional principal payment of 50% of net cash flow that the
joint venture is required to pay in 1998 for the 1997 calendar year is
$525,300, of which the Partnership's share is $262,700. The payments made
in 1997 for the 1996 calendar year were $444,600, of which the
Partnership's share was $222,300. At its option, upon meeting certain
covenants, the Partnership has two options to extend the maturity date for
one year each.
(d) This represents the weighted average interest rate for the year ended
December 31, 1997. The interest rate is subject to change in accordance
with the provisions within the loan agreement. As of December 31, 1997, the
interest rate on the Glendale loan was 10.4688%.
(e) The joint venture which owns Regency, in which the Partnership owns a 25%
interest with Affiliated partnerships, repaid the mortgage collateralized
by Regency with a portion of the proceeds from its sale. For further
information see Note 7.
The Partnership's principal amortization of mortgage loan payable for each of
the next two years as of December 31, 1997 is as follows, if options to extend
are not exercised:
<TABLE>
<S> <C>
1998 $ 776,500
1999 5,783,200
-------
$6,559,700
-------
</TABLE>
6. INCOME TAX:
The Partnership utilizes the accrual basis of accounting for both income 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 and the
Partnership's provisions for value impairment. For the year ended December 31,
1997, net (loss) for income tax reporting purposes was $(2,252,100). The
aggregate cost of commercial rental properties for Federal income tax purposes
at December 31, 1997 was $25,906,500.
7. PROPERTY SALE:
On June 16, 1997, the joint venture in which the Partnership has a 25%
interest, completed the sale of Regency Park Shopping Center, located in
Jacksonville, Florida, for a sale price of $19,325,000, of which the
Partnership's share was $4,831,300. The Partnership's share of net proceeds
from this transaction was $867,800, which is net of closing expenses and the
repayment of the mortgage loan encumbering the property, and has been retained
to supplement working capital. The Partnership recorded a gain of $799,400 for
the year ended December 31, 1997 for financial reporting purposes from this
sale. The Partnership recorded a (loss) of $(2,315,800) for income tax
reporting purposes for the year ended December 31, 1997 in connection with this
sale.
8. PROVISIONS FOR VALUE IMPAIRMENT:
Due to the depressed economic environment in the retail industry, regional
factors affecting the Partnership's properties, the uncertainty with respect to
the significant anchor tenants and other matters relating specifically to
certain of the Partnership's properties, there was uncertainty as to the
Partnership's ability to recover the net carrying value of certain of its
properties during their 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, 1996 and
1995. The provisions for value impairment were considered non-cash events for
the purposes of the Statements of Cash Flow and were not utilized in the
determination of Cash Flows (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, 1996 and 1995:
<TABLE>
<CAPTION>
Property 1996 1995
--------------------------------------------
<S> <C> <C>
Glendale Center Shopping
Mall $ 2,700,000 $6,300,000
Regency Park Shopping
Center 1,000,000 $1,000,000
--------------------------------------------
$ 2,700,000 $7,300,000
--------------------------------------------
</TABLE>
A-7
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES X
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<TABLE>
Column A Column B Column C Column D
- ------------- ----------- ------------------------- -------------------------
Initial cost Costs capitalized
to Partnership subsequent to acquisition
------------------------- -------------------------
Buildings
and
Encum- Improve- Improve- Carrying
Description brances Land ments ments Costs (1)
- ------------- ----------- -------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Shopping Center:
Glendale Center
Shopping Mall
(Indianapolis, IN)
(50% Interest)(4) $6,559,700 $4,932,600 $18,556,900 $2,349,400 $ 67,600
========== ========== =========== ========== =========
</TABLE>
<TABLE>
Column A Column E Column F Column G Column H Column I
- ------------- -------------------------------------- ------------ ------------ ------------ -------------
Life on
Gross amount at which which
carried at close of period deprecia-
-------------------------------------- tion in lat-
Buildings Accumu- est income
and lated Date of statements
Improve- Deprecia- construc- Date is com-
Description Land ments Total (2)(3) tion (2) tion Acquired puted
- ------------- ------- ------------ --------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Center:
Glendale Center
Shopping Mall
(Indianapolis, IN) 35(7)
(50% Interest)(4) $2,887,600 $14,018,900 $16,906,500 (5) $6,817,300 1985 (6) 5/85 3-13(8)
========== =========== =========== ============ ============ ============ =============
See accompanying notes on the following page.
A-8
</TABLE>
<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, 1997 December 31, 1996 December 31, 1995
------------------------- ------------------------- -------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
---------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning
of the
year $22,100,300 $7,684,100 $24,480,000 $7,099,000 $31,107,900 $6,379,100
Additions
during the
year:
Improvements 320,300 672,100
Provisions
for
depreciation 469,700 585,100 719,900
Deductions
during the
year:
Cost of
real estate
sold or
disposed (5,193,800)
Accumulated
depreciation
on real
estate sold
or disposed (1,336,500)
Provisions
for value
impairments (2,700,000) (7,300,000)
----------- ---------- ----------- ---------- ----------- ----------
Balance at
end of the
year $16,906,500 $6,817,300 $22,100,300 $7,684,100 $24,480,000 $7,099,000
=========== ========== =========== ========== =========== ==========
</TABLE>
Note 3. The aggregate cost for Federal income tax purposes is $25,906,500.
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 provisions for value impairment totaling $9,000,000.
Note 6. Renovated in 1983 and 1984.
Note 7. Estimated useful life of building.
Note 8. Estimated useful life of improvements.
A-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,842,100
<SECURITIES> 982,000
<RECEIVABLES> 297,400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,121,500
<PP&E> 16,906,500
<DEPRECIATION> 6,817,300
<TOTAL-ASSETS> 14,350,700
<CURRENT-LIABILITIES> 443,700
<BONDS> 6,559,700
0
0
<COMMON> 0
<OTHER-SE> 7,086,500
<TOTAL-LIABILITY-AND-EQUITY> 14,350,700
<SALES> 0
<TOTAL-REVENUES> 4,731,800
<CGS> 0
<TOTAL-COSTS> 1,698,400
<OTHER-EXPENSES> 94,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 888,100
<INCOME-PRETAX> 1,560,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,560,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,560,000
<EPS-PRIMARY> 35.21
<EPS-DILUTED> 35.21
</TABLE>
