<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, 1998
--------------------------------
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)
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
-------------------------
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 Partnership was formed 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, 1998, the Partnership has sold its real property investment and, with
Affiliated partnerships, dissolved two of the joint ventures following the
disposition or sale of the real property investments. As of March 1999,
Glendale Center Shopping Mall ("Glendale"), the Partnership's remaining
investment in real property, is under contract to be sold. For additional
information, see Note 7 of Notes to Financial Statements.
Property management services for the Partnership's real estate investment is
provided by an independent management company 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, 1999, there were 23 employees at the Partnership's property for
on-site property maintenance and administration.
ITEM 2. PROPERTIES
- ------- ----------
As of December 31, 1998, the Partnership owned a 50% interest in a joint venture
that owned, in fee simple, Glendale, located in Indianapolis, Indiana. Glendale
is encumbered by a first mortgage. For details of the material terms of the
mortgage, refer to Note 4 of Notes to Financial Statements. Glendale has
654,772 net leasable square feet of which 88%, 89%, 91%, 93% and 93%, was
occupied as of December 31, 1998, 1997, 1996, 1995 and 1994, respectively. The
average annual rental per square foot, as computed by dividing the property's
base revenues by its average occupied square footage, for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994 was $5.61, $5.65, $5.66, $5.48 and
$5.55 respectively. As of December 31, 1998, there were 50 tenants at Glendale,
two of which occupied ten percent or more of the rentable square footage.
For federal income tax purposes, the Partnership depreciates the portion of the
acquisition costs of Glendale allocable to real property (exclusive of land),
and all improvements thereafter over useful lives ranging from 18 years to 39
years, utilizing the Accelerated Cost Recovery System ("ACRS"). Other
depreciable assets were depreciated over their applicable recovery periods. In
the opinion of the General Partner, Glendale is adequately insured and serviced
by all necessary utilities. The Partnership's share of 1998 real estate taxes
for Glendale was $336,200.
2
<PAGE>
ITEM 2. PROPERTIES (Continued)
- ------- ----------
For additional information regarding Glendale's operating results, see Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The following table summarizes the principal provisions of the leases for each
of the tenants which occupy ten percent or more of the leasable square footage
at Glendale:
<TABLE>
<CAPTION>
Partnership's Share of per annum Renewal
Base Rents (a) for Percentage of Options
-------------------------------- Net Leasable (Renewal
Final Twelve Expiration Square Footage Options /
1999 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 1999 and the final twelve months for
each of the above leases is no lesser or greater than the amounts listed in
the above table.
The amounts in the following table represents the Partnership's portion of base
rental income from leases in the year of expiration (assuming no lease renewals)
through the year ending December 31, 2008:
<TABLE>
<CAPTION>
Number Base Rents in Year % of Total Base
Year of Tenants Square Feet of Expiration (a) Rents (b)
- ---------- ---------------- ----------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
1999 14 49,983 $ 83,500 5.71%
2000 7 13,634 $ 76,000 5.76%
2001 6 409,195 $ 78,900 8.52%
2002 5 24,728 $118,200 14.73%
2003 4 13,400 $ 90,400 14.08%
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%
2008 1 8,494 $ 42,500 100.00%
</TABLE>
(a) Represents the Partnership's portion of base rents to be collected on
expiring leases in calendar year of expiration.
(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, 1998.
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, 1998. Ordinary routine legal
matters incidental to the business which was not deemed material were pursued
during the quarter ended December 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
(a, b, c & d) None.
3
<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, 1999, there were 3,008 Holders of Units.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 3,548,500 $ 4,731,800 $ 4,299,700 $ 4,288,100 $ 5,913,000
Net (loss) income $(1,044,300) $ 1,560,000 $(2,332,100) $(7,271,600) $ (949,100)
Net (loss) income
allocated to Limited
Partners $(1,033,900) $ 1,544,400 $(2,308,800) $(7,198,900) $(1,192,200)
Net (loss) income
allocated to Limited
Partners per Unit
(43,861 Units
outstanding) (a) $ (23.57) $ 35.21 $ (52.64) $ (164.13) $ (27.18)
Total assets $12,438,100 $14,350,700 $17,384,800 $20,522,900 $26,495,200
Mortgage loans payable $ 5,570,800 $ 6,559,700 $11,194,100 $11,998,000 $10,648,600
OTHER DATA:
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $ 7,765,900 $10,089,200 $14,416,200 $17,381,000 $24,728,800
Number of real property
interests owned at
December 31 1 1 2 2 2
- ------------------------------------------------------------------------------------------
(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"):
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined in
the Partnership
Agreement) (a) $ 330,300 $ 436,700 $ 191,900 $ 288,600 $ 651,400
Items of reconciliation:
Principal payments on
mortgage loans payable 988,900 814,600 803,900 500,600 33,800
Changes in current
assets and
liabilities:
Decrease in current
assets 124,100 138,100 13,900 26,600 334,700
Increase (decrease) in
current liabilities 118,000 55,400 (6,100) (55,300) (542,900)
- ------------------------------------------------------------------------------------------
Net cash provided by
operating activities $ 1,561,300 $ 1,444,800 $ 1,003,600 $ 760,500 $ 477,000
- ------------------------------------------------------------------------------------------
Net cash (used for)
provided by investing
activities $(2,610,500) $ 4,121,100 $ (725,200) $ (743,300) $ (418,300)
- ------------------------------------------------------------------------------------------
Net cash (used for)
provided by financing
activities $(1,014,100) $(4,649,500) $ (816,800) $ 1,354,600 $(4,018,100)
- ------------------------------------------------------------------------------------------
</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.
5
<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.
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof.
The Partnership commenced the Offering of Units on September 25, 1984 and
terminated the Offering on September 24, 1985, upon the sale of 43,861 Units.
From December 1984 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, 1998, 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, 1998, 1997 and 1996.
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,
----------------------------------
1998 1997 1996
- ------------------------------------------------------------
<S> <C> <C> <C>
GLENDALE CENTER SHOPPING MALL (50%)
Rental revenues $3,313,400 $3,470,000 $3,572,300
- ------------------------------------------------------------
Property net income (b) $ 834,700 $ 657,100 $ 331,500
- ------------------------------------------------------------
Average occupancy 87% 90% 91%
- ------------------------------------------------------------
REGENCY PARK SHOPPING CENTER (25%)
Rental revenues $ 285,000 $ 599,300
- ------------------------------------------------------------
Property net income (c) $ 17,800 $ 10,500
- ------------------------------------------------------------
Average occupancy 90%
- ------------------------------------------------------------
</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
disposed of by the Partnership prior to the periods under comparison.
(b) Property net income excludes losses from provisions for value impairment of
$2,000,000 and $2,700,000, for the years ended December 31, 1998 and 1996,
respectively (see Note 7 of Notes to Financial Statements for additional
information).
(c) This property was sold in June 1997. Property net income excludes a gain of
$799,400 recorded on the sale (see Note 6 of Notes to Financial Statements
for additional information).
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE YEAR ENDED DECEMBER 31,
1997
Net income (loss) changed from $1,560,000 for the year ended December 31, 1997
to $(1,044,300) for the year ended December 31, 1998. The change was primarily
due to the gain recorded on the 1997 sale of Regency Park Shopping Center
("Regency") and the 1998 provision for value impairment recorded on Glendale
Center Shopping Mall ("Glendale").
Net income, exclusive of Regency and the provision for value impairment,
increased by $212,900 for the year ended December 31, 1998 when compared to the
year ended December 31, 1997. The increase was primarily due to improved
operating results at Glendale. The increase was also due to an increase in
interest earned on the Partnership's short-term investments due to an increase
in the average cash available for investment during 1998.
The following comparative discussion includes the operating results of Glendale
only.
Rental revenues decreased by $156,600 or 4.5% for the year ended December 31,
1998 when compared to the year ended December 31, 1997. The decrease was
primarily the result of the effects of the 1997 early termination of a tenant's
lease. This early termination resulted in additional revenues in 1997 and
reduced occupancy in 1998. The decrease was also the result of a decrease in
tenant reimbursements for common area maintenance, due to an overestimate of
1997 tenant reimbursements payable in 1998. The decrease was also due to a
decrease in base rents, which is due to the decline in average occupancy.
Interest expense decreased by $100,800 for the year ended December 31, 1998
when compared to the year ended December 31, 1997. The decrease was primarily
due to the effects of principal payments made during the past 24 months on
Glendale's mortgage loan.
Repairs and maintenance expenses decreased by $90,300 for the year ended
December 31, 1998 when compared to the year ended December 31, 1997. The
decrease was primarily due to a decrease in snow removal costs. In addition,
the decrease was due to a reduction in ordinary repairs to the interior and
exterior of the property.
Property operating expenses decreased by $94,000 for the year ended December
31, 1998 when compared to the year ended December 31, 1997. The decrease was
primarily due to a decrease in security, utility, advertising and promotional
costs at the property.
Real estate tax expense increased by $88,000 for the year ended December 31,
1998 when compared to the year ended December 31, 1997. The increase was
primarily due to an overestimate of 1996 taxes payable in 1997.
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
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
ended December 31, 1996 to $1,560,000 for the year ended December 31, 1997. The
change was primarily due to the provision for value impairment recorded in 1996
on Glendale and the gain on sale recorded in 1997 for 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 together
with 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 during 1997.
The following comparative discussion includes the operating results of Glendale
only.
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 taxing authorities' assessed value of Glendale.
As a result of a decreased assessed value, the Partnership paid lower taxes
during 1997 for tax year 1996 than previously 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.
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.
To increase and/or maintain the occupancy level at the Partnership's remaining
property, the General Partner, through its asset and property management
groups, continues to take the following actions: 1) implementation of marketing
programs, including hiring of third-party leasing agents or providing on-site
leasing personnel, advertising, direct mail campaigns and development of
building brochures; 2) early termination of existing tenant leases and
addressing any expansion needs these tenants may have; 3) promotion of local
broker events and networking with local brokers; 4) networking with national
level retailers; 5) cold-calling other businesses and tenants in the market
area and 6) providing rental concessions or competitively pricing rental rates,
depending on market conditions.
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 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.
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 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 decrease in Cash Flow (as defined in the Partnership Agreement) of $106,400
for the year ended December 31, 1998 when compared to the year ended December
31, 1997 was primarily due to the increase in principal payments on the
mortgage loan collateralized by Glendale together with the 1998 absence of
operations of Regency. The decrease was partially offset by an increase in
Glendale's net income, exclusive of depreciation, amortization and provision
for value impairment.
The decrease in the Partnership's cash position of $2,063,300 during the year
ended December 31, 1998 was primarily the result of the Partnership utilizing
its cash reserves to increase its investment in debt securities. The decrease
was partially offset by net cash provided by operating activities exceeding
principal payments on mortgage loans and escrow deposits. Liquid assets of the
Partnership as of December 31, 1998 were comprised of amounts held for working
capital purposes.
The increase in net cash provided by operating activities of $116,500 for the
year ended December 31, 1998 when compared to the year ended December 31, 1997,
was primarily the result of improved operating results at Glendale, exclusive
of depreciation and amortization, as previously discussed.
Net cash provided by (used for) investing activities changed from $4,121,100
for the year ended December 31, 1997 to $(2,610,500) for the year ended
December 31, 1998. The change was due primarily to the proceeds received from
the 1997 sale of Regency and the Partnership's 1998 increase in investments in
debt securities. The Partnership maintains working capital reserves to pay for
capital expenditures and to potentially facilitate the refinancing of the
mortgage loan
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
collateralized by Glendale. During the year ended December 31, 1998, the
Partnership spent $700 for capital and tenant improvements.
Investments in debt securities are a result of the continued extension of the
maturities of certain of the Partnership's short-term investments in an effort
to maximize the return on these amounts as they are held for working capital
purposes. These investments are of investment grade and mature less than one
year from their date of purchase.
Net cash used for financing activities decreased by $3,635,400 for the year
ended December 31, 1998 when compared to the year ended December 31, 1997. The
decrease was due primarily to the 1997 repayment of the mortgage loan
collateralized by Regency in connection with its sale. The decrease was
partially offset by an increase in principal payments on the mortgage loan
collateralized by Glendale.
The Partnership exercised the first of two options to extend by one year the
maturity of the Glendale mortgage loan. Pursuant to the covenants of the
extension, the Partnership was required to reduce the Partnership's share of
principal balance outstanding to an amount equal to or less than $5,625,000 by
December 31, 1998. In October 1998, the Partnership paid $114,500 to comply
with that extension requirement. This loan now matures in January 2000. Subject
to fulfillment of certain covenants, the Partnership has an option to extend
the maturity date to January 2001. This loan also contains provisions that
require that a portion of the cash generated by Glendale be utilized to reduce
the outstanding principal balance. On February 3, 1999 in compliance with this
provision the Partnership made a principal payment of $455,200.
The Year 2000 problem is the result of the inability of existing computer
programs to distinguish between a year beginning with "20" rather than "19".
This is the result of computer programs using two rather than four digits to
define an applicable year. If not corrected, any program having time-sensitive
software may recognize a date using "00" as the year 1900 rather than year
2000. This could result in a variety of problems including miscalculations,
loss of data and failure of entire systems. Critical areas that could be
effected are accounts receivable and rent collections, accounts payable,
general ledger, cash management, fixed assets, investor services, computer
hardware, telecommunications systems and health, security, fire and life safety
systems.
The Partnership has engaged Affiliated and unaffiliated entities to perform all
of its critical functions that utilize software that may have time-sensitive
applications. All of these service providers are providing these services for
their own organizations as well as for their clients. The General Partner, on
behalf of the Partnership, has been in close communication with each of these
service providers regarding the steps that they are taking to assure that there
will be no serious interruption of the operations of the Partnership resulting
from Year 2000 problems. Based on the results of these inquiries, as well as a
review of the disclosures by these service providers, the General Partner
believes that the Partnership will be able to continue normal business
operations and will incur no material costs related to Year 2000 issues.
The Partnership has not formulated a contingency plan. However, the General
Partner believes that based on the size of the Partnership's portfolio and its
limited number of transactions, aside from catastrophic failures of banks,
governmental agencies, etc., it could carry out substantially all of its
critical operations on a manual basis or easily convert to systems that are
Year 2000 compliant.
As discussed in the Partnership's 1997 annual report to Partners, the
Partnership continues to face uncertainty as to the future performance of
Glendale. Increased competition in the regional area has resulted in a
continued reduction in the sales at 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
its 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, 2000. The Partnership has
entered into a contract for the sale of the property. While the potential
purchaser has deposited earnest money funds with the Partnership, there can be
no assurance that the transaction contemplated by the contract will be
consummated.
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 31,1998, Cash Flow (as defined by the Partnership Agreement) of
$330,300 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 future 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 Contribution.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
With the exception of variable rate mortgage debt, the Partnership has no
financial instruments for which there are significant risks. Based on variable
rate debt outstanding as of December 31, 1998, for every 1% change in interest
rates, the Partnership's annual interest expense would change by $55,700. Due
to the timing of the maturities and liquid nature of the Partnership's
investments in debt securities, the Partnership does not believe that it has
material market risk.
8
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
The response to this item is submitted as a separate section of this report.
See page A-1 "Index of Financial Statements, Schedule and Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
(a) & (e) DIRECTORS
---------
The Partnership has no directors. First Capital Financial Corporation
("FCFC") is the General Partner. The directors of FCFC, as of March 31,
1999, 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 1999.
Name Office
---- ------
Douglas Crocker II............................... Director
Sheli Z. Rosenberg............................... Director
Douglas Crocker II, 58, 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 Wellsford Real Properties,
Inc. and Ventas Inc. and was a member of the Board of Directors of Horizon
Group, Inc. from, July 1996 to June 1998. Mr. Crocker was an Executive Vice
President of Equity Financial and Management Company ("EFMC") from November
1992 until March 1997.
Sheli Z. Rosenberg, 57, 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, LLC
("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., Capital Trust Inc., 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 and Equity Office Properties 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.
10
<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, 1999 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
Donald J. Liebentritt.................Vice President
Norman M. Field.......................Vice President -- Finance and
Treasurer
PRESIDENT AND CEO -- See Table of Directors above.
Donald J. Liebentritt, 48, has been Vice President of the General Partner
since July 1997 and is Chief Operating Officer 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, 50, has been Vice President of Finance and Treasurer of
the General Partner since February 1984, and also served as Vice President
of Great American from July 1983 until March 1995 and from July 1997 to the
present. Mr. Field had been Treasurer of Benefit Administrators since July
22, 1987 until its liquidation in November 1995. He was Chief Financial
Officer of Equality Specialties, Inc. ("Equality"), a subsidiary of Great
American, from August 1994 to 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.
<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, 1998. 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, 1999, 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,
1999, 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,
1998, this Affiliate was entitled to supervisory and asset management fees
and reimbursements of $22,200. In addition, other Affiliates of the General
Partner were entitled to fees, compensation and reimbursements of $61,700
for insurance, personnel, and other miscellaneous services for 1998.
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 $1,600 was due
to Affiliates as of December 31, 1998.
As of December 31, 1998, $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, 1998, 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
12
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
- -------- ----------------------------------------------
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, 1998, the
General Partner was allocated a Net (loss) of $(10,400).
(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, 1998 were $25,400.
(c) No management person is indebted to the Partnership.
(d) None.
<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,
1998.
<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 26, 1999 By: /s/ DOUGLAS CROCKER II
-------------- ----------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ DOUGLAS CROCKER II March 26, 1999 President, Chief Executive Officer
- ----------------------- -------------- and Director of the General Partner
DOUGLAS CROCKER II
/s/ SHELI Z. ROSENBERG March 26, 1999 Director of the General Partner
- ------------------------ --------------
SHELI Z. ROSENBERG
/s/ DONALD J. LIEBENTRITT March 26, 1999 Vice President
- -------------------------- --------------
DONALD J. LIEBENTRITT
/s/ NORMAN M. FIELD March 26, 1999 Vice President - Finance and
- -------------------- -------------- Treasurer
NORMAN M. FIELD
<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, 1998 and 1997 A-3
Statements of Partners' Capital for the Years Ended December 31, 1998, 1997 and 1996 A-3
Statements of Income and Expenses for the Years Ended December 31, 1998, 1997 and 1996 A-4
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 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, 1998 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 1997 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, 1998 and 1997, 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, 1998. Our audit also included
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, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, 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
February 26, 1999
A-2
<PAGE>
BALANCE SHEETS
December 31, 1998 and 1997
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in commercial rental property:
Land $ 2,887,600 $ 2,887,600
Buildings and improvements 12,019,600 14,018,900
- ------------------------------------------------------------------------------
14,907,200 16,906,500
Accumulated depreciation and amortization (7,141,300) (6,817,300)
- ------------------------------------------------------------------------------
Total investment property, net of accumulated
depreciation and amortization 7,765,900 10,089,200
Cash and cash equivalents 778,800 2,842,100
Investments in debt
securities 3,495,000 982,000
Rents receivable 159,600 297,400
Escrow deposits 197,200 100,400
Other assets (primarily loan acquisition costs,
net of accumulated amortization of $154,900
and $115,500, respectively) 41,600 39,600
- ------------------------------------------------------------------------------
$12,438,100 $14,350,700
- ------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage loan payable $ 5,570,800 $ 6,559,700
Accounts payable and accrued expenses 465,400 438,200
Due to Affiliates, net 11,600 8,100
Security deposits 10,000 7,400
Prepaid rent 62,700 20,400
Other liabilities 275,400 230,400
- ------------------------------------------------------------------------------
6,395,900 7,264,200
- ------------------------------------------------------------------------------
Partners' capital:
General Partner (deficit) (90,800) (80,400)
Limited Partners (43,861 units issued and
outstanding) 6,133,000 7,166,900
- ------------------------------------------------------------------------------
6,042,200 7,086,500
- ------------------------------------------------------------------------------
$12,438,100 $14,350,700
- ------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the Years Ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital,
January 1, 1996 $ (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
Net (loss) for the
year ended
December 31, 1998 (10,400) (1,033,900) (1,044,300)
- ------------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1998 $ (90,800) $6,133,000 $6,042,200
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the years ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $ 3,315,400 $ 3,754,900 $ 4,171,600
Interest 233,100 177,500 128,100
Gain on sale of property 799,400
- ------------------------------------------------------------------------------
3,548,500 4,731,800 4,299,700
- ------------------------------------------------------------------------------
Expenses:
Interest 616,500 888,100 1,068,700
Depreciation and amortization 363,500 490,700 627,900
Property operating:
Affiliates 34,900 60,500 339,400
Nonaffiliates 866,100 978,000 845,700
Real estate taxes 336,200 278,900 529,900
Insurance--Affiliate 50,100 51,100 55,400
Repairs and maintenance 220,900 329,900 362,900
General and administrative:
Affiliates 13,200 12,300 25,500
Nonaffiliates 91,400 82,300 76,400
Provisions for value impairment 2,000,000 2,700,000
- ------------------------------------------------------------------------------
4,592,800 3,171,800 6,631,800
- ------------------------------------------------------------------------------
Net (loss) income $(1,044,300) $ 1,560,000 $(2,332,100)
- ------------------------------------------------------------------------------
Net (loss) income allocated to General
Partner $ (10,400) $ 15,600 $ (23,300)
- ------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(1,033,900) $ 1,544,400 $(2,308,800)
- ------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (43,861 Units
outstanding) $ (23.57) $ 35.21 $ (52.64)
- ------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
(All dollars rounded to nearest 00s)
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,044,300) $ 1,560,000 $(2,332,100)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 363,500 490,700 627,900
Gain on sale of property (799,400)
Provisions for value impairment 2,000,000 2,700,000
Changes in assets and liabilities:
Decrease in rents receivable 137,800 138,600 8,500
(Increase) decrease in other assets (13,700) (500) 5,400
Increase (decrease) in accounts
payable and accrued expenses 27,200 (131,600) 20,600
Increase (decrease) in due to
Affiliates 3,500 (25,100) 2,700
Increase (decrease) in prepaid rent 42,300 (16,000) (29,300)
Increase (decrease) in other
liabilities 45,000 228,100 (100)
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 1,561,300 1,444,800 1,003,600
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for building and tenant
improvements (700) (320,300)
Proceeds from sale of property 4,687,600
(Increase) in investments in debt
securities (2,513,000) (485,700) (496,300)
(Increase) decrease in escrow
deposits (96,800) (80,800) 91,400
- ------------------------------------------------------------------------------
Net cash (used for) provided by
investing activities (2,610,500) 4,121,100 (725,200)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of mortgage loan payable (3,819,800)
Principal payments on mortgage loans
payable (988,900) (814,600) (803,900)
Payment of loan extension costs (27,800) (16,900)
Increase (decrease) in security
deposits 2,600 (15,100) 4,000
- ------------------------------------------------------------------------------
Net cash (used for) financing
activities (1,014,100) (4,649,500) (816,800)
- ------------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (2,063,300) 916,400 (538,400)
Cash and cash equivalents at the
beginning of the year 2,842,100 1,925,700 2,464,100
- ------------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 778,800 $ 2,842,100 $ 1,925,700
- ------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year $ 616,500 $ 912,200 $ 1,074,300
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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.
In 1998, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which was effective for
fiscal years beginning after December 15, 1997. This statement establishes
standards for the way that public business enterprises report information about
operating segments and major customers in their annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports in the second year of application. The
Partnership has one reportable segment as the Partnership is in the disposition
phase of its life cycle, wherein it is seeking to liquidate its remaining
operating assets. Management's main focus, therefore, is to prepare its assets
for sale and find purchasers for its remaining assets when market conditions
warrant such an action. The adoption of Statement 131 did not affect the
results of operations or financial position. The Partnership has two tenants
who occupy 61% of the Partnership's rental property. These tenants occupied 36%
and 25% of the Partnership's rentable space, respectively.
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. Effective July 1, 1998, the Partnership
recognizes rental income that is contingent upon tenants achieving specified
targets, only to the extent that such targets are attained.
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 until its dissolution in 1997, 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 federal 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. Upon classifying a
commercial rental property as held for disposition, no further depreciation or
amortization of such property is provided for in the financial statements.
Lease acquisition fees are recorded at cost and amortized on the 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 its estimated fair value. Except as disclosed in Note 7,
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
refinanced, the related loan acquisition costs and accumulated amortization are
removed from the respective accounts and any unamortized balance is expensed.
5
<PAGE>
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, 1998 are comprised of
obligations of the United States government and are classified as held-to-
maturity. These investments are carried at their amortized cost basis in the
financial statements, which approximated fair market value. All of these
securities had a maturity of less than one year when purchased.
Certain reclassifications have been made to the previously reported 1997 and
1996 statements in order to provide comparability with the 1998 statements.
These reclassifications have no effect on net income or Partners' (deficit)
capital.
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 values of all other
financial instruments including cash and cash equivalents, included in the
financial statements, was not materially different from their carrying values
at December 31, 1998 and 1997.
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 Management
Fee. For the year ended December 31, 1998, 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, 1998 the General Partner was
allocated a net (loss) of $(10,400) which included a (loss) from a provision
for value impairment of $(20,000). For the year ended December 31, 1997, the
General Partner was allocated net profits of $15,600, which included $8,000 of
a 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).
Fees and reimbursements paid and payable by the Partnership to Affiliates were
as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
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 $ 19,800 None $ 55,500 (2,400) $302,800 21,500
Reimbursements of
property insurance
premiums 50,100 None 51,100 None 55,400 None
Legal 25,400 None 35,200 None 41,700 None
Reimbursements of
expenses, at cost
--Accounting 7,000 1,100 9,000 400 19,800 1,500
--Investor communication 3,500 500 3,400 100 5,100 200
- -----------------------------------------------------------------------------
$105,800 $11,600 $154,200 $ 8,100 $424,800 $33,200
- -----------------------------------------------------------------------------
</TABLE>
The variance between the amount listed in this table and the Statement of
Income and Expense is due to capitalized legal costs.
(a) As of December 31, 1998, 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.
6
<PAGE>
3. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rental income due on noncancelable
leases as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
1999 $ 1,461,400
2000 1,318,200
2001 926,200
2002 801,900
2003 642,000
Thereafter 1,268,300
--------------
$ 6,418,000
--------------
</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, 1998, 1997 and 1996 were $165,700,
$102,300 and $192,900, respectively. To provide comparability in the financial
statements, the Partnership netted the effects of real estate tax refunds from
prior periods received in 1997 and 1998 with any such amounts due to tenants
and related rental revenues.
4. MORTGAGE LOAN PAYABLE:
Mortgage loan payable at December 31, 1998 and 1997 consisted of the following
non-recourse loan:
<TABLE>
<CAPTION>
Principal Balance at Average Monthly Estimated
Property Pledged as --------------------- Interest Maturity Periodic Balloon
Collateral 12/13/198 12/31/97 Rate Date (d) Payment Payment
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glendale Center Shopping
Mall (a) $5,570,800 $6,559,700 10.10% (b) 01/01/00 (c) $4,443,100
- ---------------------------------------------------------------------------------------
</TABLE>
(a) This 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) This interest rate represents the weighted average for the year ended
December 31, 1998. The interest rate is subject to change in accordance
with the provisions of the loan agreement. As of December 31, 1998, the
interest rate on this loan was 10.12%.
(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. Additionally, certain debt coverage ratios (pursuant to the loan
agreement) must be met each quarter and deficiencies in reaching benchmarks
would require additional principal payments. The additional principal
payment of 50% of net cash flow that the joint venture is required to pay
in 1999 for the 1998 calendar year is $910,400, of which the Partnership's
share is $455,200. The payment made in 1998 for the 1997 calendar year was
$525,300, of which the Partnership's share was $262,600. The loan agreement
requires the Partnership to deposit funds into an interest bearing account
with the mortgagee to be utilized for capital expenditures. As of December
31, 1998, the mortgagee was holding $197,200 on behalf of the Partnership.
(d) During the year ended December 31, 1998, the Partnership exercised an
option to extend the maturity date to January 1, 2000. At its option, upon
meeting certain covenants, the Partnership has the option to extend the
maturity date to January 2001.
Amortization of scheduled mortgage loan principal payments for the remaining
term of the loan:
<TABLE>
<S> <C>
1999 $ 1,127,700
2000 4,443,100
--------
$ 5,570,800
--------
</TABLE>
5. INCOME TAX:
The Partnership utilizes the accrual method 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,
1998, net income for income tax reporting purposes was $277,600. The aggregate
cost of commercial rental properties for federal income tax purposes at
December 31, 1998 was $25,907,200.
6. PROPERTY SALE:
On June 16, 1997, the joint venture in which the Partnership owned 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. The net proceeds have
been retained by the Partnership to supplement working capital reserves. 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.
7
<PAGE>
7. ASSET HELD FOR DISPOSITION:
The mortgage loan collateralized by Glendale, matures in January 2000. While
the Partnership has the option to extend the maturity date for one year, the
exercise of such option would require the payment of a fee together with a
requirement to dedicate much of Glendale's cash flow to service the loan.
During the past two years, Glendale has experienced a reduction in its
occupancy. In addition, the leases for both of Glendale's anchor tenants,
representing approximately 61% of the net leasable square footage of the mall,
expire in January 2001. In connection with these issues, the General Partner
believes that it is in the best interest of the Partnership to sell the
property. Accordingly, effective October 1, 1998, the Partnership has
classified Glendale as "Held for Disposition."
The Partnership, through the joint venture that owns the property, has entered
into an agreement for the sale of Glendale. The contract contains contingencies
under which the purchaser may elect not to consummate the transaction. There
can be no assurance that the transaction contemplated by this agreement will
consummate. However, failure on the purchaser's part to close on the
transaction, absent seller default, would result in the forfeiture in favor of
the Partnership of earnest money in the amount of $250,000. Based on the terms
of this contract, the Partnership has recorded an additional provision for
value impairment in the amount of $2,000,000 during 1998.
During 1996, as a result of increased competition for retail space, together
with the uncertainty as to the retention of the two anchor tenants at Glendale,
the Partnership recognized a provision for value impairment of $2,700,000.
The Partnership's share of Glendale's net operating results (exclusive of
provisions for value impairment) was $834,700, $657,100 and $331,500 for the
years ended December 31, 1998, 1997 and 1996, respectively.
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).
8
<PAGE>
FIRST CAPITAL INCOME PROPERTIES, LTD. - SERIES X
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------- ------------- ------------------------- ------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial cost Costs capitalized Gross amount at which
to Partnership subsequent 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)
- --------------- ------------- ----------- ------------ ----------- ------------ ----------- ----------- -----------
Shopping Center:
Glendale Center
Shopping Mall
(Indianapolis, IN)
(50% Interest) (4) $ 5,570,800 $ 4,932,600 $ 18,556,900 $ 2,350,100 $ 67,600 $ 2,887,600 $12,019,600 $14,907,200(5)
============= =========== ============ =========== ============ =========== =========== ===========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Column F Column G Column H Column I
---------------- ------------ --------- ------------------------------------
Accumulated Date of Date Life on which depreciation in latest
Depreciation (2) construction Acquired income statements is computed
---------------- ------------ --------- ------------------------------------
Shopping Center:
Glendale Center
Shopping Mall
(Indianapolis, IN) 35 (7)
(50% Interest) (4) $ 7,141,300 1958 (6) 5/85 3-13 (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>
Years Ended
----------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997 December 31, 1996
----------------------------- -------------------------- ------------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
------------ ------------- ------------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning
of the
year $ 16,906,500 $ 6,817,300 $ 22,100,300 $ 7,684,100 $ 24,480,000 $ 7,099,000
Additions
during the
year:
Improvements 700 320,300
Provisions
for
depreciation 324,000 469,700 585,100
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
impairment (2,000,000) (2,700,000)
------------ ------------- ------------ ------------ --------------- -------------
Balance at
end of the
year $ 14,907,200 $ 7,141,300 $ 16,906,500 $ 6,817,300 $ 22,100,300 $ 7,684,100
============ ============= ============ ============ =============== =============
</TABLE>
Note 3. The aggregate cost for federal income tax purposes is $25,907,200.
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 $11,000,000.
Note 6. Renovated in 1983 and 1984.
Note 7. Estimated useful life of building.
Note 8. Estimated useful lives of improvements.
A - 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 778,800
<SECURITIES> 3,495,000
<RECEIVABLES> 159,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,433,400
<PP&E> 14,907,200
<DEPRECIATION> 7,141,300
<TOTAL-ASSETS> 12,438,100
<CURRENT-LIABILITIES> 539,700
<BONDS> 5,570,800
0
0
<COMMON> 0
<OTHER-SE> 6,042,200
<TOTAL-LIABILITY-AND-EQUITY> 12,438,100
<SALES> 0
<TOTAL-REVENUES> 3,548,500
<CGS> 0
<TOTAL-COSTS> 1,508,200
<OTHER-EXPENSES> 104,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 616,500
<INCOME-PRETAX> (1,044,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,044,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,044,300)
<EPS-PRIMARY> (23.57)
<EPS-DILUTED> (23.57)
</TABLE>
