<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1995
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission File Number: 0-14122
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First Capital Institutional Real Estate, Ltd.-3
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(Exact name of registrant as specified in its charter)
Florida 36-3330657
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
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(Address of principal executive offices) (Zip Code)
(312) 207-0020
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the definitive Prospectus dated January 17, 1985, included
in the Registrant's Registration Statement on Form S-11, (Registration No.
2-79029), is incorporated herein by reference in Part I of this report.
<PAGE>
BALANCE SHEETS
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
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<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 1,908,600 $ 1,908,600
Buildings and improvements 18,742,400 18,713,300
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20,651,000 20,621,900
Accumulated depreciation and amortization (5,232,100) (5,024,100)
- ----------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 15,418,900 15,597,800
Cash and cash equivalents 8,411,100 8,442,900
Restricted cash 62,500 62,500
Investment in joint venture 5,153,900 5,234,600
Rents receivable 48,400 24,800
Other assets (including amounts due from joint
venture of $757,200 and $725,500, respectively) 777,200 757,600
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$29,872,000 $30,120,200
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 229,200 $ 360,000
Due to Affiliates 135,100 107,400
Security deposits 51,300 51,500
Distributions payable 635,200 559,000
Other liabilities 23,200 3,500
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1,074,000 1,081,400
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Partners' (deficit) capital:
General Partner (163,300) (163,300)
Limited Partners (45,737 Units authorized, issued
and outstanding) 28,961,300 29,202,100
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28,798,000 29,038,800
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$29,872,000 $30,120,200
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</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the quarter ended March 31, 1995
and the year ended December 31, 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' (deficit) capital, January 1,
1994 $(147,800) $31,764,300 $31,616,500
Net income (loss) for the year ended
December 31, 1994 140,400 (1,159,500) (1,019,100)
Distributions for the year ended December
31, 1994 (155,900) (1,402,700) (1,558,600)
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Partners' (deficit) capital, December 31,
1994 (163,300) 29,202,100 29,038,800
Net income for the quarter ended March
31, 1995 63,500 330,900 394,400
Distributions for the quarter ended March
31, 1995 (63,500) (571,700) (635,200)
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Partners' (deficit) capital, March 31,
1995 $(163,300) $28,961,300 $28,798,000
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</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended March 31, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Income:
Rental $ 815,200 $ 899,100
Interest 143,000 64,300
Income from participation in joint venture 69,300 49,600
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1,027,500 1,013,000
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Expenses:
Depreciation and amortization 208,000 247,600
Property operating:
Affiliates 42,500 49,700
Nonaffiliates 145,700 188,100
Real estate taxes 79,400 91,700
Insurance--Affiliate 6,100 7,700
Repairs and maintenance 94,700 118,200
General and administrative:
Affiliates 10,400 12,500
Nonaffiliates 46,300 35,600
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633,100 751,100
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Net income $ 394,400 $ 261,900
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Net income allocated to General Partner $ 63,500 $ 25,000
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Net income allocated to Limited Partners $ 330,900 $ 236,900
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Net income allocated to Limited Partners per Unit
(45,737 Units authorized, issued and outstanding) $ 7.23 $ 5.18
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</TABLE>
STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 1995 and 1994
(Unaudited)
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 394,400 $ 261,900
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 208,000 247,600
Changes in assets and liabilities:
(Increase) in rents receivable (23,600) (7,900)
(Increase) decrease in other assets (19,600) 3,800
(Decrease) in accounts payable and accrued expenses (130,800) (180,400)
Increase in due to Affiliates 27,700 22,400
Increase (decrease) in other liabilities 19,700 (43,900)
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Net cash provided by operating activities 475,800 303,500
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Cash flows from investing activities:
Payments for capital and tenant improvements (29,100) (156,700)
Distributions received from joint venture in excess of
income allocated 80,700 23,200
Collection of (payment on) loans to joint venture 30,500
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Net cash provided by (used for) investing activities 51,600 (103,000)
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Cash flows from financing activities:
Distributions paid to Partners (559,000) (134,700)
(Decrease) increase in security deposits (200) 7,000
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Net cash (used for) by financing activities (559,200) (127,700)
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Net (decrease) increase in cash and cash equivalents (31,800) 72,800
Cash and cash equivalents at the beginning of the period 8,442,900 5,831,100
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Cash and cash equivalents at the end of the period $8,411,100 $5,903,900
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement on Form S-11, filed with the
Securities and Exchange Commission. Definitions of these terms are contained in
Article III of the First Amended and Restated Certificate and Agreement of
Limited Partnership, which is incorporated herein by reference.
ACCOUNTING POLICIES:
The financial statements have been prepared in accordance with generally
accepted accounting principles. Under this method of accounting, revenues are
recorded when earned and expenses are recorded when incurred.
The financial information included in these financial statements is unaudited;
however, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter ended March 31, 1995, are not necessarily indicative of the
operating results for the year ending December 31, 1995.
The financial statements include the Partnership's interest in three joint
ventures. The joint ventures were formed for the purpose of acquiring a 100%
interest in certain real properties. These joint ventures are with affiliated
partnerships, and like these partnerships are operated under the control of the
General Partner. Accordingly, the Partnership's pro rata share of such
ventures' revenues, expenses, assets and liabilities is included in the
financial statements.
Investment in joint venture represents the recording of the Partnership's
interest, under the equity method of accounting, in a joint venture with an
Affiliated partnership. The joint venture acquired a majority preferred
interest in a joint venture with the seller of the Lansing, Michigan property.
Under the equity method of accounting, the Partnership records its initial
interest at cost and adjusts its investment account for its share of joint
venture income or loss and its distribution of cash flow.
Certain reclassifications have been made to the previously reported 1994
statements in order to provide comparability with the 1995 statements. These
reclassifications have not changed the 1994 results.
Cash equivalents are considered all highly liquid investments purchased with a
maturity of three months or less.
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a description of other accounting policies and
additional details of the Partnership's financial condition, results of
operations, changes in Partners' capital and changes in cash balances for the
year then ended. The details provided in the notes thereto have not changed
except as a result of normal transactions in the interim.
2. RELATED PARTY TRANSACTIONS:
Subsequent to May 16, 1986, the Termination of the Offering, the General
Partner is entitled to 10% of distributable Cash Flow as its Partnership
Management Fee. For the quarter ended March 31, 1995, the General Partner was
allocated a Partnership Management Fee of approximately $63,500 in conjunction
with the declaration of cash distributions to the Limited Partners.
In accordance with the Partnership Agreement, Net Profits are generally
allocated first to the General Partner in an amount equal to the greater of the
General Partner's Partnership Management Fee or 1% of Net Profits. The balance
of Net Profits, if any, is allocated to the Limited Partners. Net Losses
(exclusive of Net Losses from the sale or disposition of a Partnership
property) are allocated 1% to the General Partner and 99% to the Limited
Partners. For the quarter ended March 31, 1995 the General Partner was
allocated Net Profits of approximately $63,500. Net Losses from the sale or
disposition of a Partnership property are allocated first, to the General
Partner and Limited Partners pro rata, in proportion to the positive balance in
their capital accounts until the positive balance is reduced to zero and
second, the balance, if any, ninety-nine percent (99%) to the Limited Partners
and one percent (1%) to the General Partner. Notwithstanding anything to the
contrary, the General Partner shall be allocated not less than one percent (1%)
of Net Losses from the sale or disposition of a Partnership property.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter ended March 31, 1995 were as follows:
<TABLE>
<CAPTION>
Paid Payable
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<S> <C> <C>
Property management and leasing fees $20,900 $ 84,200
Reimbursement of property insurance premiums, at cost None 6,100
Real estate commissions (a) None 40,200
Reimbursement of expenses, at cost:
(1) Accounting 5,500 2,300
(2) Investor communication 4,800 2,300
(3) Legal 100 None
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$31,300 $135,100
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</TABLE>
(a) As of March 31, 1995, $40,200 was due to the General Partner for real
estate commissions earned in connection with the disposition of Wellington
A and the sale of Wellington B in the Wellington North Office Complex.
These commissions have been accrued but not paid. Under the terms of the
Partnership Agreement, these commissions will not be paid until such time
as the Limited Partners have received cumulative distributions of Sale or
Financing Proceeds equal to 100% of their Original Capital Contribution
plus a cumulative return (including all Cash Flow which has been
distributed to the Limited Partners) of 6% simple interest per annum on
their Capital Investment from the initial date of investment.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's annual report for the year ended
December 31, 1994, for a discussion of the Partnership's business.
OPERATIONS
One of the primary objectives of the Partnership is to provide cash
distributions to Limited Partners from Cash Flow generated by Partnership
operations. To the extent cash distributions exceed net income, such excess
distributions will be treated as a return of capital. The Statements of Cash
Flows presented in the financial statements represent a reconciliation of the
changes in cash balances. Cash Flow, as defined by the Partnership Agreement,
is generally not equal to Partnership net income or cash flows as determined
under generally accepted accounting principles, since certain items are treated
differently under the Partnership Agreement than under generally accepted
accounting principles. Management believes that in order to facilitate a clear
understanding of the Partnership's operations, an analysis of Cash Flow (as
defined by the Partnership Agreement) should be examined in conjunction with an
analysis of net income or cash flows, as defined by generally accepted
accounting principles. The amount of Cash Flow and the return on Capital
Investment are not indicative of actual distributions and actual returns on
Capital Investment.
<TABLE>
<CAPTION>
Comparative Cash Flow
Results For the
Quarters Ended
3/31/95 3/31/94
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<S> <C> <C>
Amount of Cash Flow (as defined in the Partnership
Agreement) $ 690,700 $ 593,500
Capital Investment $44,893,000 $44,893,000
Annualized return on Capital Investment (Annualized
Cash Flow/Capital Investment) 6.16% 5.29%
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</TABLE>
As the Partnership progresses through the disposition phase of its life cycle,
comparisons of Cash Flow results between the periods presented in the table are
complicated due to the timing and effect of property sales and dispositions.
Partnership Cash Flow is generally expected to decline as real property
interests are sold since the Partnership no longer receives Cash Flow generated
from such real property interests. Accordingly, rental income, property
operating expenses, repairs and maintenance and real estate taxes are expected
to decline as well, but will continue to comprise the significant components of
Cash Flow and operating results until the final property sale. Also, during the
disposition phase, cash and cash equivalents increase as sale proceeds are
received and decrease as the Partnership utilizes such proceeds for the
purposes of distributions to Limited Partners or making improvements to the
Partnership's remaining properties. Sale proceeds are excluded from the
determination of Cash Flow. On June 8, 1994 ("Wellington "C' ") of the
Wellington North Office Complex was sold.
The increase in Cash Flow of approximately $97,200 for the quarter ended March
31, 1995 when compared to the quarter ended March 31, 1994 was due to the
following: 1) increased operating results at the Park Plaza Professional
Building ("Park Plaza"), 3120 Southwest Freeway and the Ellis Building of
approximately $9,200, $4,700 and $3,300, respectively; 2) increased interest
earned on short-term investments of approximately
$78,700 due to an increase in funds available for such investments as well as
an increase in rates available; 3) the receipt of refunds of approximately
$19,500 for Wellington C and 4) an increase in operating results for the
Partnership's investment in the joint venture which owns Holiday Office Park
North and South ("Holiday") of approximately $24,100. Partially offsetting
these increases was a decrease in Cash Flow of approximately $40,100 due to the
absence of Wellington C.
Rental revenues at Park Plaza for the quarters ended March 31, 1995 and 1994
were approximately $444,500 and $446,100, respectively. The average occupancy
rate remained at 88% for the quarters ended March 31, 1995 and 1994.
Contributing to the increase in operating results for this property were
decreases in repairs and maintence and property operating expenses of
approximately $4,500 and $13,400, respectively, partially offset by an increase
in real estate tax expense of approximately $7,400.
Rental revenues at 3120 Southwest Freeway for the quarters ended March 31, 1995
and 1994 were approximately $62,600 and $57,300, respectively. The increase in
rental revenues was due to an increase in the average quarterly occupancy rate
from 91% in 1994 to 96% in 1995.
Rental revenues at the Ellis Building for the quarter ended March 31, 1995 and
1994 were approximately $288,600 and $277,300, respectively. The increase in
rental revenues was primarily due to an increase in the average quarterly
occupancy rate as well as to the base rental rate charged to new and renewing
tenants, offset by a decrease in tenant reimbursements for real estate taxes.
The three-month average occupancy rate increased from 88% in 1994 to 96% in
1995. Partially offsetting the increase in operating results were increases in
repairs and maintenance and property operating expenses of approximately $2,600
and $7,000, respectively.
Rental revenues at Wellington C for the quarter ended March 31, 1994 were
approximately $118,400.
To further increase occupancy levels at the Partnership's properties, the
General Partner, through its Affiliated asset and property management groups,
continues to take the necessary actions deemed appropriate for the properties
discussed above. Some of these actions include: 1) implementation of marketing
programs, including hiring of third-party leasing agents or providing on-site
leasing personnel, advertising, direct mail campaigns and development of
building brochures; 2) early renewal of existing tenants and addressing any
expansion needs these tenants may have; 3) promotion of local broker events and
networking with local brokers; 4) 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
The decrease in the Partnership's cash position as of March 31, 1995 when
compared to December 31, 1994 was primarily the result of distributions paid to
Partners and payments for capital and tenant improvements exceeding net cash
provided by operating activities. Liquid assets of the Partnership as of March
31, 1995 were comprised of working capital reserves and undistributed Cash
Flow.
Net cash provided by operating activities continues to be the Partnership's
primary source of funds. Net cash provided by operating activities increased
from $303,500 for the quarter ended March 31, 1994 to $475,800 for the quarter
ended March 31, 1995. This increase was primarily due the increase in operating
results discussed above as well as to the timing of the payment of certain
Partnership expenses.
Net cash (used for) provided by investing activities changed from ($103,000)
for the quarter ended March 31, 1994 to $51,600 for the quarter ended March 31,
1995. This change was primarily due to an increase in distributions received
from joint venture in excess of income allocated and to a decrease in payments
made for capital and tenant improvements. During the quarter ended March 31,
1995, the Partnership spent approximately $29,100 for capital and tenant
improvements and has budgeted to spend approximately $893,000 during the
remainder of 1995. Of the remaining budgeted amount, approximately $525,000,
$215,000 and $150,000 relates to anticipated capital and tenant improvements
and leasing costs expected to be incurred at Holiday, Park Plaza and the Ellis
Building, respectively. The General Partner believes these improvements are
necessary in order to maintain occupancy levels in very competitive markets, as
well as to maximize rental rates charged to new and renewing tenants.
Net cash used for financing activities increased from $127,700 for the quarter
ended March 31, 1994 to $559,200 for the quarter ended March 31, 1995,
primarily due to the increase in the payment of cash distributions to Partners.
The General Partner continues to take a conservative approach to projections of
future rental income and to maintain higher levels of cash reserves for the
Partnership. The higher levels of cash reserves are needed due to the
anticipated capital and tenant improvements necessary to be made to the
Partnership's properties during the next several years. As a result of this,
the Partnership continues to reserve amounts from Cash Flow to supplement
working capital reserves. For the quarter ended March 31, 1995, Cash Flow
retained to supplement working capital reserves approximated $55,500.
Distributions to Limited Partners for the quarter ended March 31, 1995 were
declared at an annualized rate of 5.09% on total Capital Investment. Cash
distributions are made 60 days after the quarter-end. The amount of future
distributions to the Limited Partners will ultimately be dependent upon the
performance of the Partnership's investments as well as the amount of Cash Flow
retained for future cash requirements. Therefore, there can be no assurance of
the availability or the amount of Cash Flow for distribution to investors.
5
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
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(a) Exhibits: Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
March 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 3
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Date: May 12, 1995 By: /s/ DOUGLAS CROCKER II
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DOUGLAS CROCKER II
President and Chief Executive Officer
Date: May 12, 1995 By: /s/ NORMAN M. FIELD
------------ ---------------------------------------
NORMAN M. FIELD
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-01-1995
<EXCHANGE-RATE> 1
<CASH> 8,473,600
<SECURITIES> 0
<RECEIVABLES> 48,400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,522,000
<PP&E> 20,651,000
<DEPRECIATION> 5,232,100
<TOTAL-ASSETS> 29,872,000
<CURRENT-LIABILITIES> 959,300
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28,961,300
<TOTAL-LIABILITY-AND-EQUITY> 29,872,000
<SALES> 0
<TOTAL-REVENUES> 1,027,500
<CGS> 0
<TOTAL-COSTS> 368,400
<OTHER-EXPENSES> 56,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 394,400
<INCOME-TAX> 0
<INCOME-CONTINUING> 394,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 394,400
<EPS-PRIMARY> 7.23
<EPS-DILUTED> 7.23
</TABLE>
