<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, 1994
---------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
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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
--------------------------------- ------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
---------------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 207-0020
-----------------------------
Securities registered pursuant to Section 12(b) NONE
of the Act: -----------------------------
Securities registered pursuant to Section 12(g) Limited Partnership Units
of the Act: -----------------------------
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. [ ]
<PAGE>
Document 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, is incorporated herein
by reference in Part IV of this report.
Exhibit Index--Page A-1
2
<PAGE>
PART I
ITEM 1. BUSINESS
The registrant, First Capital Institutional Real Estate, Ltd.-3 (the
"Partnership"), is a limited partnership organized in 1984 under the Florida
Uniform Limited Partnership Act. The Partnership sold $45,737,000 in Limited
Partnership Units ("the Units") to the public from January, 1985 to May, 1986,
pursuant to a Registration Statement on Form S-11 filed with the Securities and
Exchange Commission (Registration Statement No. 2-94419). Capitalized terms used
in this report have the same meaning as those terms have in this Registration
Statement.
The business of the Partnership is to invest primarily in existing, income-
producing commercial real estate such as shopping centers and office buildings,
and to a lesser extent, in other types of real estate.
From March, 1986 to March, 1989, the Partnership made three real property
investments (including two 50% joint venture interests and one 25% joint venture
interest) and one participating mortgage loan investment, which was recognized
as of July 1, 1990 as being foreclosed in-substance and was recorded as two real
property investments, (the North Valley Office Center Phase I ("North Valley")
and the Wellington North Office Complex ("Wellington A, B and C")) in which the
Partnership had a 50% joint venture interest. In addition, in January 1987 the
Partnership, with an Affiliated partnership, formed a joint venture ("Joint
Venture"), in which they are each 50% partners, for the purpose of entering into
a limited partnership agreement with an unaffiliated third party to which the
Joint Venture contributed 75% of the total purchase price of a property, Holiday
Office Park North and South ("Holiday"), in order to obtain a preferred majority
interest in the limited partnership. This Joint Venture is operated under the
control of the General Partner. On November 5, 1992, North Valley was disposed
of as a result of a conveyance of the title to the mortgage holder in lieu of
foreclosure. On March 17, 1993, Wellington A was disposed of in conjunction with
the mortgage holder, to a third party. On March 23, 1993 Wellington B was sold,
and on June 8, 1994, Wellington C was sold.
Property management services for certain of the Partnership's real estate
investments are provided by an Affiliate of the General Partner for fees
calculated as a percentage of gross rents received from the properties.
The real estate business is highly competitive. The results of operations of the
Partnership depend upon the availability of suitable tenants, real estate market
conditions and general economic conditions which may impact the success of these
tenants. Properties owned by the Partnership frequently compete for tenants with
similar properties owned by others.
The Partnership employs directly or through joint ventures 17 people for on-site
property maintenance and administration.
3
<PAGE>
ITEM 2. PROPERTIES (a) (b)
------ ----------
As of December 31, 1994, the Partnership owns through joint ventures, the
following four real property interests, all of which are owned in fee simple:
Net Number
Leasable of
Property Name Location Sq. Footage Tenants (c)
---------------------- ----------------- ------------ -------------
Office Buildings:
-----------------
Ellis Building (d) Sarasota, Florida 130,189 39 (2)
Holiday Office Park
North and South (e) Lansing, Michigan 398,228 70 (1)
Park Plaza Professional
Building (d) Houston, Texas 177,395 64 (1)
3120 Southwest
Freeway (f) Houston, Texas 89,346 37
Notes:
(a) For a discussion of significant operating results and major capital
expenditures planned for the Partnership's properties refer to Item 7 on
pages 11 through 15.
(b) For Federal income tax purposes, the Partnership depreciates the portion of
the acquisition costs of its properties allocable to real property, and all
improvements thereafter, over useful lives ranging from 19 years utilizing
Accelerated Cost Recovery System to 40 years utilizing the straight-line
method. The Partnership's portion of real estate taxes for the Ellis
Building ("Ellis"), Holiday and Park Plaza Professional Building ("Park
Plaza"), the Partnership's most significant properties, were approximately
$79,700, $159,700, and $185,700, respectively for the year ended December
31, 1994. In the opinion of the General Partner, the Partnership's
properties are adequately insured and serviced by all necessary utilities.
(c) Represents the total number of tenants as well as the number of tenants, in
parenthesis, that individually occupy more than 10% of the net leasable
square footage of the property.
(d) The Partnership owns a 50% joint venture interest in this property.
(e) The Partnership owns a 50% interest in a joint venture which owns a
majority preferred interest in this property.
(f) The Partnership owns a 25% joint venture interest in this property.
4
<PAGE>
ITEM 2. PROPERTIES -- Continued
------ ----------
The following table presents the Partnership's significant properties' occupancy
rates as of December 31 for each of the last five years:
Property Name 1994 1993 1992 1991 1990
------------- ---- ---- ---- ---- ----
Ellis Building 95% 86% 96% 98% 97%
Holiday Office Park
North and South 73% 84% 76% 85% 83%
Park Plaza
Professional
Building 82% 91% 91% 89% 89%
The following table sets forth the Partnership's significant properties' average
annual rentals per square foot for each of the last five years ended December 31
which are computed by dividing each property's base rental revenues by its
average occupied square footage.
Property Name 1994 1993 1992 1991 1990
-------------- ------ ------ ------ ------ ------
Ellis Building $13.32 $13.08 $12.57 $13.07 $12.71
Holiday Office Park
North and South $ 9.32 $ 8.57 $ 8.36 $ 8.15 $ 8.45
Park Plaza
Professional
Building $18.44 $17.65 $16.99 $16.63 $15.82
The following table summarizes the principal provisions of the leases for
tenants occupying ten percent or more of the rentable square footage at the
Partnership's most significant properties.
<TABLE>
<CAPTION>
Percentage
of Net
Partnership's Leasable
Portion of Expiration Square
Rent Date of Footage Renewal Options
for 1995 Lease Occupied (Renewal Options/Years)
------------- ---------- ---------- -----------------------
<S> <C> <C> <C> <C>
Ellis Building
--------------
NationsBank $384,800 03/09/01 42% 4/5
(banking)
University Club $ 50,600 04/28/01 10% None
(restaurant/banquet
facility)
Park Plaza
Professional Building
-----------------------
AMI Park Plaza Hospital $186,900 05/31/95 12% None
(health care services)
</TABLE>
5
<PAGE>
ITEM 2. PROPERTIES -- Continued
------- ----------
<TABLE>
<CAPTION>
Percentage
of Net
Partnership's Leasable
Portion of Expiration Square
Rent Date of Footage Renewal Options
for 1995 Lease Occupied (Renewal Options/Years)
------------ ---------- ---------- -----------------------
<S> <C> <C> <C> <C>
Holiday Office Park
North and South
-------------------
Michigan Public Service Commission $270,700 (a) 14% None
(state government administration)
</TABLE>
(a) See note (c) below
The following table sets forth the Partnership's portion of lease expirations
(assuming no lease renewals) for the Partnership's significant properties
through the year ended December 31, 2004:
<TABLE>
<CAPTION>
Number Base Rents % of Total
of in Year of Base Rents
Year Tenants Square Feet Expiration(a) Collected(b)
---- ------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
1995 39 104,900 $425,200 13.08%
1996 40 54,900 $214,500 8.12%
1997 30 65,000 $257,700 11.47%
1998 20 43,300 $155,600 8.34%
1999 27 61,000 $234,600 15.56%
2000(c) 11 130,100 $ 52,700 7.55%
2001 4 71,200 $ 87,100 31.37%
2002 1 19,100 $ 97,500 53.67%
2003 None None None None
2004 1 9,149 $ 35,100 100.00%
</TABLE>
(a) Represents Partnership's portion of rents to be received, through the
date of expiration, on expiring leases for each year.
(b) Represents the rents to be received on expiring leases as a percentage
of the total rents expected to be collected for each year.
(c) Included in this year are amounts for a tenant whose lease expired on
5/31/94. As of December 31, 1994 the tenant continues to occupy the
premises and pay rent as the Partnership and the tenant negotiate the
terms of a new lease. The amounts shown in the above table and the
table on the preceding page are based on the terms of the expired
lease which are expected to approximate the terms of the new lease.
6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
------- -----------------
(a & b) The Partnership and its properties are 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, 1994. Ordinary routine
litigation incidental to the business which is not deemed material was
maintained during the quarter ended December 31, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------ ---------------------------------------------------
(a, b, c & d) None.
7
<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 the Units.
As of March 1, 1995, there were 7,620 Holders of the Units.
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
Total revenues $ 3,761,600 $ 3,916,200 $ 4,263,800 $ 4,388,600 $ 3,593,600
Net (loss) income $(1,019,100) $ 1,032,000 $(2,487,800) $ 610,900 $(3,927,400)
Net (loss) income
allocated to Limited
Partners $(1,159,500) $ 977,900 $(2,462,900) $ 604,800 $(3,888,100)
Net (loss) income
allocated to Limited
Partners per Unit
(45,737 Units issued
and outstanding)(a) $ (25.35) $ 21.38 $ (53.85) $ 13.22 $ (85.01)
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $15,597,800 $19,577,300 $22,700,600 $29,106,500 $29,585,100
Mortgage loan(s) payable None None $ 2,419,000 $ 5,569,000 $ 5,581,500
Number of real
properties owned at
December 31 4 5 5 6 6(b)
Total assets $30,120,200 $32,409,600 $35,171,600 $40,808,400 $40,067,700
Cash Flow (as defined by
the Partnership
Agreement)(c) $ 2,425,700 $ 2,164,900 $ 1,795,300 $ 1,972,500 $ 2,097,600
Distributions to Limited
Partners per Unit
(45,737 Units issued
and outstanding) $ 30.67 $ 29.05 None None $ 20.00
Return of Capital to
Limited Partners per
Unit (45,737 Units
issued and
outstanding)(d) $ 30.67 $ 7.67 None None $ 20.00
----------------------------------------------------------------------------------------
</TABLE>
Reconciliation of Cash Flow (as defined by the Partnership Agreement) to net
cash provided by operating activities:
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Flow (as defined by
the Partnership
Agreement)(c) $2,425,700 $2,164,900 $1,795,300 $1,972,500 $2,097,600
Items of reconciliation:
Principal payments on
mortgage loans payable 12,500 10,200
Cash received from in-
substance foreclosure 698,400
Distribution from joint
venture (493,000) (471,800) (269,400) (783,700) (765,900)
Income from
participation in joint
venture(e) 202,600 117,000 182,800 326,600 517,400
Changes in assets and
liabilities:
Decrease (increase) in
current assets 69,200 162,700 (35,200) 18,600 (255,900)
(Decrease) increase in
current liabilities (120,200) 38,500 263,400 392,200 (63,700)
-------------------------------------------------------------------------------------
Net cash provided by
operating activities $2,084,300 $2,011,300 $1,936,900 $1,938,700 $2,238,100
-------------------------------------------------------------------------------------
</TABLE>
(a) Net income (loss) allocated to Limited Partners per Unit for 1993 and 1992
included an extraordinary gain on extinguishment of debt.
(b) Included two real property investments accounted for as an in-substance
foreclosure in 1990. Actual title was obtained in 1991.
(c) Cash Flow is defined in the Partnership Agreement as all revenues from
operations (excluding tenant deposits, proceeds from the sale, disposition
or financing of any Partnership properties), minus all expenses (including
Operating Expenses, payments of principal 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, capital expenditures and payments of Acquisition
Fees made from Offering Proceeds.
(d) To the extent cash distributions exceed net income, such excess
distributions are treated as a return of capital.
(e) Excludes provision for value impairment of $672,400 for Holiday.
The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing on pages A-1 to A-7 in
this report and the supplemental schedules on pages A-8 through A-9.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The ordinary business of the Partnership is expected to pass through three
phases: (i) Offering of Units and investment in properties, (ii) operation of
properties and (iii) sale or other disposition of properties.
The Partnership commenced the Offering of Units on January 17, 1985 and began
operations on March 4, 1985 after achieving the required minimum subscription
level. In May, 1986, the Offering was terminated upon the sale of 45,737 Units.
From March, 1986 to March, 1989 the Partnership made a total of four real
property investments (including two 50% joint venture interests, one 25% joint
venture interest and one 50% interest in a joint venture that owns a 75%
preferred majority interest in a property) and one mortgage loan investment. As
of July 1, 1990 the mortgage loan investment was recognized as being foreclosed
in-substance and was recorded as two real property investments. The Partnership
entered the disposition phase of its life cycle with the November 5, 1992
disposition of North Valley Phase I, as a result of a conveyance of the title
to the mortgage holder in lieu of foreclosure. On March 17, 1993 Wellington A
was disposed of in conjunction with the mortgage holder, to a third party. On
March 23, 1993 Wellington B was sold. On June 8, 1994, the Partnership, through
a joint venture, disposed of the last building in the Wellington North Office
Complex, Wellington C.
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 Partnership 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.
As the Partnership progresses through the disposition phase, the General
Partner continues to analyze, and if necessary adjust for, the differences
between the market values and the carrying bases of the Partnership's
properties. As a result of the current year analysis, the Partnership has
recorded provisions for value impairment for the Ellis Building and the Park
Plaza Professional Building in the amounts of $1,000,000 and $500,000,
respectively, for the year ended December 31, 1994. The General Partner will
continue to evaluate real estate market conditions affecting each of the
Partnership's properties, in its efforts to maximize the realization of
proceeds on their eventual disposition. The recording of the provisions for
value impairment does not impact cash flows as defined by generally accepted
accounting principles or Cash Flow as defined by the Partnership Agreement (see
Note 9 of Notes to Financial Statements for additional information).
<TABLE>
<CAPTION>
Comparative Cash Flow Results
For the Years Ended
-----------------------------------
12/31/94 12/31/93 12/31/92
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of Cash Flow (as defined by the
Partnership Agreement) $ 2,425,700 $ 2,164,900 $ 1,795,300
Average Capital Investment $44,893,000 $45,245,000 $45,737,000
Return on average Capital Investment (Cash
Flow/average Capital Investment) 5.40% 4.78% 3.93%
-------------------------------------------------------------------------------
</TABLE>
Comparisons of Cash Flow between the years presented in the above table are
complicated with the disposition of North Valley Phase I in 1992, the
disposition of Wellington A and sale of Wellington B in 1993 and the sale of
Wellington C in 1994. 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, mortgage debt repayments
or making improvements to the Partnership's remaining properties. Sale proceeds
are excluded from the determination of Cash Flow.
Exclusive of the effect of the sale of Wellington C, Cash Flow results
increased $304,500 for the year ended December 31, 1994 when compared to the
year ended December 31, 1993. The primary factors which contributed to the
increase in Cash Flow results were: 1) an increase in Cash Flow results at
Ellis and Southwest Freeway of $108,200 and $38,100, respectively; 2) an
increase in Cash Flow results from the Partnership's investment in the joint
venture which owns Holiday of $22,700, primarily due to a decrease in real
estate tax expense resulting from a decrease in the property's assessed value
and 3) an increase in interest income of $132,600 due to a trend in higher
interest rates earned on short-term investments. Partially offsetting the
increase in Cash Flow was lower Cash Flow results at Park Plaza of $25,400.
The increase in Cash Flow results of $369,600 for the year ended December 31,
1993 when compared to the year ended December 31, 1992 was due primarily to: 1)
a decrease in real estate tax and insurance, property operating and repairs and
maintenance expenses due to the disposition and sale of Wellington A and
Wellington B, respectively; 2) a decrease in interest expense of approximately
$127,800 due to the extinguishment of debt in connection with the disposition
of Wellington A; 3) a higher return from the Partnership's investment in the
joint venture which owns Holiday due to increased rental revenues and 4) an
increase in interest income of approximately $35,400 due to an increase in
funds available for short-term investments resulting from withholding Cash Flow
to supplement working capital reserves. The increase in Cash Flow results was
partially offset by a decrease in rental income of $383,000 due to the
disposition of Wellington A and sale of Wellington B and a decrease in rental
revenues at Ellis of approximately $43,000.
Rental revenues at Ellis for the years ended December 31, 1994, 1993 and 1992
were approximately $1,118,300 $1,084,300, and $1,127,300, respectively. The
increase in rental revenues in 1994 when compared to 1993 was primarily due to
an increase in base rents as well as an increase in the average annual
occupancy rate. The average annual occupancy rate for 1994 and 1993 was 94% and
90%, respectively. Also contributing to the increase in Cash Flow for this
property for 1994 when compared to 1993 was a decrease in property operating
expenses of $65,000 primarily due to decreases in utilities, professional fees
and advertising and promotional costs and a decrease in real estate tax expense
of $6,400. The primary reason for the decrease in Cash Flow results for this
property for 1993 when compared to 1992 was the decrease in rental revenues.
Rental revenues decreased in 1993 due to a current year credit adjustment given
to a major tenant for a 1992 real estate tax reimbursement which when
previously billed had been based on an estimate and also to a decrease in
occupancy. The average annual occupancy rate in 1992 and 1993 was 97% and 90%,
respectively.
Rental revenues at Park Plaza for the years ended December 31, 1994, 1993 and
1992 were approximately $1,815,400, $1,889,200 and $1,732,800, respectively.
The changes in rental revenues from 1992 through 1994 were the result of: 1)
the significant fluctuations of real estate tax and operating expense
reimbursements earned of approximately $19,600 in 1992 (which included a credit
to tenants for reimbursements of approximately $71,700 related to 1989 and 1990
that were determined in 1992 to be overestimated), $115,200 in 1993 and $52,100
in 1994; 2) average annual occupancy rates of 90% in 1992, 93% in 1993 and 89%
in 1994; 3) a decrease in parking income in 1993 of approximately $37,400 when
compared to 1992 and 4) the write off of tenant receivables as uncollectible in
1992 of approximately $24,100.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
These changes in rental revenues are in part due to the recent legislative
uncertainties surrounding the health care industry. As a result, in order to
maintain occupancy levels, the Partnership has begun to offer to new and
renewing tenants reduced lease rates and the use of the current year as a base
year for tenant expense reimbursements. In addition, the increase in 1994 Cash
Flow results was impacted by lower property operating expenses as a result of
lower utilities, advertising and promotional fees and property management fees,
which are based on a percentage of gross rents received by the property.
Rental revenues at 3120 Southwest Freeway for the years ended December 31,
1994, 1993 and 1992 were approximately $237,700, $202,700 and $206,900,
respectively. The increase in rental revenues in 1994 when compared to 1993 was
primarily due to an increase in the average annual occupancy rate from 86% in
1993 to 91% in 1994 as well as an increase in the average effective base rental
rate charged to new and renewing tenants and the recovery of certain tenant
receivables which were previously written off as uncollectible. Despite the
increase in the average annual occupancy from 84% in 1992 to 86% in 1993 as
well as an increase in the average effective base rental rate charged to new
and renewing tenants, rental revenues decreased in 1993 when compared to 1992
primarily due to an adjustment in 1993 of real estate tax reimbursements billed
to tenants in 1992 which were based on an estimate of real estate tax expense
that was higher than the actual real estate taxes paid. Other factors affecting
the decrease in Cash Flow results in 1993 were increases in property operating
expenses of approximately $8,200, primarily due to increases in professional
fees and utilities and an increase in repair and maintenance expenses of
approximately $6,300.
Collectively, rental revenues at North Valley and Wellington A, B and C for the
years ended December 31, 1994, 1993 and 1992 were approximately $215,400,
$497,800 and $990,000, respectively. As previously discussed, these four
buildings were sold or disposed of individually between November 1992 and June
1994 and account for the significant decreases in rental revenues and operating
expenses. In addition, interest expense decreased approximately $127,900 in
1993 due to the extinguishment of debt in connection with the sale of
Wellington A. Partially offsetting the decrease in 1993 rental revenues when
compared to 1992 was an increase in the Wellington C average annual occupancy
rate from 46% in 1992 to 78% in 1993 as well as the receipt in May 1993 of a
lease settlement payment from a tenant who vacated Wellington C in April 1993.
Rental revenue at North Valley Phase I for the year ended December 31, 1992 was
$668,700. The sale of North Valley Phase I occurred on November 5, 1992.
To increase and maintain 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.
The rate of inflation has remained relatively stable during the years under
comparison and has had a minimal impact on the operating results of the
Partnership. The nature of various tenants' lease clauses protects the
Partnership, to some extent, from increases in the rate of inflation. Certain
of the lease clauses provide for the following: 1) annual rent increases based
on the Consumer Price Index or graduated rental increases; 2) percentage
rentals at shopping centers, for which the Partnership receives as additional
rent a percentage of a tenant's sales over predetermined breakeven amounts and
3) total or partial tenant reimbursement of property operating expenses (e.g.,
common area maintenance, real estate taxes, etc.).
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Partnership's cash position as of December 31, 1994 when
compared to December 31, 1993 was primarily the result of the receipt of net
Sales Proceeds from the sale of Wellington C and the net cash provided by
operating activities exceeding expenditures for capital and tenant improvements
and distributions paid to Partners. Liquid assets of the Partnership as of
December 31, 1994 were comprised of amounts held for working capital purposes
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 $2,011,300 for the year ended December 31, 1993 to $2,084,300 for the year
ended December 31, 1994. The increase was primarily due to the net increase in
Cash Flow as discussed above, partially offset by the effects of the
disposition and sale of Wellington A and B, respectively in 1993, as well as
the sale of Wellington C in June 1994, and to a lesser extent, the timing of
the collection of tenant's rental payments and the payment of certain
Partnership expenses.
Net cash (used for) provided by investing activities changed from ($86,000) for
the year ended December 31, 1993 to $1,677,600 for the year ended December 31,
1994. This change was primarily the result of proceeds received from the sale
of Wellington C being greater than the proceeds received from the disposition
of Wellington A and the sale of Wellington B in 1993 partially offset by a
decrease in expenditures for capital and tenant improvements. During the year
ended December 31, 1994, the Partnership spent approximately $670,600 for
capital and tenant improvements and has budgeted to spend approximately
$1,036,000 during 1995. Included in the 1995 budget are building and tenant
improvements for: 1) Ellis of approximately $158,000; 2) Park Plaza of
approximately $242,000; 3) Holiday of approximately $596,000 and 4) Southwest
Freeway of approximately $40,000. 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.
On June 8, 1994, Farmington Hills Associates, a joint venture in which the
Partnership and an Affiliated partnership each have a 50% interest, sold
Wellington C in the Wellington North Office Complex for the sale price of
$4,500,000. The Partnership's share of the net proceeds from this sale
approximated $2,168,200. The proceeds from this sale were added to the
Partnership's working capital.
Net cash used for financing activities decreased from $1,249,100 for the year
ended December 31, 1993 to $1,150,100 for the year ended December 31, 1994.
This decrease was due primarily to the decrease in the payment of cash
distributions to Limited Partners in 1994.
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 year ended December 31, 1994, Cash Flow
retained to supplement working capital reserves approximated $867,100. The
General Partner believes that the Partnership's current cash position along
with any additional amounts retained from future Cash Flow will be sufficient
to cover budgeted expenditures as well as any other requirements which may be
reasonably foreseen.
Distributions to Limited Partners for 1994 were made at an annualized rate of
3.12% 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.
11
<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, Schedules and Exhibits".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
12
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
(a) DIRECTORS
---------
The Partnership has no directors. First Capital Financial Corporation
("FCFC") is the General Partner. The directors of FCFC, as of March 27,
1995, 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 May, 1995.
Name Office
---- ------
Samuel Zell....................................... Chairman of the Board
Douglas Crocker II................................ Director
Sheli Z. Rosenberg................................ Director
Sanford Shkolnik.................................. Director
Samuel Zell, 53, has been a Director of the General Partner since 1983
(Chairman of the Board since December 1985); and is Chairman of the Board
of Great American Management and Investment, Inc. ("Great American"). Mr.
Zell is also Chairman of the Board of Equity Financial and Management
Company ("EFMC") and Equity Group Investments, Inc., and is a trustee and
beneficiary of a general partner of Equity Holding Limited, an Illinois
Limited Partnership, a privately owned investment partnership. He is also
Chairman of the Board of Directors of Itel Corporation, Broadway Stores,
Inc., Falcon Building Products, Inc. and American Classic Voyages Co. He is
Chairman of the Board of Trustees of Equity Residential Properties Trust.
He is a director of Jacor Communications, Inc., Sealy Corporation and The
Vigoro Corporation, Chairman of the Board of Directors and Chief Executive
Officer of Capsure Holdings Corp. and Manufactured Home Communities, Inc.
and Co-Chairman of the Board of Revco D.S., Inc. Mr. Zell was President of
Madison Management Group, Inc. ("Madison") prior to October 4, 1991.
Madison filed for a petition under the Federal bankruptcy laws on November
8, 1991.
Douglas Crocker II, 54, has been President and Chief Executive Officer
since December, 1992 and a Director since January, 1993 of the General
Partner. Mr. Crocker has been an Executive Vice President of EFMC since
November, 1992. Mr. Crocker has been President and Chief Executive Officer
of Equity Residential Properties Trust since March 31, 1993. He was
President of Republic Savings Bank, F.S.B. ("Republic") from 1989 to June,
1992 at which time the Resolution Trust Company took control of Republic.
Sheli Z. Rosenberg, 53, was President and Chief Executive Officer of the
General Partner from December, 1990 to December, 1992 and has been a
Director of the General Partner since September, 1983; was Executive Vice
President and General Counsel for EFMC from October, 1980 to November,
1994; has been President and Chief Executive Officer of EFMC and Equity
Group Investments, Inc. since November, 1994; has been a director of Great
American since June, 1984, and is a director of various subsidiaries of
Great American. She is also a Director of Itel Corporation, Capsure
Holdings Corp., American Classic Voyages Co., Falcon Building Products,
Inc., Jacor Communications, Inc., Revco D.S., Inc. and The Vigoro
Corporation. She was Chairman of the Board from January, 1994 to September,
1994; and has been Co-Chairman of the Board since September, 1994 of CFI
Industries, Inc., She is also a trustee of Equity Residential Properties
Trust. Ms. Rosenberg is Chairman of the Board of Rosenberg & Liebentritt,
P.C., counsel to the Partnership, the General Partner and certain of their
Affiliates. Ms. Rosenberg was
13
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -- Continued
-------- --------------------------------------------------
(a) DIRECTORS (continued)
---------
Vice President of Madison prior to October 4, 1991. Madison filed for a
petition under the Federal bankruptcy laws on November 8, 1991. She has
been Vice President of First Capital Benefit Administrators, Inc. ("Benefit
Administrators") since July 22, 1987. Benefit Administrators filed for a
petition under the Federal Bankruptcy laws on January 3, 1995.
Sanford Shkolnik, 56, has been a Director of the General Partner since
December, 1985. Mr. Shkolnik has been Executive Vice President of EFMC
since 1976. He is Chairman of the Board and Chief Executive Officer of SC
Management, Inc., which is General Partner of Equity Properties and
Development Limited Partnership, a nationally ranked shopping center
company. He is also a director of Broadway Stores, Inc.
(b, c & e) EXECUTIVE OFFICERS
------------------
The Partnership does not have any executive officers. The executive
officers of the General Partner as of March 27, 1995 are shown in the
table. All officers are elected to serve for one year or until their
successors are elected and qualified.
Name Office
---- ------
Douglas Crocker II............... President and Chief Executive Officer
Arthur A. Greenberg.............. Senior Vice President
Norman M. Field.................. Vice President -- Finance and Treasurer
PRESIDENT AND CEO -- See Table of Directors above.
Arthur A. Greenberg, 53, has been Senior Vice President of the General
Partner since August, 1986. Mr. Greenberg was Executive Vice President and
Chief Financial Officer of Great American from December, 1986 to March,
1995. Mr. Greenberg also is a Director and Executive Vice
President/Treasurer of EFMC since 1971, and President of Greenberg &
Pociask, Ltd. He is Senior Vice President since 1989 and Treasurer since
1990 of Capsure Holdings Corp. Mr. Greenberg is a director of American
Classic Voyages Co., The Vigoro Corporation, and Chairman of the Board of
Firstate Financial A Savings Bank. Mr. Greenberg was Vice President of
Madison prior to October 4, 1991. Madison filed for a petition under the
Federal bankruptcy laws on November 8, 1991.
Norman M. Field, 46, has been Vice President and Treasurer of the General
Partner since February, 1984, and also served as Vice President and
Treasurer of Great American from July, 1983 until March, 1995. Mr. Field
has been treasurer of Benefit Administrators since July 22, 1987. Benefit
Administrators filed for a petition under the Federal Bankruptcy laws on
January 3, 1995. He has also been Chief Financial Officer of Equality
Specialties, Inc., a subsidiary of Great American, since August, 1994.
(d) FAMILY RELATIONSHIPS
--------------------
There are no family relationships among any of the foregoing officers.
(f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
----------------------------------------
There are no involvements in certain legal proceedings among any of the
foregoing officers.
14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
(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, 1994. However, Affiliates of the General Partner do compensate the
directors and officers of the General Partner.
(e) None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------
(a) As of March 1, 1995, no person owned of record or was known by the
Partnership to own beneficially more than 5% of the Partnership's 45,737 Units
then outstanding.
(b) The Partnership has no directors or executive officers as of March 1, 1995.
The executive officers and directors of First Capital Financial Corporation, the
General Partner, did not own any Units.
(c) None.
15
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
(a) On September 25, 1992, the entity formerly named First Capital Financial
Corporation and certain subsidiaries which may be or may have been entitled to
receive certain compensation, fees or reimbursements from the Partnership were
merged or liquidated into First Capital Properties Corporation. On February 23,
1993, First Capital Properties Corporation changed its name to First Capital
Financial Corporation.
Affiliates of the General Partner provide leasing, supervisory and property
management services to the Partnership. Compensation for these property
management services may not exceed 6% of the gross receipts from the property
being managed where the General Partner or Affiliates provide leasing, re-
leasing, and leasing related services, or 3% of gross receipts where the General
Partner or Affiliates do not perform leasing, re-leasing, and leasing related
services for a particular property. For the year ended December 31, 1994, these
Affiliates were entitled to leasing, supervisory, and property management fees
of approximately $156,600. In addition, other Affiliates of the General Partner
were entitled to receive approximately $63,400 for fees, compensation and
reimbursements from the Partnership for personnel, mailing, insurance and other
miscellaneous services. 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. A total of approximately $107,400 of
these amounts was due to Affiliates as of December 31, 1994.
Subsequent to May 16, 1986, the Termination of the Offering, the General Partner
is entitled to 10% of Cash Flow as its Partnership Management Fee. This fee is
to be paid annually and any amounts not paid in any year may be deferred and
paid in subsequent years subject to certain limitations set forth in the
Partnership Agreement. For the year ended December 31, 1994, the General Partner
was allocated a Partnership Management Fee of approximately $155,900.
In accordance with the Partnership Agreement, Net Profits are first allocated 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 is
allocated to the Limited Partners. Net Losses (exclusive of Net Losses from the
sale or disposition of a Partnership property) shall be allocated 1% to the
General Partner and 99% to the Limited Partners. For the year ended December 31,
1994, the General Partner was allocated Net Profits of $155,900. 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. In addition, provisions for value impairment are allocated ninety-nine
percent (99%) to the Limited Partners and one percent (1%) to the General
Partner. For the year ended December 31, 1994, the General Partner was allocated
a Net Loss from the sale of a Partnership property of $500 along with a Net Loss
from provisions for value impairment of $15,000.
16
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - (Continued)
-------- ----------------------------------------------
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to
the Partnership, the General Partner and certain of their Affiliates. Sheli Z.
Rosenberg, President and Chief Executive Officer of the General Partner from
December, 1990 to December, 1992 and a director of the General Partner since
September, 1983, is a principal of this firm. 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.
(c) No management person is indebted to the Partnership.
(d) None.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
-------- -----------------------------------------------------------------
(a,c & d) (1,2 & 3) See Index of Financial Statements, Schedules 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, 1994.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 3
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 30, 1995 By:
-------------- -------------------------------------------
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.
March 30, 1995 Chairman of the Board and
--------------------- -------------- Director of the General Partner
SAMUEL ZELL
March 30, 1995 President, Chief Executive Officer and
--------------------- -------------- Director of the General Partner
DOUGLAS CROCKER II
March 30, 1995 Director of the General Partner
--------------------- --------------
SHELI Z. ROSENBERG
March 30, 1995 Director of the General Partner
--------------------- --------------
SANFORD SHKOLNIK
March 30, 1995 Vice President - Finance and Treasurer
--------------------- --------------
NORMAN M. FIELD
19
<PAGE>
INDEX OF FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Pages
-----
Independent Auditors' Report A - 2
Balance Sheets at December 31, 1994 and 1993 A - 3
Statements of Partners' Capital for the Years
Ended December 31, 1994, 1993, and 1992 A - 3
Statements of Income and Expenses for the Years
Ended December 31, 1994, 1993, and 1992 A - 4
Statements of Cash Flows for the Years Ended
December 31, 1994, 1993, and 1992 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, 1994 A - 8 to A - 9
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, or in other schedules.
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-33 of the
Partnership's definitive Prospectus dated January 17, 1985, as supplemented
through March 4, 1986, Registration No. 2-94419, filed pursuant to Rule
424(b), incorporated herein by reference.
EXHIBIT (10) Material Contracts
Lease agreements for tenants that individually occupy more than 10% of the net
leasable square footage of the Partnership's significant properties, filed as
exhibits to the Partnership's Reports on Form 10-K dated December 31, 1992 and
1993, incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1993 Annual Report to holders of Units is being sent under separate cover,
not via EDGAR, for the information of the Commission.
EXHIBIT (27) Financial Data Schedule
EXHIBIT (99) Additional Exhibits
The audited financial statements for First Capital Lansing Properties Limited
Partnership for the year ended December 31, 1994 are attached hereto for the
information of the Commission and not as a filed document.
A-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
First Capital Institutional Real Estate, Ltd. - 3
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Institutional
Real Estate, Ltd. - 3 as of December 31, 1994 and 1993, and the related
statements of income and expenses, Partners' Capital and cash flows for the
years ended December 31, 1994, 1993 and 1992 and the schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Capital Institutional
Real Estate, Ltd. - 3 as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years ended December 31, 1994, 1993 and
1992 in conformity with generally accepted accounting principles. Further, it is
our opinion that the schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
Kenneth Leventhal & Company
Chicago, Illinois
February 17, 1995
A-2
<PAGE>
BALANCE SHEETS
December 31, 1994 and 1993
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in commercial rental properties:
Land $ 1,908,600 $ 2,538,600
Buildings and improvements 18,713,300 21,487,500
----------------------------------------------------------------------------
20,621,900 24,026,100
Accumulated depreciation and amortization (5,024,100) (4,448,800)
----------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 15,597,800 19,577,300
Cash and cash equivalents 8,442,900 5,831,100
Restricted Cash 62,500 62,500
Investment in joint venture 5,234,600 6,022,300
Rents receivable 24,800 52,700
Other assets (including amounts due from joint
venture of $725,500 and $790,300, respectively) 757,600 863,700
----------------------------------------------------------------------------
$30,120,200 $32,409,600
----------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 360,000 $ 473,000
Due to Affiliates 107,400 66,300
Security deposits 51,500 67,300
Other liabilities 3,500 51,800
Distributions payable 559,000 134,700
----------------------------------------------------------------------------
1,081,400 793,100
----------------------------------------------------------------------------
Partners'(deficit) capital:
General Partner (163,300) (147,800)
Limited Partners (45,737 Units authorized, issued
and outstanding) 29,202,100 31,764,300
----------------------------------------------------------------------------
29,038,800 31,616,500
----------------------------------------------------------------------------
$30,120,200 $32,409,600
----------------------------------------------------------------------------
</TABLE>
STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1994, 1993 and 1992
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
----------------------------------------------------------------------------
<S> <C> <C> <C>
Partners'(deficit) capital,
January 1, 1992 $(123,200) $34,578,000 $34,454,800
Net (loss) for
the year ended
December 31, 1992 (24,900) (2,462,900) (2,487,800)
----------------------------------------------------------------------------
Partners'(deficit) capital,
December 31, 1992 (148,100) 32,115,100 31,967,000
Net income for the
year ended
December 31, 1993 54,100 977,900 1,032,000
Distributions for the year ended
December 31, 1993 (53,800) (1,328,700) (1,382,500)
----------------------------------------------------------------------------
Partners'(deficit) capital,
December 31, 1993 (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)
----------------------------------------------------------------------------
Partners'(deficit) capital,
December 31, 1994 $(163,300) $29,202,100 $29,038,800
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-3
<PAGE>
STATEMENTS OF INCOME AND EXPENSES
For the years ended December 31, 1994, 1993 and 1992
(All dollars rounded to nearest 00s except per Unit amounts)
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental $ 3,386,800 $ 3,674,000 $ 4,057,000
Interest 374,800 242,200 206,800
------------------------------------------------------------------------------
3,761,600 3,916,200 4,263,800
------------------------------------------------------------------------------
Expenses:
Interest 127,800
Depreciation and amortization 933,100 812,200 947,600
Real estate taxes and insurance 350,800 382,500 519,400
Repairs and maintenance 459,000 570,900 667,600
Property operating 818,000 1,073,800 1,232,700
General and administrative 201,100 195,900 190,400
------------------------------------------------------------------------------
2,762,000 3,035,300 3,685,500
------------------------------------------------------------------------------
Income before (loss) income from
participation in joint venture 999,600 880,900 578,300
(Loss) income from participation in
joint venture (469,800) 117,000 182,800
------------------------------------------------------------------------------
Income before other gains (losses) 529,800 997,900 761,100
(Loss) on sale or disposition of
properties (48,900) (1,429,900) (2,293,900)
Provisions for value impairment (1,500,000) (3,065,000)
------------------------------------------------------------------------------
Net (loss) before extraordinary gain
on extinguishment of debt (1,019,100) (432,000) (4,597,800)
Extraordinary gain on extinguishment
of debt 1,464,000 2,110,000
------------------------------------------------------------------------------
Net (loss) income $(1,019,100) $ 1,032,000 $(2,487,800)
------------------------------------------------------------------------------
Net income (loss) allocated to General
Partner $ 140,400 $ 54,100 $ (24,900)
------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(1,159,500) $ 977,900 $(2,462,900)
------------------------------------------------------------------------------
Net (loss) before extraordinary gain
on extinguishment of debt allocated
to Limited Partners per Unit (45,737
Units authorized, issued and
outstanding) $ (25.35) $ (9.35) $ (99.52)
------------------------------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (45,737 Units
authorized, issued and outstanding) $ (25.35) $ 21.38 $ (53.85)
------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,019,100) $ 1,032,000 $(2,487,800)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 933,100 812,200 947,600
Provisions for value impairment 1,500,000 3,065,000
Provision for value impairment for
Holiday 672,400
Loss on sale or disposition of
properties 48,900 1,429,900 2,293,900
Extraordinary gain on extinguishment
of debt (1,464,000) (2,110,000)
Changes in assets and liabilities:
Decrease (increase) in rents
receivable 27,900 114,300 (40,400)
Decrease in other assets 41,300 48,400 5,200
(Decrease) increase in accounts
payable and accrued expenses (113,000) 31,600 263,800
Increase (decrease) in due to
Affiliates 41,100 (30,500) (12,700)
(Decrease) increase in other
liabilities (48,300) 37,400 12,300
-----------------------------------------------------------------------------
Net cash provided by operating
activities 2,084,300 2,011,300 1,936,900
-----------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the sale or disposition
of properties 2,168,200 840,000
Payments for capital and tenant
improvements (670,600) (1,078,200) (930,000)
Distributions received from joint
venture in excess of loss or income
allocated 115,200 379,400 285,900
Collection of (funding of) loans to
joint venture 64,800 (227,200) (211,000)
-----------------------------------------------------------------------------
Net cash provided by (used for)
investing activities 1,677,600 (86,000) (855,100)
-----------------------------------------------------------------------------
Cash flows from financing activities:
Distributions paid to Partners (1,134,300) (1,247,800)
(Decrease) increase in security
deposits (15,800) (1,300) 20,100
Cash paid on disposition of property (139,300)
-----------------------------------------------------------------------------
Net cash (used for) financing
activities (1,150,100) (1,249,100) (119,200)
-----------------------------------------------------------------------------
Net increase in cash and cash
equivalents 2,611,800 676,200 962,600
Cash and cash equivalents at the
beginning of the year 5,831,100 5,154,900 4,192,300
-----------------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 8,442,900 $ 5,831,100 $ 5,154,900
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
A-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DEFINITION OF SPECIAL TERMS:
Capitalized terms used in this report have the same meaning as those terms 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 November 6, 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 January 17, 1985. The
Certificate and Agreement, as amended and restated, authorized the sale to the
public of up to 50,000 Units with the General Partner's option to increase the
Offering by an additional 50,000 Units and not less than 1,400 Units. On March
4, 1985, the required minimum subscription level was reached and Partnership
operations commenced. A total of 45,737 Units were sold prior to Termination of
the Offering in May, 1986. The Partnership was formed to invest primarily in
existing, income-producing commercial real estate.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2014. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
ACCOUNTING POLICIES:
The financial statements include the Partnership's interest in four joint
ventures with Affiliated partnerships. These joint ventures were formed for the
purpose of acquiring a 100% interest in certain real properties. These joint
ventures are operated under the control of the General Partner. Accordingly,
the Partnership's pro rata share of such ventures' revenues, expenses, assets,
liabilities and capital are 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.
The Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership's income or loss on
their tax returns; therefore, no provision for income taxes is made in the
financial statements of the Partnership. It is not practicable for the
Partnership to determine the aggregate tax bases of the Limited Partners;
therefore, the disclosure of the difference between the tax bases and the
reported assets and liabilities of the Partnership would not be meaningful.
Commercial rental properties are recorded at cost, net of any provisions for
value impairment, and depreciated (exclusive of amounts allocated to land) on
the straight-line method over their estimated useful lives. Lease acquisition
fees are recorded at cost and amortized over the life of the lease. Maintenance
and repair costs are expensed against operations as incurred; expenditures for
improvements are capitalized to the appropriate property accounts and
depreciated over the estimated life of the improvements.
Property sales or dispositions are recorded when title transfers and sufficient
consideration has been received by the Partnership. Upon disposition, the
related costs and accumulated depreciation are removed from the respective
accounts. Any gain or loss on sale or disposition is recognized in accordance
with generally accepted accounting principles.
Cash equivalents are considered all highly liquid investments purchased with an
original maturity of three months or less.
Certain reclassifications have been made to the previously reported 1993 and
1992 statements in order to provide comparability with the 1994 statements.
These reclassifications have no effect on net income, net (loss) or Partner's
capital.
2. RELATED PARTY TRANSACTIONS:
Subsequent to May 16, 1986, the Termination of the Offering, the General
Partner is entitled to 10% of Cash Flow as its Partnership Management Fee. In
accordance with the Partnership Agreement, Net Profits are first allocated 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 is
allocated to the Limited Partners. Net Losses (exclusive of Net Losses from the
sale or disposition of a Partnership property) shall be allocated 1% to the
General Partner and 99% to the Limited Partners. For the years ended December
31, 1994 and 1993, the General Partner was allocated a Partnership Management
Fee of approximately $155,900 and $53,800, respectively, in conjunction with
the declaration of cash distributions to Limited Partners. Due to the
suspension of cash distributions to the Limited Partners for the year December
31, 1992 the General Partner was not allocated a Partnership Management Fee for
the year ended December 31, 1992. For the years ended December 31, 1994, 1993
and 1992, the General Partner was allocated Net Profits of approximately
$155,900, $53,800 and $7,600, respectively. 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. In
addition, extraordinary gain on extinguishment of debt and provisions for value
impairment are allocated ninety-nine percent (99%) to the Limited Partners and
one percent (1%) to the General Partner. For the years ended December 31, 1994,
1993 and 1992, the General Partner was allocated total Net (Loss) Profit from
the sale or disposition of Partnership properties along with an extraordinary
gain on extinguishment of debt and provisions for value impairment of
approximately ($15,500), $300 and ($32,500), respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates for
the years ended December 31, 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
1994 1993 1992(a)
----------------- ---------------- ----------------
Paid Payable Paid Payable Paid Payable
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property management and
leasing fees $115,700 $ 62,600 $252,600 $21,700 $266,100 $31,200
Real estate commissions(b) None 40,200 None 40,200 None None
Reimbursement of property
insurance premiums, at
cost 28,000 None 35,900 None 49,000 None
Reimbursement of expenses,
at cost:
(1) Accounting 20,300 2,300 21,700 2,600 24,200 3,700
(2) Investor communication 14,900 2,300 9,400 1,800 7,800 1,000
(3) Legal 15,700 None 37,800 None 10,700 4,400
-------------------------------------------------------------------------------
$194,600 $107,400 $357,400 $66,300 $357,800 $40,300
-------------------------------------------------------------------------------
</TABLE>
A-5
<PAGE>
(a) Property management reimbursements previously reported in 1992 have been
excluded from the above table and amounts previously included in 1992 in due to
Affiliates have been reclassified to accounts payable and accrued expenses in
order to provide comparability to the fees presented for 1993 and 1994.
(b) As of December 31, 1994, $40,200 was due to the General Partner for real
estate commissions earned in connection with the disposition and sale of
Partnership property. 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 Limited Partners) of 6% simple interest per annum on their
Capital Investment from the initial date of investment.
On-site property management for the Partnership's properties is provided by an
Affiliate of the General Partner for fees based upon various percentage rates
of gross rents received from the properties.
3. INVESTMENT IN JOINT VENTURE:
A summary of the financial information for First Capital Lansing Properties
Limited Partnership, which owns the Holiday Office Park North and South
("Holiday"), for the year ended December 31, 1994 is as follows:
<TABLE>
<S> <C>
ASSETS
Investment property, net of
accumulated depreciation and
amortization $10,874,800
Cash and cash equivalents 496,300
Loans receivable 525,600
Rents receivable 202,500
Escrow deposit 46,600
Other assets 92,000
----------------------------------------------
$12,237,800
----------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Loan payable to Affiliate $ 1,451,000
Accounts payable and accrued expenses 155,900
Due to Affiliates 62,600
Distribution payable 406,000
Security deposits 33,900
Other liabilities 3,800
Partners' capital 10,124,600
----------------------------------------------
$12,237,800
----------------------------------------------
STATEMENT OF INCOME AND EXPENSES
Total income $ 2,995,200
----------------------------------------------
Expenses:
Property operating 1,913,900
Depreciation and amortization 466,600
Provision for value impairment 2,000,000
Interest 140,000
----------------------------------------------
Net (loss) $(1,525,300)
----------------------------------------------
</TABLE>
The information presented above represents 100% of the activity of Holiday. The
Partnership purchased a 50% interest in a joint venture which acquired a 75%
preferred interest in this property. The provision for value impairment was
allocated in accordance with the joint venture agreement. The Partnership's
share of the provision for value impairment was $672,400. For additional
details see Note 9.
4. FUTURE MINIMUM RENTALS:
The Partnership's share of future minimum rentals due on noncancelable
operating leases as of December 31, 1994 was as follows:
<TABLE>
<S> <C>
1995 $2,181,900
1996 1,681,400
1997 1,326,900
1998 975,400
1999 706,700
Thereafter 973,400
-------------
$7,845,700
-------------
</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.
5. MANAGEMENT AGREEMENTS:
On-site property management for the Partnership's properties is provided by an
Affiliate of the General Partner for fees based upon various percentage rates
of gross rents received from the properties.
6. RESTRICTED CASH:
Restricted cash includes negotiable certificates of deposit in the amount of
$37,500 which has been pledged as collateral for security deposits to the
Houston Lighting & Power Company and $25,000 which has been pledged as
collateral for security deposits to the Florida Lighting & Power Company.
A-6
<PAGE>
7. INCOME TAX:
The Partnership utilizes an accrual basis method of accounting for both tax
reporting and financial statement purposes. Financial statement results will
differ from tax results due to the use of differing depreciation lives and
methods, the recognition of rents received in advance as taxable income, the
use of differing methods in computing the gain on sale of property and the
Partnership's provisions for value impairment. The net effect of these
accounting differences for the year ended December 31, 1994 was that the loss
for tax reporting purposes was approximately $156,200 more than the net loss
for financial statement purposes.
8. PROPERTY SALES AND DISPOSITIONS:
On June 8, 1994, Farmington Hills Associates ("FHA"), the joint venture which
owned North Valley Office Center Phase I ("North Valley Phase I") and
Wellington A, B and C in the Wellington North Office Complex ("Wellington A, B
and C"), in which the Partnership owns a 50% interest, sold Wellington C for
the sale price of $4,500,000. The Partnership's share of selling expenses was
approximately $81,800. The Partnership's share of the net proceeds from this
sale was approximately $2,168,200. The Partnership recorded a total loss on the
sale of this property of approximately $2,048,900 for financial statement
purposes, of which $2,000,000 was recorded as of December 31, 1992 as a
provision for value impairment. For tax reporting purposes the Partnership
recorded a total loss in 1994 of approximately $1,980,700 on this sale. The
sale was on all-cash terms with no further involvement on the part of the
Partnership.
On March 23, 1993, FHA sold Wellington B for a total sale price of
approximately $1,680,000. The Partnership's share of selling expenses were
approximately $64,600, including $45,900 of accrued expenses. The Partnership's
share of the net proceeds from this sale approximated $821,300. The Partnership
recorded a loss on the disposition of this property of approximately $463,600
for financial statement purposes. Due to the anticipated loss in connection
with this sale, the Partnership recorded $300,000 of the total loss as of
December 31, 1992 as a provision for value impairment and the remaining portion
of the loss in 1993. For tax purposes the Partnership recorded a loss in 1993
of approximately $446,500 on this sale. The sale was on all-cash terms with no
further involvement on the part of the Partnership.
On March 17, 1993, FHA disposed of Wellington A in conjunction with the
mortgage holder, to a third party for a total sale price of approximately
$2,060,000. Of this amount, FHA remitted $1,910,000 to the mortgage holder (the
Partnership's share of this amount was $955,000) which relieved the Partnership
of its share of the obligation of approximately $2,419,000 under the mortgage
loan and any interest in the assets therein. This extinguishment of debt was
considered a noncash event for the purposes of the Statement of Cash Flows, and
was not included in the Partnership's calculation of Cash Flow (as defined by
the Partnership Agreement) for the year ended December 31, 1993. The
Partnership incurred transaction costs of approximately $63,500, including
$10,600 of accrued expenses. The Partnership's share of the net proceeds from
this transaction approximated $22,100. The Partnership recorded a loss on the
disposition of this property of approximately $2,027,900 for financial
statement purposes. This loss represented the net book value of this property
and transaction costs incurred by the Partnership in excess of the sale price
of the property. Due to an anticipated loss in connection with this
disposition, the Partnership recorded $765,000 as a provision for value
impairment in 1992. Upon sale of the property in 1993, an additional loss of
$1,262,900 was recorded. In addition, the Partnership also recorded an
extraordinary gain on extinguishment of debt in connection with the disposition
of this property of approximately $1,464,000 for financial statement purposes.
This extraordinary gain on extinguishment of debt represented the excess
property indebtedness over the amount remitted to the mortgage holder upon sale
of the property. For the year ended December 31, 1993, the Partnership recorded
a loss of approximately $597,300 on this disposition for tax purposes.
On November 5, 1992, FHA disposed of North Valley Phase I as a result of a
conveyance of the title to the mortgage holder in lieu of foreclosure. The
disposition of the property relieved the Partnership of its share of the
obligation under the mortgage loan of approximately $3,150,000 and any interest
in the assets therein. For the years ended December 31, 1993 and 1992, the
Partnership recorded a loss on the disposition of North Valley Phase I of
approximately $3,400 and $2,293,900, respectively, for financial statement
purposes. The loss of $2,297,300 represented the net book value of this
property, the net cash outlay and transaction costs incurred by the Partnership
in excess of the estimated market value of the property. In addition, for the
year ended December 31, 1992 the Partnership also recorded an extraordinary
gain on extinguishment of debt in connection with the disposition of this
property of approximately $2,110,000 for financial statement purposes. This
extraordinary gain on extinguishment of debt represented the excess property
indebtedness over the estimated market value of the property. For the year
ended December 31, 1992, the Partnership recorded a loss of approximately
$85,100 on this disposition for tax purposes.
9. PROVISIONS FOR VALUE IMPAIRMENT:
In 1995, the Financial Accounting Standards Board agreed to issue a new
standard entitled "Accounting for the Impairment of Long-Lived Assets" (the
"Standard"). This Standard establishes guidance for determining if defined
assets are impaired, and if so, how impairment losses should be measured and
reported in the financial statements of companies. The carrying amounts of
impaired assets will be required to be reduced to fair value. The Standard is
effective for fiscal years beginning after December 15, 1995. The General
Partner believes that implementation will not materially affect the
Partnership's financial position or results of operations once the Standard
becomes effective.
The Partnership recorded provisions for value impairment for the Ellis Building
and Park Plaza in the amounts of $1,000,000 and $500,000, respectively, for the
year ended December 31, 1994. Due to the uncertainty of the Partnership's
ability to recover the net carrying value of these investment properties (prior
to provision for value impairment) during the estimated remaining holding
periods, it was appropriate to reduce the basis of these properties for
financial statement purposes.
The joint venture which owns Holiday also recorded a provision for value
impairment in the amount of $4,000,000 as of December 31, 1993. Pursuant to the
joint venture agreement this provision for value impairment was allocated to
the limited partners of the joint venture that owns Holiday, and not to the
Partnership in 1993. For the year ended December 31, 1994, an additional
provision for value impairment for Holiday was recorded in the amount of
$2,000,000. Of this amount $655,200 was allocated to the limited partners of
the joint venture to reduce their capital account to zero and the remaining
amount was allocated to the General Partner's of which the Partnership's share
is $672,400.
With respect to the disposition of Wellington C mentioned above, and the loss
incurred, the Partnership had recorded a provision for value impairment in the
amount of $2,000,000 for the year ended December 31, 1992.
The provision amounts were in part based on the General Partner's estimate of
the current market value. These provisions for value impairment were considered
non-cash events for the purposes of the Statements of Cash Flows, and were not
included in the Partnership's calculation of Cash Flow (as defined by the
Partnership Agreement) for the years ended December 31, 1994 and 1992,
respectively.
Copies of the Partnership's Form 10-K are
available upon written request to the
General Partner at no charge.
A-7
<PAGE>
<TABLE>
<CAPTION>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. -- 3
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
Column A Column C Column D Column E
--------- ---------------------------- -------------------------- ----------------------------------------------
Initial cost Costs capitalized Gross amount carried
to Partnership subsequent to acquisition at close of period
---------------------------- -------------------------- ----------------------------------------------
Buildings Buildings and
and Improve- Carrying and
Description Land Improvements ments Costs(1) Land Improvements Total(2)(3)
----------- ---------- ------------- ----------- ------------ ---------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Buildings:
Ellis Building
(Sarasota, FL) $ 860,000 $ 5,405,600 $1,269,700 $ 25,900 $ 860,000 $ 5,701,200 $ 6,561,200(4)
(50% interest)
Park Plaza
Professional
Building
(Houston, TX) 802,900 10,750,400 1,826,800 82,400 802,900 12,159,600 12,962,500(7)
(50% interest)
3120 Southwest
Freeway
(Houston, TX) 245,700 440,600 401,700 10,200 245,700 852,500 1,098,200
(25% interest)
---------- ----------- ---------- -------- ---------- ---------- ------------
$1,908,600 $16,596,600 $3,498,200 $118,500 $1,908,600 $18,713,300 $20,621,900
========== =========== ========== ======== ========== =========== ===========
Colmnn F Column G Column H Column I
-------------- --------- -------- ------------
Life on
which
depreciation
in latest
Accumulated Date income
Depreciation of con- Date statement
(2) struction Acquired is computed
-------------- --------- -------- ------------
<S> <C> <C> <C> <C>
Office Buildings:
Ellis Building 35(5)
(Sarasota, FL) $ 1,696,000 1969 3/86 3-10(6)
(50% interest)
Park Plaza
Professional
Building 35(5)
(Houston, TX) 3,072,300 1976 11/86 3-10(6)
(50% interest)
3120 Southwest
Freeway 35(5)
(Houston, TX) 255,800 1972 3/89 3-10(6)
(25% interest)
----------
$5,024,100
==========
</TABLE>
Column B - Not Applicable.
See accompanying notes on the following page.
A-8
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. -- 3
NOTES TO SCHEDULE III
Note 1. Consists of legal fees, appraisal fees, title costs and other
related professional fees.
Note 2. The following is a reconciliation of activity in columns E and F:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993 December 31, 1992
-------------------------- --------------------------- ---------------------------
Accumulated Accumulated Accumulated
Cost Depreciation Cost Depreciation Cost Depreciation
----------- ------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
year $24,026,100 $4,448,800 $26,592,300 $3,891,700 $32,212,300 $3,105,800
Additions during
year:
Improvements 670,600 1,078,200 930,000
Provisions for
depreciation 933,000 812,200 947,600
Deductions
during year:
Basis of real
estate
disposed (2,574,800) (3,644,400) (3,485,000)
Accumulated
depreciation
of real
estate
disposed (357,700) (255,100) (161,700)
Provisions for
value
impairment (1,500,000) (3,065,000)
----------- ---------- ----------- ---------- ----------- ----------
Balance at end
of year $20,621,900 $5,024,100 $24,026,100 $4,448,800 $26,592,300 $3,891,700
=========== ========== =========== ========== =========== ==========
</TABLE>
Note 3. The aggregate cost for Federal income tax purposes at
December 31, 1994 is $22,121,900.
Note 4. Includes provision for value impairment of $1,000,000.
Note 5. Estimated useful life of building.
Note 6. Estimated useful life of improvements.
Note 7. Includes provision for value impairment of $500,000.
A-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000757528
<NAME> FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD-3
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 8,505,400
<SECURITIES> 0
<RECEIVABLES> 24,800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,530,200
<PP&E> 20,621,900
<DEPRECIATION> 5,024,100
<TOTAL-ASSETS> 30,120,200
<CURRENT-LIABILITIES> 919,000
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 29,038,800
<TOTAL-LIABILITY-AND-EQUITY> 30,120,200
<SALES> 0
<TOTAL-REVENUES> 3,761,600
<CGS> 0
<TOTAL-COSTS> 1,627,800
<OTHER-EXPENSES> 201,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,019,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,019,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,019,100)
<EPS-PRIMARY> (25.35)
<EPS-DILUTED> (25.35)
</TABLE>
<PAGE>
EXHIBIT (99)
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
AUDITED FINANCIAL STATEMENTS
(With Independent Auditors' Report Thereon)
FOR THE YEAR ENDED DECEMBER 31, 1994
<PAGE>
INDEX OF FINANCIAL STATEMENTS
Pages
-------
Independent Auditors' Report 1
Balance Sheet at December 31, 1994 2
Statement of Partners' Capital for the year
ended December 31, 1994 3
Statement of Income and Expenses for the year
ended December 31, 1994 4
Statement of Cash Flows for the year
ended December 31, 1994 5
Notes to Financial Statements 6 through 8
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994
(All dollars rounded to nearest 00s)
ASSETS
Investment in commercial rental property:
Land $ 1,999,600
Buildings and improvements 13,259,700
-----------
15,259,300
Accumulated depreciation and amortization (4,384,500)
-----------
Total investment property, net of accumulated
depreciation and amortization 10,874,800
Cash and cash equivalents 496,300
Loans receivable 525,600
Rents receivable 202,500
Escrow deposit 46,600
Other assets 92,000
-----------
$12,237,800
===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loans payable to Affiliate $ 1,451,000
Accounts payable and accrued expenses 155,900
Due to Affiliates 62,600
Distribution payable 406,000
Security deposits 33,900
Other liabilities 3,800
-----------
2,113,200
Partners' capital 10,124,600
-----------
$12,237,800
===========
The accompanying notes are an integral part of the financial statements.
- 2 -
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1994
(All dollars rounded to nearest 00s)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
Partners' capital, January 1, 1994 $12,050,400 $ 585,700 $12,636,100
Net (loss) for the year ended December 31, 1994 (939,600) (585,700) (1,525,300)
Distributions for the year ended December 31, 1994 (986,200) (986,200)
----------- --------- -----------
Partners' capital, December 31, 1994 $10,124,600 $ 0 $10,124,600
=========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
- 3 -
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF INCOME AND EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994
(All dollars rounded to nearest 00s)
Income:
Rental $ 2,928,600
Interest 66,600
-----------
2,995,200
Expenses:
Interest 140,000
Depreciation and amortization 466,600
Real estate taxes and insurance 505,200
Repairs and maintenance 626,900
Property operating 776,200
General and administrative 5,600
-----------
2,520,500
-----------
Income before provision for value impairment 474,700
Provision for value impairment (2,000,000)
-----------
Net (loss) $(1,525,300)
===========
Net (loss) allocated to General Partner $ (939,600)
===========
Net (loss) allocated to Limited Partners $ (585,700)
===========
The accompanying notes are an integral part of the financial statements.
- 4 -
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
(All dollars rounded to nearest 00s)
Cash flows from operating activities:
Net (loss) $(1,525,300)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Depreciation and amortization 466,600
Provision for value impairment 2,000,000
Changes in assets and liabilities:
(Increase) in rents receivable (30,000)
(Increase) in other assets (10,500)
Increase in accounts payable and accrued expenses 50,800
(Decrease) in accrued interest payable to Affiliate (40,300)
Increase in due to Affiliate 2,300
Increase in other liabilities 3,800
-----------
Net cash provided by operating activities 917,400
-----------
Cash flows from investing activities:
Payments for capital and tenant improvements (175,500)
(Increase) in escrow deposits (2,400)
-----------
Net cash (used for) investing activities (177,900)
-----------
Cash flows from financing activities:
(Decrease) in loan payable to Affiliate (129,700)
Decrease in loan receivable 76,400
Increase in security deposits 400
Distributions paid to Partners (635,800)
-----------
Net cash (used for) financing activities (688,700)
-----------
Net increase in cash and cash equivalents 50,800
Cash and cash equivalents at the beginning of the year 445,500
-----------
Cash and cash equivalents at the end of the year $ 496,300
===========
Supplemental information:
Interest paid during the year $ 175,800
===========
The accompanying notes are an integral part of the financial statements.
- 5 -
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. Organization and summary of significant accounting policies:
Definition of special terms:
Capitalized terms used in this report have the same meaning as those terms
have in the Agreement of Limited Partnership (the "Agreement"). Definitions
of these terms are contained in Article III of the Agreement.
Organization:
First Capital Lansing Properties Limited Partnership (the "Partnership") was
formed on December 1, 1986 as a limited partnership pursuant to the laws of
the State of Illinois. First Capital Lansing Associates, whose joint venture
partners are First Capital Institutional Real Estate, Ltd. - 2 and First
Capital Institutional Real Estate, Ltd. - 3, is the General Partner. The
Limited Partners consist of four Michigan limited partnerships. The
Partnership purchased the Holiday Office Park North and South (the
"Property") in Lansing, Michigan in January 1987. The General Partner made an
Initial Capital contribution of $14,250,000 representing an undivided 75%
interest in the Property. The Limited Partners contributed, as their Initial
Capital, property valued at $4,750,000 representing the remaining undivided
25% interest, as tenants in common, in the Property. In addition, the General
Partner paid an acquisition fee to an Affiliate of the General Partner and
closing costs in the amount of approximately $996,200.
The Agreement provides that the Partnership will be dissolved on or before
December 31, 2020, unless terminated sooner under provisions of the
Agreement.
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 Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership income or loss on
their individual tax returns; therefore, no provision for income taxes is
made in the financial statements of the Partnership. It is not practicable
for the Partnership to determine the aggregate tax bases of the Partners;
therefore, the disclosure of the difference between the tax bases and the
reported assets and liabilities of the Partnership would not be meaningful.
The Property is recorded at cost and depreciated (exclusive of amounts
allocated to land) on the straight-line method over its estimated useful life
of 35 years. Maintenance and repair costs are expensed against operations as
incurred and expenditures for improvements are capitalized to the appropriate
property accounts and depreciated over the estimated life of the
improvements. Lease acquisition fees are recorded at cost and amortized over
the life of the leases.
Cash equivalents are considered all highly liquid investments purchased with
an original maturity of three months or less.
- 6 -
<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - Continued
2. Related party transactions:
In accordance with the Agreement, Cash Flow from Operations is first
distributed to the General Partner in that amount necessary to provide the
General Partner cumulatively with per annum returns (per section 10.1 (a)) on
its Capital Balance. Next, to the extent available, Distributions of Cash
Flow from Operations are distributed to the Limited Partners in that amount
necessary to provide the Limited Partners with the same per annum returns on
their respective Capital Balances. However, to the extent the Limited
Partners do not receive, in any fiscal year, the specified return, such
deficiency shall not accumulate from year to year. The balance, if any, of
Cash Flow from Operations will be distributed 75% to the General Partner and
25% to the Limited Partners. For the year ended December 31, 1994, the rate
of the preferred annual return was 11.50% and the General Partner was
allocated Cash Flow from Operations of approximately $986,200, of which
approximately $406,000 was payable as of December 31, 1994. The Limited
Partners were not allocated Cash Flow from Operations for the year ended
December 31, 1994.
Net Operating Profits and Net Operating Losses for each fiscal year are
allocated to the respective Partners in the same ratio of such respective
Partner's cumulative Distributions to total Partnership cumulative
Distributions. For the year ended December 31, 1994 Net Operating Profits
allocated to the General Partner and Limited Partners were approximately
$405,300 and $69,400, respectively. In addition, pursuant to the Agreement,
Sale Losses (including any provision for value impairment) shall be allocated
among the Partners as follows: (i) first, to Limited Partners with positive
Capital Account balances, in proportion to and to the extent of such positive
balances; (ii) second, if the General Partner has a positive Capital Account
balance, to the General Partner, to the extent of such positive balance; and
(iii) the balance, if any, will be allocated 75% to the General Partner, and
25% to the Limited Partners (in proportion to the respective Percentage
Interests of the Limited Partners as of the date of such allocation). As of
December 31, 1994, a provision for value impairment was allocated to the
General Partner and Limited Partners of approximately $1,344,900 and
$655,100, respectively (See Note 5 for more information on value impairment).
Fees and reimbursements paid and payable by the Partnership to Affiliates for
the year ended December 31, 1994 were as follows:
Paid Payable
--------- ---------
Property management and leasing fees $ 138,200 $ 62,600
Reimbursement of property
insurance premiums, at cost 39,600 None
Legal fees 10,000 None
--------- --------
$ 187,800 $ 62,600
========= ========
In addition, through December 31, 1994 the General Partner has made
cumulative loans of approximately $1,715,400 to the Partnership. Of this
amount approximately $264,400 was repaid as of December 31, 1994. These loans
were made to pay for capital and tenant improvements. Total interest expense
incurred on these loans during 1994 was approximately $140,000.
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<PAGE>
FIRST CAPITAL LANSING PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - Continued
2. Related party transactions: (continued)
On-site property management for the Property is provided by an Affiliate of
the General Partner for fees based on a percentage of gross rents received
from the Property.
3. Future minimum rentals:
Future minimum rentals due on noncancelable operating leases as of December
31, 1994 were as follows:
1995 $1,317,200
1996 896,400
1997 755,700
1998 565,100
1999 289,600
Thereafter 620,400
-----------
$4,444,400
===========
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 reimbursements.
4. Income tax:
The Partnership utilizes an accrual basis method of accounting for both tax
reporting and financial statement purposes. Financial statement results will
differ from taxable results due to the use of differing depreciation lives
and methods and the recognition of prepaid rents as taxable income. The net
effect of these accounting differences for the year ended December 31, 1994
is that taxable income for tax reporting purposes was greater than the net
(loss) for financial statement purposes by approximately $1,845,900.
5. Provision for value impairment:
The Partnership recorded a provision for value impairment for the Property in
the amount of $2,000,000 as of December 31, 1994. Due to the uncertainty of
the Partnership's ability to recover the net carrying value of its investment
in the Property (prior to any provision for value impairment) during the
remaining estimated holding period, it was deemed appropriate to reduce the
basis of the Property for financial statement purposes. The transaction was
considered a noncash event for purposes of the Statement of Cash Flows, and
was not included in the Partnership's calculation of Cash Flow (as defined by
the Agreement) for the year ended December 31, 1994. The provision amount was
in part based on a third party appraisal prepared as of December 31, 1994. In
addition, the General Partner considered estimates of future cash flow and
capital improvements, as well as the anticipated remaining holding period of
the Property.
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