<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
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15632
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First Capital Institutional Real Estate, Ltd. - 4
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(Exact name of registrant as specified in its charter)
Illinois 36-3441345
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Two North Riverside Plaza, Suite 950, Chicago, Illinois 60606-2607
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 207-0020
---------------------
Securities registered pursuant to Section 12(b) of
the Act: NONE
----------------------
Securities registered pursuant to Section
12(g) of the Act: Limited Partnership Assignee Units
----------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated November 5, 1986,
included in the Partnership's Registration Statement on Form S-11, is
incorporated herein by reference in Part IV of this report.
Exhibit Index - Page A-1
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<PAGE>
PART I
ITEM 1. BUSINESS
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The registrant, First Capital Institutional Real Estate, Ltd. - 4 (the
"Partnership"), is a limited partnership organized in 1986 under the Uniform
Limited Partnership Act of the State of Illinois. The Partnership sold
$59,302,500 in Limited Partnership Assignee Units (the "Units") to the public
from November, 1986 through May, 1988, pursuant to a Registration Statement on
Form S-11 filed with the Securities and Exchange Commission (Registration
Statement No. 33-06149). 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, improved
income-producing commercial real estate such as shopping centers, warehouses and
office buildings, and, to a lesser extent, in other types of real estate. From
January 1987 to March 1989, the Partnership made four real property investments,
including two 50% joint venture interests and one 75% joint venture interest,
each with Affiliated partnerships, 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 with an Affiliated partnership. 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 the Partnership's real estate investments are
provided by Affiliates 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 nine people for on-
site property maintenance and administration.
ITEM 2. PROPERTIES (a)(b)
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As of December 31, 1994, the Partnership owned directly or through joint
ventures, the following four property interests, all of which were owned in fee
simple:
<TABLE>
<CAPTION>
Net Leasable Number of
Property Name Location Sq. Footage Tenants (c)
------------- -------- ------------ -------------
<S> <C> <C> <C>
Office Buildings:
-----------------
Park Plaza Professional Building (d) Houston, Texas 177,395 64(1)
3120 Southwest Freeway (e) Houston, Texas 89,346 38
Shopping Centers:
-----------------
Indian Ridge Plaza Mishawaka, Indiana 186,837 29(2)
Carrollton Crossroads (d) Carrollton, Georgia 297,406 29(3)
</TABLE>
2
<PAGE>
ITEM 2. PROPERTIES (a)(b) - Continued
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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 8 through 9.
(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 a useful life of 40 years utilizing the
straight-line method. The Partnership's portion of real estate taxes for
Park Plaza Professional Building ("Park Plaza"), 3120 Southwest Freeway,
Indian Ridge Plaza ("Indian Ridge") and Carrollton Crossroads ("Carrollton")
were approximately $185,700, $47,700, $254,000 and $97,900, 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 75% joint venture interest in this property.
The following table presents the properties' occupancy rates as of December 31
for each of the last five years:
<TABLE>
<CAPTION>
Property Name 1994 1993 1992 1991 1990
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Park Plaza 90% 91% 91% 89% 89%
3120 Southwest Freeway 96% 90% 80% 88% 95%
Indian Ridge 98% 98% 97% 90% 89%
Carrollton 99% 99% 99% 97% 94%
</TABLE>
The amounts in the following table represent the properties' average annual
rentals per square foot for each of the last five years ended December 31 and
are computed by dividing each property's base rental revenues by its average
occupied square footage:
<TABLE>
<CAPTION>
Property Name 1994 1993 1992 1991 1990
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Park Plaza $18.64 $17.65 $16.99 $16.63 $15.82
3120 Southwest Freeway $10.51 $10.23 $ 9.94 $ 9.84 $ 8.82
Indian Ridge $ 9.32 $ 9.18 $ 9.25 $ 8.36 $ 9.08
Carrollton $ 6.30 $ 5.94 $ 5.73 $ 5.77 $ 6.05
</TABLE>
3
<PAGE>
ITEM 2. PROPERTIES - Continued
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The following table summarizes the principal provisions of the leases for
tenants occupying ten percent or more rentable square footage of Park Plaza,
Indian Ridge and Carrollton:
<TABLE>
<CAPTION>
Percentage
of Net Renewal
Leasable Options
Partnership's Expiration Square (Renewal
Share of Rent Date of Footage Options/
for 1995 Lease Occupied Years)
-------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Park Plaza
----------
AMI Park Plaza Hospital
(health care services) $ 77,900 5/31/95 12% None
Indian Ridge
------------
TJ Maxx
(department store sales) $227,700 5/31/97 17% 3/5
Phar-Mor
(drugstore sales) $315,000 7/31/02 24% 3/5
Carrollton
----------
Wal-Mart
(department store sales) $306,500 9/30/07 42% 6/5
Kroger
(grocery store sales) $159,000 12/9/07 17% 5/5
JC Penney
(department store sales) $ 63,400 2/28/08 11% 4/5
</TABLE>
The following table sets forth the Partnership's portion of the lease
expirations (assuming no lease renewals) through the year ended December 31,
2004:
<TABLE>
<CAPTION>
Base Rents % of Total
Number of in Year of Base Rents
Year Tenants Square Feet Expiration (a) Collected (b)
---- --------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
1995 39 129,442 $489,900 11.71%
1996 34 69,491 $297,300 8.85%
1997 39 99,659 $507,100 18.41%
1998 27 96,297 $409,300 23.10%
1999 12 24,693 $138,800 10.70%
2000 1 1,697 $ 1,300 0.11%
2001 None None None None
2002 2 54,000 $248,900 26.17%
2003 3 19,703 $115,500 17.92%
2004 None None None None
</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.
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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(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
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(a, b, c & d) None.
5
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY HOLDER MATTERS
------- ----------------------------------------------------------------------
There has not been, nor is there expected to be, a public market for Units.
As of March 1, 1995, there were 5,006 Holders of the Units.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 6,156,100 $ 6,174,800 $ 6,296,800 $ 6,359,800 $ 5,234,300
Net income (loss) $ 1,249,200 $ 1,623,300 $(2,034,200) $ 864,600 $(4,101,900)
Net income (loss)
allocated to Limited
Partners $ 1,080,700 $ 1,107,600 $(2,013,900) $ 856,000 $(4,060,900)
Net income (loss)
allocated to Limited
Partners per Unit
(593,025 Units Issued
and Outstanding)(a) $ 1.82 $ 1.87 $ (3.40) $ 1.44 $ (6.85)
Investment in commercial
rental properties (net
of accumulated
depreciation and
amortization) $37,607,600 $41,405,300 $43,555,100 $50,356,100 $51,307,500
Number of real property
interests owned at
December 31 4 5 5 6 6(b)
Total assets $42,175,300 $44,887,600 $46,932,900 $52,943,300 $52,319,600
Mortgage loan(s) payable None None $ 2,419,000 $ 5,569,000 $ 5,581,500
Note payable None None None $ 775,000 $ 575,000
Cash Flow (as defined by
the Partnership
Agreement)(c) $ 3,112,400 $ 2,448,300 $ 2,655,300 $ 2,265,800 $ 1,941,800
Distributions to Limited
Partners per Unit
(593,025 Units issued
and outstanding) $ 6.14 $ 2.26 None None $ 7.50
Return of Capital to
Limited Partners per
Unit (593,025 Units
issued and
outstanding)(d) $ 4.32 $ 0.39 None None $ 7.50
-----------------------------------------------------------------------------------------
</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) $3,112,400 $2,448,300 $2,655,300 $2,265,800 $1,941,800
Items of reconciliation:
Principal payments on
mortgage loans and
notes payable 12,500 10,200
Cash received from
insubstance
foreclosure 698,400
General Partner
Partnership Management
Fee 174,000 515,400 219,400
Changes in assets and
liabilities:
Decrease (increase) in
current assets 1,900 254,500 (175,300) (92,500) (193,000)
(Increase) decrease in
current liabilities (141,100) 132,900 222,600 249,400 125,100
------------------------------------------------------------------------------------
Net cash provided by
operating activities $3,147,200 $3,351,100 $2,702,600 $2,435,200 $2,801,900
------------------------------------------------------------------------------------
</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, the General Partner's Partnership Management Fee, and any
reserves of revenues from operations deemed reasonably necessary by the
General Partner), except depreciation and amortization expenses, capital
expenditures, lease acquisition 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.
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
schedule on pages A-8 and A-9.
7
<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 November 5, 1986 and began
operations on December 15, 1986 after achieving the required minimum
subscription level. On May 4, 1988, the Offering was terminated upon the sale
of 593,025 Units. From January 1987 to March 1989, the Partnership made four
real property investments, including two 50% joint venture interests and one
75% joint venture interest, each with Affiliated partnerships, 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 with an Affiliated partnership. 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.
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 are 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 a provision for value impairment for the Park Plaza Professional
Building in the amount of $500,000 for the year ended December 31, 1994. The
recording of the provision for value impairment does not impact cash flow as
defined by generally accepted accounting principles or Cash Flow as defined by
the Partnership Agreement (see Note 8 of Notes to Financial Statements for
additional information). 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.
<TABLE>
<CAPTION>
Comparative Cash Flow Results
For the Years Ended December 31,
-----------------------------------
1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of Cash Flow (as defined by the
Partnership Agreement) $ 3,112,400 $ 2,448,300 $ 2,655,300
Average Capital Investment $57,916,900 $58,810,166 $59,302,500
Return on average Capital Investment (Cash
Flow/ average Capital Investment) 5.37% 4.16% 4.48%
-------------------------------------------------------------------------------
</TABLE>
As the Partnership enters the disposition phase of its life cycle, comparisons
of Cash Flow results between periods are complicated. Partnership Cash Flow is
generally expected to decline as real property interests are sold or disposed
of 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, repayment of the loan payable to the General
Partner or making improvements to the Partnership's remaining properties. Prior
to being utilized for such purposes, these funds are invested in short-term
money market instruments. Sale Proceeds are excluded from the determination of
Cash Flow.
The increase in Cash Flow results of $664,100 for the year ended December 31,
1994 when compared to the year ended December 31, 1993 was primarily due to: 1)
a decrease in the General Partner's Partnership Management Fee (the "Fee") of
approximately $341,400 as a result of the cumulative charge in 1993 relating to
1991, 1992 and 1993 Fees which were not paid in prior years when distributions
were suspended; 2) increased Cash Flow results at 3120 Southwest Freeway,
Carrollton Crossroads Shopping Center ("Carrollton") and Indian Ridge Plaza
("Indian Ridge") of approximately $115,100, $109,000 and $17,800, respectively;
3) increased interest income earned on short-term investments of approximately
$85,400 due to an increase in the average interest rate earned on these
investments as well as an increase in the funds available for investment and 4)
decreased general and administrative expenses of approximately $48,500
primarily due to Indiana state and county income and sales taxes being assessed
against the Partnership in 1993 for the tax years 1989, 1990 and 1992.
Partially offsetting the increase in Cash Flow results was: 1) decreased Cash
Flow results of approximately $42,800 at Wellington A, B and C as a result of
the sales and disposition previously discussed; 2) decreased Cash Flow results
at Park Plaza of approximately $24,900 and 3) increased interest expense of
approximately $22,300 due to an additional draw in the first quarter of 1994 on
the line of credit available from the General Partner. A partial repayment of
the loan due to the General Partner was made in the third quarter of 1994 in
the amount of $541,600 in connection with the distribution of proceeds from the
sale of Wellington C.
The decrease in Cash Flow results of $207,000 for the year ended December 31,
1993 when compared to the year ended December 31, 1992 was primarily due to: 1)
the cumulative Fee charge, which amounted to approximately $515,400 in 1993,
not paid in prior years as a result of suspended distributions, as previously
discussed; 2) an increase in general and administrative expenses of
approximately $59,500 due to the Indiana state and county income and sales
taxes previously discussed and 3) decreased Cash Flow results of approximately
$53,500 at 3120 Southwest Freeway. Partially offsetting the decrease in Cash
Flow results was: 1) increased Cash Flow results at Park Plaza, Indian Ridge,
Carrollton and, collectively, North Valley and Wellington A, B and C of
approximately $171,700, $143,100, $77,200 and $13,700, respectively and 2)
decreased interest expense of approximately $38,600 as a result of the full
repayment of the outstanding balance of the Partnership's line of credit with a
New York bank in November, 1992.
Rental revenues at 3120 Southwest Freeway for the years ended December 31,
1994, 1993 and 1992 were approximately $713,100, $607,700 and $620,800,
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 collection of certain tenant
receivables which were previously written off as uncollectible. The decrease in
rental revenue in 1993 when compared to 1992 was 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. Partially offsetting the decrease in 1993 rental
revenues was an increase in the average annual occupancy rate from 82% in 1992
to 86% in 1993 as well as an increase in the average effective base rental rate
charged to new and renewing tenants. Other factors which contributed to the
decrease in Cash Flow results in 1993 were increases in property operating
expenses of approximately $23,900, primarily due to increases in professional
fees and utilities, and repair and maintenance expenses of approximately
$19,300.
Rental revenues at Carrollton for the years ended December 31, 1994, 1993 and
1992 were approximately $1,094,800, $1,017,200 and $832,200, respectively. The
increases in rental revenues were primarily due to the expansion of a major
tenant's leasable square footage in May 1993 from approximately 87,100 square
feet to approximately 124,100 square feet. This additional square footage
represents a 14% increase in the total leasable square footage of Carrollton.
In addition, increases in the average base rental rate charged to new and
renewing tenants also contributed to the increases in rental revenues. Another
factor which impacted the change in Cash Flow results in 1994 when compared to
1993 was decreased repair and maintenance expenses of approximately $20,500.
Partially offsetting the increase in Cash Flow results at Carrollton in 1993
when compared to 1992 was increased repair and maintenance expenses of
approximately $45,500 and increased real estate taxes of approximately $50,000.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
Rental revenues at Indian Ridge for the years ended December 31, 1994, 1993 and
1992 were approximately $2,147,400, $2,078,200 and $2,024,400, respectively.
The increases in rental revenues are primarily due to increases in the average
annual occupancy rate from 92% in 1992 to 96% in 1993 to 98% in 1994. Partially
offsetting the increase in 1994 Cash Flow results was an increase in 1994
repair and maintenance expenses of approximately $27,700 primarily due to
additional snow removal, parking lot repairs and landscaping and an increase in
property operating expenses of approximately $15,800 primarily as a result of
additional advertising and promotional fees. Partially offsetting the decrease
in 1993 Cash Flow results was lower repair and maintenance expenses of
approximately $64,800 primarily as a result of higher than normal 1992 expenses
relating to snow removal, exterior building painting and parking lot repairs.
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 fluctuation 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 1993 parking income of approximately $37,400 when
compared to 1992 and 4) the write off of tenant receivables as uncollectible in
1992 of approximately $24,100. These changes in rental revenues are due to
recent legislation to the 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.
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.
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 that these tenants may have; 3) promotion of local broker
events and networking with local brokers; 4) networking with national level
retailers; 5) cold-calling other businesses and tenants in the market area; and
6) providing rental concessions or competitively pricing rental rates depending
on market conditions.
The rate of inflation has remained relatively stable during the years under
comparison and has had a minimal impact on the operating results of the
Partnership. The nature of various tenant's 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 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 net cash provided by
operating activities and net Sale Proceeds received from the sale of Wellington
C exceeding distributions paid to Partners and expenditures for capital and
tenant improvements. Liquid assets of the Partnership as of December 31, 1994
were comprised of working capital reserves and undistributed Cash Flow.
Net cash provided by operating activities decreased from $3,351,100 to
$3,147,200 for the years ended December 31, 1993 and 1994, respectively. This
decrease was primarily due to the disposition and sale of Wellington A and B,
respectively, in 1993, as well as the sale of Wellington C in June 1994. Aside
from the Wellington transactions, net cash provided by operating activities
decreased approximately $19,200. Factors impacting this decrease were the
timing of the payment of certain Partnership expenses and the collection of
rental revenues partially offset by the increase in Cash Flow results
previously discussed.
Net cash (used for) provided by investing activities changed from ($1,773,300)
for the year ended December 31, 1993 to $1,761,300 for the year ended December
31, 1994. This change was due to the proceeds received from the sale of
Wellington C in 1994 being greater than the proceeds received on the
disposition of Wellington A and sale of Wellington B in 1993 and the decrease
in payments made in 1994 for capital and tenant improvements.
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 for the sale price of $4,500,000. The Partnership's share of the
net proceeds from this sale approximated $2,168,300. In August 1994, the
Partnership distributed approximately 75%, or $1,624,900 of these proceeds to
Limited Partners in August 1994 and approximately 25%, or $541,600 to the
General Partner as a partial repayment of the outstanding loan payable to the
General Partner (see Note 2 in Notes to Financial Statements).
The decrease in the amounts paid for capital and tenant improvements by the
Partnership in 1994 was primarily due to the reimbursement of $1,304,700 in
1993 to a major tenant at Carrollton which had expanded its leasable square
footage approximately 37,000 square feet. The Partnership has budgeted to spend
approximately $700,000 for building and tenant improvements in 1995, consisting
of approximately $240,000 each at Park Plaza and Indian Ridge, $120,000 at 3120
Southwest Freeway and $100,000 at Carrollton. The General Partner believes
these improvements are necessary in order to maintain occupancy levels in very
competitive markets, as well as to maximize rental rates charged to new and
renewing tenants.
Net cash (used for) financing activities changed from ($1,218,100) for the year
ended December 31, 1993 to ($3,820,400) for the year ended December 31, 1994.
This change was due to: 1) increased cash distributions paid to Partners in
1994, including the net proceeds from the sale of Wellington C; 2) the partial
repayment in August 1994 of the loan payable to the General Partner from the
sale proceeds of Wellington C exceeding the loan proceeds received in February
1994 and 3) a decrease in tenant security deposits, primarily at Park Plaza.
On June 2, 1994, the Partnership cancelled the revolving line of credit it had
with a major New York bank originally scheduled to expire on November 5, 1996.
This line of credit provided that the bank would lend to the Partnership, from
time to time, up to $2,965,100, which was equal to approximately 5% of the
gross proceeds of the Offering. As of the date of cancellation, the Partnership
did not have an outstanding balance under this line of credit.
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 remaining 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 $1,096,100.
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
reasonably be foreseen.
Distributions to Limited Partners for the year ended December 31, 1994 were
made at an annualized rate of 3.48% of average Capital Investment. Cash
distributions are made 60 days after the quarter-end. The amount of Cash Flow
available for distributions to Partners is ultimately 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 amount of future Cash Flow available for distribution to Partners.
9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------- -------------------------------------------
The response to this item is submitted as a separate section of this report. See
page A-1 "Index of Financial Statements, Schedule and Exhibits."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
(a) 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,
11
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -- Continued
-------- ---------------------------------------------------------------
(a) DIRECTORS (continued)
---------------------
the General Partner and certain of their Affiliates. Ms. Rosenberg was 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.
12
<PAGE>
ITEM 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------- --------------------------------------------------
(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 compensation from the Partnership during
the year ended December 31, 1994. However, various 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 593,025 Units
then outstanding.
(b) The Partnership has no directors or executive officers. As of March 1, 1995
the executive officers and directors of the General Partner, as a group, did not
own any Units.
(c) None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------
(a) Certain 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 $348,000. In addition, other Affiliates of the General Partner
were entitled to receive approximately $101,400 for fees and reimbursements from
the Partnership for insurance and personnel 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 $82,000 of these amounts was due to Affiliates as of December
31, 1994.
In addition, 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.
As set forth in the Partnership Agreement, the General Partner has agreed to
make available to the Partnership a line of credit in an amount equal to the sum
of the Partnership Management Fees and Acquisition Fees paid to the General
Partner or its Affiliates. This line of credit may be drawn upon for
distribution to the Holders on a pro rata basis to the extent that Cash Flow is
otherwise less than sufficient to distribute cash in amounts equal to the
Holders' Preferred Return (7.5% per annum noncompounding cumulative return on
the Holders' Capital Investment); provided, however, that the maximum amount
which shall be advanced to the Partnership by the General Partner for
distribution to the Holders shall be the amount of Acquisition Fees and
Partnership Management Fees actually paid to the General Partner or its
Affiliates. Amounts advanced bear interest at the rate of 8.5% per annum simple
interest, payable monthly. On February 28, 1994, the Partnership drew an
additional $515,400 on this line of credit. Repayment of amounts advanced shall
be made only from Cash Flow if and to the
13
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -- Continued
-------- -----------------------------------------------------------
extent that Cash Flow is more than sufficient to distribute cash to the Holders
in amounts equal to the Holders' Preferred Return and from Sale or Financing
Proceeds. Per the Partnership Agreement, whenever there is a sale, disposition
or financing of a Partnership property, the Sale or Financing Proceeds shall be
distributed: 1) first, 75% to all Holders and 25% to the General Partner until
the earlier of (i) receipt by Holders of cumulative distributions of Sale or
Financing Proceeds in an amount equal to 100% of their Original Capital
Contribution, or (ii) receipt by the General Partner of cumulative distributions
of Sale or Financing Proceeds sufficient to repay all outstanding advances under
the line of credit and 2) second, to the General Partner, until all outstanding
advances under the line of credit, if any, have been repaid. In August 1994, the
Partnership distributed to the General Partner approximately $541,600, which
represented approximately 25% of the net proceeds from the sale of Wellington C
(see Note 7 in Notes to Financial Statements) as a partial repayment of the
outstanding loan payable to the General Partner. For the year ended December 31,
1994, the Partnership made interest payments of approximately $361,900 on this
loan payable. As of December 31, 1994 the outstanding loan payable and the
interest expense due to the General Partner was approximately $3,911,700 and
$28,600, respectively.
Subsequent to May 4, 1988, the Termination of the Offering, as compensation for
services rendered in managing the affairs of the Partnership, the General
Partner shall be entitled to receive a Partnership Management Fee (the "Fee")
payable within 60 days following the end of each fiscal year. Such amount shall
be equal to the lesser of (i) 0.5% of the net value of the Partnership's assets
as of the end of such year as reflected on the Certificate of Value furnished to
the Holders, plus, the amount, if any, the Fee paid in any prior year was less
than 0.5% of the net value of the Partnership's assets in such prior years, or
(ii) an amount equal to the difference between (a) 10% of the Partnership's
aggregate Cash Flow from the Commencement of Operations to the end of the year
for which such Fee is payable, and (b) the aggregate amount previously paid to
the General Partner as a Fee. For the year ended December 31, 1994, the General
Partner was paid Fees of approximately $174,000.
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) shall be
allocated to the General Partner in an amount equal to the greater of the
General Partner's Fee for such year, or 1% of such Net Profits. The balance of
Net Profits, if any, is allocated to the Holders. Net Losses from the sale or
disposition of Partnership properties (including provisions for value
impairment) shall be allocated first, after giving effect to any distributions
of Sale Proceeds, to the General Partner and Holders with positive balances in
their Capital Accounts, pro rata in proportion to such respective positive
balances, to the extent of the total amount of such positive balances and the
balance, if any, 1% to the General Partner and 99% to the Holders.
Notwithstanding, in all events, there shall be allocated to the General Partner
not less than 1% of all items of Partnership income, gain, loss, deduction and
credit allocated during the existence of the Partnership. For the year ended
December 31, 1994, the General Partner was allocated Net Income from operations
of approximately $174,000, a Net Loss from the sale of a Partnership property of
approximately $500 and provisions for value impairment of $5,000.
(b) Rosenberg & Liebentritt, P.C. ("Rosenberg"), serves as legal counsel to the
Partnership, the General Partner and certain of their Affiliates. Sheli Z.
Rosenberg, President and Chief Executive Officer of the General Partner from
December, 1990 to December, 1992 and a director of the General Partner since
September, 1983, is Chairman of the Board 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.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
-------- --------------------------------------------------------------
(a, c & d) (1, 2 & 3) See Index of Financial Statements, Schedule and Exhibits
on page A-1 of Form 10-K.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the quarter ended December 31, 1994.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4
BY: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
Dated: March 30, 1995 By: /s/ DOUGLAS CROCKER II
---------------- -------------------------------------
DOUGLAS CROCKER II
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ SAMUEL ZELL March 30, 1995 Chairman of the Board and
-------------------------- -------------- Director of the General Partner
SAMUEL ZELL
/s/ DOUGLAS CROCKER II March 30, 1995 President, Chief Executive
-------------------------- -------------- Officer and Director of the
DOUGLAS CROCKER II General Partner
/s/ SHELI Z. ROSENBERG March 30, 1995 Director of the General Partner
-------------------------- --------------
SHELI Z. ROSENBERG
/s/ SANFORD SHKOLNIK March 30, 1995 Director of the General Partner
-------------------------- --------------
SANFORD SHKOLNIK
/s/ NORMAN M. FIELD March 30, 1995 Vice President - Finance and
-------------------------- -------------- Treasurer
NORMAN M. FIELD
16
<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 and 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-32 of the Partnership's
definitive Prospectus dated November 5, 1986 on Form S-11 Registration
No. 33-06149, filed pursuant to Rule 424 (b), incorporated herein by reference.
EXHIBIT (10) Material Contracts
(a) Settlement agreement for the disposition of the Partnership's investment in
the North Valley Office Center Phase I filed as an exhibit to the Partnership's
Report on Form 8-K dated November 5, 1992, incorporated herein by reference.
(b) Lease agreements for tenants that individually occupy more than 10% of the
net leasable square footage of the Partnership's most significant properties,
filed as an exhibit to the Partnership's Report on Form 10-K dated December 31,
1992, incorporated herein by reference.
EXHIBIT (13) Annual Report to Security Holders
The 1993 Annual Report to Holders of Units is being filed under separate cover,
not via EDGAR, for the information of the Commission.
EXHIBIT (27) Financial Data Schedule
A - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
First Capital Institutional Real Estate, Ltd. - 4
Chicago, Illinois
We have audited the accompanying balance sheets of First Capital Institutional
Real Estate, Ltd. - 4 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. - 4 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 $ 5,550,400 $ 6,180,400
Buildings and improvements 39,760,400 41,798,200
------------------------------------------------------------------------------
45,310,800 47,978,600
Accumulated depreciation and amortization (7,703,200) (6,573,300)
------------------------------------------------------------------------------
Total investment properties, net of accumulated
depreciation and amortization 37,607,600 41,405,300
Cash and cash equivalents 4,142,100 3,054,000
Restricted certificates of deposit 62,500 62,500
Rents receivable 298,100 296,500
Other assets 65,000 69,300
------------------------------------------------------------------------------
$42,175,300 $44,887,600
------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable to General Partner $ 3,911,700 $ 3,937,900
Accounts payable and accrued expenses 661,700 838,600
Due to Affiliates 150,800 125,300
Security deposits 101,100 118,300
Distributions payable 678,100 639,900
Other liabilities 79,200 68,900
------------------------------------------------------------------------------
5,582,600 5,728,900
------------------------------------------------------------------------------
Partners' (deficit) capital:
General Partner (246,300) (240,800)
Limited Partners (750,000 Units authorized, 593,025
issued and outstanding) 36,839,000 39,399,500
------------------------------------------------------------------------------
36,592,700 39,158,700
------------------------------------------------------------------------------
$42,175,300 $44,887,600
------------------------------------------------------------------------------
</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 $(220,800) $41,646,000 $41,425,200
Net (loss) for the
year ended
December 31, 1992 (20,300) (2,013,900) (2,034,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1992 (241,100) 39,632,100 39,391,000
Net income for the year ended December
31, 1993 515,700 1,107,600 1,623,300
Distributions for the year ended December
31, 1993 (515,400) (1,340,200) (1,855,600)
-------------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1993 (240,800) 39,399,500 39,158,700
Net income for the year ended December
31, 1994 168,500 1,080,700 1,249,200
Distributions for the year ended December
31, 1994 (174,000) (3,641,200) (3,815,200)
-------------------------------------------------------------------------------
Partners' (deficit) capital,
December 31, 1994 $(246,300) $36,839,000 $36,592,700
-------------------------------------------------------------------------------
</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 $5,986,000 $6,090,100 $ 6,200,100
Interest 170,100 84,700 96,700
-------------------------------------------------------------------------------
6,156,100 6,174,800 6,296,800
-------------------------------------------------------------------------------
Expenses:
Interest 361,700 339,400 505,900
Depreciation and amortization 1,488,300 1,374,500 1,440,600
Real estate taxes and insurance 696,200 733,600 831,400
Repairs and
maintenance 564,300 657,400 759,700
Property operating 1,071,000 1,255,700 1,376,800
General and administrative 176,500 225,000 167,700
-------------------------------------------------------------------------------
4,358,000 4,585,600 5,082,100
-------------------------------------------------------------------------------
Income before other gains and (losses) 1,798,100 1,589,200 1,214,700
(Loss) on sale or disposition of
properties (48,900) (1,429,900) (2,293,900)
Provision for value impairment (500,000) (3,065,000)
-------------------------------------------------------------------------------
Net income (loss) before extraordinary
gain on extinguishment of debt 1,249,200 159,300 (4,144,200)
Extraordinary gain on extinguishment of
debt 1,464,000 2,110,000
-------------------------------------------------------------------------------
Net income (loss) $1,249,200 $1,623,300 $(2,034,200)
-------------------------------------------------------------------------------
Net income (loss) allocated to General
Partner $ 168,500 $ 515,700 $ (20,300)
-------------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners $1,080,700 $1,107,600 $(2,013,900)
-------------------------------------------------------------------------------
Net income (loss) before extraordinary
gain on extinguishment of debt allocated
to Limited Partners per Unit (593,025
Units issued and outstanding) $ 1.82 $ (0.58) $ (6.92)
-------------------------------------------------------------------------------
Net income (loss) allocated to Limited
Partners per Unit (593,025 Units issued
and outstanding) $ 1.82 $ 1.87 $ (3.40)
-------------------------------------------------------------------------------
</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 income (loss) $1,249,200 $1,623,300 $(2,034,200)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,488,300 1,374,500 1,440,600
Loss on sale or disposition of properties 48,900 1,429,900 2,293,900
Provision for value impairment 500,000 3,065,000
Extraordinary (gain) on extinguishment of
debt (1,464,000) (2,110,000)
Changes in assets and liabilities:
(Increase) decrease in rents receivable (1,600) 218,400 (174,400)
Decrease (increase) in other assets 3,500 36,100 (900)
(Decrease) increase in accounts payable
and accrued expenses (176,900) 156,200 196,300
Increase (decrease) in due to Affiliates 25,500 (16,900) 22,500
Increase (decrease) in other liabilities 10,300 (6,400) 3,800
----------------------------------------------------------------------------------
Net cash provided by operating activities 3,147,200 3,351,100 2,702,600
----------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the sale or disposition of
properties 2,168,300 840,000
Payments for capital and tenant
improvements (407,000) (2,613,300) (1,027,200)
----------------------------------------------------------------------------------
Net cash provided by (used for) investing
activities 1,761,300 (1,773,300) (1,027,200)
----------------------------------------------------------------------------------
Cash flows from financing activities:
Distributions paid to Partners (3,777,000) (1,215,700)
(Decrease) increase in security deposits (17,200) (2,400) 8,700
Net repayment of loan payable to General
Partner (26,200)
Repayment of note payable (775,000)
Cash paid on disposition of property (139,300)
----------------------------------------------------------------------------------
Net cash (used for) financing activities (3,820,400) (1,218,100) (905,600)
----------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,088,100 359,700 769,800
Cash and cash equivalents at the beginning
of the year 3,054,000 2,694,300 1,924,500
----------------------------------------------------------------------------------
Cash and cash equivalents at the end of the
year $4,142,100 $3,054,000 $ 2,694,300
----------------------------------------------------------------------------------
Supplemental information:
Interest paid during the year $ 361,900 $ 339,400 $ 349,200
----------------------------------------------------------------------------------
</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 May 20, 1986, by the filing of a Certificate and
Agreement of Limited Partnership with the Recorder of Deeds of Cook County,
Illinois, and commenced the Offering of Units on November 5, 1986. On December
15, 1986, the required minimum subscription level was reached and Partnership
operations commenced. The Offering was terminated on May 4, 1988 with 593,025
Units sold. The Partnership was formed to invest primarily in existing,
improved, income-producing commercial real estate.
The Partnership Agreement provides that the Partnership will be dissolved on or
before December 31, 2016. The Limited Partners, by a majority vote, may
dissolve the Partnership at any time.
ACCOUNTING POLICIES:
The financial statements include the Partnership's 50% interest in two joint
ventures and its 75% interest in one joint venture. In addition, the financial
statements include the Partnership's 50% interest in a joint venture which
owned North Valley Office Center Phase I ("North Valley") prior to its
disposition on November 5, 1992 and the Wellington North Office Complex
("Wellington A, B and C") prior to the separate disposition and sales of
Wellington A, B and C on March 17, 1993, March 23, 1993 and June 8, 1994,
respectively. These joint ventures are operated under the control of the
General Partner. Accordingly, the Partnership's pro rata share of the ventures'
revenues, expenses, assets, liabilities and capital is included in the
financial statements.
The Partnership is not liable for Federal income taxes as the Partners
recognize their proportionate share of the Partnership income or loss 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 Limited Partners;
therefore, the disclosure of the difference between the tax bases and the
reported 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. Repair and
maintenance costs are expensed against operations as incurred; expenditures for
improvements are capitalized 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 Partners'
capital.
2. RELATED PARTY TRANSACTIONS:
Subsequent to May 4, 1988, the Termination of the Offering, as compensation for
services rendered in managing the affairs of the Partnership, the General
Partner shall be entitled to receive a Partnership Management Fee (the "Fee")
payable within 60 days following the end of each fiscal year. Such amount shall
be equal to the lesser of (i) 0.5% of the net value of the Partnership's assets
as of the end of such year as reflected on the Certificate of Value furnished
to the Holders, plus, the amount, if any, the Fee paid in any prior year was
less than 0.5% of the net value of the Partnership's assets in such prior
years, or (ii) an amount equal to the difference between (a) 10% of the
Partnership's aggregate Cash Flow from the Commencement of Operations to the
end of the year for which such Fee is payable, and (b) the aggregate amount
previously paid to the General Partner as a Fee. For the years ended December
31, 1994, 1993 and 1992, the General Partner was allocated Fees of
approximately $174,000, $183,500 and $164,000, respectively. The 1994 Fee was
paid in February 1995 and was included in the Partnership's calculation of Cash
Flow for the year ended December 31, 1994. The 1992 and 1993 Fees,
collectively, were included in the Fee which was paid in February 1994 and were
included in the Partnership's calculation of Cash Flow for the year ended
December 31, 1993.
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) shall be
allocated to the General Partner in an amount equal to the greater of the Fee
for such year, or 1% of such Net Profits. The balance of Net Profits, if any,
is allocated to the Holders. Net Losses from the sale or disposition of
Partnership properties (including provisions for value impairment) shall be
allocated first, after giving effect to any distributions of Sale Proceeds, to
the General Partner and Holders with positive balances in their Capital
Accounts, pro rata in proportion to such respective positive balances, to the
extent of the total amount of such positive balances and the balance, if any,
1% to the General Partner and 99% to the Holders. Notwithstanding, in all
events, there shall be allocated to the General Partner not less than 1% of all
items of Partnership income, gain, loss, deduction and credit allocated during
the existence of the Partnership. For the year ended December 31, 1994, the
General Partner was allocated Net Income from operations of approximately
$174,000, a Net Loss from the sale of a Partnership property of approximately
$500 and a provision for value impairment of $5,000. For the year ended
December 31, 1993, the General Partner was allocated Net Income from operations
of approximately $515,400, a Net Loss on the sale or disposition of Partnership
properties of approximately $14,300 and an extraordinary gain on extinguishment
of debt of approximately $14,600. For the year ended December 31, 1992, the
General Partner was allocated Net Income from operations of approximately
$12,100, a Net Loss from the disposition of a Partnership property of
approximately $22,900, a Net Loss from a provision for value impairment of
approximately $30,600 and an extraordinary gain on extinguishment of debt of
approximately $21,100.
A-5
<PAGE>
2. RELATED PARTY TRANSACTIONS:
As set forth in the Partnership Agreement, the General Partner has agreed to
make available to the Partnership a line of credit in an amount equal to the
sum of the Partnership Management Fees and Acquisition Fees paid to the General
Partner or its Affiliates. This line of credit may be drawn upon for
distribution to the Holders on a pro rata basis to the extent that Cash Flow is
otherwise less than sufficient to distribute cash in amounts equal to the
Holders' Preferred Return (7.5% per annum noncompounding cumulative return on
the Holders' Capital Investment); provided, however, that the maximum amount
which shall be advanced to the Partnership by the General Partner for
distribution to the Holders shall be the amount of Acquisition Fees and
Partnership Management Fees actually paid to the General Partner or its
Affiliates. Amounts advanced shall bear interest at the rate of 8.5% per annum
simple interest, payable monthly. On February 28, 1994, the Partnership drew an
additional $515,400 on this line of credit. Repayment of amounts advanced shall
be made only from Cash Flow if and to the extent that Cash Flow is more than
sufficient to distribute cash to the Holders in amounts equal to the Holders'
Preferred Return and from Sale or Financing Proceeds. Per the Partnership
Agreement, whenever there is a sale, disposition or financing of a Partnership
property, the Sale or Financing Proceeds shall be distributed: 1) first, 75% to
all Holders and 25% to the General Partner until the earlier of (i) receipt by
Holders of cumulative distributions of Sale or Financing Proceeds in an amount
equal to 100% of their Original Capital Contribution, or (ii) receipt by the
General Partner of cumulative distributions of Sale or Financing Proceeds
sufficient to repay all outstanding advances under the line of credit and 2)
second, to the General Partner, until all outstanding advances under the line
of credit, if any, have been repaid. In August 1994, the Partnership
distributed to the General Partner approximately $541,600, which represented
approximately 25% of the net proceeds from the sale of Wellington C (see Note
7) as a partial repayment of the outstanding loan payable to the General
Partner. As of December 31, 1994 the outstanding loan payable to the General
Partner was approximately $3,911,700.
Fees and reimbursements paid and payable by the Partnership to Affiliates are
as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31, 1994
----------------------------------------------------
1994 1993 1992(a)
----------------- ----------------- ----------------
Paid Payable Paid Payable Paid Payable
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property management and
leasing fees $310,800 $ 76,900 $397,400 $ 39,700 $373,300 $46,600
Real estate
commissions(b) None 40,200 None 40,200 None None
Interest expense on loan
payable to General
Partner 361,900 28,600 339,400 28,800 311,600 28,800
Reimbursement of property
insurance premiums, at
cost 67,600 None 72,700 None 96,600 None
Reimbursement of
expenses, at cost:
(1) Accounting 18,600 3,100 18,700 2,600 24,400 4,300
(2) Investor
communication 13,900 2,000 8,700 1,200 7,800 1,600
(3 Legal 48,500 None 65,600 12,800 46,300 4,400
-------------------------------------------------------------------------------
$821,300 $150,800 $902,500 $125,300 $860,000 $85,700
-------------------------------------------------------------------------------
</TABLE>
(a) Certain 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. These fees range from 1% to 6%
based upon the terms of the individual management agreements.
3. RESTRICTED CERTIFICATES OF DEPOSIT:
Restricted certificates of deposit include negotiable certificates of deposit
of $37,500, which have 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.
4. LINE OF CREDIT:
On June 2, 1994, the Partnership cancelled the revolving line of credit with a
New York bank scheduled to expire on November 5, 1996. This line of credit
provided that the bank would lend to the Partnership from time to time up to
$2,965,100, which was equal to approximately 5% of the gross proceeds of the
Offering. As of the date of cancellation, the Partnership did not have an
outstanding balance under this line of credit.
5. 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 $ 4,184,200
1996 3,359,000
1997 2,754,500
1998 1,771,900
1999 1,298,000
Thereafter 5,920,200
-------------------------------------------
$19,287,800
-------------------------------------------
</TABLE>
A-6
<PAGE>
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 (i) operating
expense and real estate tax expense reimbursements and (ii) percentage rents.
6. 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 loss on sale of property and the
Partnership's provision for value impairment. The net effect of these
accounting differences for the year ended December 31, 1994 was that the income
for tax reporting purposes was less than the net income for financial statement
purposes by approximately $981,700.
7. PROPERTY SALES AND DISPOSITIONS:
On June 8, 1994, Farmington Hills Associates ("FHA"), the joint venture which
owned North Valley and Wellington A, B and C, in which the Partnership owned a
50% interest, sold Wellington C for the sale price of $4,500,000. The
Partnership's share of selling expenses was approximately $81,700. The
Partnership's share of the net proceeds from this sale was approximately
$2,168,300. 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 will record a total loss
in 1994 of approximately $1,915,700 on this sale.
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 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.
On November 5, 1992, FHA disposed of North Valley as a result of a conveyance
of 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 losses on the disposition of North Valley 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.
All of the above transactions were all-cash sales and dispositions, with no
further involvement on the part of the Partnership.
8. 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 amount 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 a provision for value impairment for the Park Plaza
Professional Building of $500,000 as of December 31, 1994. Due to the
uncertainty of the Partnership's ability to recover the net carrying value of
this investment 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 provision amount
was in part based on the General Partner's estimate of the current market
value. This provision for value impairment along with those mentioned in Note 7
were considered noncash events for the purposes of the Statement 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, 1992 and 1994.
A-7
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD. - 4
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
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 Improve- Carrying and
Description Land Improvements ments Costs (1) Land Improvements Total (2)(3)
------------------ ---------- ------------ ---------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Buildings:
-----------------
Park Plaza
Professional
Building
(Houston, TX)
(50% interest) $ 803,000 $10,772,500 $1,804,600 $ 82,400 $ 803,000 $12,159,500(6) $12,962,500
3120 Southwest
Freeway
(Houston, TX)
(75% interest) 737,100 1,489,200 1,037,600 30,600 737,100 2,557,400 3,294,500
Shopping Centers:
-----------------
Carrollton
Crossroads
(Carrollton, GA)
(50% interest) 1,000,400 7,703,400 1,524,500 59,900 1,000,400 9,287,800 10,288,200
Indian Ridge Plaza
(Mishawaka, IN) 3,009,900 15,431,100 257,600 67,000 3,009,900 15,755,700 18,765,600
---------- ----------- ---------- --------- ---------- ----------- -----------
$5,550,400 $35,396,200 $4,624,300 $239,900 $5,550,400 $39,760,400 $45,310,800
========== =========== ========== ========= ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
------------------ ------------ --------- -------- ------------
Life on
which
depreciation
in latest
Accumulated Date income
Depreciation of con- Date statements
Description (2) struction Acquired is computed
------------------ ------------ --------- -------- ------------
<S> <C> <C> <C> <C>
Office Buildings:
-----------------
Park Plaza
Professional
Building
(Houston, TX) 35(4)
(50% interest) $3,072,300 1976 1/87 5-10(5)
3120 Southwest
Freeway
(Houston, TX) 35(4)
(75% interest) 767,400 1964 3/89 5-10(5)
Shopping Centers:
-----------------
Carrollton
Crossroads 35(4)
(Carrollton, GA) 1,409,100 1988 8/88 5-10(5)
(50% interest)
35(4)
Indian Ridge Plaza 2,454,400 1986 1/89 5-10(5)
(Mishawaka, IN)
----------
$7,703,200
==========
</TABLE>
Column B - Not Applicable
See accompanying notes on the following page.
A-8
<PAGE>
FIRST CAPITAL INSTITUTIONAL REAL ESTATE , LTD. -- 4
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 the year $47,978,600 $6,573,300 $49,009,700 $5,454,600 $54,532,500 $4,176,400
Additions during year:
Improvements 407,000 2,613,300 1,027,200
Provision for depreciation 1,487,600 1,373,800 1,439,900
Deductions during year:
Basis of real estate disposed (6) (2,574,800) (3,644,400) (3,485,000)
Accumulated depreciation on
real estate disposed (357,700) (255,100) (161,700)
Provisions for value impairment (500,000) (3,065,000)
----------- ---------- ----------- ---------- ----------- ----------
Balance at end of the year $45,310,800 $7,703,200 $47,978,600 $6,573,300 $49,009,700 $5,454,600
=========== ========== =========== ========== =========== ==========
</TABLE>
Note 3. The aggregate cost for Federal income tax purposes as of December 31,
1994 was $45,810,800.
Note 4. Estimated useful life for building.
Note 5. Estimated useful life for improvements.
Note 6. Included a provision for value impairment. See Notes 7 and 8 in Notes
to Financial Statements for additional information.
A - 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000794665
<NAME> FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD-4
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,204,600
<SECURITIES> 0
<RECEIVABLES> 298,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,502,700
<PP&E> 45,310,800
<DEPRECIATION> 7,703,200
<TOTAL-ASSETS> 42,175,300
<CURRENT-LIABILITIES> 1,339,800
<BONDS> 3,911,700
<COMMON> 0
0
0
<OTHER-SE> 36,592,700
<TOTAL-LIABILITY-AND-EQUITY> 42,175,300
<SALES> 0
<TOTAL-REVENUES> 6,156,100
<CGS> 0
<TOTAL-COSTS> 2,331,500
<OTHER-EXPENSES> 176,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361,700
<INCOME-PRETAX> 1,249,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,249,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,249,200
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
