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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-12945
First Capital Institutional Real Estate, Ltd.-2
(Exact name of registrant as specified in its charter)
Florida 59-2313852
(State or other (I.R.S.
jurisdiction Employer Identification
of incorporation or No.)
organization)
Two North Riverside Plaza, 60606-2607
Suite 700, (Zip Code)
Chicago, Illinois
(Address of principal
executive offices)
(312) 207-0020
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Documents incorporated by reference:
The First Amended and Restated Certificate and Agreement of Limited Partnership
filed as Exhibit A to the Partnership's Prospectus dated October 19, 1983,
included in the Partnership's Registration Statement on Form S-11, is
incorporated herein by reference in Part I of this report.
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BALANCE SHEETS
(All dollars rounded to nearest 00s)
June 30,
2002 December 31,
--------------------------------------------------
ASSETS
Cash and cash equivalents $6,250,400 $6,279,200
Other assets 10,500 12,900
--------------------------------------------------
$6,260,900 $6,292,100
--------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and
accrued expenses $ 91,500 $ 94,600
Due to Affiliates 9,100 4,400
Other liabilities 2,800 2,800
--------------------------------------------------
103,400 101,800
--------------------------------------------------
Partners' capital:
General Partner 79,300 79,600
Limited Partners (84,886
Units issued and
outstanding) 6,078,200 6,110,700
--------------------------------------------------
6,157,500 6,190,300
--------------------------------------------------
$6,260,900 $6,292,100
--------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
For the six months ended June 30, 2002 (Unaudited) and the year ended December
31, 2001
(All dollars rounded to nearest 00s)
General Limited
Partners Partners Total
----------------------------------------------------------
Partners' capital,
January 1, 2001 $ 78,700 $6,021,500 $6,100,200
Net income for the year
ended December 31,
2001 900 89,200 90,100
----------------------------------------------------------
Partners' capital,
December 31, 2001 79,600 6,110,700 6,190,300
Net (loss) for the
six months ended
June 30, 2002 (300) (32,500) (32,800)
----------------------------------------------------------
Partners' capital,
June 30, 2002 $ 79,300 $6,078,200 $6,157,500
----------------------------------------------------------
3
The accompanying notes are an integral part of the financial statements
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended June 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2002 2001
--------------------------------------------------------
Income:
Interest $ 28,300 $69,400
--------------------------------------------------------
Expenses:
General and administrative:
Affiliates 5,500 5,200
Nonaffiliates 36,700 33,700
--------------------------------------------------------
42,200 38,900
--------------------------------------------------------
Net (loss) income $(13,900) $30,500
--------------------------------------------------------
Net (loss) income allocated to General
Partner $ (100) $ 300
--------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(13,800) $30,200
--------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (84,886 Units
outstanding) $ (0.16) $ 0.36
--------------------------------------------------------
STATEMENTS OF INCOME AND EXPENSES
For the six months ended June 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2002 2001
---------------------------------------------------------
Income:
Interest $ 57,700 $155,300
---------------------------------------------------------
Expenses:
General and administrative:
Affiliates 9,500 7,000
Nonaffiliates 81,000 68,200
---------------------------------------------------------
90,500 75,200
---------------------------------------------------------
Net (loss) income $(32,800) $ 80,100
---------------------------------------------------------
Net (loss) income allocated to General
Partner $ (300) $ 800
---------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(32,500) $ 79,300
---------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (84,886 Units
outstanding) $ (0.38) $ 0.93
---------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s)
2002 2001
---------------------------------------------------------
Cash flows from operating
activities:
Net (loss) income $ (32,800) $ 80,100
Adjustments to reconcile net
(loss) income to net cash
(used for) provided by
operating activities:
Changes in assets and
liabilities:
Decrease in other assets 2,400 --
(Decrease) increase in
accounts payable and
accrued expenses (3,100) 1,600
Increase in due to
Affiliates 4,700 4,800
Increase in other liabilities -- 1,500
---------------------------------------------------------
Net cash (used for)
provided by
operating activities (28,800) 88,000
---------------------------------------------------------
Cash from investing
activities -- --
---------------------------------------------------------
Cash from financing
activities -- --
---------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (28,800) 88,000
Cash and cash equivalents at the
beginning of the period 6,279,200 6,187,600
---------------------------------------------------------
Cash and cash equivalents at the
end of the period $6,250,400 $6,275,600
---------------------------------------------------------
4
The accompanying notes are an integral part of the financial statements
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 2002
1. Summary of significant accounting policies:
Definition of special terms:
Capitalized terms used in this report have the same meaning as those terms have
in the Partnership's Registration Statement 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 included in the Registration Statement and
incorporated herein by reference.
Accounting policies:
The Partnership has disposed of its real estate properties. Upon resolution of
the environmental matter disclosed in Note 3 and other post-closing matters
related to the sales of the Partnership's properties, the Partnership will make
a liquidating distribution and dissolve.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP"). The Partnership
utilizes the accrual method of accounting. Under this method, revenues are
recorded when earned and expenses are recorded when incurred.
Preparation of the Partnership's financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The financial information included in these financial statements is unaudited;
however, in management's opinion, all adjustments (consisting of only normal,
recurring accruals) necessary for a fair presentation of the results of
operations for the periods included have been made. Results of operations for
the quarter and six months ended June 30, 2002 are not necessarily indicative
of the operating results for the year ending December 31, 2002.
The Partnership has one reportable segment as the Partnership is in the
disposition phase of its life cycle, wherein it is seeking to resolve
post-closing matters related to the properties sold by the Partnership.
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
Reference is made to the Partnership's Annual Report for the year ended
December 31, 2001 for a description of other accounting policies and additional
details of the Partnership's financial condition, results of operations,
changes in Partners' capital and changes in cash balances for the year then
ended. The details provided in the notes thereto have not changed except as a
result of normal transactions in the interim or as otherwise disclosed herein.
2. Related party transactions:
In accordance with the Partnership Agreement, subsequent to October 19, 1984,
the Termination of the Offering, the General Partner is entitled to 10% of Cash
Flow (as defined in the Partnership Agreement) as a Partnership Management Fee.
For the quarter and six months ended June 30, 2002 and 2001, the General
Partner was not paid a Partnership Management Fee.
Net Profits (exclusive of Net Profits from the sale or disposition of
Partnership properties) are allocated: first, to the General Partner, in an
amount equal to the greater of the General Partner's Partnership Management Fee
or 1% of such Net Profits; second, the balance, if any, to the Limited
Partners. Net Profits from the sale or disposition of a Partnership property
are allocated: first, prior to giving effect to any distributions of Sale
Proceeds from the transaction, to the General Partner and the Limited Partners
with negative balances in their capital accounts pro rata in proportion to such
respective negative balances, to the extent of the total of such negative
balances; second, to the General Partner, in an amount necessary to make the
balance in its capital account equal to the amount of Sale Proceeds to be
distributed to the General Partner with respect to the sale or disposition of
such property and third, the balance, if any, to the Limited Partners. Net
Losses (exclusive of Net Losses from the sale, disposition or provision for
value impairment of Partnership properties) are allocated 1% to the General
Partner and 99% to the Limited Partners. Net Losses from the sale, disposition
or provision for value impairment of Partnership properties are allocated:
first, prior to giving effect to any distributions of Sale Proceeds from the
transaction, to the extent that the balance in the General Partner's capital
account exceeds its Capital Investment or the balance in the capital accounts
of the Limited Partners exceeds the amount of their Capital Investment (the
"Excess Balances"), to the General Partner and the Limited Partners pro rata in
proportion to such Excess Balances until such Excess Balances are reduced to
zero; second, to the General Partner and the Limited Partners and among them
(in the ratio which balances) until the balance in their capital accounts shall
be reduced to zero; third, the balance, if any, 99% to the Limited Partners and
1% to the General Partner. Notwithstanding the foregoing, in all events there
shall be allocated to the General Partner not less than 1% of Net Profits and
Net Losses from the sale, disposition or provision for value impairment of a
Partnership property. For the quarter and six months ended June 30, 2002, the
General Partner was allocated Net (Losses) of $(100) and $(300), respectively.
For the quarter and six months ended June 30, 2001, the General Partner was
allocated Net Profits, of $300 and $800, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and six months ended June 30, 2002 were as follows:
Paid
--------------
Six
Quarter Months Payable
----------------------------------------------------
Reimbursement of expenses, at
cost:
--Accounting $1,500 $2,500 $1,500
--Investor communications -- 2,400 7,600
----------------------------------------------------
Total $1,500 $4,900 $9,100
----------------------------------------------------
5
3. Environmental matter:
In 1996, the General Partner became aware of the existence of hazardous
substances in the soil and groundwater under Lakewood Square Shopping Center
("Lakewood"). In connection with the 1997 sale of Lakewood, the purchaser
assumed the obligation to remedy the hazardous substances in the manner
required by law, which includes, but is not limited to, payment of all costs in
connection with the remediation work. In addition, the purchaser provided the
Partnership with certain indemnification protection in relation to clean-up
costs and related expenses arising from the presence of these hazardous
substances. At the present time, the General Partner is unaware of any claims
or other matters referred to above against the Partnership. The California
Regional Water Quality Control Board has approved the purchaser's revised
remedial action plan (the "Plan") for the site. The remediation is scheduled to
begin in 2002, provided the proper permits are obtained. There can be no
assurance as to the timing of successful completion of the Plan. The General
Partner continues to monitor the documentation delivered by the purchaser
regarding the purchaser's activities to remedy the hazardous substances at
Lakewood.
[LOGO] First Capital Institutional Real Estate, Ltd.-2
[Graphic]
sponsored by FIRST CAPITAL FINANCIAL LLC
Two North Riverside Plaza
Chicago, Illinois 60606
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the Partnership's Annual Report for the year ended
December 31, 2001 for a discussion of the Partnership's business.
Statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are not historical facts, may be
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
The Partnership has substantially completed the disposition phase of its life
cycle. The Partnership has sold its remaining real property investments and is
currently working toward resolution of post closing property sale matters.
Operations
Net income (loss) changed from $30,500 and $80,100 for the quarter and
six-months ended June 30, 2001 to $(13,900) and $(32,800) for the quarter and
six-months ended June 30, 2002, respectively. The changes were primarily due to
the decrease in interest earned on the Partnership's short-term investments,
which was due to the decrease in interest rates earned on those investments.
Liquidity and Capital Resources
The decrease in the Partnership's cash position of $28,800 for the six months
ended June 30, 2002 was due to net cash used for operating activities. Liquid
assets (including cash and cash equivalents) of the Partnership as of June 30,
2002 were comprised of amounts held for the Lakewood environmental matter (as
hereafter discussed) and Partnership liquidation expenses.
Net cash provided by (used for) operating activities changed from $88,000 for
the six months ended June 30, 2001 to $(28,800) for the six months ended June
30, 2002. The change was primarily due to the decrease in net results as
previously discussed.
The Partnership has no financial instruments for which there are significant
market risks.
As described in Note 3 of Notes to Financial Statements, the Partnership is
awaiting resolution of an environmental matter at Lakewood. The General Partner
is continuing to monitor the documentation delivered by the purchaser of
Lakewood regarding the purchaser's activities to remedy the hazardous
substances at Lakewood. There can be no assurance as to the actual timeframe
for the remediation or that it will be completed without cost to the
Partnership. When the environmental matter is satisfactorily remediated, the
Partnership will pay a liquidating distribution to Partners of the remaining
assets held by the Partnership, less amounts reserved for administrative
expenses and any amounts deemed necessary for contingencies and other post
closing matters.
2
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: 99.1: Certification Of Periodic Financial Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the three months ended June 30,
2002.
7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CAPITAL INSTITUTIONAL REAL
ESTATE, LTD.-2
By: FIRST CAPITAL FINANCIAL LLC
GENERAL PARTNER
/s/ DOUGLAS CROCKER II
Date: August 12, 2002
By: ______________________________
DOUGLAS CROCKER II
President and Chief Executive
Officer
/s/ PHILIP G. TINKLER
Date: August 12, 2002
By: _________________________________
PHILIP G. TINKLER
Vice President--Finance and
Treasurer
8