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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 September 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 0-12538
First Capital Institutional Real Estate, Ltd.--1
(Exact name of registrant as specified in its charter)
Florida 59-2197264
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two North Riverside Plaza,
Suite 700,
Chicago, Illinois 60606-2607
(Address of principal executive offices) (Zip Code)
(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 definitive Prospectus dated October 25, 1982,
included in the Registrant's Registration Statement on Form S-11 (Registration
No. 2-79092), is incorporated herein by reference in Part I of this report.
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BALANCE SHEETS
(All dollars rounded to nearest 00s)
September 30,
2002 December 31,
(Unaudited) 2001
----------------------------------------------------
ASSETS
Cash and cash equivalents $4,111,400 $4,131,900
Other assets 6,000 7,800
----------------------------------------------------
$4,117,400 $4,139,700
----------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and
accrued expenses $ 37,600 $ 34,800
Due to Affiliates 10,500 3,500
Other liabilities 2,300 2,300
----------------------------------------------------
50,400 40,600
----------------------------------------------------
Partners' capital:
General Partners 614,800 615,100
Limited Partners (60,000
Units issued and
outstanding) 3,452,200 3,484,000
----------------------------------------------------
4,067,000 4,099,100
----------------------------------------------------
$4,117,400 $4,139,700
----------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
For the nine months ended September 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 $614,600 $3,434,700 $4,049,300
Net income for the
year ended
December 31, 2001 500 49,300 49,800
---------------------------------------------------------
Partners' capital,
December 31, 2001 615,100 3,484,000 4,099,100
Net (loss) for the nine
months ended
September 30, 2002 (300) (31,800) (32,100)
---------------------------------------------------------
Partners' capital,
September 30, 2002 $614,800 $3,452,200 $4,067,000
---------------------------------------------------------
3
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended September 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2002 2001
-------------------------------------------------------
Income:
Interest $17,900 $37,900
-------------------------------------------------------
17,900 37,900
-------------------------------------------------------
Expenses:
General and administrative:
Affiliates 4,100 6,700
Nonaffiliates 20,800 26,900
-------------------------------------------------------
24,900 33,600
-------------------------------------------------------
Net (loss) income $(7,000) $ 4,300
-------------------------------------------------------
Net income allocated to General
Partners -- --
-------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(7,000) $ 4,300
-------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (60,000 Units
outstanding) $ (0.12) $ 0.07
-------------------------------------------------------
STATEMENTS OF INCOME AND EXPENSES
For the nine months ended September 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2002 2001
---------------------------------------------------------
Income:
Interest $ 55,900 $139,300
---------------------------------------------------------
55,900 139,300
---------------------------------------------------------
Expenses:
General and administrative:
Affiliates 11,000 11,400
Nonaffiliates 77,000 76,400
---------------------------------------------------------
88,000 87,800
---------------------------------------------------------
Net (loss) income $(32,100) $ 51,500
---------------------------------------------------------
Net (loss) income allocated to General
Partners $ (300) $ 500
---------------------------------------------------------
Net (loss) income allocated to Limited
Partners $(31,800) $ 51,000
---------------------------------------------------------
Net (loss) income allocated to Limited
Partners per Unit (60,000 Units
outstanding) $ (0.53) $ 0.85
---------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2002 and 2001
(Unaudited)
(All dollars rounded to nearest 00s)
2002 2001
-------------------------------------------------------
Cash flows from operating
activities:
Net (loss) income $ (32,100) $ 51,500
Adjustments to reconcile net
(loss) income to net cash
(used for) provided by
operating activities:
Changes in assets and
liabilities:
Decrease in other assets 1,800 --
Increase in accounts
payable and accrued
expenses 2,800 2,400
Increase in due to
Affiliates 7,000 2,700
-------------------------------------------------------
Net cash (used for)
provided by
operating activities (20,500) 56,600
-------------------------------------------------------
Cash from investing activities -- --
-------------------------------------------------------
Cash from financing activities -- --
-------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (20,500) 56,600
-------------------------------------------------------
Cash and cash equivalents at the
beginning of the period 4,131,900 4,084,100
-------------------------------------------------------
Cash and cash equivalents at the
end of the period $4,111,400 $4,140,700
-------------------------------------------------------
4
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 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 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 sale 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 nine months ended September 30, 2002 are not necessarily
indicative of the operating results for the year ending December 31, 2002.
Cash equivalents are considered all highly liquid investments with maturity of
three months or less when purchased.
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.
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 March 31, 1983, the
Termination of the Offering, the General Partners are entitled to 10% of Cash
Flow (as defined in the Partnership Agreement) as their Subordinated
Partnership Management Fee, provided that Limited Partners first receive
specified non-cumulative annual rates of return on their Capital Investment.
In accordance with the Partnership Agreement, Net Profits (exclusive of
depreciation and Net Profits from the sale or disposition of Partnership
properties) are allocated: first, to the General Partners, in an amount equal
to the greater of the General Partners' Subordinated Partnership Management Fee
or 1% of such Net Profits; and second, the balance, if any, to the Limited
Partners. Net Profits from the sale or disposition of a Partnership property
are allocated: first, to the General Partners, in an amount equal to the
aggregate amount of depreciation previously allocated to them; second, to the
General Partners 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; third, to the General
Partners, in an amount necessary to make the aggregate amount of their capital
accounts equal to the greater of the Sale Proceeds to be distributed to the
General Partners with respect to the sale or disposition of such property or 1%
of such Net Profits; and fourth, the balance, if any, to the Limited Partners.
Net Losses (exclusive of depreciation and Net Losses from the sale, disposition
or provision for value impairment of Partnership properties) are allocated 1%
to the General Partners and 99% to the Limited Partners. All depreciation is
allocated 10% to the General Partners and 90% to the Limited Partners. Net
Losses from the sale, disposition or provision for value impairment of
Partnership properties are allocated: first, to the extent that the balance in
the General Partners' capital accounts exceeds their Capital Investment or the
balance in the capital accounts of the Limited Partners exceeds the amount of
their Capital Investment (collectively, the "Excess Balances"), to the General
Partners and the Limited Partners pro rata in proportion to such Excess
Balances until such Excess Balances are reduced to zero; second, to the General
Partners and the Limited Partners and among them (in the ratio which their
respective capital account balances bear to the aggregate of all capital
account 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 Partners. In all events there shall be allocated to the General
Partners not less than 1% of Net Profits and Net Losses from the sale,
disposition or provision for value impairment of a Partnership property. The
General Partners were not entitled to a Subordinated Partnership Management Fee
for the quarters and nine months ended September 30, 2002 and 2001. For the
quarter and nine months ended September 30, 2002 the General Partners were
allocated Net (Losses) of $0 and $(300), respectively. For the quarter and nine
months ended September 30, 2001 the General Partners were allocated Net Profits
of $0 and $500, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and nine months ended September 30, 2002 were as follows:
Paid
--------------
Nine
Quarter Months Payable
-------------------------------------------------
Reimbursement of expenses,
at cost:
--Accounting $-- $2,500 $ 3,000
--Investor communications -- 1,500 7,500
-------------------------------------------------
Total $-- $4,000 $10,500
-------------------------------------------------
5
3. Environmental matter:
In 1996, the Managing 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 Managing General Partner is
unaware of any claims or other matters referred to above against the
Partnership. The purchaser has completed the initial stage of the Remedial
Action Plan which was approved by the Los Angeles Regional Water Quality
Control Board ("Water Board"). However, there can be no assurance as to the
timing of the completion of the remediation process. The Managing General
Partner continues to monitor the documentation delivered by the purchaser
regarding the purchaser's activities to remedy the hazardous substances at
Lakewood.
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 property investments and is
working toward resolution of post closing property sale matters.
Operations
Net income (loss) changed from $4,300 and $51,500 for the quarter and nine
months ended September 30, 2001 to $(7,000) and $(32,100) for the quarter and
nine months ended September 30, 2002, respectively. The changes were primarily
due to a decrease in interest earned on the Partnership's short-term
investments, which was due to a decrease in the interest rates earned on those
investments.
Liquidity and Capital Resources
The decrease in the Partnership's cash position of $20,500 during the nine
months ended September 30, 2002 was due to net cash used for operating
activities. Liquid assets, including cash and cash equivalents, as of September
30, 2002 were comprised of amounts reserved for the Lakewood environmental
contingency (as hereafter discussed) and Partnership liquidation expenses.
Net cash provided by (used for) operating activities changed from $56,600 for
the nine months ended September 30, 2001 to $(20,500) for the nine months ended
September 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 Managing
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. As a result of this, it will be necessary for the Partnership to
remain in existence. When the environmental matter at Lakewood is
satisfactorily remediated, Limited Partners will receive a final liquidating
distribution of the remaining cash held by the Partnership, less amounts
reserved for administrative expenses and any amounts deemed necessary to
resolve, or provide for, any post closing matters.
Item 4 Controls and Procedures
Within the 90 days prior to the date of this Quarterly Report on Form 10-Q,
First Capital Financial, L.L.C. ("FCF"), the managing general partner of the
Partnership, carried out an evaluation, under supervision and with the
participation of FCF's management, including FCF's President and Chief
Executive Officer and FCF's Vice President--Finance, of the effectiveness of
the design and operation of the Partnership disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the President
and Chief Executive Officer and the Vice President--Finance concluded that the
Partnership disclosure controls and procedures are effective in timely alerting
them to material information relating to the Partnership. There have been no
significant changes to the internal controls of the Partnership or in other
factors that could significantly affect the internal controls subsequent to the
completion of this evaluation.
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 September
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.--1
By: FIRST CAPITAL FINANCIAL LLC
MANAGING GENERAL PARTNER
Date: November 13, 2002 By: /s/ DOUGLAS CROCKER II
-----------------------------
DOUGLAS CROCKER II
President and Chief Executive
Officer
Date: November 13, 2002 By: /s/ PHILIP G. TINKLER
-----------------------------
PHILIP G. TINKLER
Vice President--Finance and
Treasurer
8
FORM OF SECTION 302 CERTIFICATION
I, Douglas Crocker, President and Chief Executive Officer of First Capital
Financial, L.L.C., the managing general partner of First Capital Institutional
Real Estate, Ltd.--1, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Capital
Institutional Real Estate, Ltd.--1;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/S/ DOUGLAS CROCKER
______________________________________
DOUGLAS CROCKER
President and Chief Executive Officer
9
FORM OF SECTION 302 CERTIFICATION
I, Philip Tinkler, Vice President--Finance and Treasurer of First Capital
Financial, L.L.C., the managing general partner of First Capital Institutional
Real Estate, Ltd.-1, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Capital
Institutional Real Estate, Ltd.-1;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/S/ PHILIP TINKLER
--------------------------------------
PHILIP TINKLER
Vice President--Finance and Treasurer
10