Back to GetFilings.com
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
-----------------
FORM 10-Q
-----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2003
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
jurisdiction of (I.R.S. Employer
incorporation or
organization) Identification No.)
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.
================================================================================
BALANCE SHEETS
(All dollars rounded to nearest 00s)
March 31,
2003 December 31,
(Unaudited) 2002
--------------------------------------------------
ASSETS
Cash and cash equivalents $6,216,300 $6,230,600
Other assets 6,500 8,700
--------------------------------------------------
$6,222,800 $6,239,300
--------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and
accrued expenses $ 94,800 $ 93,800
Other liabilities 2,800 2,800
--------------------------------------------------
97,600 96,600
--------------------------------------------------
Partners' capital:
General Partners 78,900 79,100
Limited Partners (84,886
Units issued and
outstanding) 6,046,300 6,063,600
--------------------------------------------------
6,125,200 6,142,700
--------------------------------------------------
$6,222,800 $6,239,300
--------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
For the quarter ended March 31, 2003 (Unaudited)
and the year ended December 31, 2002
(All dollars rounded to nearest 00s)
General Limited
Partners Partners Total
----------------------------------------------------
Partners' capital,
January 1, 2002 $79,600 $6,110,700 $6,190,300
Net (loss) for the
year ended
December 31, 2002 (500) (47,100) (47,600)
----------------------------------------------------
Partners' capital,
December 31, 2002 79,100 6,063,600 6,142,700
Net (loss) for the
quarter ended
March 31, 2003 (200) (17,300) (17,500)
----------------------------------------------------
Partners' capital,
March 31, 2003 $78,900 $6,046,300 $6,125,200
----------------------------------------------------
2
The accompanying notes are an integral part of the financial statements.
STATEMENTS OF INCOME AND EXPENSES
For the quarters ended March 31, 2003 and 2002 (Unaudited)
(All dollars rounded to nearest 00s except per Unit amounts)
2003 2002
------------------------------------------------------------
Income:
Interest $ 19,400 $ 29,400
------------------------------------------------------------
19,400 29,400
------------------------------------------------------------
Expenses:
General and administrative:
Affiliates 2,400 4,000
Nonaffiliates 34,500 44,300
------------------------------------------------------------
36,900 48,300
------------------------------------------------------------
Net (loss) $(17,500) $(18,900)
------------------------------------------------------------
Net (loss) allocated to General Partners $ (200) $ (200)
------------------------------------------------------------
Net (loss) allocated to Limited Partners $(17,300) $(18,700)
------------------------------------------------------------
Net (loss) allocated to Limited Partners
per Unit (84,886 Units outstanding) $ (0.20) $ (0.22)
------------------------------------------------------------
STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 2003 and 2002
(Unaudited)
(All dollars rounded to nearest 00s)
2003 2002
----------------------------------------------------------
Cash flows from operating
activities:
Net (loss) $ (17,500) $ (18,900)
Adjustments to reconcile net
(loss) to net cash (used for)
operating activities:
Changes in assets and
liabilities:
Decrease in other assets 2,200 1,800
Increase in accounts
payable and accrued
expenses 1,000 200
Increase in due to
Affiliates -- 700
Increase in other liabilities -- 300
----------------------------------------------------------
Net cash (used for) operating
activities (14,300) (15,900)
----------------------------------------------------------
Cash and cash equivalents at the
beginning of the period 6,230,600 6,279,200
----------------------------------------------------------
Cash and cash equivalents at the
end of the period $6,216,300 $6,263,300
----------------------------------------------------------
3
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 2003
1. Summary of significant accounting policies:
Definition of special terms:
Capitalized terms used in this report have the same meaning as those terms 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 accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. Reference is made to the Partnership's Annual Report for the
year ended December 31, 2002, 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.
The Partnership has disposed of its real estate properties and upon resolution
of the environmental matter disclosed in Note 3, the Partnership will make a
liquidating distribution and dissolve.
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.
Cash equivalents are considered all highly liquid investments with a 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.
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.
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 or disposition of a Partnership property. For the
three months ended March 31, 2003 and 2002, the General Partner was not paid a
Partnership Management Fee. For the three months ended March 31, 2003 and 2002,
the General Partner was allocated Net (Losses) of $(200) and $(200),
respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates as of
March 31, 2003 were as follows:
Paid Payable
--------------------------------------------------
Reimbursement of expenses, at cost:
--Accounting $2,400 $None
--------------------------------------------------
4
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 purchaser has
completed the initial stage of the Remediation Action Plan which was approved
by the Los Angeles Regional Water Quality Control Board. However, there can be
no assurance as to the timing of the completion of the remediation process. The
General Partner continues to monitor the documentation delivered by the
purchaser regarding the purchaser's activities to remedy the hazardous
substances at Lakewood.
5
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, 2002 for a discussion of the Partnership's business.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements can be identified by the use of forward-looking terminology such as
"believes", "expects", "prospects", "estimated", "should", "may" or the
negative thereof or other variations thereon or comparable terminology
indicating the Partnership's expectations or beliefs concerning future events.
The Partnership cautions that such statements are qualified by important
factors that could cause actual results to differ materially from those in the
forward-looking statements. These risks and uncertainties should be considered
in evaluating forward-looking statements and undue reliance should not be
placed on such statements.
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 (loss) changed from $(18,900) for the three months ended March 31, 2002 to
$(17,500) for the three months ended March 31, 2003, respectively. The change
was primarily due to a reduction in salary expense, accounting fees and other
professional fees, as well as a decrease in the interest earned on the
Partnership's short-term investments, the result of a decrease in the interest
rates earned on those investments.
Liquidity and Capital Resources
The decrease in the Partnership's cash position of $14,300 for the three months
ended March 31, 2003 was the result of net cash used for operating activities.
Liquid assets (including cash and cash equivalents) of the Partnership as of
March 31, 2003 were comprised of amounts reserved for the Lakewood Square
Shopping Center ("Lakewood") (sold in 1997) environmental matter (as hereafter
discussed) and Partnership liquidation expenses.
Net cash (used for) operating activities changed from $(15,900) for the three
months ended March 31, 2002 to $(14,300) for the three months ended March 31,
2003. The change was primarily due to the change 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 the 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. As a result of this, it will be necessary for the Partnership to
remain in existence and maintain a reserve for such costs. When the
environmental matter at Lakewood is remediated to the satisfaction of the
Partnership, 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.
6
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this Quarterly Report on Form 10-Q, the
General Partner carried out an evaluation, under supervision and with the
participation of the General Partner's management, including the General
Partner's President and Chief Executive Officer and the General Partner'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.
7
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 March 31,
2003.
8
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, L.L.C.
GENERAL PARTNER
Date: May 13, 2003 /S/ DONALD J. LIEBENTRITT
By: -------------------------------------
DONALD J. LIEBENTRITT
President and Chief Executive Officer
Date: May 13, 2003 /S/ PHILIP TINKLER
By: -------------------------------------
PHILIP TINKLER
Vice President--Finance and Treasurer
9
FORM OF SECTION 302 CERTIFICATION
I, Donald J. Liebentritt, President and Chief Executive Officer of First
Capital Financial, L.L.C., the general partner of First Capital Institutional
Real Estate, Ltd.-2, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Capital
Institutional Real Estate, Ltd.-2;
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: May 13, 2003
/S/ DONALD J. LIEBENTRITT
--------------------------------------
DONALD J. LIEBENTRITT
President and Chief Executive Officer
10
FORM OF SECTION 302 CERTIFICATION
I, Philip Tinkler, Vice President--Finance and Treasurer of First Capital
Financial, L.L.C., the general partner of First Capital Institutional Real
Estate, Ltd.-2, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Capital
Institutional Real Estate, Ltd.-2;
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: May 13, 2003
/S/ PHILIP TINKLER
---------------------------
PHILIP TINKLER
Vice President--Finance and Treasurer
11