10-Q 1 d10q.txt FORM 10-Q -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 September 30, 2001 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, 60606-2607 Suite 600, (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 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. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- BALANCE SHEETS (All dollars rounded to nearest 00s)

STATEMENTS OF PARTNERS' CAPITAL For the nine months ended September 30, 2001 (Unaudited) and the year ended December 31, 2000 (All dollars rounded to nearest 00s)

3 The accompanying notes are an integral part of the financial statements. STATEMENTS OF INCOME AND EXPENSES For the quarters ended September 30, 2001 and 2000 (Unaudited) (All dollars rounded to nearest 00s except per Unit amounts)

STATEMENTS OF INCOME AND EXPENSES For the nine months ended September 30, 2001 and 2000 (Unaudited) (All dollars rounded to nearest 00s except per Unit amounts)

STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2001 and 2000 (Unaudited) (All dollars rounded to nearest 00s)

4 The accompanying notes are an integral part of the financial statements. NOTES TO FINANCIAL STATEMENTS (Unaudited) June 30, 2001 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, 2001 are not necessarily indicative of the operating results for the year ending December 31, 2001. 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, 2000, 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, 2001 and 2000. For the quarter and nine months ended September 30, 2001 the General Partners were allocated Net Profits of $0 and $500, respectively. For the quarter and nine months ended September 30, 2000 the General Partners were allocated Net Profits of $400 and $1,100, respectively. Fees and reimbursements paid and payable by the Partnership to Affiliates during the quarter and nine months ended September 30, 2001 were as follows:

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's revised remedial action plan (the "Plan") for the site has been approved by the California Regional Water Quality Control Board (the "Water Board"). The remediation is scheduled to begin in 2002, providing the proper permits are obtained. There can be no assurance as to the timing or successful completion of the Plan. 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. TRANSFER AGENT AND REGISTRAR THE BANK OF NEW YORK P.O. Box 7090 Troy, Michigan 48007-7090 (800) 447-7364 [LOGO] First Capital Institutional Real Estate, Ltd.-1 [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, 2000 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 decreased by $34,600 and $56,900 for the quarter and nine months ended September 30, 2001 when compared to the quarter and nine months ended September 30, 2000. The decreases 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 increase in the Partnership's cash position of $56,600 during the nine months ended September 30, 2001 was primarily due to net cash provided by operating activities. Liquid assets, including cash and cash equivalents, as of September 30, 2001 were comprised of amounts reserved for the Lakewood environmental contingency (as hereafter discussed) and Partnership liquidation expenses. Net cash provided by operating activities decreased by $34,600 for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. The decrease was primarily due to the decrease in net income as previously discussed. The decrease was partially offset due to the timing of the payment of certain Partnership expenses. Net cash provided by investing activities decreased by $17,600 for the nine months ended September 30, 2001 when compared to the nine months ended September 30, 2000. The decrease was primarily due to the maturity of the Partnership's investments in debt securities during 2000. 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. 2 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: None (b) Reports on Form 8-K: There were no reports filed on Form 8-K for the three months ended September 30, 2001. 6 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 /s/ DOUGLAS CROCKER II Date: November 13, 2001 By: _________________________________ DOUGLAS CROCKER II President and Chief Executive Officer /s/ PHILIP G. TINKLER Date: November 13, 2001 By: _________________________________ PHILIP G. TINKLER Vice President--Finance and Treasurer 7

FIRST CAPITAL INSTITUTIONAL REAL ESTATE LTD 1 10-Q