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, 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. ================================================================================ BALANCE SHEETS (All dollars rounded to nearest 00s)

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)

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:

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

FIRST CAPITAL INSTITUTIONAL REAL ESTATE LTD 1 10-Q