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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, 2000
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 0-15632
FIRST CAPITAL INSTITUTIONAL REAL ESTATE, LTD.-4
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 36-3441345
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TWO NORTH RIVERSIDE PLAZA,
SUITE 600,
CHICAGO, ILLINOIS 60606-2607
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
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 November 5, 1986,
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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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, 1999 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. During 1999, the Partnership sold its remaining real property
investment. The Partnership is currently working toward resolution of post
closing property sale matters.
OPERATIONS
Net income decreased by $240,900 and $269,000 for the quarter and nine months
ended September 30, 2000 when compared to the quarter and nine months ended
September 30, 1999, respectively. The decreases were primarily due to absence
of 2000 operating results from Indian Ridge Plaza Shopping Center ("Indian
Ridge") resulting from its 1999 sale. The decrease for the nine-month periods
under comparison was partially offset by an increase in interest earned on the
Partnership's short-term investments, which was due to an increase in the
average amount of cash available for investment, and to a lesser degree by an
increase in the average interest rate earned.
LIQUIDITY AND CAPITAL RESOURCES
The increase in the Partnership's cash position for the nine months ended
September 30, 2000 resulted primarily from the net maturities of a portion of
the Partnership's investments in debt securities and net cash provided by
operating activities, which was partially utilized to pay cash distributions to
Partners. Liquid assets (including cash, cash equivalents and investments in
debt securities) of the Partnership as of September 30, 2000 were comprised of
amounts held for distribution to Partners, post property sale matters and for
Partnership liquidation expenses.
Net cash provided by operating activities decreased by $843,000 for the nine
months ended September 30, 2000 when compared to the nine months ended
September 30, 1999. The decrease was primarily due to the 2000 absence of
operating results from Indian Ridge, exclusive of depreciation and
amortization, due to its December 1999 sale. In addition, the decrease was due
to the timing of the collection of receivables at Indian Ridge.
Net cash (used for) provided by investing activities changed from $(826,600)
for the nine months ended September 30, 1999 to $18,130,900 for the nine months
ended September 30, 2000. The change was primarily due to a net maturity of
investments in debt securities during the nine months ended September 30, 2000
exceeding the net investment during the comparable period of 1999. Investments
in debt securities are a result of the extension of the maturities of certain
of the Partnership's short-term investments in an effort to maximize the return
on these amounts as they are held for working capital purposes. These
investments are of investment-grade and mature less than one year from their
date of purchase.
The Partnership has no financial instruments for which there are significant
market risks. Due to the timing of the maturities and liquid nature of the
Partnership's investments in debt securities, the Partnership does not believe
that it has material market risk.
The increase in cash used for financing activities of $14,332,900 for the nine
months ended September 30, 2000 when compared to the nine months ended
September 30, 1999 was primarily due to the 2000 special distribution to
Limited Partners. In May 2000, the Partnership distributed $14,624,000,
representing the proceeds from the sale of Indian Ridge, to Limited Partners of
record as of December 13, 1999.
The General Partner has begun the process of wrapping-up the Partnership's
affairs. This process includes the resolution of post-closing property and
Partnership matters together with the expiration of representations and
warranties included in the contract for the sale of Indian Ridge. Following the
resolution of post-closing property matters and the establishment of a reserve
for contingencies and wrap-up expenses, the General Partner will make a
liquidating distribution to Partners and dissolve. In line with reduced Cash
Flow (as defined in the Partnership Agreement) following the sale of its
remaining property, the Partnership has suspended distributions to Partners
until such time as the liquidating distribution is paid.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
(All dollars rounded to nearest 00s)
September 30,
2000 December 31,
(Unaudited) 1999
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ASSETS
Cash and cash equivalents $3,817,200 $ 574,700
Investments in debt securities 497,800 18,628,700
Rents receivable 90,700 90,700
Other assets 12,900 14,100
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$4,418,600 $19,308,200
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 69,300 $ 149,500
Due to Affiliates 800 3,900
Distributions payable 15,015,500
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70,100 15,168,900
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Partners' capital:
General Partner 92,800 87,700
Limited Partners (593,025 Units issued and
outstanding) 4,255,700 4,051,600
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4,348,500 4,139,300
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$4,418,600 $19,308,200
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STATEMENTS OF PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2000 (Unaudited)
and the Year Ended December 31, 1999
(All dollars rounded to nearest 00s)
General Limited
Partner Partners Total
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Partners' capital, January 1, 1999 $ 40,300 $ 17,766,700 $ 17,807,000
Net income for the year ended December
31, 1999 142,400 2,095,000 2,237,400
Distributions for the year ended
December 31, 1999 (95,000) (15,810,100) (15,905,100)
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Partners' capital, December 31, 1999 87,700 4,051,600 4,139,300
Net income for the nine months ended
September 30, 2000 5,100 500,600 505,700
Distributions for the nine months ended
September 30, 2000 (296,500) (296,500)
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Partners' capital, September 30, 2000 $ 92,800 $ 4,255,700 $ 4,348,500
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The accompanying notes are an integral part of the financial statements
3
STATEMENTS OF INCOME AND EXPENSES
For the Quarters Ended September 30, 2000 and 1999
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2000 1999
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Income:
Rental $ $523,500
Interest 69,900 66,700
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69,900 590,200
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Expenses:
Depreciation and amortization 107,500
Property operating:
Affiliates 15,200
Nonaffiliates 43,600
Real estate taxes 76,000
Insurance--Affiliate 4,800
Repairs and maintenance 18,900
General and administrative:
Affiliates 1,400 5,900
Nonaffiliates 17,300 26,200
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18,700 298,100
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Net income $51,200 $292,100
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Net income allocated to General Partner $ 600 $ 23,000
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Net income allocated to Limited Partners $50,600 $269,100
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Net income allocated to Limited Partners per Unit (593,025
Units outstanding) $ 0.09 $ 0.45
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STATEMENTS OF INCOME AND EXPENSES
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(All dollars rounded to nearest 00s
except per Unit amounts)
2000 1999
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Income:
Rental $ $1,557,700
Interest 564,900 183,800
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564,900 1,741,500
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Expenses:
Depreciation and amortization 322,500
Property operating:
Affiliates 5,700 26,800
Nonaffiliates 153,400
Real estate taxes 228,000
Insurance--Affiliate (900) 13,800
Repairs and maintenance 99,700
General and administrative:
Affiliates 6,100 16,200
Nonaffiliates 48,300 106,400
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59,200 966,800
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Net income $505,700 $ 774,700
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Net income allocated to General Partner $ 5,100 $ 69,000
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Net income allocated to Limited Partners $500,600 $ 705,700
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Net income allocated to Limited Partners per Unit
(593,025 Units outstanding) $ 0.84 $ 1.19
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STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(All dollars rounded to nearest 00s)
2000 1999
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Cash flows from operating activities:
Net income $ 505,700 $ 774,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 322,500
Changes in assets and liabilities:
Decrease in rents receivable 63,800
Decrease in other assets 1,200
(Decrease) increase in accounts payable and
accrued expenses (80,200) 88,300
(Decrease) in due to Affiliates (3,100) (800)
Increase in other liabilities 18,100
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Net cash provided by operating activities 423,600 1,266,600
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Cash flows from investing activities:
Decrease (increase) in investments in debt
securities, net 18,130,900 (826,600)
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Net cash provided by (used for) investing
activities 18,130,900 (826,600)
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Cash flows from financing activities:
Distributions paid to Partners (15,312,000) (982,300)
Increase in security deposits 3,200
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Net cash (used for) financing activities (15,312,000) (979,100)
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Net increase (decrease) in cash and cash
equivalents 3,242,500 (539,100)
Cash and cash equivalents at the beginning of the
period 574,700 1,107,100
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Cash and cash equivalents at the end of the period $ 3,817,200 $ 568,000
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The accompanying notes are an integral part of the financial statements
4
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
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 Agreement of Limited Partnership,
which is included in the Registration Statement and incorporated herein by
reference.
ACCOUNTING POLICIES:
The Partnership sold its remaining property during 1999. The Partnership is in
the process of resolving post closing matters related to the sold properties,
which includes reprorations, adjustments and expiration of representations and
warranties made to the purchaser of the final property. Upon completion of this
process, together with the resolution of the other pending matters, the
Partnership will make a liquidating distribution to Partners 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, 2000 are not necessarily
indicative of the operating results for the year ending December 31, 2000.
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 a maturity
of three months or less when purchased.
Investments in debt securities are comprised of obligations of the United
States government and are classified as held-to-maturity. These investments are
carried at their amortized cost basis in the financial statements, which
approximated fair value. All of these securities had maturities of less than
one year when purchased.
Reference is made to the Partnership's Annual Report for the year ended
December 31, 1999, 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, as compensation for services
rendered in managing the affairs of the Partnership, the General Partner shall
be entitled to receive subsequent to May 4, 1988, the Termination of the
Offering, a Partnership Management Fee payable annually within 60 days
following the last day of each fiscal year, which shall be an amount equal to
the lesser of (i) 0.5% of the net value of the Partnership's assets as of the
end of such fiscal year reflected on the Certificate of Value furnished to the
Limited Partners, plus, to the extent the Partnership Management Fee paid in
any prior year was less than 0.5% of the net value of the Partnership's assets
in such prior year, the amount of such deficit, or (ii) an amount equal to the
difference between 10% of the Partnership's aggregate Cash Flow (as defined in
the Partnership Agreement) for the period from the Commencement of Operations
to the end of the fiscal year for which such Partnership Management Fee is
payable, and the aggregate amount previously paid to the General Partner as a
Partnership Management Fee. In addition, Sale Proceeds are distributed: first,
75% to all Limited Partners and 25% to the General Partner until the earlier of
(i) receipt by Limited Partners of cumulative distributions of Sale Proceeds in
an amount equal to 100% of their Original Capital Contribution, or (ii) receipt
by the General Partner of cumulative distributions of Sale Proceeds sufficient
to repay all outstanding advances to the Partnership from the General Partner;
thereafter, to the General Partner, until all outstanding advances, if any, to
the Partnership from the General Partner have been repaid; thereafter, to the
Limited Partners, until they have received cumulative distributions of Sale
Proceeds in an amount equal to 100% of their Original Capital Contribution,
plus an amount (including Cash Flow (as defined in the Partnership Agreement))
equal to a cumulative return of 6% per annum simple interest on their Capital
Investment from their investment date in the Partnership; thereafter, 85% to
all Limited Partners; and 15% to the General Partner, provided, however, that
no distribution of the General Partner's 15% share of Sale Proceeds shall be
made until Limited Partners have received the greater of (i) Sale Proceeds plus
Cash Flow (as defined in the Partnership Agreement) previously received in
excess of the Preferred Return equal to 125% of the Limited Partners' Original
Capital Contribution, or (ii) Sale Proceeds plus all Cash Flow (as defined in
the Partnership Agreement) previously received equal to their Original Capital
Contribution plus a 10% per annum simple interest return on their Capital
Investment from the date of investment.
In accordance with the Partnership Agreement, Net Profits (exclusive of Net
Profits from the sale or disposition of Partnership properties) shall be
allocated to the General Partner in an amount equal to the greater of 1% of
such Net Profits or the Partnership Management Fee paid by the Partnership to
the General Partner during such year, and 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 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 Limited Partners with negative balances in their Capital
Accounts, pro rata in proportion to
5
such respective negative balances, to the extent of the total of such negative
balances; second, to each Limited Partner in an amount, if any, necessary to
make the positive balance in its Capital Account equal to the Sale Proceeds to
be distributed to such Limited Partner with respect to the sale or disposition
of such property; third, to the General Partner in an amount, if any, necessary
to make the positive balance in its Capital Account equal to the Sale Proceeds
to be distributed to the General Partner with respect to the sale or
disposition of such property; and fourth, the balance, if any, 15% to the
General Partner and 85% to the Limited Partners. Net Losses from the sale,
disposition or provision for value impairment of Partnership properties are
allocated: first, after giving effect to any distributions of Sale Proceeds
from the transaction to the General Partner and Limited Partners with positive
balances in their Capital Accounts, pro rata in proportion to such respective
positive balances, to the extent of the total amount of such positive balances;
and second, the balance, if any, 1% to the General Partner and 99% to the
Limited Partners. Notwithstanding anything to the contrary, there shall be
allocated to the General Partner not less than 1% of all items of Partnership
income, gain, loss, deduction and credit during the existence of the
Partnership. For the quarter and nine months ended September 30, 2000, the
General Partner was not allocated a Partnership Management Fee. For the quarter
and nine months ended September 30, 2000, the General Partner was allocated
earnings of $600 and $5,100, respectively. For the quarter and nine months
ended September 30, 1999, the General Partner was allocated earnings and
accrued a Partnership Management Fee of $23,000 and $69,000, respectively.
Fees and reimbursements paid and payable by the Partnership to Affiliates
during the quarter and nine months ended September 30, 2000 were as follows:
Paid
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Quarter Nine Months Payable
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Asset management fees $ -- $ 5,700 None
Refund of property insurance premiums -- (900) None
Reimbursement of expenses, at cost:
--Accounting -- 4,400 None
--Investor communication 800 4,700 800
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$ 800 $13,900 $800
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3. SPECIAL DISTRIBUTION TO LIMITED PARTNERS
On May 31, 2000, the Partnership distributed $14,624,000 or $24.66 per Unit to
Limited Partners of record as of December 13, 1999. The funds for this
distribution were generated from the December 1999 sale of Indian Ridge.
6
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 during the quarter ended September 30,
2000.
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.-4
By: FIRST CAPITAL FINANCIAL CORPORATION
GENERAL PARTNER
/s/ DOUGLAS CROCKER II
Date: November 14, 2000 By: ______________________________________
DOUGLAS CROCKER II
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ NORMAN M. FIELD
Date: November 14, 2000 By: ______________________________________
NORMAN M. FIELD
VICE PRESIDENT--FINANCE AND TREASURER
8